-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rc/GEssPwPGgmqvF/1kQn2SW4aHIe/GOrfYOIatmXxyTYe5sCyDq0YQsjEJvzLyR 6eQSXdy2zLvDhk5l7e/FlA== 0000930661-01-501275.txt : 20010723 0000930661-01-501275.hdr.sgml : 20010723 ACCESSION NUMBER: 0000930661-01-501275 CONFORMED SUBMISSION TYPE: S-4 PUBLIC DOCUMENT COUNT: 13 FILED AS OF DATE: 20010720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELCO REMY INTERNATIONAL INC CENTRAL INDEX KEY: 0001046859 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 351909253 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552 FILM NUMBER: 1685426 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 MAIL ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMY INTERNATIONAL INC CENTRAL INDEX KEY: 0001047204 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 352004050 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-01 FILM NUMBER: 1685427 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DR CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 MAIL ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WORLD WIDE AUTOMOTIVE INC CENTRAL INDEX KEY: 0001047208 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 351909253 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-02 FILM NUMBER: 1685428 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE STREET 2: FORT COLLIER INDUSTRIAL PARK CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786799 MAIL ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE STREET 2: FORT COLLIER INDUSTRIAL PARK CITY: ANDERSON STATE: IN ZIP: 46013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POWRBILT PRODUCTS INC CENTRAL INDEX KEY: 0001047212 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 752398592 STATE OF INCORPORATION: TX FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-03 FILM NUMBER: 1685429 BUSINESS ADDRESS: STREET 1: 617 S 4TH STREET CITY: MANSFIELD STATE: TX ZIP: 76063 BUSINESS PHONE: 8174733208 MAIL ADDRESS: STREET 1: 617 S 46TH STREET CITY: MANSFIELD STATE: TX ZIP: 76063 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MARINE CORP OF AMERICA CENTRAL INDEX KEY: 0001047222 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 351804826 STATE OF INCORPORATION: IN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-04 FILM NUMBER: 1685430 BUSINESS ADDRESS: STREET 1: 980 HURRICANE RD CITY: FRANKLIN STATE: IN ZIP: 46131 BUSINESS PHONE: 3177389408 MAIL ADDRESS: STREET 1: 980 HURRICANE RD CITY: FRANKLIN STATE: IN ZIP: 446131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POWER INVESTMENTS MARINE INC CENTRAL INDEX KEY: 0001047226 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 580941862 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-05 FILM NUMBER: 1685431 BUSINESS ADDRESS: STREET 1: GRISOM AERPLES 1175 N HOOSIER BLVD CITY: PERU STATE: IN ZIP: 46970 BUSINESS PHONE: 7656898176 MAIL ADDRESS: STREET 1: GRISOM AEROPLES 1175 N HOOSIER BLVD CITY: PERU STATE: IN ZIP: 46970 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERNATIONAL FUEL SYSTEMS INC CENTRAL INDEX KEY: 0001047229 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 232212698 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-06 FILM NUMBER: 1685432 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DR CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 3177389408 MAIL ADDRESS: STREET 1: 980 HURRICANE RD CITY: FRANKLIN STATE: IN ZIP: 46131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FRANKLKIN POWER PRODUCTS INC CENTRAL INDEX KEY: 0001047233 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 351809762 STATE OF INCORPORATION: IN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-07 FILM NUMBER: 1685433 BUSINESS ADDRESS: STREET 1: 400 FORSYTHE STREET P O BOX 667 CITY: FRANKLIN STATE: IN ZIP: 46131 BUSINESS PHONE: 3177382117 MAIL ADDRESS: STREET 1: 400 FORSYTHE STREET P O BOX 667 CITY: FRANKLIN STATE: IN ZIP: 46131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: POWER INVESTMENTS INC CENTRAL INDEX KEY: 0001047236 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 351567602 STATE OF INCORPORATION: IN FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-08 FILM NUMBER: 1685434 BUSINESS ADDRESS: STREET 1: 400 FORSYTHE STREET P O BOX 667 CITY: FRANKLIN STATE: IN ZIP: 46131 BUSINESS PHONE: 3177382117 MAIL ADDRESS: STREET 1: 400 FORSYTHE STREET P O BOX 667 CITY: FRANKLIN STATE: IN ZIP: 46131 FILER: COMPANY DATA: COMPANY CONFORMED NAME: MCA INC OF MISSISSIPPI CENTRAL INDEX KEY: 0001047241 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640765216 STATE OF INCORPORATION: MS FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-09 FILM NUMBER: 1685435 BUSINESS ADDRESS: STREET 1: 412 BAY ST P O BOX 257 CITY: HIEDELBERG STATE: MS ZIP: 39439 BUSINESS PHONE: 6017872688 FILER: COMPANY DATA: COMPANY CONFORMED NAME: R&L TOOL CO INC CENTRAL INDEX KEY: 0001047245 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640701131 STATE OF INCORPORATION: MS FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-10 FILM NUMBER: 1685436 BUSINESS ADDRESS: STREET 1: R I BOX 320 HIGHWAY 481 N CITY: RALEIGH STATE: MS ZIP: 39153 BUSINESS PHONE: 6015362193 FILER: COMPANY DATA: COMPANY CONFORMED NAME: A&B CORES INC CENTRAL INDEX KEY: 0001047246 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640815878 STATE OF INCORPORATION: MS FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-11 FILM NUMBER: 1685437 BUSINESS ADDRESS: STREET 1: 225 WHITE OAK DRIVE P O BOX 339 CITY: RALEIGH STATE: MS ZIP: 391533 BUSINESS PHONE: 6017829922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DALEX INC CENTRAL INDEX KEY: 0001047247 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640719018 STATE OF INCORPORATION: MS FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-12 FILM NUMBER: 1685438 BUSINESS ADDRESS: STREET 1: BAY SPRINGS INDUSTRIAL PARK P O BOX1901 STREET 2: 123 COMMERCE STREET CITY: BAY SPRINGS STATE: MS ZIP: 39422 BUSINESS PHONE: 6017644168 FILER: COMPANY DATA: COMPANY CONFORMED NAME: A&B ENTERPRISES INC CENTRAL INDEX KEY: 0001047248 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 640643692 STATE OF INCORPORATION: MS FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-13 FILM NUMBER: 1685439 BUSINESS ADDRESS: STREET 1: HIGHWAY 18 WEST PO BOX 8 CITY: MERIDAN STATE: MS ZIP: 39153 BUSINESS PHONE: 6017829922 FILER: COMPANY DATA: COMPANY CONFORMED NAME: A&B GROUP INC CENTRAL INDEX KEY: 0001047249 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 64082345 STATE OF INCORPORATION: MS FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-14 FILM NUMBER: 1685440 BUSINESS ADDRESS: STREET 1: 1029 B STREET CITY: MERIDIAN STATE: MS ZIP: 39391 BUSINESS PHONE: 6014858575 FILER: COMPANY DATA: COMPANY CONFORMED NAME: REMAN HOLDINGS INC CENTRAL INDEX KEY: 0001047257 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 521910536 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-15 FILM NUMBER: 1685441 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DR CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 MAIL ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DELCO REMY AMERICA INC CENTRAL INDEX KEY: 0001047268 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 351909405 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-16 FILM NUMBER: 1685442 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 MAIL ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 FILER: COMPANY DATA: COMPANY CONFORMED NAME: NABCO INC /MI/ CENTRAL INDEX KEY: 0001047535 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 382105668 STATE OF INCORPORATION: MI FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-17 FILM NUMBER: 1685443 BUSINESS ADDRESS: STREET 1: 591 E CHURCH ST STREET 2: PO BOX 66 CITY: REED CITY STATE: MI ZIP: 49677 BUSINESS PHONE: 6168328104 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BALLANTRAE CORP CENTRAL INDEX KEY: 0001051697 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 383312998 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-18 FILM NUMBER: 1685444 BUSINESS ADDRESS: STREET 1: 1445 STEPHENS DR CITY: WARREN STATE: MI ZIP: 48090 BUSINESS PHONE: 8107593850 MAIL ADDRESS: STREET 1: 1445 STEPHENS DR CITY: WARREN STATE: MI ZIP: 48090 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRACTECH INC CENTRAL INDEX KEY: 0001051698 STANDARD INDUSTRIAL CLASSIFICATION: MOTOR VEHICLE PARTS & ACCESSORIES [3714] IRS NUMBER: 383313000 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-19 FILM NUMBER: 1685445 BUSINESS ADDRESS: STREET 1: 1445 STEPHENS DR CITY: WARREN STATE: MI ZIP: 48090 BUSINESS PHONE: 8107593850 MAIL ADDRESS: STREET 1: 1445 STEPHENS DR CITY: WARREN STATE: MI ZIP: 48090 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WILLIAMS TECHNOLOGIES IN CENTRAL INDEX KEY: 0001144538 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 58165382 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-20 FILM NUMBER: 1685446 BUSINESS ADDRESS: STREET 1: 211 FARMINGTON ROAD CITY: SUMMERVILLE STATE: SC ZIP: 29484 BUSINESS PHONE: 7657786499 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ENGINE MASTER LP CENTRAL INDEX KEY: 0001144541 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 311650548 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-21 FILM NUMBER: 1685447 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 FILER: COMPANY DATA: COMPANY CONFORMED NAME: M&M KNOPF AUTO PARTS INC CENTRAL INDEX KEY: 0001144542 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 112255442 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-22 FILM NUMBER: 1685448 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSGI INC CENTRAL INDEX KEY: 0001144543 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 352081750 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-23 FILM NUMBER: 1685449 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HSGI II INC CENTRAL INDEX KEY: 0001144544 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 352081751 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-24 FILM NUMBER: 1685450 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DR SALES INC CENTRAL INDEX KEY: 0001144545 STANDARD INDUSTRIAL CLASSIFICATION: [] IRS NUMBER: 383480653 STATE OF INCORPORATION: MS FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-4 SEC ACT: SEC FILE NUMBER: 333-65552-25 FILM NUMBER: 1685451 BUSINESS ADDRESS: STREET 1: 2902 ENTERPRISE DRIVE CITY: ANDERSON STATE: IN ZIP: 46013 BUSINESS PHONE: 7657786499 S-4 1 ds4.txt FORM S-4 REGISTRATION STATEMENT As filed with the Securities and Exchange Commission on July 20, 2001 Registration No. 333- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------ FORM S-4 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------------ Delco Remy International, Inc. (Exact name of Registrant as specified in its charter) Delaware 6719 35-1909253 (State or Other (Primary Standard (I.R.S. Employer Jurisdiction of Industrial Classification Identification No.) Incorporation or Code Number) Organization) ------------ 2902 Enterprise Drive Anderson, Indiana 46013 (765) 778-6499 (Address, Including Zip Code, and Telephone Number, Including Area Code, of Registrant's Principal Executive Offices) ------------ See Table of Additional Registrants Below ------------ Thomas J. Snyder President and Chief Executive Officer Delco Remy International, Inc. 2902 Enterprise Drive Anderson, Indiana 46013 (765) 778-6499 (Name, address including zip code, and telephone number, including area code, of agent for service) ------------ With a Copy to: G. Daniel O'Donnell, Esq. Dechert 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, Pennsylvania 19103 (215) 994-4000 Approximate date of commencement of proposed sale of the securities to the public: As soon as practicable after this Registration Statement becomes effective. If the securities being registered on this Form are being offered in connection with the formation of a holding company and there is compliance with General Instruction G, check the following box [_] If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering [_] If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering [_] CALCULATION OF REGISTRATION FEE - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------
Proposed Proposed Maximum Title of each Class of Amount Maximum Aggregate Amount of Securities to be to be Offering Price Offering Registration Registered Registered Per Unit Price(1) Fee - ------------------------------------------------------------------------------ 11% Senior Subordinated Notes due 2009.......... $165,000,000 100% 165,000,000 $41,250 - ------------------------------------------------------------------------------ Guarantees(2)............ $165,000,000 -- -- (3) - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------
(1) Estimated pursuant to Rule 457(f) under the Securities Act of 1933, as amended, solely for purposes of calculating the registration fee. (2) The other companies listed in the Table of Additional Registrants below have guaranteed, jointly and severally, the 11% Senior Subordinated Notes Due 2009 being registered hereby. The Guarantors are registering the Guarantees. Pursuant to Rule 457(n) under the Securities Act of 1933, no registration fee is required with respect to the Guarantees. (3) Not applicable. The Registrants hereby amend this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall filed a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine. - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ +The information in this prospectus is not complete and may be changed. We may + +not sell these securities until the registration statement filed with the + +Securities and Exchange Commission is effective. This prospectus is not an + +offer to sell these securities and is not soliciting an offer to buy these + +securities in any state where the offer or sale is not permitted. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED JULY 20, 2001 PROSPECTUS [LOGO OF DELCO REMY] OFFER TO EXCHANGE 11% Senior Subordinated Notes Due 2009 for all outstanding 11% Senior Subordinated Notes Due 2009 of DELCO REMY INTERNATIONAL, INC. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME ON , , UNLESS EXTENDED. -------- Terms of the exchange offer: --We will exchange all old notes that are validly tendered and not withdrawn prior to the expiration of the exchange offer. --You may withdraw tenders of old notes at any time prior to the expiration of the exchange offer. --We believe that the exchange of old notes will not be a taxable event for U.S. federal income tax purposes, but you should see "United States Federal Income Tax Considerations" on page 119 for more information. --We will not receive any proceeds from the exchange offer. --The terms of the new notes are substantially identical to the old notes, except that the new notes are registered under the Securities Act of 1933 and the transfer restrictions and registration rights applicable to the old notes do not apply to the new notes. -------- See "Risk Factors" beginning on page 12 for a discussion of risks that should be considered by holders prior to tendering their old notes. -------- Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense. The date of this prospectus is , 2001. Delco Remy International, Inc. Table of Additional Registrants
Primary Standard Industrial State of Incorporation Classification IRS Employer Name or Organization Code Number Identification No. - ---- ---------------------- ---------------- ------------------ Delco Remy America, Inc.................... Delaware 3694 35-1909405 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499 Remy International, Inc.................... Delaware 3694 35-2004050 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499 Reman Holdings, Inc..... Delaware 3714 52-1910536 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499 NABCO, Inc.............. Michigan 3694 38-2105668 591 E. Church Street Reed City, MI 49677 (231) 832-8114 The A&B Group, Inc...... Mississippi 3694 64-0823245 5168 Water Tower Road Meridian, MS 39302 (601) 485-8575 A&B Enterprises, Inc.... Mississippi 3694 64-0643692 5168 Water Tower Road, P. O. Box 5468 Meridian, MS 39302 (601) 782-9922 Dalex, Inc.............. Mississippi 3694 64-0719018 5168 Water Tower Road, P. O. Box 5468 Meridian, MS 39302 (601) 764-4168 A&B Cores, Inc.......... Mississippi 3694 64-0815878 5168 Water Tower Road, P. O. Box 5468 Meridian, MS 39302 (601) 782-9922 R&L Tool Company, Inc... Mississippi 3694 64-0701131 5168 Water Tower Road, P. O. Box 5468 Meridian, MS 39302 (601) 536-2510 MCA, Inc. of Mississippi............ Mississippi 3694 64-0765216 5168 Water Tower Road, P. O. Box 5468 Meridian, MS 39302 (601) 787-2688
Primary Standard Industrial State of Incorporation Classification IRS Employer Name or Organization Code Number Identification No. - ---- ---------------------- ---------------- ------------------ Power Investment, Inc... Indiana 3714 35-1567602 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499 Franklin Power Products, Inc.................... Indiana 3519 35-1809762 400 Forsythe Street Franklin, IN 46131 (317) 738-2117 International Fuel Systems, Inc. ......... Indiana 3519 35-1880654 980 North Hurricane Road Franklin, IN 46131 (317) 738-9408 Marine Corporation of America................ Indiana 3568 35-1804826 400 Forsythe Street Franklin, IN 46131 (317) 738-9408 Powrbilt Products, Inc. .................. Texas 3519 75-2398592 617 S. 4th Avenue Mansfield, TX 76063 (817) 473-3208 World Wide Automotive, Inc. .................. Virginia 3694 54-1025997 300 West Brooke Road Winchester VA 22603 (540) 667-9100 Ballantrae Corporation.. Delaware 3714 35-2073201 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499 Tractech, Inc. ......... Delaware 3714 38-3313000 1445 Stephens Drive Warren, MI 48090 (810) 759-3850 Williams Technologies, Inc. .................. South Carolina 3714 58-1653182 211 Farmington Road, P.O. Box 1548 Summerville SC 29484- 1548 (843) 875-0150 Engine Master, L.P. .... Delaware 3714 31-1660548 1011 Regal Row Dallas, TX 75247 (214) 267-5100 M.&M. Knopf Auto Parts, Inc. .................. New York 3714 11-2255442 239 Old New Brunswick Road Piscataway, New Jersey 08854 (732) 981-8040
Primary Standard Industrial State of Incorporation Classification IRS Employer Name or Organization Code Number Identification No. - ---- ---------------------- ---------------- ------------------ Power Investments Marine, Inc. .......... New Jersey 3568 58-0941862 400 Forsythe Street Franklin, IN 46131 (765) 778-6499 DR Sales, Inc. ......... Delaware 3694 38-3480653 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499 HSG I, Inc. ............ Delaware 3714 35-2081750 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499 HSG II, Inc. ........... Delaware 3714 35-2081751 2902 Enterprise Drive Anderson, IN 46013 (765) 778-6499
------------ TABLE OF CONTENTS Forward-Looking Statements........... ii Industry Data........................ ii Where You Can Find More Information.. ii Summary.............................. 1 Risk Factors......................... 12 Use of Proceeds...................... 22 Capitalization....................... 23 Unaudited Pro Forma Condensed Consolidated Financial Data......... 24 Selected Consolidated Historical Financial Data...................... 31 Management's Discussion and Analysis of Financial Condition and Results of Operations.......................... 33 Business............................. 44
The Exchange Offer................. 55 Management......................... 63 Ownership of Capital Stock......... 70 Description of Capital Stock....... 72 Certain Relationships and Related Transactions...................... 75 Description of Other Indebtedness.. 76 Description of Notes............... 80 United States Federal Income Tax Consequences...................... 119 Plan of Distribution............... 123 Legal Matters...................... 123 Experts............................ 123 Index to Consolidated Financial Statements........................ F-1
------------ You should rely only on the information contained in this document. We have not authorized anyone to provide you with information that is different. This document may only be used where it is legal to sell these securities. The information in this document may only be accurate on the date of this document. Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of new notes. The letter of transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act of 1933, as amended, which we refer to as the Securities Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date, we will make this prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." i ------------ FORWARD-LOOKING STATEMENTS This prospectus contains both historical and forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act. These forward-looking statements are not historical facts, but only predictions and generally can be identified by use of statements that include phrases such as "believe," "expect," "anticipate," "intend," "plan," "foresee" or other words or phrases of similar import. Similarly, statements that describe our objectives, plans or goals also are forward-looking statements. These forward-looking statements are subject to risks and uncertainties which could cause actual results to differ materially from those currently anticipated. Factors that could materially affect these forward-looking statements can be found below under "Risk Factors." Potential investors and other readers are urged to consider these factors carefully in evaluating the forward-looking statements and are cautioned not to place undue reliance on these forward-looking statements. The forward-looking statements included in this prospectus are made only as of the date of this prospectus and we undertake no obligation to publicly update these forward-looking statements to reflect new information, future events or otherwise. In light of these risks, uncertainties and assumptions, the forward-looking events might or might not occur. We cannot assure you that projected results or events will be achieved. INDUSTRY DATA In this prospectus, we rely on and refer to information regarding the automotive industry and its segments and participants from market research reports, analyst reports and other publicly available information, including without limitation reports issued or prepared by R.L. Polk, J.D. Power, Automotive News, ACT, ARMC, MacKay and Frost & Sullivan. Although we believe that this information is reliable, we cannot guarantee the accuracy and completeness of this information, and we have not independently verified any of it. WHERE YOU CAN FIND MORE INFORMATION Delco Remy International, Inc. files annual and quarterly reports and other information with the Securities and Exchange Commission, which we refer to as the SEC. These documents include specific information regarding Delco Remy International, Inc. You may read and copy any document we file with the SEC at the SEC's public reference rooms in Washington, DC, New York, New York and Chicago, Illinois. Please call the SEC at 1-800-SEC-0330 for further information on the public reference rooms. Our SEC filings are also available to the public at the SEC's web site at http://www.sec.gov. We have filed with the SEC a registration statement on Form S-4 under the Securities Act, covering the notes to be issued in the exchange offer (Registration No. 333- ). This prospectus, which is a part of the registration statement, does not contain all of the information included in the registration statement. Any statement made in this prospectus concerning the contents of any contract, agreement or other document is not necessarily complete. For further information regarding our company and the notes to be issued in the exchange offer, please reference the registration statement, including its exhibits. If we have filed any contract, agreement or other document as an exhibit to the registration statement, you should read the exhibit for a more complete understanding of the documents or matter involved. Copies of the registration statement, including all related exhibits and schedules, may be inspected without charge at the public reference facilities maintained by the SEC, or obtained at prescribed rates from the Public Reference Section of the SEC. In addition, you may request a copy of any of these filings, at no cost, by writing or telephoning us at the following address: Delco Remy International, Inc., 2902 Enterprise Drive, Anderson, Indiana 46013; the telephone number at that address is (765) 778-6499. ii SUMMARY This summary may not contain all of the information that may be important to you. You should read this entire prospectus, including the financial data and related notes, before making an investment decision. As used in this prospectus, the terms "we," "us," "Delco Remy" and the "Company" refer to Delco Remy International, Inc. and its subsidiaries on a consolidated basis, unless the context requires otherwise. We changed our fiscal year to December 31, effective August 1, 2000. Prior to August 1, 2000, our fiscal year ended July 31. As used in this prospectus, the term "fiscal year" refers to the year ended July 31 in the year indicated. The Exchange Offer On April 26, 2001, we issued and sold $165.0 million aggregate principal amount of 11% Senior Subordinated Notes Due 2009, which we refer to as the old notes. In connection with that sale, we entered into a registration rights agreement with the initial purchasers of the old notes in which we agreed to deliver this prospectus to you and to complete an exchange offer for the old notes. As requested by the registration rights agreement, we are offering to exchange $165.0 million aggregate principal amount of our new 11% Senior Subordinated Notes Due 2009, which we refer to as the new notes, the issuance of which will be registered under the Securities Act, for a like aggregate principal amount of our old notes. We refer to this offer to exchange new notes for old notes in accordance with the terms set forth in this prospectus and the accompanying letter of transmittal as the exchange offer. You are entitled to exchange your old notes for new notes. We urge you to read the discussions under the headings "The Exchange Offer" and "The New Notes" in this summary for further information regarding the exchange offer and the new notes. The Company We are a leading global manufacturer and remanufacturer of original equipment and aftermarket electrical and powertrain/drivetrain components for automobiles, light trucks, medium and heavy duty trucks and other heavy duty vehicles. We sell our products worldwide primarily under the "Delco Remy" brand name, first used in 1918, as well as other widely recognized private label brand names. Our products include starter motors, alternators, engines, transmissions, torque converters and fuel systems. In calendar year 2000, about 50% of our sales were to the original equipment market and about 50% were to the aftermarket. We sell our products principally in North America, Europe, Latin America and Asia-Pacific. We believe that we are the largest producer in North America of original equipment starters for automobiles and light trucks and starters and alternators for medium and heavy duty vehicles. We believe we are also the largest producer in North America of remanufactured starters and alternators for the aftermarket. We provide exchange services for used components, commonly known as cores, for third party aftermarket remanufacturers. Our largest customers include General Motors, which we refer to as GM, International Truck and Engine Corporation, which we refer to as Navistar, Freightliner, Caterpillar, Advance Auto Parts, PACCAR, Delphi, Ford, AutoZone, Cummins, Mack, Volvo Trucks, O'Reilly and Pep Boys. Since our separation from GM in July 1994, management has focused on increasing revenues and improving margins. From fiscal year 1995 through fiscal year 2000, we have: . increased our sales from $573.4 million to $1.091 billion, representing a compound annual growth rate of about 13.7%; and . improved our Adjusted EBITDA margin from 9.8% to 13.5%. Since 1994, we have successfully acquired and integrated 16 strategic businesses and entered into six joint ventures. These acquisitions and joint ventures have enabled us to broaden our product line, expand our manufacturing and remanufacturing capability, extend our participation in international markets and increase our penetration of the retail automotive parts channel. As a result, sales to our customers other than GM have increased from 41% of total sales in fiscal year 1995 to 70% in fiscal year 2000. We have also increased sales outside of the Class 8 heavy duty truck market from 87% of total sales in fiscal year 1995 to 91% in fiscal year 2000. Our expanding aftermarket business benefits from the non-deferrable nature of the repairs for which many of our products are used. Additionally, the design, manufacturing and technological expertise that we have developed in our original equipment operations contributes to our aftermarket business. This expertise provides us with advantages over many of our aftermarket competitors. We believe that our participation in both original equipment manufacturer, or OEM, and aftermarket businesses and our diversified customer base reduce our exposure to the cyclical nature of the automotive industry. Competitive Strengths Global Manufacturing Footprint Since 1995, we have transitioned our production capacity to lower cost plant sites. Currently, our manufacturing base includes a presence in nine countries on four continents. Today, about 19% of our workforce is unionized and we enjoy a good relationship with our local International Union, United Automobile, Aerospace and Agricultural Implement Workers of America, which we refer to as the UAW. Lean Manufacturing Operations We have shifted our OEM production from older, vertically integrated plants to new, smaller and more efficient "focus" factories, reducing our U.S. floor space for OEM production by more than 70% since 1994. Our focus factories generally produce one product line in a plant designed to facilitate lean manufacturing techniques. In conjunction with our emphasis on focus factories, we continue to work with our employees to establish best-in-class work practices, including reducing the number of job classifications per focus factory and implementing team-based lean manufacturing techniques. In fiscal year 2000, we launched an initiative to implement the lean manufacturing concepts applied in our focus factories throughout our entire company. We are committed to product quality. Twenty-five of our manufacturing and remanufacturing facilities are QS9000 certified. In addition, our powertrain/drivetrain operations that remanufacture products for Ford have received the Q-1 rating, Ford's highest quality rating. Strong Brand Recognition We manufacture and market brand name products worldwide principally under the "Delco Remy" and private label brand names. In connection with our 1994 separation from GM, we acquired perpetual rights to our Delco Remy brand name. Our premium brand names are important assets in a time of customer consolidation and merging distribution channels. In 2000, we earned the Automotive Industries magazine's prestigious Quest for Excellence Award as one of the industry's "Best-of-the-Best" in the Electrical Systems Suppliers category for the second consecutive year. Diverse Customer Base We continue to build upon our long-standing relationships with our customers around the world and are focused on developing new customer relationships as well. Our largest customers include GM, Navistar, 2 Freightliner, Caterpillar, Advance Auto Parts, PACCAR, Delphi, Ford, AutoZone, Cummins, Mack, Volvo Trucks, O'Reilly and Pep Boys. We have broadened our customer base in the highly competitive automotive retail aftermarket. We believe that we are the principal supplier of starters and alternators for many of our major OEM customers. Proven Management Team Our management team of seven senior executives has over 145 years of combined industry experience. Our Chief Executive Officer, Thomas Snyder, has been in the automotive industry for 28 years in both the OEM and aftermarket businesses, having held executive positions within GM's Delco Remy division since 1980. We have strengthened our management team in the aftermarket by recruiting executives from a wide range of automotive aftermarket companies other than GM. Our management team led our transformation from a division of GM to a successful stand-alone business, and our revenues have grown at a compounded annual rate of 13.7% from fiscal year 1995 through fiscal year 2000 while Adjusted EBITDA margins increased from 9.8% to 13.5% over the same period. Since our separation from GM, our management team has: . successfully reduced our financial leverage; and . successfully integrated 16 acquisitions and entered into six joint ventures. Business Strategy Exploit Leading Market Share in Fragmented Aftermarket We participate in a portion of the aftermarket that is large and highly fragmented. Most participants are small, regional companies offering relatively narrow product lines. A key element of our growth strategy is to capitalize on our position as a consolidator. We believe that we are the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America and in Europe. However, we continue to have significant growth opportunity because our sales of these products in North America account for less than 15% of this $2.2 billion market and our sales of these products in Europe account for less than 10% of what we believe to be a $1 billion market. Today, remanufacturing is less prevalent in Europe than in the U.S. We believe we are well-positioned to capitalize on the increasing trend towards remanufacturing from repair. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to reduce the number of their suppliers. With our OEM capabilities, remanufacturing expertise, full product line, access to cores and ability to capitalize on economies of scale, we are well positioned to benefit from the consolidation of the aftermarket. Strengthen Customer Relationships We intend to increase our sales to new and existing customers by capitalizing on our balanced coverage of the key aftermarket distribution channels and our competitive strengths as an OEM supplier. We plan to strengthen our customer relationships by: . meeting the increasing demands of OEMs and their dealer networks for high-quality remanufactured units, which enable them to reduce warranty and extended service costs; . growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs due primarily to longer warranty and service programs and growing vehicle complexity; . continuing to expand our product offerings; and . capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are our customers. 3 Increase Global Presence OEMs are increasingly requiring suppliers to provide components on a global basis as vehicle platforms are standardized across geographic markets. Additionally, the Western European market for automotive components is expected to grow at a greater rate than the North American market over the next few years due to higher levels of OEM outsourcing. The emerging markets also should benefit from long-term growth as demand for automotive vehicles in these markets is expected to increase at a compounded annual rate of almost 7% over the next five years. Currently, our manufacturing base includes a presence in nine countries on four continents. We believe that continued global expansion will enable us to continue to grow to meet these demands. Increase Focus on Technologically Advanced Products We continue to produce technologically advanced products by regularly updating and enhancing our product line. These products help us to compete successfully in the global marketplace. Since 1994, we have completed the introduction of a new family of gear reduction starters that replaced all straight drive starters in GM automobiles and light duty trucks by the 1998 model year and introduced several longer-life heavy duty alternators. We are also in various stages of development on a number of new products including: . an integrated starter and alternator product scheduled for production in GM vehicles beginning in 2004; . a small gear reduction starter specifically designed for application on world automobile platforms; and . high-technology products in the distributed generation and hybrid electric vehicle markets. 4 Recent Developments Going Private Transaction On February 7, 2001, we agreed to a going private transaction with our largest stockholder, Court Square Capital Limited, which we refer to as Court Square, pursuant to which Court Square made a cash tender offer for all of our common stock not owned by it. Following completion of the tender offer on February 23, 2001, an affiliate of Court Square merged with us and the merger eliminated the remaining common stock not owned by Court Square. The aggregate consideration for the shares purchased in the tender offer and the merger was about $104.2 million. We did not incur any indebtedness in connection with the tender offer and merger. Following completion of the merger on March 14, 2001, the New York Stock Exchange delisted our common stock, and we terminated the registration of our common stock under the Exchange Act. Acquisitions On June 28, 2001, we acquired the North American remanufacturing business of Mazda North American Operations for about $17.1 million, including fees and expenses and excluding future contingent payments. The business, located in Jacksonville, Florida, is responsible for the remanufacturing of Mazda automatic transmissions, transaxles and rotary engines for Mazda's service requirements in North America. We will continue to remanufacture these components to support Mazda's service and replacement parts needs in North America. On May 4, 2001, we completed the acquisition of 100% of the stock of Auto Matic Transmission International A/S, which we refer to as AMT, and its wholly- owned subsidiary, Mr. Transmission ApS., for about $500,000. AMT is based in Soborg, which is a suburb of Copenhagen, Denmark. AMT will expand our existing business of remanufacturing automatic transmissions for passenger cars and commercial vehicles. On February 12, 2001, we expanded our aftermarket product line by acquiring the business and assets of XL Component Distribution Limited, which we refer to as XL, for about $2.4 million. Since 1985, XL, with headquarters in Droitwich, Worcestershire, England, has been involved in the remanufacturing, packaging and distribution of steering racks, brake calipers, ignition distributors, ignition leads, transmission components and rotating electrics. These products are distributed under the XL brand, with the exception of rotating electrics, which are branded under the Autostart name. In December 2000, we and AeroVironment, Inc. formed iPower Technologies, L.L.C., which we refer to as iPower, to pursue the development and commercialization of high-technology products in the distributed generation and hybrid electric vehicle markets. Distributed generation is the on-site generation of electrical power. Hybrid electric vehicles use both a traditional combustion power source and an electric motor to drive the vehicle. iPower will develop these technologies as a manufacturer and seller for the hybrid electric vehicle applications. We and AeroVironment own iPower equally. We will both devote management time to iPower and use some of our technology, intellectual property and development contracts for iPower's benefit. We expect that iPower will raise additional capital from strategic and financial investors. 5 The Exchange Offer Securities Offered.............. $165,000,000 aggregate principal amount of 11% Senior Subordinated Notes Due 2009. The terms of the new notes and old notes are identical in all material respects, except for transfer restrictions and registration rights relating to the old notes. The Exchange Offer.............. We are offering the new notes to you in exchange for a like principal amount of old notes. Old notes may be exchanged only in integral multiples of $1,000. We intend by the issuance of the new notes to satisfy our obligations contained in the registration rights agreement. Expiration Date; Withdrawal of Tender......................... The exchange offer will expire at 5:00 p.m., New York City time, on , 2001, or such later date and time to which it may be extended by us. The tender of old notes pursuant to the exchange offer may be withdrawn at any time prior to the expiration date of the exchange offer. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder thereof as promptly as practicable after the expiration or termination of the exchange offer. Conditions to the Exchange Offer.......................... Our obligation to accept for exchange, or to issue new notes in exchange for, any old notes is subject to customary conditions relating to compliance with any applicable law or any applicable interpretation by the staff of the SEC, the receipt of any applicable governmental approvals and the absence of any actions or proceedings of any governmental agency or court which could materially impair our ability to consummate the exchange offer. We currently expect that each of the conditions will be satisfied and that no waivers will be necessary. See "The Exchange Offer--Conditions to the Exchange Offer." Procedures for Tendering Old Notes.......................... If you wish to participate in the exchange offer and tender your old notes, you must complete, sign and date the letter of transmittal, or a facsimile of the letter of transmittal, in accordance with its instructions and the instructions in this prospectus, and mail or otherwise deliver the letter of transmittal, or the facsimile, together with the old notes and any other required documentation, to the exchange agent at the address set forth herein. See "The Exchange Offer--Procedures for Tendering Old Notes." Use of Proceeds................. We will not receive any proceeds from the exchange offer. Exchange Agent.................. First Union National Bank is serving as the exchange agent in connection with the exchange offer. Federal Income Tax Consequences................... The exchange of notes pursuant to the exchange offer should not be a taxable event for federal income tax purposes. See "United States Federal Income Tax Consequences." 6 Consequences of Exchanging Old Notes Pursuant to the Exchange Offer Based on certain interpretive letters issued by the staff of the SEC to third parties in unrelated transactions, we are of the view that holders of old notes (other than any holder who is an "affiliate" of our company within the meaning of Rule 405 under the Securities Act) who exchange their old notes for new notes pursuant to the exchange offer generally may offer the new notes for resale, resell the new notes and otherwise transfer the new notes without compliance with the registration and prospectus delivery provisions of the Securities Act, provided: . the new notes are acquired in the ordinary course of the holders' business; . the holders have no arrangement with any person to participate in a distribution of the new notes; and . neither the holder nor any other person is engaging in or intends to engage in a distribution of the new notes. Each broker-dealer that receives new notes for its own account in exchange for old notes must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. See "Plan of Distribution." In addition, to comply with the securities laws of applicable jurisdictions, the new notes may not be offered or sold unless they have been registered or qualified for sale in the applicable jurisdiction or in compliance with an available exemption from registration or qualification. We have agreed, under the registration rights agreement and subject to limitations specified in the registration rights agreement, to register or qualify the new notes for offer or sale under the securities or blue sky laws of the applicable jurisdictions as any holder of the notes reasonably requests in writing. If a holder of old notes does not exchange the old notes for new notes according to the terms of the exchange offer, the old notes will continue to be subject to the restrictions on transfer contained in the legend printed on the old notes. In general, the old notes may not be offered or sold, unless registered under the Securities Act, except under an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. Holders of old notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law in connection with the exchange offer. See "The Exchange Offer--Consequences of Failure to Exchange; Resales of New Notes." The old notes are currently eligible for trading in the Private Offerings, Resales and Trading through Automated Linkages (PORTAL) market. Following commencement of the exchange offer but prior to its completion, the old notes may continue to be traded in the PORTAL market. Following completion of the exchange offer, the new notes will not be eligible for PORTAL trading. 7 The New Notes The terms of the new notes and the old notes are identical in all material respects, except for transfer restrictions and registration rights relating to the old notes. Issuer.......................... Delco Remy International, Inc. Maturity Date................... May 1, 2009. Interest Payment Dates.......... May 1 and November 1 of each year commencing November 1, 2001. Optional Redemption............. Until May 1, 2004, we can choose to redeem up to 35% of the original principal amount of the notes, and any additional notes issued under the same indenture governing the notes, at a redemption price of 111% of the principal amount thereof, plus accrued and unpaid interest to the date of redemption, with money we raise in specified equity offerings, as long as: . at least 65% of the original aggregate principal amount of the notes, and any additional notes, remains outstanding after each redemption (other than notes held, directly or indirectly, by us or our affiliates); and . each redemption occurs within 90 days after the date of the related equity offering. On or after May 1, 2005, we can choose to redeem some or all of the notes at the redemption prices listed in the "Description of Notes--Optional Redemption." Change of Control............... If a Change of Control of our company occurs, subject to some conditions, we must give holders of the new notes an opportunity to sell to us the new notes at a purchase price of 101% of the principal amount of the new notes, plus accrued and unpaid interest to the date of the purchase. The term "Change of Control" is defined under "Description of Notes--Change of Control." Ranking......................... The new notes will be our senior subordinated unsecured obligations. They will rank senior in right of payment to any of our future Subordinated Obligations, equal in right of payment with any of our existing and future Senior Subordinated Indebtedness and subordinated in right of payment to any of our existing and future Senior Indebtedness. As of March 31, 2001, on a pro forma basis after giving effect to the sale of the old notes, we would have had about $200.1 million of Senior Indebtedness and $302.9 million of Senior Subordinated Indebtedness. The terms "Senior Indebtedness," "Senior Subordinated Indebtedness" and "Subordinated Obligation" are defined under "Description of Notes-- Certain Definitions." 8 The new notes will be effectively subordinated to indebtedness and other liabilities of our subsidiaries which are not guaranteeing the notes. A portion of our operations are conducted through our non- guarantor subsidiaries. See "Description of Notes--Ranking." Guarantees...................... The payment of the principal, premium and interest on the new notes is guaranteed on a senior subordinated basis by our material domestic subsidiaries. The guarantees by subsidiaries will be senior to any of their existing and future Subordinated Obligations, equal in right of payment with any of their existing and future Senior Subordinated Indebtedness and subordinated to any of their existing and future Senior Indebtedness. As of March 31, 2001, on a pro forma basis after giving effect to the sale of the old notes,the guaranteeing subsidiaries would have had $220.4 million of Senior Indebtedness and $302.9 million of Senior Subordinated Indebtedness. See "Description of Notes--Guarantees." Restrictive Covenants........... The indenture governing the notes contains covenants that limit our ability and certain of our subsidiaries' ability to: . incur additional indebtedness; . pay dividends on our capital stock or redeem, repurchase or retire our capital stock or subordinated indebtedness; . make investments; . create restrictions on the payment of dividends or other amounts to us from our restricted subsidiaries; . engage in transactions with our affiliates; . sell assets, including capital stock of our subsidiaries; and . consolidate, merge or transfer assets. These covenants are subject to important exceptions and qualifications, which are described under "Description of Notes-- Certain Covenants." For a more detailed discussion of the new notes, see "Description of Notes." Risk Factors You should carefully consider the risk factors set forth under the caption "Risk Factors" and the other information included in this prospectus prior to making an investment in the new notes. See "Risk Factors." 9 SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL DATA The following table sets forth certain summary historical and pro forma consolidated financial data. The pro forma data gives effect to the transactions described under "Unaudited Pro Forma Condensed Consolidated Financial Data." The balance sheet data under the column heading "As Adjusted" adjusts the historical balance sheet data to give effect to the issuance of the notes and the use of the net proceeds to repay a portion of the outstanding loans under our senior credit facility. The information below should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Unaudited Pro Forma Condensed Consolidated Financial Data," our consolidated financial statements, the related notes and the other financial information included elsewhere in this prospectus.
Historical Pro Forma -------------------------------------------- -------------------------- Three Months Three Months Fiscal Year Ended July 31 Ended Fiscal Year Ended ------------------------------ March 31, Ended March 31, 1998 1999 2000 2001 July 31, 2000 2001 -------- -------- ---------- ------------ ------------- ------------ (dollars in thousands) Statement of Operations Data: Net sales.............. $815,313 $953,706 $1,090,938 $261,663 $1,132,506 $261,633 Gross profit........... 147,515 182,804 228,766 48,287 243,129 48,287 Selling, general and administrative expenses.............. 76,937 88,795 108,051 28,140 113,870 28,140 Amortization of goodwill and intangibles........... 3,478 5,203 6,043 1,289 6,809 1,289 Non-recurring charges.. 26,515 -- 35,222 -- 35,222 -- Operating income....... 40,585 88,806 79,450 18,858 87,228 18,858 Interest expense....... 40,291 45,505 48,766 13,294 58,648 14,864 Income (loss) before extraordinary items... (2,187) 28,346 12,418 (1,888) 11,060 (2,956) Extraordinary items.... (1,833) -- -- -- 627 671 Net income (loss)...... (4,020) 28,346 12,418 (1,888) 11,687 (2,285) Other Financial Data: EBITDA(a).............. $ 57,226 $112,367 $ 111,907 $ 22,063 $ 120,451 $ 22,063 Adjusted EBITDA(b)..... 87,559 116,922 147,718 22,992 156,262 22,992 Cash provided by (used in) operating activities............ (11,306) 43,086 69,718 (11,489) 68,593 (12,650) Cash used in investing activities............ (69,267) (73,387) (106,376) (5,937) (106,376) (5,937) Cash provided by financing activities.. 79,123 38,048 39,806 8,076 40,967 9,237 Depreciation and amortization.......... 17,069 23,561 32,169 8,292 32,935 8,292 Capital expenditures... 24,190 25,066 38,371 3,458 38,371 3,458 EBITDA margin.......... 7.0% 11.8% 10.3% 8.4% 10.6% 8.4% Adjusted EBITDA margin................ 10.7% 12.3% 13.5% 8.8% 13.8% 8.8% Ratio of Adjusted EBITDA to interest expense............... 2.2x 2.6x 3.0x 1.7x 2.7x 1.5x Ratio of total debt to Adjusted EBITDA....... 4.5x 3.8x 3.3x NA 3.2x NA Ratio of earnings to fixed charges(c)...... -- 1.9x 1.6x 1.0x 1.5x --
10
March 31, 2001 -------------------- Actual As Adjusted -------- ----------- Balance Sheet Data: Working capital........................................... $326,024 $326,757 Total assets.............................................. 935,873 941,434 Total debt................................................ 536,229 541,825 Total stockholders' equity(d)............................. 112,702 113,400
- -------------------- (a) EBITDA represents income before extraordinary item plus the sum of interest expense, income taxes, minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures, preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion and depreciation and amortization. EBITDA for the three months ended March 31, 2001 was reduced by non-recurring costs of $3.7 million incurred in connection with our going private transaction. Excluding these costs, EBITDA would have been $25.7 million. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities prepared in accordance with generally accepted accounting principles or as an indicator of our operating performance or liquidity. We have presented EBITDA because it is commonly used by some investors to analyze a company's ability to service debt. The definition of EBITDA differs from the definition of EBITDA applicable to the covenants for the notes and may not be comparable to EBITDA as defined by other companies. (b) Adjusted EBITDA represents EBITDA plus the sum of non-cash post-retirement benefits other than pensions and non-recurring charges. Adjusted EBITDA for the three months ended March 31, 2001 was reduced by non-recurring costs of $3.7 million incurred in connection with our going private transaction. Excluding these costs, Adjusted EBITDA would have been $26.7 million. Adjusted EBITDA was calculated as follows:
Historical Pro Forma ----------------------------------------- --------------------------- Fiscal Year Ended July 31 Three Months Fiscal Year Three Months ------------------------- Ended March 31, Ended July Ended March 31, 1998 1999 2000 2001 31, 2000 2001 ------- -------- -------- --------------- ----------- --------------- (dollars in thousands) EBITDA, as defined...... $57,226 $112,367 $111,907 $ 22,063 $120,451 $ 22,063 Non-cash post-retirement benefits other than pensions............... 3,818 4,555 589 929 589 929 Non-recurring charges... 26,515 -- 35,222 -- 35,222 -- ------- -------- -------- -------- -------- -------- Adjusted EBITDA......... $87,559 $116,922 $147,718 $ 22,992 $156,262 $ 22,992 ======= ======== ======== ======== ======== ========
(c) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes, fixed charges, minority interest in income of subsidiaries and income (loss) from unconsolidated joint ventures. Fixed charges include preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion, interest expense and the portion of operating rents that is deemed representative of an interest factor. Our earnings were insufficient to cover our fixed charges by $3.9 million during fiscal year 1998 and, on a pro forma basis, would have been insufficient to cover our fixed charges by $1.1 million in the three months ended March 31, 2001. (d) Reflects the extraordinary gain, net of income tax, realized on the early retirement of our 8% Subordinated Debenture. Does not include any adjustment to reflect the cancellation of a stock purchase plan in connection with our going private transaction. 11 RISK FACTORS You should consider carefully the following risk factors, in addition to the other information set forth in this prospectus, before making an investment decision. Our substantial indebtedness may limit cash flow available to invest in the ongoing needs of our business to generate future cash flow, which could prevent us from fulfilling our obligations under the notes. We have a significant amount of indebtedness. The following chart sets forth important credit information on a pro forma basis after giving effect to the sale of the old notes as of the date, or at the beginning of the period, specified below:
At March 31, 2001 --------------------- (dollars in millions) Total indebtedness..................................... $541.8 Stockholders' equity................................... 113.4 Three Months End March 31, 2001 ---------------- Ratio of earnings to fixed charges..................... --
On a pro forma basis, our earnings were insufficient to cover our fixed changes by $1.1 million during the first quarter of 2001. In addition, on a pro forma basis, after giving effect to the sale of the old notes, as of March 31, 2001, we would have had about $233.0 million of unused availability under our senior credit facility, subject to specific requirements, including compliance with financial covenants. Our substantial indebtedness could have important consequences to you. For example, it could: . require us to dedicate a substantial portion of our cash flow from operations to payments on our indebtedness, reducing the availability of our cash flow to fund working capital, capital expenditures, research and development efforts and other general corporate purposes; . increase the amount of interest expense that we have to pay, because certain of our borrowings are at variable rates of interest, which, if interest rates increase, could result in higher interest expense; . increase our vulnerability to adverse general economic or industry conditions; . limit our flexibility in planning for, or reacting to, changes in our business or the industry in which we operate; . prevent us from raising the funds necessary to repurchase all notes tendered to us upon the occurrence of specific changes of control in our ownership, which would constitute a default under the indenture governing our notes; or . place us at a competitive disadvantage compared to our competitors that have less debt. See "Capitalization," "Summary Consolidated Historical and Pro Forma Financial Data," "Selected Consolidated Historical Financial Data," "Unaudited Pro Forma Condensed Consolidated Financial Data" and "Description of Other Indebtedness." Despite our level of indebtedness, we and our subsidiaries will be able to incur substantially more debt. This could further exacerbate the risks described above. We and our subsidiaries may be able to incur substantial additional indebtedness in the future. Although the indenture governing the notes contains restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and the indebtedness incurred in compliance with these restrictions could be substantial. Also, these restrictions do not prevent us from incurring obligations that do not constitute indebtedness. As of March 31, 2001, on a pro forma basis, after giving effect to the sale of the old notes, our senior credit facilities would have provided for additional borrowing of up to 12 about $233.0 million, subject to specific requirements, including compliance with financial covenants. To the extent new debt is added to our and our subsidiaries' currently anticipated debt levels, the substantial leverage risks described above would increase. See "Description of Notes" and "Description of Other Indebtedness." To service our indebtedness, we will require a significant amount of cash. Our ability to generate cash depends on many factors beyond our control. If we cannot generate the required cash, we may not be able to make the necessary payments under the notes. Our ability to make payments on our indebtedness, including the notes, and to fund planned capital expenditures and research and development efforts 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. Our historical financial results have been, and we anticipate that our future financial results will be, subject to substantial fluctuations. We cannot assure you that our business will generate sufficient cash flow from operations, that we will realize the currently anticipated cost savings and operating improvements on schedule or that future borrowings will be available to us in an amount sufficient to enable us to pay our indebtedness, including the notes, or to fund our other liquidity needs. Our inability to pay our debts would require us to pursue one or more alternative strategies, such as selling assets, refinancing or restructuring our indebtedness or selling equity capital. However, we cannot assure you that any alternative strategies will be feasible at the time or prove adequate. Also, some alternative strategies would require the prior consent of our senior secured lenders, which we may not be able to obtain. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." Your right to receive payments on the new notes, like the old notes, is junior to our existing senior indebtedness and the existing senior indebtedness of the subsidiary guarantors and possibly all of our and their future borrowings. Further, claims of creditors of our non-guarantor subsidiaries will generally have priority with respect to the assets and earnings of those subsidiaries over your claims. The new notes, like the old notes, and the subsidiary guarantees will be subordinated to the prior payment in full of our and the subsidiary guarantors' respective current and future senior indebtedness to the extent set forth in the indenture. As of March 31, 2001, after giving pro forma effect to the sale of the old notes, we would have had about $200.1 million of Senior Indebtedness, consisting of our 8 5/8% Senior Notes Due 2007 and our senior guarantee of our subsidiaries' obligations under the senior credit facilities, and the subsidiary guarantors would have had about $220.4 million of Senior Indebtedness, consisting of the senior credit facilities and their senior guarantee of our obligations under our 8 5/8% Senior Notes Due 2007. Because of the subordination provisions of the notes, in the event of the bankruptcy, liquidation or dissolution of our company or any guarantor, our assets or the assets of the guarantors would be available to pay obligations under the notes and our other senior subordinated obligations only after all payments had been made on our or the guarantors' Senior Indebtedness. Sufficient assets may not remain after all these payments have been made to make any payments on the notes and our other senior subordinated obligations, including payments of interest when due. The term "Senior Indebtedness" is defined in the "Description of Notes" section of this prospectus. In addition, all payments on the notes and the guarantees will be prohibited in the event of a payment default on our Senior Indebtedness (including borrowings under the senior credit facilities) and, for limited periods, upon the occurrence of other defaults under the senior credit facilities. We conduct all of our business through our subsidiaries. Some of our immaterial domestic subsidiaries, and all of our foreign subsidiaries, are not guaranteeing the notes. The aggregate net sales and EBITDA for the five months ended December 31, 2000 of our subsidiaries that are not guaranteeing the notes were $171.3 million and $12.6 million, respectively, and at December 31, 2000, those subsidiaries had total assets of $220.0 million. Claims of creditors of the non-guarantor subsidiaries, including trade creditors, secured creditors and unsecured creditors, and claims of preferred stockholders (if any) of the non-guarantor subsidiaries, will 13 generally have priority with respect to their assets and earnings over the claims of creditors of our company, including holders of the notes, even if the obligations of the subsidiaries do not constitute senior indebtedness. See "Description of Notes--Ranking" and "Description of Notes--Certain Covenants-- Limitation on Indebtedness." The new notes, like the old notes, are not secured by our assets and those of our subsidiaries, and the lenders under the senior credit facilities will be entitled to remedies available to a secured lender, which gives them priority over the note holders to collect amounts due on our debt. In addition to being subordinated to all of our existing and future senior debt, the new notes, like the old notes, and the subsidiary guarantees will not be secured by any of our assets. Our obligations under the senior credit facilities are secured by, among other things, a first priority pledge of all of our capital stock, mortgages upon all of the real property owned by us in the U.S. and by substantially all of the assets of our company and each of our existing and subsequently acquired or organized material domestic (and, to the extent no adverse tax consequences will result, foreign) subsidiaries. If we become insolvent or are liquidated, or if payment under the senior credit facilities or in respect of any other secured senior indebtedness is accelerated, the lenders under the senior credit facilities or holders of other secured senior indebtedness will be entitled to exercise the remedies available to a secured lender under applicable law (in addition to any remedies that may be available under documents pertaining to the senior credit facilities or the other senior debt). Upon the occurrence of any default under the senior credit facilities (and even without accelerating the indebtedness under the senior credit facilities), the lenders may be able to prohibit the payment of the notes and guarantees either by limiting our ability to access our cash flow or under the subordination provisions contained in the indenture governing the notes. See "Description of Other Indebtedness--Senior Credit Facility" and "Description of Notes." Restrictions imposed by our senior credit facilities, the indentures governing our existing notes and the indenture governing these notes limit our ability to engage in or enter into business, operating and financing arrangements, which could prevent us from taking advantage of potentially profitable business opportunities. The operating and financial restrictions and covenants in our debt instruments, including the senior credit facilities, the 8 5/8% Senior Notes Due 2007, the 10 5/8% Senior Subordinated Notes Due 2006 and these notes, may affect adversely our ability to finance our future operations or capital needs or engage in other business activities that may be in our interest. In particular, our senior credit facilities require us to maintain certain financial ratios which become more restrictive over time. Our ability to comply with these ratios may be affected by events beyond our control. A breach of any of these covenants or our inability to comply with the required financial ratios could result in a default under our senior credit facilities. In the event of any default under our senior credit facilities, the lenders under our senior credit facilities could elect to declare all borrowings outstanding, together with accrued and unpaid interest and other fees, to be due and payable, to require us to apply all of our available cash to repay these borrowings or to prevent us from making debt service payments on these notes, any of which would be an event of default under these notes. See "Description of Notes" and "Description of Other Indebtedness." We may not have the ability to raise the funds necessary to finance the change of control offer required by the indenture governing the notes, which would violate the terms of the notes. Upon the occurrence of a change of control, we will be required to offer to repurchase all of our existing notes and these notes. The existing notes include the 8 5/8% Senior Notes Due 2007 which rank pari passu with the obligations and guarantees arising under our senior credit facilities and senior to most of our other indebtedness. We cannot assure you that there will be sufficient funds available for us to make any required repurchases of the notes, including the senior notes, upon a change of control. In addition, our senior credit facilities will prohibit us from purchasing any notes and provide that the occurrence of a change of control 14 constitutes a default. If we do not repay all borrowings under our senior credit facilities or obtain a consent of our lenders under our senior credit facilities to repurchase the notes, we will be prohibited from purchasing the notes. Our failure to purchase tendered notes would constitute a default under the indenture governing the notes, which, in turn, would constitute a default under our senior credit facilities. See "Description of Notes--Change of Control." A subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy laws or comparable state laws, which could result in the holders of the notes not being able to rely on that subsidiary guarantor to satisfy claims. Under U.S. bankruptcy law and comparable provisions of state fraudulent transfer laws, a guarantee can be voided, or claims under a guarantee may be subordinated to all other debts of that guarantor if, among other things, the guarantor, at the time it incurred the indebtedness evidenced by its guarantee: . intended to hinder, delay or defraud any present or future creditor or received less than reasonably equivalent value or fair consideration for the incurrence of the guarantee; and . the guarantor: . was insolvent or rendered insolvent by reason of the incurrence; . was engaged in a business or transaction for which the guarantor's remaining assets constituted unreasonably small capital; or . intended to incur, or believed that it would incur, debts beyond its ability to pay those debts as they mature. In addition, any payment by that guarantor under a guarantee could be voided and required to be returned to the guarantor or to a fund for the benefit of the creditors of the guarantor. The measures of insolvency for purposes of fraudulent transfer laws will vary depending upon the governing law. Generally, a guarantor would be considered insolvent if: . the sum of its debts, including contingent liabilities, was greater than the fair salable value of all of its assets; . the present fair salable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or . it could not pay its debts as they become due. On the basis of historical financial information, recent operating history and other factors, we believe that the subsidiary guarantees are being incurred for proper purposes and in good faith and that each guarantor, after giving effect to its guarantee of the notes, will not be insolvent, have unreasonably small capital for the business in which it is engaged or have incurred debts beyond its ability to pay as they mature. We cannot be certain, however, that a court would agree with our conclusions in this regard. Our business is cyclical in nature and downturns in the automotive industry could reduce the revenues and profitability of our business. The demand for our products is largely dependent on the production of automobiles, light trucks and heavy duty vehicles in North America. The automotive industry is highly cyclical, as new vehicle demand is dependent on consumer spending and is tied closely to the overall strength of the North American economy. The North American automotive industry is facing costly inventory corrections which could adversely affect our revenues and the profitability of our business. Recent production cuts announced by the three largest auto makers, including GM, and cutbacks in heavy duty truck production, have adversely affected us. Any decline in 15 the demand for new automobiles, particularly in the United States, could have a material adverse impact on our financial condition and results of operations. Seasonality experienced by the automobile industry also impacts our operations, and historically we have reported lower levels of sales for July and December due to model changeovers and plant idlings by the automobile and light truck OEMs. Consolidation among automotive parts customers and suppliers could make it more difficult for us to compete successfully. In both the original equipment market and aftermarket, the customer base for original equipment and aftermarket automotive parts is consolidating. As a result, we are competing for business from fewer customers. Due to the cost focus of these major customers, we have been, and expect to continue to be, required to reduce our prices. We cannot be sure that we will be able to generate cost savings and operational improvements in the future that would be sufficient to offset price reductions required by existing customers and necessary to win new business. Furthermore, the trend towards consolidation among automotive parts suppliers is resulting in fewer, larger suppliers who benefit from purchasing and distribution economies of scale. If we cannot achieve cost savings and operational improvements sufficient to allow us to compete favorably in the future with these larger companies, our financial condition and results of operations could be adversely affected due to a reduction of, or inability to increase, sales. See "Business--Industry Overview." Longer product life of automotive parts may reduce aftermarket demand for some of our products. The average useful life of automotive parts has been steadily increasing in recent years due to innovations in products and technologies. The longer product life allows vehicle owners to replace parts of their vehicles less often. As a result, a portion of sales in the aftermarket has been displaced. Additional increases in the average useful life of automotive parts are likely to adversely affect the demand for our aftermarket products. Aftermarket sales represented about 50% of our net sales for calendar year 2000. See "Business-- Industry Overview." We depend heavily on GM. If GM develops alternative sources or otherwise decreases its need for the products we currently supply, our revenues may decrease. The loss of GM as a customer for OEM or aftermarket products, the default by GM on its obligations to act as a distributor or to purchase our OEM or aftermarket products, a substantial decrease in demand for GM's automobile models containing our products or our failure to obtain supply orders for our products used in GM's new automobile models could have a material adverse effect on our business, financial condition and results of operations. In addition, strikes and work stoppages affecting GM's operations may postpone GM's need for components produced by us, which could have a material adverse effect on our business, financial condition and results of operations. GM accounted for about 45% of our total OEM net sales in fiscal year 2000. GM Service Parts Operations, which we refer to as GM SPO, accounted for about 15% of our total aftermarket net sales in fiscal year 2000. In connection with our separation from GM in July 1994, GM entered into long-term contracts to purchase from us 100% of its North American requirements for automotive starters (other than for Saturn and Geo) and 100% of its U.S. and Canadian requirements for heavy duty starters and alternators. GM's obligation to purchase automotive starters from us terminates on August 31, 2008. GM's obligation to purchase heavy duty starters and alternators from us terminated on July 31, 2000. GM's commitments to purchase products from us in the future are subject to those products remaining competitive as to price, technology and design. See "Business--Customers." We cannot be sure that GM will not develop alternative sources for components currently produced by us and purchase some or all of its requirements for starters and alternators from these alternative sources. 16 In addition, GM SPO has been designated as the exclusive distributor of a significant amount of our automotive products and as a distributor of our heavy duty aftermarket products. GM SPO has agreed to provide us with purchasing support, which enables us to obtain raw materials at competitive prices. Our exclusive distribution arrangements with GM SPO for our automotive aftermarket products terminates on July 31, 2009. Our distribution arrangement with GM SPO is continuously renewable on an annual basis for our heavy duty aftermarket products. The prices that we can charge GM and some of our other customers are predetermined and we bear the risk of costs in excess of our estimates. Our supply agreements with GM and some of our other customers require us to provide our products at predetermined prices. In some cases, these prices decline over the course of the contract. The costs that we incur in fulfilling these contracts may vary substantially from our initial estimates. Unanticipated cost increases may occur as a result of several factors, including increases in the costs of labor, components or materials. In some cases, we are permitted to pass on to our customers the cost increases associated with specific materials. Cost overruns that we cannot pass on to our customers would adversely affect our business, financial condition and results of operations. A limited number of persons indirectly control us and may exercise their control in a manner adverse to you. Court Square, Berkshire Hathaway Inc. and DRI Group, LLC, which we refer to as DRI Group, together own beneficially about 94.6% of our outstanding common stock and members of our management own beneficially about 5.4% of our outstanding common stock. By virtue of their ownership, these persons have the power to direct our affairs and will be able to determine the outcome of all matters required to be submitted to our stockholders for approval, including the election of a majority of our directors, the approval of mergers, consolidations and the sale of all or substantially all of our assets and the amendment of our certificate of incorporation. These persons have the power to prevent or cause a change of control of our company. See "Ownership of Capital Stock" and "Description of Capital Stock--Securities Transfer, Recapitalization and Holders Agreement." We may be required to make substantial additional payments in connection with our completed acquisitions. In connection with our separation from GM, one of our subsidiaries issued a contingent purchase price note to GM payable beginning in 2004. The amount payable will depend on our earnings over the three-year period ending December 31, 2003. We cannot predict the amounts of the payments, if any, that we will be required to make under the contingent note. We will also be required to make additional payments in connection with our acquisitions of M&M Knopf, Delco Remy Mexico, Delco Remy Korea and AMT. We expect that the aggregate amount of these payments will be in the range of $15 million to $40 million, payable over about four years. Because the amounts of some of these payments depend on future earnings, the actual amounts of these payments may differ substantially from our estimates. We granted put/call options in connection with the acquisitions of World Wide Automotive and Power Investments that became exercisable in February 2001 for World Wide Automotive and March 2001 for Power Investments. The exercise prices that we would be required to pay upon exercise of the put options, which are based on earnings formulas, are currently estimated to be about $26 million in total for the two acquisitions. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Liquidity and Capital Resources" and "Description of Other Indebtedness--GM Contingent Purchase Price Note." We may not be able to consummate future acquisitions or successfully integrate acquisitions into our business. To expand our markets and take advantage of the consolidation trend in the automotive parts industry, our business strategy includes growth through acquisitions. Our failure to integrate acquired businesses successfully 17 into our existing businesses, or the expense incurred in consummating future acquisitions, could result in our company incurring unanticipated expenses and losses. We are continually investigating opportunities for domestic and foreign acquisitions. In connection with future acquisitions, the process of integrating acquired operations into our existing operations may result in unforeseen operating difficulties and may require significant financial resources that would otherwise be available for the ongoing development or expansion of existing operations. Our ability to make future acquisitions may be constrained by our ability to obtain additional financing. Acquisitions may involve a number of special risks, including: . unexpected losses of key employees or customers of the acquired business; . conforming the standards, processes, procedures and controls of the acquired business with those of our existing operations; . coordinating new product and process development; . hiring additional management and other critical personnel; . negotiating with labor unions; and . increasing the scope, geographic diversity and complexity of our operations. Possible future acquisitions could result in our incurrence of additional debt, contingent liabilities and amortization expenses related to goodwill and other intangible assets, all of which could have a material adverse effect on our financial condition and operating results. See "Business--Business Strategy" and "Description of Other Indebtedness." If we are unable to retain senior executives and other qualified professionals our growth may be hindered. Our success is largely dependent on maintaining our staff of qualified professionals. The market for qualified professionals is competitive and we may not continue to be successful in our efforts to attract and retain these professionals. Our future operations could be harmed if any of our senior executives or other key personnel ceased working for us. Our success depends in part on key customer relationships forged by members of our senior management. We cannot assure you that we will be able to continue to maintain these relationships if members of senior management leave us. We may experience increased costs associated with labor unions that could adversely affect our financial performance and results of operations. As of March 31, 2001, about 1,491 of our 7,710 employees, or about 19%, were represented by unions. Our contract with the UAW, which represents 550 of our hourly workers, is effective through March 2003 and stipulates an annual wage and benefit increase of about 3.2%. Some of our other union contracts also provide for wage and benefit increases. If we are unable to offset these wage and benefit increases through cost reduction initiatives and increased productivity, our financial condition and operating results would be adversely affected. See "Business--Employees." Our business is very competitive and increased competition could reduce our revenues. The motor vehicle parts industry in which we operate is highly competitive. Some of our OEM competitors are divisions or subsidiaries of companies that are larger and have substantially greater resources 18 than we do. We cannot be sure that we will be able to compete successfully with our competitors. See "Business--Competition." Our international operations subject us to risks not faced by domestic competitors, which include unfavorable political, regulatory, labor and tax conditions in other countries. About 22.3% of our net sales in fiscal year 2000 were derived from sales in foreign markets. We expect sales from international markets to represent an increasing portion of total sales. Risks inherent in international operations include the following: . agreements may be difficult to enforce and receivables difficult to collect through a foreign country's legal system; . foreign customers may have longer payment cycles; . foreign countries may impose additional withholding taxes or otherwise tax our foreign income, impose tariffs or adopt other restrictions on foreign trade or investment, including exchange controls; . U.S. export licenses may be difficult to obtain; . intellectual property rights may be more difficult to enforce in foreign countries; . fluctuations in exchange rates may affect product demand and may adversely affect the profitability in U.S. dollars of products and services provided by us in foreign markets where payment for our products and services is made in the local currency; . general economic conditions in the countries in which we operate could have an adverse effect on our earnings from operations in those countries; . unexpected adverse changes in foreign laws or regulatory requirements may occur; . compliance with a variety of foreign laws and regulations may be difficult; and . overlap of different tax structures may subject us to additional taxes. We cannot be sure that any of these factors will not have a material adverse effect on our business, financial condition and results of operations. See "Business--Business Strategy." An insufficient supply of cores could make it difficult or impossible for us to respond to customer demands. In our remanufacturing operations, we obtain cores from various sources, principally our existing aftermarket customers, which generally return cores when they purchase remanufactured products. As a result, GM SPO and Navistar each supplied greater than 10% of the cores used by us in fiscal year 2000. We also obtain cores from brokers who specialize in buying and selling cores. No single broker supplies us with more than 10% of those cores. We expect our recent acquisition of M&M Knopf to improve our ability to acquire cores. The ability to obtain cores of the types and quantities required by our business is essential to our ability to meet demand and expand production in our remanufacturing business. A sufficient supply of cores may not always be available to permit us to respond fully to customer demands for our remanufactured products. Shortages of cores could result from, among other things: . a time lag between the initial customer order for a remanufactured product and the return of cores for the products; . an inability to salvage cores for reuse due to excessive wear or deterioration; or . our inability to acquire cores because of loss or significant deterioration of our relationships with our customers. 19 Although we believe that our relationships with several of our customers will continue to provide us with access to cores, we cannot be sure that we will continue to have an adequate supply of cores for our remanufactured products. We are dependent on the availability of raw materials. We require substantial amounts of raw materials and substantially all raw materials we require are purchased from outside sources. The availability and prices of raw materials may be subject to curtailment or change due to, among other things, new laws or regulations, suppliers' allocations to other purchasers, interruptions in production by suppliers, changes in exchange rates and worldwide price levels. Any change in the supply of, or price for, these raw materials could materially affect our operating results. We are subject to the effects of fluctuations in foreign exchange rates. We are exposed to fluctuations in foreign currencies as a significant portion of our revenue, and some of our costs, assets and liabilities, are denominated in currencies other than the U.S. dollar. Principal and interest on the notes will be payable in U.S. dollars. Our ability to pay interest and principal on the notes and our other principal indebtedness when due is dependent on the then current exchange rates between U.S. dollars, on the one hand, and the euro and other European as well as Asian currencies, on the other hand, which rates are and will be subject to fluctuation. About 22.3% of our net sales in fiscal year 2000 were derived from sales in foreign markets. We expect that our share of revenue in non-U.S. dollar denominated currencies will continue to increase in future periods. We cannot be sure, however, that exchange rate fluctuations will not have a material adverse effect on our results of operations and financial condition and, therefore, on our ability to make principal and interest payments on our indebtedness, including the notes, when due. Environmental and health and safety liabilities and requirements could require us to incur material costs. We are subject to various U.S. and foreign laws and regulations relating to environmental protection and worker health and safety, including those governing: .discharges of pollutants into the air and water; .the management and disposal of hazardous substances; and .the cleanup of contaminated properties. The nature of our operations exposes us to the risk of liabilities or claims with respect to environmental matters, including on-site and off-site disposal matters. For example, there are ongoing investigation and remediation activities in connection with several of our properties, and we have been identified as a potentially responsible party at two off-site disposal sites. Although virtually all of these matters are being handled by former owners of our various properties and businesses pursuant to indemnification and similar agreements, we could incur material costs in connection with these matters if these indemnities become inapplicable or unavailable. Based on our experience to date, we believe that the future cost of compliance with existing environmental laws, regulations and ordinances (or liability for known environmental claims) will not have a material adverse effect on our business, financial condition and results of operations. However, future events could require us to make additional expenditures to modify or curtail our operations, install pollution control equipment or investigate and cleanup contaminated sites, such as: .the discovery of new information concerning past releases of hazardous substances; .the discovery or occurrence of compliance problems relating to our operations; .changes in existing environmental laws or their interpretation; and 20 .more rigorous enforcement by regulatory authorities. Expenditures resulting from these events could have a material adverse effect on our business, financial condition and results of operations. See "Business-- Environmental Regulation." We have a holding company structure and will depend on distributions from our operating subsidiaries to pay our existing notes and these notes. Contractual or legal restrictions applicable to our subsidiaries could limit distributions from them. We are a holding company and derive all of our operating income from, and hold substantially all of our assets through, our subsidiaries. The effect of this structure is that we will depend on the earnings of our subsidiaries, and the payment or other distributions to us of these earnings, to meet our obligations under our Senior Credit Facility, the 8 5/8% Senior Notes Due 2007, the 10 5/8% Senior Subordinated Notes Due 2006 and these notes. Provisions of law, like those requiring that dividends be paid only out of surplus, and provisions of our senior indebtedness limit the ability of our subsidiaries to make payments or other distributions to us. Our subsidiaries also could agree to other contractual restrictions on their ability to make distributions. See "Description of Other Indebtedness." There is no public trading market for the new notes and an active trading market may not develop for the new notes. The old notes are currently eligible for trading in the PORTAL Market, a screen-based market operated by the National Association of Securities Dealers. The PORTAL market is limited to qualified institutional investors as defined by Rule 144A of the Securities Act. The new notes are new securities for which there is no established trading market. We do not intend to apply for listing or quotation of the notes on any securities exchange or stock market. Credit Suisse First Boston Corporation and Deutsche Banc Alex. Brown Inc. acted as initial purchasers in connection with the offer and sale of the old notes. The initial purchasers have informed us that they intend to make a market in the new notes. However, these initial purchasers may cease their market-making at any time. In addition, the liquidity of the trading market in the new notes, and the market price quoted for the new notes, may be adversely affected by changes in the overall market for high yield securities and by changes in our financial performance or prospects or in the prospects for companies in our industry generally. As a result, we cannot assure you that an active trading market will develop for the new notes. Failure to tender your old notes for new notes could limit your ability to resell the old notes. The old notes were not registered under the Securities Act or under the securities laws of any state and may not be resold, offered for resale or otherwise transferred unless they are subsequently registered or resold under an exemption from the registration requirements of the Securities Act and applicable state securities laws. If you do not exchange your old notes for new notes in the exchange offer, you will not be able to resell, offer to resell or otherwise transfer the old notes unless they are registered under the Securities Act or unless you resell them, offer to resell or otherwise transfer them under an exemption from the registration requirements of, or in a transaction not subject to, the Securities Act. In addition, we will no longer be under an obligation to register the old notes under the Securities Act except in the limited circumstances provided under the registration rights agreement. If you want to exchange your old notes in the exchange offer for the purpose of participating in a distribution of the new notes, you may be deemed to have received restricted securities, and, if so, will be required to comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. 21 USE OF PROCEEDS We will not receive any proceeds from the exchange offer. In consideration for issuing the new notes, we will receive in exchange old notes of like principal amount, the terms of which are identical in all material respects, except for transfer restrictions and registration rights relating to the old notes, to the new notes. The old notes surrendered in exchange for new notes will be retired and canceled and cannot be reissued. Accordingly, issuance of the new notes will not result in any increase in our indebtedness. We have agreed to bear the expenses of the exchange offer. No underwriter is being used in connection with the exchange offer. The net proceeds from the sale of the old notes was about $157 million. We used about $138 million of the net proceeds from the sale of the old notes to repay a portion of the outstanding loans under our senior credit facility and about $19 million of the net proceeds from the sale of the old notes to retire our 8% Subordinated Debenture. 22 CAPITALIZATION (dollars in thousands) The following table sets forth our consolidated cash and cash equivalents and capitalization as of March 31, 2001, on an actual basis and adjusted to give effect to the sale of the old notes. You should read this table in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," "Description of Other Indebtedness" and our financial statements, the related notes and the other financial information included elsewhere in this prospectus.
March 31, 2001 ------------------ Actual Pro Forma -------- --------- Cash and cash equivalents.................................... $ 14,398 $ 14,398 ======== ======== Debt: Senior Credit Facility(l).................................. $193,438 $ 55,098 8% Subordinated Debenture(2)............................... 18,916 -- 8 5/8% Senior Notes Due 2007(3)............................ 145,000 145,000 Other Senior Debt and Capitalized Leases................... 38,875 38,875 10 5/8% Senior Subordinated Notes Due 2006(4).............. 140,000 140,000 11% Senior Subordinated Notes Due 2009(5).................. -- 162,852 -------- -------- Total Debt............................................... 536,229 541,825 Stockholders' Equity(6)...................................... 112,702 113,400 -------- -------- Total Capitalization..................................... $648,931 $655,225 ======== ========
- --------------------- (1) The senior credit facility provides for borrowings of up to $300,000 subject to specific requirements, including compliance with financial covenants. The loans under our senior credit facility mature on October 31, 2003. The weighted average interest rate on the amounts outstanding under our senior credit facility at March 31, 2001 was about 8.0%. (2) The 8% Subordinated Debenture was issued to GM by Delco Remy America, Inc., on December 22, 1997 in a principal amount of $19,488 and matures on July 31, 2004. The 8% Subordinated Debenture bears interest, payable in cash, at the rate of 8% per year. (3) The 8 5/8% Senior Notes Due 2007 were issued in 1997 in an aggregate principal amount of $145,000. The 8 5/8% Senior Notes Due 2007 accrue interest at the rate of 8 5/8% per annum and are due December 15, 2007. Interest on the 8 5/8% Senior Notes Due 2007 is payable in cash semi- annually. The 8 5/8% Senior Notes Due 2007 are fully and unconditionally guaranteed on a senior basis by our material domestic subsidiaries. (4) The 10 5/8% Senior Subordinated Notes Due 2006 were issued in 1996 in an aggregate principal amount of $140 million. The 10 5/8% Senior Subordinated Notes Due 2006 accrue interest at the rate of 10 5/8% per annum and are due August 1, 2006. Interest on the 10 5/8% Senior Subordinated Notes is payable in cash semi-annually. The 10 5/8% Senior Subordinated Notes are fully and unconditionally guaranteed on a senior subordinated basis by our material domestic subsidiaries. (5) Reflects issuance of $165,000 principal amount of 11% Senior Subordinated Notes Due 2009 at 98.698% of face value. (6) Reflects the extraordinary gain, net of income tax, realized on the early retirement of our 8% Subordinated Debenture. 23 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA The following unaudited pro forma condensed consolidated financial data are based on our consolidated financial statements included elsewhere in this prospectus, adjusted to give effect to the acquisition of M.&M. Knopf Auto Parts, Inc., which we refer to as M&M Knopf, on March 10, 2000 and the sale of the old notes, which we refer to as the transactions, as described below. The unaudited pro forma condensed consolidated statement of operations for the fiscal year ended July 31, 2000 has been adjusted to give effect to the transactions as if they had occurred on August 1, 1999. The unaudited pro forma condensed consolidated statement of operations for the three months ended March 31, 2001 has been adjusted to give effect to the sale of the old notes as if it had occurred on January 1, 2001. The unaudited pro forma condensed consolidated balance sheet at March 31, 2001 has been adjusted to give effect to the sale of the old notes as if it had occurred on March 31, 2001. The unaudited pro forma condensed consolidated financial data do not purport to be indicative of the results of operations or financial position that would actually have been obtained if the transactions had occurred on the dates indicated or of the results of operations or financial position that may be obtained in the future. The unaudited pro forma condensed consolidated financial data are presented for comparative purposes only. The pro forma adjustments, as described in the accompanying data, are based on available information and certain assumptions that management believes are reasonable. The unaudited pro forma condensed consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," our consolidated financial statements, the related notes and the other financial information included elsewhere in this prospectus. 24 Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Fiscal Year Ended July 31, 2000
Historical -------------------- Pro Forma M&M Acquisition for Offering Delco Remy Knopf(a) Adjustments(b) Acquisition Adjustments(c) Pro Forma ---------- -------- -------------- ----------- -------------- ---------- (dollars in thousands) Net sales............... $1,090,938 $41,568 $ -- $1,132,506 $ -- $1,132,506 Cost of goods sold...... 862,172 27,205 -- 889,377 -- 889,377 ---------- ------- ------- ---------- -------- ---------- Gross profit............ 228,766 14,363 -- 243,129 -- 243,129 Selling, general and administrative expenses............... 108,051 5,819 -- 113,870 -- 113,870 Amortization of goodwill and intangibles........ 6,043 -- 766 (1) 6,809 -- 6,809 Non-recurring charge.... 35,222 -- -- 35,222 -- 35,222 ---------- ------- ------- ---------- -------- ---------- Operating income........ 79,450 8,544 (766) 87,228 -- 87,228 Interest expense........ (48,766) (415) (3,187)(2) (52,368) (6,280)(1) (58,648) Non-operating income.... 288 -- -- 288 -- 288 ---------- ------- ------- ---------- -------- ---------- Income (loss) before income taxes (benefit), minority interest in income of subsidiaries, loss from unconsolidated joint ventures and extraordinary item..... 30,972 8,129 (3,953) 35,148 (6,280) 28,868 Income taxes (benefit).. 11,460 3,080 (1,502)(3) 13,038 (2,324)(2) 10,714 Minority interest in income of subsidiaries........... (6,742) -- -- (6,742) -- (6,742) Loss from unconsolidated joint ventures......... (352) -- -- (352) -- (352) ---------- ------- ------- ---------- -------- ---------- Net income (loss) before extraordinary item..... 12,418 5,049 (2,451) 15,016 (3,956) 11,060 Extraordinary item: Gain on early extinguishment of debt............... -- -- -- -- 627(3) 627 ---------- ------- ------- ---------- -------- ---------- Net income (loss)....... $ 12,418 $ 5,049 $(2,451) $ 15,016 $ (3,329) $ 11,687 ========== ======= ======= ========== ======== ========== Other Financial Data: EBITDA(d).............. $ 111,907 $ 8,544 $ -- $ 120,451 $ -- $ 120,451 Adjusted EBITDA(e)..... 147,718 8,544 -- 156,262 -- 156,262 Cash provided by (used in) operating activities............ 69,718 5,049 (1,685)(4) 73,082 (4,489)(4) 68,593 Cash used in investing activities............ (106,376) -- -- (106,376) -- (106,376) Cash provided by financing activities.. 39,806 -- -- 39,806 1,161 (5) 40,967 Depreciation and amortization.......... 32,169 -- 766 (1) 32,935 -- 32,935 Capital expenditures... 38,371 -- -- 38,371 -- 38,371
- --------------------- (a) This column provides the historical results of M&M Knopf for the period from August 1, 1999 through March 9, 2000. The results of M&M Knopf were included in our historical consolidated statements of operations from March 10, 2000, the closing date of the M&M Knopf acquisition. 25 (b) This column provides the purchase accounting adjustments and related income tax effect for the acquisition of M&M Knopf for the period from August 1, 1999 through March 9, 2000 as if the acquisition had occurred on August 1, 1999. (1) Represents goodwill recorded in the acquisition of about $37,600 amortized over a period of 30 years. (2) Represents the incremental interest expense associated with the cash purchase price of about $61,300, at an assumed interest rate of 8.5%. (3) Represents the incremental income tax benefit resulting from the above adjustments at an assumed effective tax rate of 38.0%. (4) Represents incremental interest payments net of the income tax benefit on the acquisition adjustments. (c) This column provides adjustments to give effect to the sale of the old notes and the application of the proceeds as if they had occurred on August 1, 1999. (1) Represents interest expense on the notes of about $19,114, including amortization of deferred acquisition costs, at an interest rate of 11.0%, less the reduction in interest expense of about $11,275 at an assumed interest rate of 8.15% resulting from paying down the senior credit facility and the reduction in interest expense of about $1,559 from the retirement of our 8% Subordinated Debenture with the net proceeds. (2) Represents the income tax effect on the above adjustments at an assumed effective tax rate of 37.0%. (3) Represents the gain, net of income tax, realized on the early retirement of our 8% Subordinated Debenture. (4) Represents incremental interest payments, net of the income tax benefit, the extraordinary gain and payment of accrued interest on the 8% Subordinated Debenture. (5) Reflects payments and receipts on debt and for deferred financing costs as follows: 11% Senior Subordinated Notes................................... $ 162,852 Senior Credit Facility.......................................... (138,340) 8% Subordinated Debenture....................................... (17,790) Deferred financing costs........................................ (5,561) --------- Net change to cash provided by financing activities............. $ 1,161 =========
(d) EBITDA represents income before extraordinary item plus the sum of interest expense, income taxes, minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures, preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion and depreciation and amortization. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities prepared in accordance with generally accepted accounting principles or as an indicator of our operating performance or liquidity. We have presented EBITDA because it is commonly used by some investors to analyze a company's ability to service debt. The definition of EBITDA differs from the definition of EBITDA applicable to the covenants for the notes and may not be comparable to EBITDA as defined by other companies. (e) Adjusted EBITDA represents EBITDA plus the sum of non-cash post-retirement benefits other than pensions and non-recurring charges. Adjusted EBITDA was calculated as follows:
Pro Forma Fiscal Year Ended July 31, 2000 ------------------- EBITDA, as defined...................................... $120,451 Non-cash post-retirement benefits other than pensions... 589 Non-recurring charge.................................... 35,222 -------- Adjusted EBITDA......................................... $156,262 ========
26 Unaudited Pro Forma Condensed Consolidated Statement of Operations For the Three Month Period Ended March 31, 2001
Historical ---------- Offering Delco Remy Adjustments(a) Pro Forma ---------- -------------- --------- (dollars in thousands) Net sales................................. $261,663 $ -- $ 261,663 Cost of goods sold........................ 213,376 -- 213,376 -------- ------ --------- Gross profit.............................. 48,287 -- 48,287 Selling, general and administrative expenses................................. 28,140 -- 28,140 Amortization of goodwill and intangibles.. 1,289 -- 1,289 -------- ------ --------- Operating income.......................... 18,858 -- 18,858 Interest expense.......................... (13,294) (1,570)(1) (14,864) Non-operating expense..................... (5,087) -- (5,087) -------- ------ --------- Income (loss) before income taxes (benefit), minority interest in income of subsidiaries, loss from unconsolidated joint ventures and extraordinary item.... 477 (1,570) (1,093) Income taxes (benefit).................... 152 (502)(2) (350) Minority interest in income of subsidiaries............................. (1,822) -- (1,822) Loss from unconsolidated joint ventures... (391) -- (391) -------- ------ --------- Net income (loss) before extraordinary item..................................... (1,888) (1,068) (2,956) Extraordinary item: Gain on early extinguishment of debt..... -- 671(3) 671 -------- ------ --------- Net income (loss)......................... $ (1,888) $ (397) $ (2,285) ======== ====== ========= Other Financial Data: EBITDA(b)................................ $ 22,063 $ -- $ 22,063 Adjusted EBITDA(c)....................... 22,992 -- 22,992 Cash used in operating activities........ (11,489) (1,161)(4) (12,650) Cash used in investing activities........ (5,937) -- (5,937) Cash provided by financing activities.... 8,076 1,161(5) 9,237 Depreciation and amortization............ 8,292 -- 8,292 Capital expenditures..................... 3,458 -- 3,458
- --------------------- (a) This column provides adjustments to give effect to the sale of the old notes and the application of the proceeds as if they had occurred on January 1, 2001. (1) Represents interest expense of about $4,779, including amortization of deferred acquisition costs, at an interest rate of 11.0%, less the reduction in interest expense of about $2,819 at an assumed interest rate of 8.15% resulting from paying down the senior credit facility and the reduction in interest expense of about $390 from retirement of our 8% Subordinated Debenture with the net proceeds. (2) Represents the income tax effect on the above adjustments at an assumed effective tax rate of 32.0%. (3) Represents the gain, net of income tax, realized on the early retirement of our 8% Subordinated Debenture. (4) Represents payment of accrued interest on the 8% Subordinated Debenture. (5) Reflects payments and receipts on debt and for deferred financing costs as follows: 11% Senior Subordinated Notes................................... $ 162,852 Senior Credit Facility.......................................... (138,340) 8% Subordinated Debenture (17,790) Deferred financing costs........................................ (5,561) --------- Net change to cash provided by financing activities............. $ 1,161 =========
(b) EBITDA represents income before extraordinary item plus the sum of interest expense, income taxes, minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures, preferred 27 dividend requirement of subsidiary, deemed dividend on preferred stock conversion and depreciation and amortization. EBITDA for the three months ended March 31, 2001 was reduced by non-recurring costs of $3.7 million incurred in connection with our going private transaction. Excluding these costs, EBITDA would have been $25.7 million. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities prepared in accordance with generally accepted accounting principles or as an indicator of our operating performance or liquidity. We have presented EBITDA because it is commonly used by some investors to analyze a company's ability to service debt. The definition of EBITDA differs from the definition of EBITDA applicable to the covenants for the notes and may not be comparable to EBITDA as defined by other companies. (c) Adjusted EBITDA represents EBITDA plus the sum of non-cash post-retirement benefits other than pensions and non-recurring charges. Adjusted EBITDA for the three months ended March 31, 2001 was reduced by non-recurring costs of $3.7 million incurred in connection with our going private transaction. Excluding these costs, Adjusted EBITDA would have been $26.7 million. Adjusted EBITDA was calculated as follows:
Pro Forma Three Month Period Ended March 31, 2001 ------------------ EBITDA, as defined....................................... $22,063 Non-cash post-retirement benefits other than pensions.... 929 Non-recurring charge..................................... -- ------- Adjusted EBITDA.......................................... $22,992 =======
28 Unaudited Pro Forma Condensed Consolidated Balance Sheet As of March 31, 2001 (in thousands)
Pro Forma Offering for the Historical Adjustments Offering ---------- ----------- --------- ASSETS Current assets: Cash and cash equivalents................. $ 14,398 $ -- $ 14,398 Trade accounts receivable, net............ 188,909 -- 188,909 Other receivables......................... 16,887 -- 16,887 Inventories............................... 300,857 -- 300,857 Deferred income taxes..................... 16,383 -- 16,383 Other current assets...................... 11,157 -- 11,157 -------- ------- -------- Total current assets.................... 548,591 -- 548,591 Property and equipment.................... 306,302 -- 306,302 Less accumulated depreciation............. 111,857 -- 111,857 -------- ------- -------- Property and equipment, net............... 194,445 -- 194,445 Deferred financing costs.................. 8,251 5,561 (a) 13,812 Goodwill (net of accumulated amortization)............................ 168,503 -- 168,503 Investments in joint ventures............. 8,962 -- 8,962 Other assets.............................. 7,121 -- 7,121 -------- ------- -------- Total assets............................ $935,873 $ 5,561 $941,434 ======== ======= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable.......................... $155,979 $ -- $155,979 Accrued interest payable.................. 7,880 (1,161)(b) 6,719 Accrued non-recurring charges............. 7,977 -- 7,977 Other liabilities and accrued expenses.... 43,148 428 (c) 43,576 Current debt.............................. 7,583 -- 7,583 -------- ------- -------- Total current liabilities............... 222,567 (733) 221,834 Deferred income taxes....................... 9,981 -- 9,981 Long-term debt, less current portion........ 528,646 5,596 (d) 534,242 Post-retirement benefits other than pensions................................... 23,723 -- 23,723 Accrued pension benefits.................... 4,860 -- 4,860 Other noncurrent liabilities................ 4,897 -- 4,897 Minority interest in subsidiaries........... 28,497 -- 28,497 Stockholders' equity: Preferred stock - Series A................ 21 -- 21 Common stock: Class A shares.......................... -- -- -- Class B shares.......................... 1 -- 1 Class C shares.......................... 2 -- 2 Paid-in-capital........................... 231,752 -- 231,752 Retained deficit.......................... (94,962) 698 (e) (94,264) Accumulated other comprehensive loss...... (24,112) -- (24,112) -------- ------- -------- Total stockholders' equity.............. 112,702 698 113,400 -------- ------- -------- Total liabilities and stockholders' equity................................. $935,873 $ 5,561 $941,434 ======== ======= ========
29 - --------------------- (a) Represents deferred financing costs related to the Offering. (b) Represents payment of accrued interest relating to the early retirement of our 8% Subordinated Debenture. (c) Represents income tax payable relating to the extraordinary gain realized on the early retirement of our 8% Subordinated Debenture. (d) Details regarding the changes to our long-term debt (excluding current portion) are as follows: Total long-term debt (historical)................................ $ 528,646 11% Senior Subordinated Notes Due 2009........................... 162,852 8% Subordinated Debenture........................................ (18,916) Senior Credit Facility........................................... (138,340) --------- Pro forma for the Offering....................................... $ 534,242 =========
(e) Represents the extraordinary gain relating to the early retirement of our 8% Subordinated Debenture net of income taxes at a marginal rate of 38.0%. 30 SELECTED CONSOLIDATED HISTORICAL FINANCIAL DATA The following table sets forth selected financial data for our company. The data for the five fiscal years is derived from our audited financial statements. The data for the three months ended March 31, 2001 and 2000 is derived from our unaudited condensed consolidated financial statements. The table should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations," our consolidated financial statements, the related notes and the other financial information included elsewhere in this prospectus.
Three Months Three Months Fiscal Year Ended July 31 Ended Ended -------------------------------------------------- March 31, March 31, 1996 1997 1998 1999 2000 2001 2000 -------- -------- -------- -------- ---------- ------------ ------------ (dollars in thousands) Statement of Operations Data: Net sales.............. $636,852 $689,787 $815,313 $953,706 $1,090,938 $261,663 $276,115 Gross profit........... 122,520 141,254 147,515 182,804 228,766 48,287 61,501 Selling, general and administrative expenses.............. 70,572 77,645 76,937 88,795 108,051 28,140 27,552 Amortization of goodwill and intangibles........... 3,168 3,154 3,478 5,203 6,043 1,289 1,445 Non-recurring charges.. 8,101 34,500 26,515 -- 35,222 -- -- Operating income....... 40,679 25,955 40,585 88,806 79,450 18,858 32,504 Interest expense....... 27,367 38,774 40,291 45,505 48,766 13,294 11,103 Income (loss) from continuing operations............ 5,796 (10,263) (2,187) 28,346 12,418 (1,888) 11,401 Loss from discontinued operations, net of tax................... (10,637) (1,682) -- -- -- -- -- Net income (loss)...... (4,841) (14,296) (4,020) 28,346 12,418 (1,888) 11,401 Other Financial Data: EBITDA(a).............. $ 59,525 $ 50,360 $ 57,226 $112,367 $ 111,907 $ 22,063 40,690 Adjusted EBITDA(b)..... 71,378 89,351 87,559 116,922 147,718 22,992 41,663 Cash provided by (used in) operating activities............ (684) 22,537 (11,306) 43,086 69,718 (11,489) 19,204 Cash used in investing activities............ (54,761) (74,087) (69,267) (73,387) (106,376) (5,937) (68,401) Cash provided by financing activities.. 56,490 57,786 79,123 38,048 39,806 8,076 55,661 Depreciation and amortization.......... 18,846 22,323 17,069 23,561 32,169 8,292 8,573 Capital expenditures... 32,741 31,888 24,190 25,066 38,371 3,458 7,163 EBITDA margin.......... 9.3% 7.3% 7.0% 11.8% 10.3% 8.4% 14.7% Adjusted EBITDA margin................ 11.2% 13.0% 10.7% 12.3% 13.5% 8.8% 15.1% Ratio of Adjusted EBITDA to interest expense............... 2.6x 2.3x 2.2x 2.6x 3.0x 1.7x 3.8x Ratio of total debt to Adjusted EBITDA....... 4.2x 4.1x 4.5x 3.8x 3.3x NA NA Ratio of earnings to fixed charges(c)...... 1.3x -- -- 1.9x 1.6x 1.0x 2.8x
31
July 31 --------------------------------------------- March 31, March 31, 1996 1997 1998 1999 2000 2001 2000 -------- -------- -------- -------- -------- --------- --------- (dollars in thousands) Balance Sheet Data: Working capital........ $113,801 $154,041 $199,460 $242,349 $272,661 $326,024 $299,605 Total assets........... 475,082 570,569 684,997 782,663 889,240 935,873 897,721 Total debt............. 298,796 363,768 395,754 447,527 491,724 536,229 508,702 Total stockholders' equity (deficit)...... 1,589 (9,797) 84,240 109,520 117,826 112,702 131,582
- -------- (a) EBITDA represents income before extraordinary item plus the sum of interest expense, income taxes, minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures, preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion and depreciation and amortization, plus, in fiscal years 1996 and 1997, loss from discontinued operations, net of tax. EBITDA for the three months ended March 31, 2001 was reduced by non-recurring costs of $3.7 million incurred in connection with our going private transaction. Excluding these costs, EBITDA would have been $25.7 million. EBITDA should not be construed as a substitute for income from operations, net income or cash flow from operating activities prepared in accordance with generally accepted accounting principles or as an indicator of our operating performance or liquidity. We have presented EBITDA because it is commonly used by some investors to analyze a company's ability to service debt. The definition of EBITDA differs from the definition of EBITDA applicable to the covenants for the notes and may not be comparable to EBITDA as defined by other companies. (b) Adjusted EBITDA represents EBITDA plus non-cash post-retirement benefits other than pensions plus non-recurring charges. Adjusted EBITDA for the three months ended March 31, 2001 was reduced by non-recurring costs of $3.7 million incurred in connection with our going private transaction. Excluding these costs, Adjusted EBITDA would have been $26.7 million. Adjusted EBITDA was calculated as follows:
Fiscal Year Ended July 31 Three Months Three Months ----------------------------------------- Ended Ended 1996 1997 1998 1999 2000 March 31, 2001 March 31, 2000 ------- ------- ------- -------- -------- -------------- -------------- (dollars in thousands) EBITDA, as defined...... $59,525 $50,360 $57,226 $112,367 $111,907 $22,063 $40,690 Non-cash post-retirement benefits other than pensions............... 3,752 4,491 3,818 4,555 589 929 973 Non-recurring charges... 8,101 34,500 26,515 -- 35,222 -- -- ------- ------- ------- -------- -------- ------- ------- Adjusted EBITDA......... $71,378 $89,351 $87,559 $116,922 $147,718 $22,992 $41,663 ======= ======= ======= ======== ======== ======= =======
(c) For purposes of computing the ratio of earnings to fixed charges, earnings consist of income from continuing operations before income taxes, fixed charges, minority interest in income of subsidiaries and income (loss) from unconsolidated joint ventures. Fixed charges include preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion, interest expense and the portion of operating rents that is deemed representative of an interest factor. Our earnings were insufficient to cover our fixed charges by $13.5 million and $3.9 million during fiscal years 1997 and 1998, respectively. 32 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with and is qualified in its entirety by reference to our consolidated financial statements and accompanying notes. Except for historical information, the discussions in this section contain forward-looking statements that involve risks and uncertainties. Future results could differ materially from those discussed below. We changed our fiscal year to December 31, effective August 1, 2000. Prior to August 1, 2000, our fiscal year ended on July 31. Accordingly, our audited financial statements include a balance sheet at December 31, 2000 and statements of operations, stockholders' equity and cash flows for the five- month transition period ended December 31, 2000. For comparative purposes, we have included unaudited statements of operations and cash flows for the five- month period ended December 31, 1999. Overview We manufacture and remanufacture electrical and powertrain/drivetrain components for the aftermarket and OEM market and provide core exchange services. We sell our products principally in North America, Europe, Latin America and Asia-Pacific to OEMs, warehouse distributors and retail automotive parts chains. The aftermarket is highly fragmented and competitive. We believe that aftermarket suppliers are consolidating. We believe that this consolidation is occurring, in part, because of higher quality demands for remanufactured products, which may be more expensive or technically difficult for smaller remanufacturers to meet. We plan to continue to increase our penetration of the aftermarket through internal growth and strategic acquisitions. The demand for components in the OEM market is cyclical. We believe that opportunities for growth in the OEM market will continue to come primarily through the introduction of new products and expansion of our global operations. We believe that our aftermarket and OEM products are complementary and provide us with a competitive advantage in meeting customer needs and maintaining the high levels of expertise necessary to compete successfully in both markets. We believe that the high capability and expertise required to meet the stringent technology and quality requirements of OEM customers provides us with a competitive advantage in the development and production of products for the aftermarket. The primary components of the cost of goods sold in our products include component parts, material, labor costs, overhead and the cost of cores. Although the availability and cost of cores fluctuate based on supply and demand, our relationships with dealers and other customers have historically provided us with sufficient access to cores at favorable prices. We believe that our recent acquisition of M&M Knopf, one of the world's largest automotive components recovery and exchange companies, will provide us with a key competitive advantage in the area of core management. About 13% of our domestic hourly labor force is represented by the UAW. In June 2000, we signed a new two-year extension to the previous four-year master agreement with the UAW. Wage and benefit increases under the agreement generally follow the same pattern as the prior agreement and, as a result, we will experience higher wage and benefit rates in future periods. Under provisions of the agreement, we and the UAW developed special programs of incentives for hourly employees who agree to leave us. The cost of these programs is included in the non-recurring charge in fiscal year 2000 described below. We have implemented our strategy of shifting production to focus factories, which we believe has reduced costs and will continue to reduce costs as these focus factories continually improve and implement lean manufacturing concepts. Since 1994, we have successfully acquired and integrated 15 strategic businesses and entered into six joint ventures. These acquisitions and joint ventures have enabled us to broaden our product line, expand our manufacturing and remanufacturing capability, extend our participation in international markets and increase 33 our penetration of the retail automotive parts channel. As a result, sales to our customers other than GM have increased from 41% of our total sales in fiscal year 1995 to 70% in fiscal year 2000. We have also increased sales outside of the Class 8 heavy duty truck market from 87% of our total sales in fiscal year 1995 to 91% in fiscal year 2000. In fiscal year 2000, we completed the acquisitions of Engine Master, M&M Knopf and Elmot-DR, Sp z.o.o, which we refer to as Elmot. Results for these businesses are reflected in our results of operations effective as of their respective acquisition dates. The acquisitions completed in fiscal year 1999, including Williams Technologies and Delco Remy Korea, provided a full-year contribution to our results in fiscal year 2000. Results for M&M Knopf and Elmot are not reflected in the results for the five-month period ended December 31, 1999. GM accounted for about 45% of our total OEM net sales in fiscal year 2000. GM SPO accounted for about 15% of our total aftermarket net sales in fiscal year 2000. In connection with our separation from GM, GM entered into long-term contracts to purchase from us 100% of its North American requirements for automotive starters (other than for Saturn and Geo) and 100% of its U.S. and Canadian requirements for heavy duty starters and alternators. GM's obligation to purchase automotive starters from us terminates on August 31, 2008. GM's obligation to purchase heavy duty starters and alternators from us terminated on July 31, 2000. GM's commitments to purchase products from us in the future are subject to those products remaining competitive as to price, technology and design. See "Business--Customers." We cannot be sure that GM will not develop alternative sources for components currently produced by us and purchase some or all of its requirements for starters and alternators from these alternative sources. In addition, GM SPO has been designated as an exclusive distributor of a significant amount of our automotive and as a distributor of our heavy duty aftermarket products. GM SPO has agreed to provide us with purchasing support, which enables us to obtain raw materials at competitive prices. Our exclusive distribution arrangements with GM SPO for our automotive aftermarket products terminates on July 31, 2009. Our distribution arrangement with GM SPO is continuously renewable on an annual basis for our heavy duty aftermarket products. In May 2000, we completed a plan for the realignment of some of our manufacturing facilities in the United States, Canada and the United Kingdom. A one-time charge of $35.2 million was recorded in the fourth quarter of fiscal year 2000 for the estimated cost of the plan, which included various employee separation programs and the write-down of some production assets. Cash payments relative to this charge were $5.0 million in fiscal year 2000 and $16.0 million in the five months ended December 31, 2000. Payments are expected to approximate $3.1 million, $2.8 million and $200,000 in calendar years 2001, 2002 and 2003, respectively. In fiscal year 1998, we developed a plan to restructure our workforce to a level that should enable it to realize better efficiency. The plan included a buyout provision for the hourly workforce designed to assist those employees with their transition from our company. This program was completed in fiscal year 1999. We incurred a non-recurring charge of $26.5 million as a result of this action, and we established a reserve in that amount. We reduced this reserve through cash payments of $10.0 million in fiscal year 1998, $11.6 million in fiscal year 1999 and $3.9 million in fiscal year 2000. We paid an additional $900,000 in the five months ended December 31, 2000 and $200,000 is expected to be paid in calendar year 2001. 34 The following table sets forth statements of operations data expressed as a percentage of sales:
Three Months Ended Five Months Ended Fiscal Year Ended March 31 December 31 July 31 --------------------- ------------------ ------------------- 2001 2000 2000 1999 2000 1999 1998 --------- --------- -------- -------- ----- ----- ----- Net sales................ 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% 100.0% Cost of goods sold....... 81.5 77.7 80.2 79.8 79.0 80.8 81.9 --------- --------- -------- -------- ----- ----- ----- Gross profit............. 18.5 22.3 19.8 20.2 21.0 19.2 18.1 Selling, general and ad- ministrative expenses... 10.8 10.0 10.0 10.2 9.9 9.3 9.4 Amortization of goodwill and intangibles......... 0.5 0.5 0.6 0.5 0.6 0.6 0.4 Non-recurring charges.... -- -- -- -- 3.2 -- 3.3 --------- --------- -------- -------- ----- ----- ----- Operating income......... 7.2 11.8 9.2 9.5 7.3 9.3 5.0 Interest expense and other non-operating items................... (7.0) (4.2) (4.9) (4.4) (4.5) (4.8) (5.0) --------- --------- -------- -------- ----- ----- ----- Income (loss) before income taxes (benefit), minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures, preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion and extraordinary item...... 0.2 7.6 4.3 5.1 2.8 4.5 -- Income taxes (benefit)... 0.1 2.9 1.4 1.9 1.1 1.7 -- Minority interest in income of subsidiaries.. (0.7) (0.6) (0.6) (0.7) (0.6) (0.4) (0.3) Income (loss) from unconsolidated joint ventures................ (0.1) -- (0.1) -- -- 0.6 0.3 Preferred dividend requirement of subsidiary.............. -- -- -- -- -- -- (0.1) Deemed dividend on preferred stock conversion.............. -- -- -- -- -- -- (0.2) --------- --------- -------- -------- ----- ----- ----- Income (loss) before extraordinary item...... (0.7) 4.1 2.2 2.5 1.1 3.0 (0.3) Extraordinary item: Write-off of debt issuance costs, net of applicable income tax benefit............... -- -- -- -- -- -- (0.2) --------- --------- -------- -------- ----- ----- ----- Net income (loss)........ (0.7)% 4.1% 2.2% 2.5% 1.1% 3.0% (0.5)% ========= ========= ======== ======== ===== ===== =====
Three Months Ended March 31, 2001 Compared to Three Months Ended March 31, 2000 Net Sales Net sales of $261.7 million declined $14.5 million, or 5.2%, due to lower demand in the heavy duty and automotive OEM markets ($38.0 million), partially offset by sales of M&M Knopf and Elmot, which we acquired in 2000, and XL, which we acquired in February 2001 ($14.7 million) and increased demand in the electrical and powertrain/drivetrain products aftermarket ($9.1 million). Gross Profit Gross profit of $48.3 million was down $13.2 million, or 21.5%, and as a percentage of net sales was 18.5% compared with 22.3% in the first quarter of 2000. These declines were due to lower volume and product mix in the heavy duty and automotive OEM markets ($12.1 million) and lower product mix and higher warranty costs in the aftermarket businesses ($1.6 million), partially offset by the effect of acquisitions ($1.9 million). Selling, General and Administrative Expenses Selling, general and administrative (SG&A) expenses increased $0.6 million, or 2.1%, and as a percentage of net sales were 10.8% compared with 10.0% in the first quarter of 2000. Control of spending throughout the Company was largely offset by increases associated with acquisitions. 35 Operating Income Operating income of $18.9 million declined $13.6 million, or 42.0%, and as a percentage of sales was 7.2% versus 11.8% in the first quarter of 2000. This decline reflected the sales, gross profit and SG&A issues discussed above. Interest Expense Interest expense of $13.3 million in the first quarter of 2001 compares with $11.1 million in the comparable period of 2000. This increase was due to higher average levels of debt to fund acquisitions ($0.9 million) and operations ($0.9 million), rate increases by the Federal Reserve ($0.2 million) and interest rate swaps ($0.2 million). Other Non-Operating Expense Non-operating expense in the first quarter of 2001 consists primarily of one-time expenses associated with the merger and tender offer transactions ($3.7) and realized losses on non-deliverable currency forward contracts entered into as a hedge against fluctuations between the South Korean Won and U.S. dollar ($1.7 million). Income Taxes Our consolidated effective income tax rate was approximately 32% in the first quarter of 2001 compared with approximately 37% in the first quarter of 2000. This reduction reflects the implementation of various tax planning initiatives and increased utilization of certain foreign subsidiaries. Five Months Ended December 31, 2000 Compared to Five Months Ended December 31, 1999 Net Sales Net sales of $443.1 million declined $3.7 million, or 0.8%, due to lower demand from customers in the heavy duty OEM market ($23.6 million), reduced orders from GM and other customers in the OEM automotive products market ($4.3 million) and lower demand for powertrain/drivetrain products in the aftermarket ($3.1 million). These factors were mostly offset by sales of M&M Knopf ($23.9 million), which we acquired in March 2000, and increased volume in the electrical products aftermarket ($3.4 million). Gross Profit Gross profit of $87.6 million declined $2.9 million, or 3.2%, and as a percentage of sales declined to 19.8% in the five-month period of 2000 from 20.2% in the comparable period of 1999. The decline in gross profit was due to lower volume and product mix in the heavy duty OEM market ($9.4 million), lower volume in the powertrain/drivetrain aftermarket ($1.8 million) and lower volume and product mix in the OEM automotive market ($1.1 million). Cost improvements, including realization of cost savings associated with the June 2000 manufacturing realignment, mitigated these volume and product mix declines. Increased volume in the electrical aftermarket ($5.3 million) and the acquisition of M&M Knopf ($4.1 million) favorably impacted gross profit. The decline in gross profit as a percentage of sales reflects the effect of lower volume on fixed manufacturing costs and unfavorable product mix, largely offset by cost improvements throughout our company. 36 Selling, General and Administrative Expenses SG&A expenses declined $1.3 million, or 2.9%, and as a percentage of sales, improved from 10.2% in the five-month period of 1999 to 10.0% in the comparable period of 2000. These improvements were driven primarily by cost reductions associated with the June 2000 realignment that were partially offset by increased costs associated with the acquisition of M&M Knopf. Operating Income Operating income of $40.8 million declined $1.7 million, or 4.1%, from $42.5 million in the five-month period of 1999. This decrease reflects the sales volume, product mix and cost issues discussed above. Interest Expense Interest expense increased $2.1 million, or 10.9%, in the five months ended December 31, 2000. This increase was due primarily to higher levels of debt we incurred to finance acquisitions ($2.1 million) and higher rates reflecting increases by the Federal Reserve. Non-operating Income (Expense) Non-operating income in the five-month period of 2000 included a $0.6 million business dissolution fee from a customer and a foreign currency transaction gain realized by our South Korean subsidiary on the settlement of U.S. dollar denominated accounts receivable which was partially offset by realized losses on non-deliverable forward contracts on the South Korean Won entered into as a hedge against these transactions. The net foreign currency transaction gain was approximately $0.5 million. These items were offset by one-time expenses associated with the merger and tender offer transactions of approximately $1.1 million. Income Taxes Our consolidated effective income tax rate of 32.0% in the five-month period ended December 31, 2000 compares with 37.9% in the comparable period of 1999. This decrease reflects implementation of various tax planning initiatives and acquisitions of foreign subsidiaries with lower rates. Net Income Net income of $9.7 million, or $0.37 per share on a diluted basis, compares with $11.2 million, or $0.43 per share on a diluted basis. This decline reflects lower sales volume, partially offset by cost improvements, non- operating income and the lower effective income tax rate. Fiscal Year Ended July 31, 2000 Compared to Fiscal Year Ended July 31, 1999 Net Sales Net sales of $1,090.9 million increased $137.2 million, or 14.4%, due primarily to the effect of fiscal year 2000 and 1999 acquisitions ($93.1 million) and increased demand for electrical and powertrain/drivetrain products in the aftermarket ($26.5 million) and automotive products in the OEM market ($17.6 million). Sales in the heavy duty OEM market were down marginally due to lower customer production. Price increases did not have a significant effect on year-over-year sales as we continued to face price pressures in most of our markets. Gross Profit Gross profit of $228.8 million increased $46.0 million, or 25.1%, and as a percentage of sales improved from 19.2% to 21.0%. The increase in gross profit was due primarily to acquisitions ($30.7 million) and sales growth in the electrical aftermarket ($13.6 million) and automotive OEM market ($7.0 million), partially offset by lower 37 demand and margins in the heavy duty OEM market ($4.8 million). The improvement in gross profit as a percentage of sales was due primarily to the integration of strategic acquisitions, productivity improvements realized from lean manufacturing initiatives and the leveraging of higher production volume on fixed costs. Selling, General and Administrative Expenses SG&A expenses increased $19.3 million, or 21.7%, and as a percentage of net sales, were 9.9% in fiscal year 2000 compared with 9.3% in fiscal year 1999. These increases were the result of acquisitions and costs related to implementation of enterprise-wide systems. Operating Income Operating income of $79.5 million declined $9.4 million, or 10.5%, from $88.8 million in fiscal year 1999. Excluding the effect of the non-recurring charge of $35.2 million in fiscal year 2000, operating income increased $25.9 million, or 29.1%, and as a percentage of sales improved from 9.3% in fiscal year 1999 to 10.5% in fiscal year 2000. This increase reflects the sales growth, gross margin improvement and SG&A expense issues discussed above. Interest Expense Interest expense increased $3.3 million, or 7.2%, in fiscal year 2000. This increase was due primarily to higher average levels of debt incurred to finance acquisitions ($2.7 million) and higher rates reflecting increases by the Federal Reserve. Income Taxes Our consolidated effective income tax rate of 37.0% in fiscal year 2000 compares with 38.0% reported in fiscal year 1999. This decrease reflects implementation of various tax planning initiatives and acquisitions of foreign subsidiaries with lower rates. Foreign subsidiaries should continue to favorably impact the effective rate in future years. Minority Interest in Income of Subsidiaries Minority interests' share of earnings of our consolidated subsidiaries was $6.7 million in fiscal year 2000 compared with $3.9 million in fiscal year 1999. This increase reflects the consolidation of Delco Remy Korea effective in the fourth quarter of fiscal year 1999. Income (Loss) from Unconsolidated Joint Ventures The loss of $0.4 million in fiscal year 2000 compares with income of $5.4 million in fiscal year 1999. This change reflects the consolidation of Delco Remy Korea, which was previously accounted for under the equity method. Net Income Net income of $12.4 million, or $0.48 per share on a diluted basis, compares with $28.3 million, or $1.09 per share on a diluted basis. Excluding the after- tax effect of the non-recurring charges, net income of $34.6 million, or $1.33 per share, increased 22.1% and 22.0%, respectively. Fiscal Year Ended July 31, 1999 Compared to Fiscal Year Ended July 31, 1998 Net Sales Net sales of $953.7 million increased $138.4 million, or 17.0%, due primarily to increased demand for both automotive and heavy duty electrical products in the OEM market ($64.8 million), the effect of the fiscal 38 year 1999 and 1998 acquisitions ($61.1 million) and increased demand for electrical and powertrain/drivetrain products in the aftermarket ($12.5 million). Price increases did not have a significant effect on year-over-year sales. A prolonged strike by GM reduced fiscal year 1998 sales an estimated $22.3 million. Gross Profit Gross profit of $182.8 million increased $35.3 million, or 23.9%, and as a percentage of sales improved from 18.1% in fiscal year 1998 to 19.2% in fiscal year 1999. The increase in gross profit dollars was due primarily to acquisitions in fiscal years 1999 and 1998 ($15.7 million) and sales growth in the aftermarket ($15.5 million) and OEM market ($4.1 million) (including the effect of the GM strike in fiscal year 1998). The improvement in gross profit as a percentage of sales reflects the realization of cost efficiencies generated by the OEM restructuring, including successful integration of the new focus factories, and the effect of certain aftermarket and foreign acquisitions which generate higher gross profit percentages. Selling, General and Administrative Expenses SG&A expenses increased $11.9 million, or 15.4%, and as a percentage of net sales were 9.3% in fiscal year 1999 compared with 9.4% in fiscal year 1998. The cost structure of certain acquisitions completed in fiscal years 1999 and 1998 partially offset sales growth and effective control of costs. Operating Income Operating income of $88.8 million in fiscal year 1999 compares with $40.6 million in fiscal year 1998. Excluding the effect of the non-recurring charge in fiscal year 1998, operating income increased $21.7 million, or 32.3%, and as a percentage of sales improved from 8.2% in fiscal year 1998 to 9.3% in fiscal year 1999. This increase reflects the sales growth, profitability improvements and cost control items discussed above. The GM strike reduced operating income by an estimated $8.6 million in fiscal year 1998. Interest Expense Interest expense increased $5.2 million, or 12.9%, in fiscal year 1999. This increase was due primarily to higher average levels of debt incurred to finance acquisitions. Operations generated sufficient cash to otherwise reduce utilization of our senior credit facility. In addition, our overall average interest rate declined year-over-year. Income Taxes Our consolidated effective income tax rate of 38.0% in fiscal year 1999 compares with 38.8% reported in fiscal year 1998. This decrease reflects implementation of various tax planning initiatives. Income From Unconsolidated Joint Ventures Our share of the earnings of our unconsolidated joint ventures of $5.4 million in fiscal year 1999 compares with $2.6 million in fiscal year 1998. The increase was primarily attributable to Delco Remy Korea. Net Income (Loss) As a result of the items discussed above, net income of $28.3 million in fiscal year 1999 compares with the net loss of $4.0 million in fiscal year 1998. Excluding the after-tax effect of the non-recurring charges, net income was $12.2 million in fiscal year 1998. 39 Liquidity and Capital Resources Our short-term liquidity needs include required debt service (including capital lease payments), day-to-day operating expenses, working capital requirements and the funding of capital expenditures. Cash interest payments are expected to approximate $55.0 million in calendar year 2001. Long-term liquidity requirements include principal payments of long-term debt and the funding of acquisitions. Note 6 to our consolidated financial statement presents our principal payments on long-term debt and capital lease obligations. Our principal sources of cash to fund our short-term liquidity needs consist of cash generated by operations and borrowings under our senior credit facility. At March 31, 2001, borrowings under our senior credit facility were $193.4 million, leaving $94.7 million available under the $300 million facility, net of lines of credit. At December 31, 2000, borrowings under the senior credit facility were $182.4 million, leaving $105.7 million available under the $300 million facility, net of lines of credit. In connection with our separation from GM, one of our subsidiaries issued a contingent purchase price note to GM payable beginning in 2004. The amount of the payment will be based upon a percentage of our average earnings over the three-year period ending December 31, 2003 in excess of certain imputed earnings. It is not currently possible to estimate the amount of payments, if any, payable under this note. See "Description of Other Indebtedness--GM Contingent Purchase Price Note." We will also be required to make additional payments in connection with our acquisitions of M&M Knopf, Delco Remy Mexico, Delco Remy Korea and AMT. We expect that the aggregate amount of these additional payments will be in the range of $15 million to $40 million, payable over about four years. We granted put/call options in connection with the acquisitions of World Wide Automotive and Power Investments that became exercisable in February 2001 for World Wide Automotive and March 2001 for Power Investments. The exercise prices that we would be required to pay upon exercise of the put options, which are based on earnings formulas, are currently estimated to be about $26 million in total for the two acquisitions. The payments will be added to the goodwill recorded for each acquisition and amortized over our remaining useful life. Cash used in operating activities in the first quarter ended March 31, 2001 was $11.5 million compared with cash provided of $19.2 million in the first quarter of 2000. Accounts receivable increased $15.4 million in the first quarter of 2001 due primarily to XL's first quarter sales, sales of previously consigned inventory to certain aftermarket customers and timing of payments from OE customers. The $13.1 million decrease in the first quarter of 2000 primarily reflected one-time accelerated payments from certain customers. The $16.6 million increase in inventory in the first quarter of 2000 was due primarily to an increase in core returns from customers. Accounts payable increased $7.2 million in the first quarter of 2000 due primarily to changes in terms with certain suppliers. Acquisitions included XL in the first quarter of 2001 and M&M Knopf in 2000. The higher level of capital expenditures in 2000 was due to enterprise-wide system implementations and equipment supporting new products and customers. Net borrowings under our revolving line of credit and other debt of $8.8 million was $46.8 million below the prior year's first quarter due to lower expenditures on acquisitions and capital, partially offset by cash used in operating activities. Cash used in operating activities during the five months ended December 31, 2000 of $15.4 million reflects cash generated from earnings adjusted for non- cash items offset by increased working capital (primarily inventory) and cash payments relative to the manufacturing realignment. The inventory increase was due primarily to higher average return rates on cores and lower customer demand. Capital expenditures of $11.8 million during the transition period were for production equipment, tooling and enterprise-wide systems. Cash provided by financing activities was generated entirely from our senior credit facility. 40 Cash provided by operating activities of $69.7 million in fiscal year 2000 compares with $43.1 million in fiscal year 1999. This improvement was due primarily to increased earnings excluding the non-recurring charge and non- cash items. Earnings growth of $6.3 million excluding the non-recurring charge included the results of Delco Remy Korea, which we reported as an unconsolidated joint venture in fiscal year 1999, a $8.6 million increase in depreciation and amortization expense, a $2.8 million increase in minority interest and a $5.8 million decline in earnings of joint ventures. Excluding the amounts recorded from acquisitions, net working capital increased $19.3 million in fiscal year 2000 compared to a $6.1 million increase in fiscal year 1999. Accounts receivable increased $1.6 million due primarily to very strong shipments in the fourth quarter. Collections improved overall in fiscal year 2000. The $4.6 million decline in fiscal year 1999 was due primarily to strong fourth quarter collections. Inventories increased $18.2 million in fiscal year 2000 due primarily to delayed product pull from aftermarket customers. The $17.7 million increase in fiscal year 1999 reflected support for sales growth in the electrical aftermarket. Accounts payable increased $15.8 million in fiscal year 2000 and $13.6 million in fiscal year 1999. The $15.4 million increase in other current assets in fiscal year 2000 reflects non-cash charges to the reserve for non-recurring items and decreases in other accrued expenses. The decline in other non-current assets and liabilities of $12.2 million in fiscal year 2000 was due primarily to the net change in non-current deferred income taxes. Cash used in investing activities was $106.4 million in fiscal year 2000 compared with $73.4 million in fiscal year 1999. Acquisitions in fiscal year 2000 included M&M Knopf, Engine Master and Elmot, all of which we funded with proceeds from the senior credit facility. Capital expenditures, consisting primarily of production equipment and tooling, were $38.4 million in fiscal year 2000 and $25.1 million in fiscal year 1999. This increase reflects implementation of enterprise-wide systems and projects to facilitate the global manufacturing realignment. Cash provided by financing activities in fiscal year 2000 and fiscal year 1999 were generated entirely from our senior credit facility. In fiscal year 2000, we made a $1.2 million cash distribution to the minority stockholders of Delco Remy Korea. Instruments governing our indebtedness restrict the ability of our subsidiaries to make distributions to us. We believe that cash generated from operations, together with the amounts available under the senior credit facility, will be adequate to meet our debt service requirements, capital expenditures and working capital needs for at least the next 12 months, although no assurance can be given. Our future operating performance and ability to extend or refinance our indebtedness will be dependent on future economic conditions and financial, business and other factors that are beyond our control. Seasonality Our business is seasonal, as our major OEM customers historically have one- or two-week operations shutdowns each July. In response, we typically shut down our own operations for one week each July, depending on backlog, scheduled maintenance and inventory buffers, as well as an additional week during the December holidays. Our second and fourth quarter results in the fiscal years ended July 31, 2000, 1999 and 1998, and the five-month periods ended December 31, 2000 and 1999 reflect the effects of these shutdowns. Refer to Note 17 to our consolidated financial statements, which pertains to quarterly (unaudited) financial information. As a result of the change in our fiscal year, in the future these shutdowns will affect our third and fourth quarter results. Effects of Inflation We believe that the relatively moderate inflation over the last few years has not had a significant impact on our revenues or profitability and that we have been able to offset the effects of inflation by increasing prices or by realizing improvements in operating efficiency. We have provisions in many of our contracts that provide for the pass through of fluctuations in the prices of certain raw materials, such as copper and aluminum. 41 Foreign Sales We derived about 22.8% of our net sales in the quarter ended March 31, 2001, about 21.3% in the five-month period ended December 31, 2000 and about 22.3%, 21.3%, and 23.9% of our fiscal year 2000, 1999 and 1998 net sales, respectively, from sales made to customers in foreign countries. Because of these foreign sales, our business is subject to the risks of doing business abroad, including currency exchange rate fluctuations, limits on repatriation of funds, compliance with foreign laws and other economic and political uncertainties. Accounting Pronouncements For a discussion of pending accounting pronouncements that may affect us, see Note 2 to our consolidated financial statements. Euro Conversion In January 1999, 11 European nations adopted a common currency, the euro, and formed the European Economic and Monetary Union, or EMU. For a three-year transition period, both the euro and individual participants' currencies will remain in circulation. After July 1, 2002, at the latest, the euro will be the sole legal tender for EMU countries. The adoption of the euro will affect a multitude of financial systems and business applications as the commerce of these nations will be transacted in the euro and the existing national currency. We are currently addressing these issues and their potential effect on information systems, currency exchange rate risk, taxation, contracts, competition and pricing. Plans will be developed and implemented which are expected to result in compliance with all laws and regulations. However, we cannot be certain that our plans will be successfully implemented or that external factors will not have an adverse effect on our operations. Any costs of compliance associated with the adoption of the euro will be expensed as incurred and we do not expect these costs to be material to our results of operations, financial condition or liquidity. Quantitative and Qualitative Disclosures About Market Risk In the normal course of business, our operations are exposed to continuing fluctuations in foreign currency values, interest rates and commodity prices that can affect the cost of operating, investing and financing. Accordingly, we address a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments. Our objective is to reduce earnings and cash flow volatility associated with these fluctuations. Our derivative activities, all of which are for purposes other than trading, are initiated within the guidelines of established policies and procedures designed to manage market risk. We do not enter into any derivative transactions for speculative purposes. Our primary interest rate risk exposure results from changes in short-term U.S. dollar interest rates. In an effort to manage our interest rate exposures, we strive to achieve an acceptable balance between fixed and variable rate debt positions. In order to limit the effect of interest rate changes on earnings and cash flows, we maintain a significant percentage of fixed rate debt (83% at December 31, 2000). In November 2000, we entered into an interest rate swap on a notional amount of $100.0 million of the senior credit facility. Under this transaction, we swapped a variable rate for a fixed rate. The $100.0 million notional amount is included in the fixed rate debt for purposes of analyzing a change in market interest rates. Accordingly, we are exposed to changes in U.S. interest rates only on the senior credit facility. A 100 basis point increase in U.S. market interest rates on the amounts outstanding at December 31, 2000 under the senior credit facility would result in an increase in our annual interest expense of about $800,000. Our foreign currency risk exposure results from fluctuating currency exchange rates, primarily the strengthening of the U S. dollar against the South Korean Won and specific European currencies. We face transactional currency exposures that arise when we or our foreign subsidiaries enter into transactions, generally on an intercompany basis, denominated in currencies other than local currency. We also face currency exposure that arises from translating the results of our global operations to the U.S. dollar at exchange rates that have fluctuated from the beginning of the period. We manage our exposure to variability in foreign 42 currency exchange rates primarily through the use of natural hedges, whereby funding obligations and assets are both denominated in the local currency. From time to time, we enter into exchange agreements to manage our exposure arising from fluctuating exchange rates related to specific transactions. A hypothetical 10% strengthening in the exchange rates (primarily the South Korean Won against the U.S. dollar) over a one-year period would decrease earnings by about $3.6 million. A hypothetical 10% weakening in exchange rates would reduce the carrying value of our net investment in our foreign subsidiaries at December 31, 2000 by approximately $2.4 million. In order to reduce the uncertainty of price movements relating to the purchase of specific commodities, primarily copper, we enter into forward purchase contracts and various supply and purchase agreements with our customers and vendors. Based on our overall commodity hedge exposure at December 31, 2000 and July 31, 2000 and 1999, a hypothetical 10% change in market rates applied to the fair value of the instruments would not have a material effect on our earnings, cash flows or financial position in the five- month transition period ended December 31, 2000 or in fiscal years 2000 and 1999. 43 BUSINESS We are a leading global manufacturer and remanufacturer of original equipment and aftermarket electrical and powertrain/drivetrain components for automobiles, light trucks, medium and heavy duty trucks and other heavy duty vehicles. We sell our products worldwide primarily under the "Delco Remy" brand name, first used in 1918, as well as other widely recognized private label brand names. Our products include starter motors, alternators, engines, transmissions, torque converters and fuel systems. In calendar year 2000, about 50% of our sales were to the OEM market and about 50% were to the aftermarket. We sell our products principally in North America, Europe, Latin America and Asia-Pacific. We believe that we are the largest producer in North America of OEM starters for automobiles and light trucks and starters and alternators for medium and heavy duty vehicles. We believe we are also the largest producer in North America of remanufactured starters and alternators for the aftermarket. We provide exchange services for cores for third party aftermarket remanufacturers. Our largest customers include GM, Navistar, Freightliner, Caterpillar, Advance Auto Parts, PACCAR, Delphi, Ford, AutoZone, Cummins, Mack, Volvo Trucks, O'Reilly and Pep Boys. Since 1994, we have successfully acquired and integrated 15 strategic businesses and entered into six joint ventures. These acquisitions and joint ventures have enabled us to broaden our product line, expand our manufacturing and remanufacturing capability, extend our participation in international markets and increase our penetration of the retail automotive parts channel. As a result, sales to our customers other than GM have increased from 41% of our total sales in fiscal year 1995 to 70% in fiscal year 2000. We have also increased sales outside of the Class 8 heavy duty truck market from 87% of our total sales in fiscal year 1995 to 91% in fiscal year 2000. Industry Overview In general, our business is influenced by the underlying trends of the automotive industry. However, we believe that our focus on expanding our remanufacturing capabilities heightens the importance of the aftermarket and reduces our dependence on the cyclical OEM business. Aftermarket The aftermarket consists of the production and sale of both new and remanufactured parts used in the maintenance and repair of automobiles, trucks and other vehicles. Remanufacturing is a process through which cores are disassembled into their sub-components, cleaned, inspected, tested, combined with new subcomponents and reassembled into finished products. A remanufactured product can be produced at a lower cost than a comparable individually repaired unit due to effective salvage technology methods, high volume precision manufacturing techniques and rigorous inspection and testing procedures. The ability to procure cores is critical to the remanufacturing process. Aftermarket parts are supplied principally through three distribution channels: . car and truck dealers that obtain parts either through an OEM parts organization (like GM SPO, Ford Parts & Service, Chrysler Mopar and Navistar) or directly from an OEM-authorized remanufacturer; . retail automotive parts chains and mass merchandisers; and . wholesale distributors and jobbers who supply independent service stations, specialty and general repair shops, farm equipment dealers, car dealers and small retailers. We believe that the aftermarket and our opportunities in the aftermarket have been, and will continue to be, impacted by the following trends: . the increasing number and average age of vehicles in use and the number of miles driven annually; 44 . the increasing demands of customers that their aftermarket suppliers meet high quality and service standards; . the increasing use of remanufactured parts for OEM warranty and extended service programs, especially on larger, more complex components, like engines, transmissions and fuel system components; . the growth and consolidation of large retail automotive parts chains and warehouse distributors requiring larger, nationally capable suppliers; . the increasing engine output and durability demands related to the high temperatures at which engines operate; . the increased high-technology content of replacement components which requires more factory manufacturing compared with in-vehicle repair; and . the increasing product lives of automotive parts. The use of remanufactured components for warranty and extended service repairs has increased in recent years as OEMs have offered extended warranty and extended service coverage and dealers have begun to provide extended service plans and warranties on used vehicles. OEMs have sought to reduce warranty and extended service costs by using remanufactured components, which generally offer the same degree of quality and reliability as OEM products at a lower cost. This trend has also resulted in independent aftermarket customers requiring higher quality standards for remanufactured products. Recently, large retail automotive parts chains offering a broad range of new and remanufactured products have experienced rapid growth at the expense of small, independent retail and wholesale stores. We have significantly grown our sales to these large retail channels and believe that further increasing our sales to retail chains offers a significant opportunity for growth. Retail chains generally prefer to deal with large, national suppliers capable of meeting their cost, quality, volume and service requirements. OEM Markets The OEM market consists of the production and sale of new component parts for use in the manufacture of new vehicles. The OEM market includes two major classes of customers: . automobile and light truck manufacturers; and . medium and heavy duty truck and engine manufacturers and other heavy duty vehicle manufacturers. Recent fundamental changes in the OEMs' sourcing strategies have impacted the OEM market. OEMs are consolidating their supplier base, demanding that their suppliers provide technologically advanced product lines, greater systems engineering support and management capabilities, just-in-time sequenced delivery and lower system costs. As a result, each OEM has selected its own preferred suppliers. OEMs are increasingly requiring that their preferred suppliers establish global production capabilities to meet their needs as they expand internationally and increase platform standardization across multiple markets. As OEM global alliances increase, global pricing for automotive components is becoming the norm. OEMs continue to outsource component manufacturing of non-strategic parts. Outsourcing has taken place in response to competitive pressures on OEMs to improve quality and reduce capital outlays, production costs, overhead and inventory levels. In addition, OEMs are increasingly purchasing integrated systems from suppliers who provide the design, engineering, manufacturing and project management support for a complete package of integrated products. By purchasing complete systems, OEMs are able to shift design, engineering and product management to fewer and more capable suppliers. Integrated systems suppliers are generally able to design, manufacture and deliver components at a lower cost than the OEMs due to: . their lower labor costs and other manufacturing efficiencies; 45 . their ability to spread research and development and engineering costs over products provided to multiple OEMs; and . other economies of scale inherent in high volume manufacturing such as the ability to automate and leverage global purchasing capabilities. Products Our product line includes a diverse range of manufactured and remanufactured products for the aftermarket and OEM markets under the "Delco Remy" brand name or under a private-label brand name specified by the OEM or the aftermarket customer. We also provide core acquisition services for third party aftermarket remanufacturers as well as our own subsidiaries. The product line is classified into two product categories: Electrical Systems and Powertrain/Drivetrain. Third-party sales for core acquisition services are included in the "Other" category. The following table sets forth the approximate composition by product category of our revenues for the five months ended December 31, 2000 and the last three fiscal years:
Fiscal Year Ended July 31 ------------------- Five Months Ended Product Categories 1998 1999 2000 December 31, 2000 ------------------ ----- ----- ----- ----------------- Electrical systems................ 85.5% 83.2% 78.7% 76.2% Powertrain/drivetrain............. 13.5 15.7 17.8 17.5 Other............................. 1.0 1.1 3.5 6.3 ----- ----- ----- ----- Total............................. 100.0% 100.0% 100.0% 100.0% ===== ===== ===== =====
See the consolidated financial statements and the related notes for a more detailed presentation of revenues from external customers, a breakdown of foreign revenues, measure of profit (loss) and total assets. Products within the electrical systems category include manufactured and remanufactured starters and alternators. The starters are used in all automobiles and trucks manufactured by GM in North America (except for its Saturn and Geo divisions). We manufacture a full line of heavy duty starters and alternators for use primarily with large diesel engines. Our starters and alternators are specified as part of the standard electrical system by most North American heavy duty truck and engine manufacturers. We believe that we are the largest manufacturer and remanufacturer in North America of (1) starters for automobiles and light trucks (including sport-utility vehicles, minivans and pickup trucks) and (2) starters and alternators for medium and heavy duty vehicles. With the acquisition of M&M Knopf in March 2000, we expanded our role as a provider of core acquisition services. Products within the powertrain/drivetrain category include gas, diesel and marine engines, fuel injectors, injection pumps and turbo chargers (fuel systems), transmissions, torque converters, water pumps, rack and pinions, power steering pumps, gears and clutches and traction control systems. Customers Our principal customers include OEM automotive and heavy duty manufacturers, OEM dealer networks, leading automotive parts retail chains and warehouse distributors. Our major customers include GM, Navistar, Freightliner, Caterpillar, Advance Auto Parts, PACCAR, Delphi, Ford, AutoZone, Cummins, Mack, Volvo Trucks, O'Reilly and Pep Boys. We have long-term agreements, with terms typically ranging from three to five years, to supply heavy duty starters and alternators to GM and PACCAR. Total sales to GM and related affiliates accounted for about 28.1%, of which about 21.1% are OEM sales, and sales to Navistar accounted for about 12.1% of our sales in 46 the five months ended December 31, 2000. No other customer accounted for more than 10.0% of consolidated net sales. In 1994, GM entered into long-term contracts with us to purchase 100% of its North American requirements for automotive starters (other than for Saturn and Geo) and 100% of its U.S. and Canadian requirements for heavy duty starters and alternators, at fixed prices which are scheduled to decline over the life of the contracts. GM's obligations to purchase our automotive starters and heavy duty starters and alternators under these agreements are subject to those products remaining competitive as to price, technology and design. In fiscal year 1999, we and GM extended the terms of these agreements for us to supply automotive starting motors for existing and planned new engines introduced to support GM North American Operations to August 31, 2008. The amendment also provides that Delco Remy America and its international operations will be the supplier of starting motors for the life of production of those engines. The contracts relating to heavy duty products terminated on July 31, 2000. In 1994, GM also entered into a long-term contract with us to distribute exclusively our automotive aftermarket products. Prices to GM under this agreement are driven by the market. This agreement terminates on July 31, 2009. Until July 1998, we had a long-term contract with GM to distribute exclusively our heavy duty aftermarket products. We and GM have entered into an amendment to that agreement which is continuously renewable on an annual basis for non-exclusive distribution of heavy duty products to the independent aftermarket. As part of this agreement, heavy duty replacement parts will continue to be supplied to the independent aftermarket through existing AC Delco distributors and newly appointed Delco Remy distributors. As a result of this agreement, we are developing a distribution network of independent warehouse distributors to expand the sales volume previously covered by the expired agreement for heavy duty aftermarket product distribution. We expect that we will be able to expand our market share through this more direct channel of distribution. Although we expect that our automotive and heavy duty products will remain competitive throughout the term of the agreements with GM, we cannot be sure that GM will not develop alternative sources for those components and purchase some or all of its requirements from these sources prior to or following the expiration of the agreements. We employ our own direct sales force which develops and maintains sales relationships with major North American truck fleet operators as well as our OEM customers worldwide. These sales efforts are supplemented by a network of field service engineers and product service engineers. Distribution Our products are distributed to our customers primarily by common carrier. Competition The automotive parts market is highly competitive. Competition is based primarily on quality of products, service, delivery, technical support and price. Most OEM manufacturers and aftermarket distributors source parts from one or two suppliers. We compete with a number of companies who supply automobile manufacturers throughout the world. In the North American automotive market, our principal competitors include Denso, Valeo, Mitsubishi, Bosch, Visteon, Rayloc, Units Parts and Motorcar Parts & Accessories. Business Strategy Exploit Leading Market Share in Fragmented Aftermarket We participate in a portion of the aftermarket that is large and highly fragmented. Most participants are small, regional companies offering relatively narrow product lines. A key element of our growth strategy is to 47 capitalize on our position as a consolidator. We believe that we are the largest manufacturer and remanufacturer of aftermarket starters and alternators in North America and in Europe. However, we continue to have significant growth because our sales of these products in North America account for less than 15% of this $2.2 billion market and our sales of these products in Europe account for less than 10% of what we believe to be a $1 billion market. Today, remanufacturing is less prevalent in Europe than in the U.S. We believe we are well-positioned to capitalize on the increasing trend towards remanufacturing from repair. Consolidation of the aftermarket is occurring as many competitors are finding it difficult to meet the increasing quality, cost and service demands of customers, who, in turn, are seeking to reduce the number of their suppliers. With our OEM capabilities, remanufacturing expertise, full product line, access to cores and ability to capitalize on economies of scale, we are well positioned to benefit from the consolidation of the aftermarket. Strengthen Customer Relationships We intend to increase our sales to new and existing customers by capitalizing on our balanced coverage of the key aftermarket distribution channels and our competitive strengths as an OEM supplier. We plan to strengthen our customer relationships by: . meeting the increasing demands of OEMs and their dealer networks for high-quality remanufactured units, which enable them to reduce warranty and extended service costs; . growing sales of existing and new product lines to OEM dealer networks as dealers continue to capture an increasing percentage of vehicle repairs due primarily to longer warranty and service programs and growing vehicle complexity; . continuing to expand our product offerings; and . capitalizing on the expansion of the national automotive retail parts chains and warehouse distributors that are our customers. Increase Global Presence OEMs are increasingly requiring suppliers to provide components on a global basis as vehicle platforms are standardized across geographic markets. Additionally, the Western European market for automotive components is expected to grow at a greater rate than the North American market over the next few years due to higher levels of OEM outsourcing. The emerging markets also should benefit from long-term growth as demand for automotive vehicles in these markets is expected to increase at a compounded annual rate of almost 7% over the next five years. Currently, our manufacturing base includes a presence in nine countries on four continents. We plan to seek out collaborative opportunities in order to expand our OEM starter and alternator product lines and our international marketing and distribution capability. We believe that continued global expansion will enable us to continue to grow to meet these demands. Increase Focus on Technologically Advanced Products We continue to produce technologically advanced products by regularly updating and enhancing our product line. These products help us to compete successfully in the global marketplace. Since 1994, we have completed the introduction of a new family of gear reduction starters that replaced all straight drive starters in GM automobiles and light duty trucks by the 1998 model year and introduced several longer-life heavy duty alternators. We are also in various stages of development on a number of new products including: . an integrated starter and alternator product scheduled for production in GM vehicles beginning in 2004; . a small gear reduction starter specifically designed for application on world automobile platforms; and . high-technology products in the distributed generation and hybrid electric vehicle markets. 48 Patents, Trademarks and Licenses Under a Trademark Agreement between us and GM, GM has granted us an exclusive license to use the "Delco Remy" trademark on and in connection with automotive starters and heavy duty starters and alternators until July 31, 2004, extendable indefinitely at our option upon payment of a fixed $100,000 annual licensing fee to GM. We have also been granted a perpetual, royalty-free license to use the "Remy" trademark. The "Delco Remy" and "Remy" trademarks are registered in the United States, Canada and Mexico and in most major markets worldwide. GM has agreed with us that, upon our request, GM will register the trademarks in any jurisdiction where they are not currently registered. We have also been granted an exclusive license to use the "Delco Remy" name as a tradename and corporate name worldwide until July 31, 2004 under a Tradename License Agreement between us and GM. In addition, GM has granted us a perpetual license to use the "Remy" name as a tradename and corporate name worldwide. We own and have obtained licenses to various domestic and foreign patents and patent applications related to our products and processes. The patents expire at various times over the next 15 years. While these patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to us. Raw Materials Principal raw materials for our business include bare copper strap, insulated copper, aluminum castings, forgings, outer frames, nomex paper, steel coils, steel bars, copper tube, copper wire, gray iron castings, ductile iron castings, copper cross-section coils, magnets, steel shafts, steel cores, steel wire and molding material. All materials are readily available from a number of suppliers. We have entered into a long-term worldwide purchasing support agreement with GM that allows us to purchase copper wire and steel, which are used in the manufacture of starters sold to GM, at prices that we believe generally to be lower than those that would otherwise be obtainable by us. This agreement expires on July 31, 2004, or earlier, upon termination of the automotive and heavy duty supply OEM agreements between us and GM. We generally follow the North American industry practice of passing on to our customers the costs or benefits of fluctuation in copper and aluminum prices on an annual or semi-annual basis. Employees As of March 31, 2001, we employed 7,710 people, 1,968 of whom were salaried and administrative employees and 5,742 of whom were hourly employees. Of our total employees, about 19% are represented by unions. In the United States, 550 of our hourly workers are represented by the UAW under an agreement between us and the UAW, the applicable provisions of which were assumed by us in connection with the separation from GM. The agreement between the UAW and us, originally scheduled to expire on March 22, 2001, was extended an additional two years. In addition, 59 of our hourly employees are represented by the International Brotherhood of Teamsters, or the Teamsters. Our agreement with the Teamsters expires on August 31, 2003. As of March 31, 2001, 115 of our 132 Canadian hourly employees were represented by the National Automobile, Aerospace, Transportation and General Workers Union of Canada, 14 were represented by the United Steel Workers of America and three were represented by the Metallurgists Unis d'Amerique. The agreements with these unions expire in November 2002, December 2002 and November 2003, respectively. As of March 31, 2001, about 149 of Delco Remy Hungary's 459 hourly employees were affiliated with the Hungarian Steel Industry Workers Union. The agreement was signed July 17, 1996 and is perpetual, subject to termination upon three months' notice from either party. 49 As of March 31, 2001, all of Elmot's hourly workers were affiliated with The Intercompany Trade Union or the Intercompany Union Organization NSZZ. Agreements with these unions were signed on August 23, 2000 and are perpetual. Our other facilities are primarily non-union. We are unaware of any current efforts to organize the employees in our other facilities. There can be no assurance that there will not be any labor union efforts to organize employees at facilities that are not currently unionized. At the present time, we believe that our relations with our employees are good. Research and Development Our engineering staff works independently and with OEMs to design new products, improve performance and technical features of existing products and develop methods to lower manufacturing costs. In support of our engineering efforts, we have formed technical alliances with a select number of engineering and technology firms to identify long-term engineering advances and opportunities. We have entered into a joint venture with Continental AG for the joint industrialization of the Integrated Starter Alternator Damper, or the ISAD, motor in Europe. This new technology combines the starter and alternator functions in one compact, high performance unit integrated between the engine and gearbox. We are also a participant in Electricore Incorporated, a consortium for advanced transportation technologies. Through this participation, we are working on developing the technical alliances to develop the next generation motors and alternators. We have also entered into an alliance with Lynx Motion Technologies to develop a family of electric drive motors which will be integral components of the propulsion system needed for advanced hybrid gas-electric, diesel-electric and fuel cell vehicles. Consistent with our strategy to introduce technologically advanced and improved products, we spent about $7.2 million in the five-month period ended December 31, 2000 and about $16.3 million, $13.5 million, and $13.3 million in fiscal years 2000, 1999 and 1998, respectively, on research and development activities. All expenditures were company-funded. Properties and Foreign Operations Our world headquarters are located at 2902 Enterprise Drive, Anderson, Indiana 46013. We lease our headquarters. The following table sets forth information regarding manufacturing and other facilities operated by us as of March 31, 2001.
Number Location of Facilities Use Leased/Owned - -------- ------------- -------------------- ------------ Anderson, IN.................. 3 Office Leased Anderson, IN.................. 7 Manufacturing Leased Anderson, IN.................. 1 Testing Leased Anderson, IN.................. 1 Warehouse Leased Atlanta, GA................... 1 Warehouse Leased Bay Springs, MS............... 2 Manufacturing Leased Brooklyn, NY.................. 2 Warehouse Leased Brusque, Brazil............... 1 Manufacturing Leased Budapest, Hungary............. 1 Office Leased Budapest, Hungary............. 1 Warehouse Owned Buffalo, NY................... 2 Warehouse Leased Chantilly, VA................. 1 Manufacturing Leased Cradler Heath, United Kingdom...................... 1 Manufacturing Leased Dallas, TX.................... 1 Manufacturing/Office Leased Droitwick, Worcestshire, United Kingdom............... 1 Warehouse/Office Leased Edinburgh, IN................. 1 Manufacturing Leased
50
Number Location of Facilities Use Leased/Owned - -------- ------------- ----------------------- ------------ Edmonton, Canada........... 2 Manufacturing Leased Findlay, OH................ 1 Manufacturing Leased Flint, MI.................. 1 Warehouse Leased Fort Wayne, IN............. 1 Warehouse Leased Fradley, West Midland, United Kingdom............ 1 Manufacturing Leased Franklin, IN............... 3 Manufacturing Owned Hancock, MD................ 1 Warehouse Leased Haverly, United Kingdom.... 1 Office Leased Heidelberg, MS............. 2 Manufacturing Leased Heist Op Den Berg, Belgium................... 2 Office Leased Heverly, Belgium........... 1 Office Leased Holbrook, NY............... 1 Warehouse Leased Indaiatuba, Brazil......... 1 Manufacturing Leased Indianapolis, IN........... 3 Manufacturing Leased Jemmel, Tunisia............ 2 Manufacturing Leased Kaleva, MI................. 1 Manufacturing Leased Kearny, NJ................. 1 Warehouse Leased Kings Winford, Leicester, United Kingdom............ 1 Manufacturing Leased Kyoungnam, South Korea..... 2 Manufacturing Leased Laredo, TX................. 1 Warehouse Leased Lavant, West Sussex, United Kingdom................... 1 Manufacturing Leased Mansfield, TX.............. 1 Manufacturing Leased Marion, MI................. 1 Manufacturing Leased Memphis, TN................ 1 Warehouse Leased Meridian, MS............... 3 Manufacturing/Warehouse Leased Mezokovesd, Hungary........ 1 Manufacturing Owned Miskolc, Hungary........... 1 Manufacturing Leased Moncton, Canada............ 1 Manufacturing Leased North Kansas City, MO...... 2 Manufacturing Leased Peru, IN................... 2 Manufacturing Leased Philadelphia, PA........... 2 Warehouse Leased Piscataway, NJ............. 1 Office/Warehouse Leased Plainfield, IN............. 1 Warehouse Leased Raleigh, MS................ 3 Manufacturing Leased/Owned Reed City, MI.............. 4 Manufacturing/Warehouse Leased Ridgeville, SC............. 1 Manufacturing Leased San Luis Potosi, Mexico.... 3 Manufacturing Leased Saskatoon, Canada.......... 1 Manufacturing Leased Seoul, South Korea......... 1 Office Leased Sligo, Ireland............. 1 Manufacturing Leased Spartanburg, SC............ 1 Warehouse Leased St. Laurent, Canada........ 1 Warehouse Leased Summerville, SC............ 5 Manufacturing/Warehouse Leased Swidnica, Poland........... 2 Manufacturing Owned Sylvarena, MS.............. 1 Manufacturing Leased Taylorsville, MS........... 1 Manufacturing Leased Toledo, OH................. 1 Manufacturing Leased Toronto, Canada............ 2 Manufacturing/Warehouse Leased Troy, MI................... 1 Office Leased Warren, MI................. 1 Manufacturing Owned Winchester, VA............. 1 Manufacturing/Warehouse Leased Winnepeg, Canada........... 2 Manufacturing Leased/Owned
51 We believe all facilities are suitable for their intended purpose, are being efficiently utilized and provide adequate capacity to meet demand for the next several years. Information about our foreign operations is set forth in Note 14 to our consolidated financial statements included elsewhere in this prospectus. Environmental Regulation Our facilities and operations are subject to a wide variety of federal, state, local and foreign environmental laws, regulations and ordinances, including those related to air emissions, wastewater discharges and chemical and hazardous waste management and disposal, which we refer to as environmental laws. Our operations also are governed by laws relating to workplace safety and worker health, primarily the Occupational Safety and Health Act, and foreign counterparts to those laws, which we refer to as employee safety laws. We believe that we are in compliance with current requirements under environmental laws and employee safety laws except for non-compliance where the cost we might incur to resolve the non-compliance would not be material. The nature of our operations, however, exposes us to the risk of liabilities or claims relating to environmental and worker health and safety matters. We cannot be sure that we will not incur material costs in connection with liabilities or claims arising out of those matters. In September 2000, one of our Franklin, Indiana facilities received a Finding of Violation and Order for Compliance from the Environmental Protection Agency, which we refer to as the EPA, requiring us to correct violations of the facility's wastewater discharge permit. We are in compliance with the terms of the order and are determining the actions we will need to take to correct the noncompliance with the permit. Based on the projects proposed by our consultant, and assuming the EPA approves the project we select, we do not believe that the costs of the correction will be material. We have commenced a series of environmental, health and safety reviews to confirm our compliance with environmental laws and employee safety laws. We do not believe that the costs of the reviews and of response to any matters we discover will be material. Based on our experience to date, we believe that the future cost of compliance with existing environmental laws, regulations and ordinances (or liability for known environmental claims) will not have a material adverse effect on our business, financial condition or results of operations. However, future events, like changes in existing laws and regulations or their interpretation, may give rise to additional compliance costs or liabilities that could have a material adverse effect on our business, financial condition or results of operations. Compliance with more stringent laws or regulations, as well as more vigorous enforcement policies of regulatory agencies or stricter or different interpretations of existing laws, may require additional expenditures by us that may be material. Some environmental laws hold current owners or operators of land or businesses liable for their own and for previous owners' or operators' releases of hazardous or toxic substances, materials or wastes, pollutants or contaminants, including petroleum and petroleum products, which we refer to as hazardous substances. Because of our operations, the long history of industrial uses at some of our facilities, the operations of predecessor owners or operators of some of the businesses, and the use, production and release of hazardous substances at these sites, we are affected by the liability provisions of environmental laws. Some of our facilities have experienced various levels of regulatory scrutiny in the past and are, or may become, subject to further regulatory inspections, future requests for investigation or liability for past disposal practices. During the environmental due diligence performed in connection with our separation from GM in July 1994, we and GM identified some on-site pre-closing environmental conditions including the presence of some hazardous substances in the soil at our Meridian, Mississippi property and in the soil and groundwater at our Anderson, Indiana property. At the time, GM reported the presence of these substances in the groundwater at Anderson to the EPA and the Indiana Department of Environmental Management, and we understand that GM 52 continues to work with EPA to resolve these issues. We are in the process of vacating the Anderson and Meridian facilities and terminating these leases and subleases with GM. Based on our experience to date, the terms of the indemnification in the GM acquisition agreement and GM's continuing performance in responding to these conditions, we do not believe that we will expend material costs in responding to these on-site environmental conditions or in terminating our leases or subleases. In connection with our acquisition of facilities and businesses from GM, Nabco, Inc., A&B Group, Inc., Autovill, Power Investments, Inc., World Wide Automotive, Ballantrae Corporation, Lucas Varity, Electro Diesel Rebuild, Electro Rebuild Tunisia, Atlantic Reman Limited, Williams Technologies, Elmot and M&M Knopf, we obtained various indemnities for some claims related to on- site and/or off-site environmental conditions and violations of environmental laws which arose prior to the acquisitions. The environmental indemnities are subject to certain deductibles, caps, cost sharing and time limitations depending on the nature and timing of the environmental claim. The Comprehensive Environmental Response, Compensation, and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, which we refer to as CERCLA, provides for responses to and joint and several liability for releases of specific hazardous substances into the environment. We have received requests for information or notifications of potential liability from EPA under CERCLA for certain off-site locations. We have not incurred any significant costs relating to these matters, and based on the existence of indemnification agreements from our predecessors and their assumption of liabilities to date and other legal defenses, we believe that we will not incur material costs in the future in responding to conditions at these sites. The Resource Conservation and Recovery Act and the regulations thereunder and similar state counterparts to this law regulate hazardous wastes. The Anderson, Indiana facilities we leased from GM were once part of a larger industrial complex owned and operated by GM. Since 1990 (when it was owned by GM), this complex has been undergoing corrective action under the Resource Conservation and Recovery Act. In connection with the Resource Conservation and Recovery Act corrective action requirements, GM has been investigating various solid waste management units and areas of concern identified in the federal and state Resource Conservation and Recovery Act permits. Some of these solid waste management units and areas of concern are located on portions of the Anderson, Indiana properties leased by us from GM and some solid waste management units had been used by us. The costs of responding to releases, if any, from those solid waste management units used by us would presumptively be borne by us. To date, no claims for any of these costs have been made. Subject to the terms and conditions of GM's environmental indemnity provided in connection with our separation from GM, GM is required to indemnify us for some of these areas. One of our facilities in Franklin, Indiana has been undergoing a Resource Conservation and Recovery Act investigation and clean-up of volatile organic compounds in the soil and groundwater under an EPA Administrative Order on Consent, which we refer to as the EPA Order, issued to both Franklin Power Products, one of our subsidiaries, and Amphenol Corporation, a prior owner of the property. Under the EPA Order, Franklin Power Products and Amphenol Corporation are jointly addressing this matter. Amphenol indemnified Franklin Power Products for specific liabilities associated with the EPA Order, and Amphenol has satisfied and continues to satisfy the requirements of the EPA Order. Based on our experience to date and the indemnities from Amphenol and the sellers of Franklin Power Products to us, we believe that future costs associated with this site will not have a material adverse effect on our results of operations, business or financial condition. Our Marion, Michigan facility was listed on Michigan's state list of sites under the Michigan version of CERCLA in 1993 because of suspected releases of hazardous substances, primarily volatile organic compounds (mineral spirits), to the soils and groundwater at the facility. An investigation conducted by Nabco prior to its acquisition by us determined that the levels of volatile organic compounds in the soils and groundwater are below the applicable state clean-up levels. We proposed no further action at this facility. Although the Michigan environmental authority has not accepted this conclusion, it has taken no action on this matter for several years. Even if the Michigan environmental authority was to require remedial action relating to this site, we do not believe that we would expend material costs in connection with the conditions giving rise to this listing. 53 Backlog The majority of our products are not on a backlog status. They are produced from readily available materials and have a relatively short manufacturing cycle. For products supplied by outside suppliers, we generally purchase products from more than one source. We expect to be capable of handling the anticipated sales volumes for the next fiscal year. Legal Proceedings From time to time, we are party to legal actions in the normal course of our business. We believe we are not currently party to any proceedings that, if adversely determined, would have a material adverse effect on our business, financial condition and results of operations. Seasonality Our business is seasonal, since our major OEM customers historically have one- or two-week operations shutdowns each July. In response, we typically shut down our own operations for one week each July, depending on backlog, scheduled maintenance and inventory buffers, as well as an additional week during the December holidays. Our results for July and December reflect the effects of these shutdowns. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 54 THE EXCHANGE OFFER Purpose and Effect of the Exchange Offer We issued and sold the old notes to the initial purchasers on April 26, 2001. The initial purchasers subsequently sold the old notes to qualified institutional buyers in reliance on Rule 144A under the Securities Act. Because the old notes are subject to transfer restrictions, we, the subsidiary guarantors and the initial purchasers entered into a registration rights agreement dated April 19, 2001 under which we agreed: . on or before July 25, 2001, to prepare and file with the SEC the registration statement of which this prospectus is a part; . on or before September 23, 2001, to use our best efforts to cause the registration statement to become effective under the Securities Act; . upon the effectiveness of the registration statement, to offer the new notes in exchange for surrender of the old notes; and . to keep the exchange offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the exchange offer is mailed to the holders of the old notes. The registration statement is intended to satisfy in part our obligations relating to the old notes under the registration rights agreement. Under existing interpretations of the SEC, the new notes will be freely transferable by holders other than our affiliates after the exchange offer without further registration under the Securities Act if the holder of the new notes represents that: . it is acquiring the new notes in the ordinary course of its business; . it has no arrangement or understanding with any person to participate in the distribution of the new notes; and . it is not our affiliate, as that term is interpreted by the SEC. However, broker-dealers receiving new notes in the exchange offer will have a prospectus delivery requirement regarding resales of the new notes. The SEC has taken the position that broker-dealers receiving new notes in the exchange offer may fulfill their prospectus delivery requirements relating to new notes (other than a resale of an unsold allotment from the original sale of the old notes) with this prospectus. Under the registration rights agreement, we are required to allow broker-dealers receiving new notes in the exchange offer and other persons, if any, with similar prospectus delivery requirements to use this prospectus in connection with the resale of the new notes. Each broker- dealer that receives new notes for its own account in exchange for old notes, where the old notes were acquired by the broker-dealer as a result of market- making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. See "Plan of Distribution." Terms of The Exchange Offer; Period For Tendering Old Notes Upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal (which together constitute the exchange offer), we will accept for exchange old notes which are properly tendered on or prior to the expiration date of the exchange offer and not withdrawn as permitted below. The expiration date of the exchange offer shall be 5:00 p.m., New York City time, on , 2001, unless extended by us, in our sole discretion. As of the date of this prospectus, $165.0 million aggregate principal amount of the old notes are outstanding. This prospectus, together with the letter of transmittal, is first being sent on or about , 2001 to all holders of old notes known to us. Our obligation to accept old notes for exchange 55 pursuant to the exchange offer is subject to conditions as set forth under "-- Conditions to the Exchange Offer" below. We expressly reserve the right, at any time or from time to time, to extend the period of time during which the exchange offer is open, and thereby delay acceptance for any exchange of any old notes, by giving notice of the extension to the holders of old notes as described below. During any extension, all old notes previously tendered will remain subject to the exchange offer and may be accepted for exchange by us. Any old notes not accepted for exchange for any reason will be returned without expense to the tendering holder as promptly as practicable after the expiration or termination of the exchange offer. We expressly reserve the right to amend or terminate the exchange offer, and not to accept for exchange any old notes not previously accepted for exchange, upon the occurrence of any of the conditions of the exchange offer specified below under "--Conditions to the Exchange Offer." We will give notice of any extension, amendment, non-acceptance or termination to the holders of the old notes as promptly as practicable, the notice in the case of any extension to be issued no later than 9:00 a.m., New York City time, on the next business day after the previously scheduled expiration date of the exchange offer. Holders of old notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law in connection with the exchange offer. Procedures for Tendering Old Notes The tender to us of old notes by a holder of old notes as set forth below and the acceptance of the tender by us will constitute a binding agreement between the tendering holder and us upon the terms and subject to the conditions set forth in this prospectus and in the accompanying letter of transmittal. Except as set forth below, a holder who wishes to tender old notes for exchange under the exchange offer must transmit a properly completed and duly executed letter of transmittal, including all other documents required by the letter of transmittal, to First Union National Bank at the address set forth below under "--Exchange Agent" on or prior to the expiration date of the exchange offer. In addition, the exchange agent must receive: . certificates for the old notes along with the letter of transmittal, or . prior to the expiration date of the exchange offer, a timely confirmation of a book-entry transfer of the old notes into the exchange agent's account at The Depository Trust Company in accordance with the procedure for book-entry transfer described below, or . the holder must comply with the guaranteed delivery procedure described below. The method of delivery of old notes, letters of transmittal and all other required documents is at your election and risk. If delivery is by mail, we recommend that you use registered mail, properly insured, with return receipt requested. In all cases, you should allow sufficient time to assure timely delivery. You should not send letters of transmittal or old notes to us. Signatures on a letter of transmittal or a notice of withdrawal, as the case may be, must be guaranteed unless the old notes surrendered for exchange are tendered: . by a registered holder of the old notes who has not completed the box entitled "Special Issuance Instruction" or "Special Delivery Instruction" on the letter of transmittal; or . for the account of a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States. In the event that signatures on a letter of transmittal or a notice of withdrawal, as the case may be, are required to be guaranteed, the guarantees must be by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or by a commercial 56 bank or trust company having an office or correspondent in the United States. If old notes are registered in the name of a person other than a signer of the letter of transmittal, the old notes surrendered for exchange must be endorsed by, or be accompanied by a written instrument or instruments of transfer or exchange, in satisfactory form as determined by us in our sole discretion, duly executed by the registered holder with the signature on the old notes or the written instrument or instruments of transfer or exchange guaranteed by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States. Any beneficial owner whose old notes are registered in the name of a broker, dealer, commercial bank, trust company or other nominee, and who wishes to tender, should contact the registered holder promptly and instruct the registered holder to tender on the beneficial owner's behalf. If the beneficial owner wishes to tender on the owner's own behalf, the owner must, prior to completing and executing the letter of transmittal and delivering the owner's old notes, either (1) make appropriate arrangements to register ownership of the old notes in the owner's name or (2) obtain a properly completed bond power from the registered holder. The transfer of registered ownership may take considerable time. All questions as to the validity, form, eligibility (including time of receipt) and acceptance of old notes tendered for exchange will be determined by us in our sole discretion. This determination shall be final and binding. We reserve the absolute right to reject any and all tenders of any old notes not properly tendered or to not accept any old notes which acceptance might, in our judgment or our counsel's judgment, be unlawful. We also reserve the absolute right to waive any defects or irregularities or conditions of the exchange offer as to any old notes either before or after the expiration date of the exchange offer (including the right to waive the ineligibility of any holder who seeks to tender old notes in the exchange offer). The interpretation of the terms and conditions of the exchange offer as to any old notes either before or after the expiration date of the exchange offer (including the letter of transmittal and the instructions to the letter of transmittal) by us shall be final and binding on all parties. Unless waived, any defects or irregularities in connection with tenders of old notes for exchange must be cured within a reasonable period of time as we shall determine. Neither we, the exchange agent nor any other person shall be under any duty to give notification of any defect or irregularity regarding any tender of old notes for exchange, nor shall any of them incur any liability for failure to give notification. If the letter of transmittal or any old notes or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, these persons should so indicate when signing, and, unless waived by us, proper evidence satisfactory to us of their authority to so act must be submitted. By tendering, each holder of old notes will represent to us in writing that, among other things: . the new notes acquired in the exchange offer are being obtained in the ordinary course of business of the holder and any beneficial holder; . neither the holder nor any beneficial holder has an arrangement or understanding with any person to participate in the distribution of the new notes; and . neither the holder nor any other person is an "affiliate," as defined under Rule 405 of the Securities Act, of our company. If the holder is not a broker-dealer, the holder must represent that it is not engaged in nor does it intend to engage in distribution of the new notes. If any holder or any other person is an "affiliate," as defined under Rule 405 of the Securities Act, of ours, or is engaged in, or intends to engage in, or has an arrangement or understanding with any person to participate in, a distribution of the new notes to be acquired in the exchange offer, the holder or any other person must comply with the registration and prospectus delivery requirements of the Securities Act in connection with any resale transaction. 57 If the holder is a broker-dealer, the holder must represent that it will receive new notes for its own account in exchange for old notes that were acquired as a result of market-making activities or other trading activities. Each broker-dealer that receives new notes for its own account in exchange for old notes, where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. See "Plan of Distribution." Acceptance of Old Notes For Exchange; Delivery Of New Notes Upon satisfaction or waiver of all of the conditions to the exchange offer, we will accept, promptly after the expiration date of the exchange offer, all old notes properly tendered, and will issue the new notes promptly after acceptance of the old notes. See "--Conditions to the Exchange Offer" below. For purposes of the exchange offer, we shall be deemed to have accepted properly tendered old notes for exchange when, as and if we have given oral and written notice to the exchange agent. The new notes will bear interest from the most recent date to which interest has been paid on the old notes, or if no interest has been paid on the old notes, from April 26, 2001. Accordingly, registered holders of new notes on the relevant record date for the first interest payment date following the consummation of the exchange offer will receive interest accruing from the most recent date to which interest has been paid or, if no interest has been paid, from April 26, 2001. Old notes accepted for exchange will cease to accrue interest from and after the date of consummation of the exchange offer. Holders of old notes whose old notes are accepted for exchange will not receive any payment for accrued interest on the old notes otherwise payable on any interest payment date the record date for which occurs on or after consummation of the exchange offer and will be deemed to have waived their rights to receive accrued interest on the old notes. In all cases, issuance of new notes for old notes that are accepted for exchange in the exchange offer will be made only after timely receipt by the exchange agent of (1) certificates for the old notes or a timely confirmation of a book-entry transfer of the old notes into the exchange agent's account at The Depository Trust Company, (2) a properly completed and duly executed letter of transmittal and (3) all other required documents. If any tendered old notes are not accepted for any reason set forth in the terms and conditions of the exchange offer or if old notes are submitted for a greater principal amount than the holder desires to exchange, the unaccepted or non-exchanged old notes will be returned without expense to the tendering holder of the old notes (or, in the case of old notes tendered by book-entry transfer into the exchange agent's account at The Depository Trust Company according to the book-entry transfer procedures described below, the non-exchanged old notes will be credited to an account maintained with the Depository Trust Company) as promptly as practicable after the expiration of the exchange offer. Book-Entry Transfer Any financial institution that is a participant in The Depository Trust Company's systems may make book-entry delivery of old notes by causing The Depository Trust Company to transfer the old notes into the exchange agent's account at The Depository Trust Company in accordance with The Depository Trust Company's procedures for transfer. However, although delivery of old notes may be effected through book-entry transfer at The Depository Trust Company, the letter of transmittal or facsimile of the letter of transmittal with any required signature guarantees and any other required documents must, in any case, be transmitted to and received by the exchange agent at the address set forth below under "--Exchange Agent" on or prior to the expiration date of the exchange offer, unless the holder has strictly complied with the guaranteed delivery procedures described below. We understand that the exchange agent has confirmed with The Depository Trust Company that any financial institution that is a participant in The Depository Trust Company's system may utilize The Depository Trust Company's Automated Tender Offer Program to tender old notes. We further understand that the exchange agent will request, within two business days after the date the exchange offer commences, that The 58 Depository Trust Company establish an account for the old notes for the purpose of facilitating the exchange offer, and any participant may make book-entry delivery of old notes by causing The Depository Trust Company to transfer the old notes into the exchange agent's account in accordance with The Depository Trust Company's Automated Tender Offer Program procedures for transfer. However, the exchange of the old notes so tendered will only be made after timely confirmation of the book-entry transfer and timely receipt by the exchange agent of, in addition to any other documents required, an appropriate letter of transmittal with any required signature guarantee and an agent's message, which is a message, transmitted by The Depository Trust Company and received by the exchange agent and forming part of a confirmation of a book- entry transfer, which states that The Depository Trust Company has received an express acknowledgment from a participant tendering old notes which are the subject of the confirmation of a book-entry transfer and that the participant has received and agrees to be bound by the terms of the letter of transmittal and that we may enforce the agreement against that participant. Guaranteed Delivery Procedures If a registered holder of the old notes desires to tender the old notes and the old notes are not immediately available, or time will not permit the holder's old notes or other required documents to reach the exchange agent before the expiration date of the exchange offer, or the procedure for book- entry transfer cannot be completed on a timely basis, a tender may nonetheless be effected if: . the tender is made through a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States; . prior to the expiration date of the exchange offer, the exchange agent received from the firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or commercial bank or trust company having an office or correspondent in the United States a properly completed and duly executed letter of transmittal (or a facsimile of the letter of transmittal) and Notice of Guaranteed Delivery, substantially in the form provided by us (by telegram, telex, facsimile transmission, mail or hand delivery), setting forth the name and address of the holder of old notes and the amount of old notes tendered, stating that the tender is being made and guaranteeing that within five New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered old notes, in proper form for transfer, or a confirmation of a book-entry transfer, as the case may be, and any other documents required by the letter of transmittal will be deposited by the firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or commercial bank or trust company having an office or correspondent in the United States with the exchange agent; and . the certificates for all physically tendered old notes, in proper form for transfer, or a confirmation of a book-entry transfer, as the case may be, and all other documents required by the letter of transmittal are received by the exchange agent within five New York Stock Exchange trading days after the date of execution of the Notice of Guaranteed Delivery. Withdrawal Rights Tenders of old notes may be withdrawn at any time prior to the expiration date of the exchange offer. For a withdrawal to be effective, a written notice of withdrawal must be received by the exchange agent at the address set forth below under "--Exchange Agent." Any notice of withdrawal must: . specify the name of the person having tendered the old notes to be withdrawn; . identify the old notes to be withdrawn (including the principal amount of the old notes); and . where certificates for old notes have been transmitted specify the name in which the old notes are registered, if different from that of the withdrawing holder. 59 If certificates for old notes have been delivered or otherwise identified to the exchange agent, then, prior to the release of the certificates, the withdrawing holder must also submit the serial numbers of the particular certificates to be withdrawn and a signed notice of withdrawal with signatures guaranteed by a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States unless the holder is a firm which is a member of a registered national securities exchange or a member of the National Association of Securities Dealers, Inc. or a commercial bank or trust company having an office or correspondent in the United States. If old notes have been tendered in accordance with the procedure for book- entry transfer described above, any notice of withdrawal must specify the name and number of the account at The Depository Trust Company to be credited with the withdrawn old notes and otherwise comply with the procedures of the facility. All questions as to the validity, form and eligibility (including time of receipt) of the notices will be determined by us, whose determination shall be final and binding on all parties. Any old notes so withdrawn will be deemed not to have been validly tendered for exchange for purposes of the exchange offer. Any old notes which have been tendered for exchange but which are not exchanged for any reason will be returned to the holder without cost to the holder (or in the case of old notes tendered by book-entry transfer into the exchange agent's account at The Depository Trust Company according to the book-entry transfer procedures described above, the old notes will be credited to an account maintained with The Depository Trust Company for the old notes) as soon as practicable after withdrawal, rejection of tender or termination of the exchange offer. Properly withdrawn old notes may be retendered by following one of the procedures described under "--Procedures for Tendering Old Notes" above at any time on or prior to the expiration date of the exchange offer. Conditions To The Exchange Offer Notwithstanding any other provision of the exchange offer, we shall not be required to accept for exchange, or to issue new notes in exchange for, any old notes and may terminate or amend the exchange offer if at any time before the acceptance of the old notes for exchange or the exchange of new notes for the old notes, we determine that: . the exchange offer does not comply with any applicable law or any applicable interpretation of the staff of the Securities and Exchange Commission; . we have not received all applicable governmental approvals; or . any actions or proceedings of any governmental agency or court exist which could materially impair our ability to consummate the exchange offer. The foregoing conditions are for our sole benefit and may be asserted by us regardless of the circumstances giving rise to any condition or may be waived by us in whole or in part at any time and from time to time in our reasonable discretion. Our failure at any time to exercise any of the foregoing rights shall not be deemed a waiver of that right and each right shall be deemed an ongoing right which may be asserted at any time and from time to time. In addition, we will not accept for exchange any old notes tendered, and no new notes will be issued in exchange for any old notes, if at that time any stop order shall be threatened or in effect with respect to the registration statement of which this prospectus constitutes a part or the qualification of the indenture under the Trust Indenture Act of 1939, as amended. In any event we are required to use every reasonable effort to obtain the withdrawal of any stop order at the earliest possible time. Exchange Agent First Union National Bank has been appointed as the exchange agent for the exchange offer. All executed letters of transmittal should be directed to the exchange agent at the address set forth below. Questions and 60 requests for assistance, requests for additional copies of this prospectus or of the letter of transmittal and requests for Notices of Guaranteed Delivery should be directed to the exchange agent addressed as follows: First Union National Bank First Union Customer Information Center Corporate Trust Operations--NC1153 1525 West W.T. Harris Boulevard--3C3 Charlotte, NC 28288 Attention: Laura Richardson Delivery other than as set forth above will not constitute a valid delivery. Fees and Expenses We will not make any payments to brokers, dealers or others soliciting acceptances of the exchange offer. The principal solicitation is being made by mail; however, additional solicitations may be made in person or by telephone by our officers and employees. The expenses to be incurred in connection with the exchange offer will be paid by us. These expenses include fees and expenses of the exchange agent and trustee under the indenture governing the notes, accounting and legal fees and printing costs, among others. Accounting Treatment The new notes will be recorded at the same carrying amount as the old notes, which is the principal amount as reflected in our accounting records on the date of the exchange and, accordingly, no gain or loss will be recognized. The debt issuance costs will be capitalized and amortized to interest expense over the term of the new notes. Transfer Taxes Holders who tender their old notes for exchange will not be obligated to pay any transfer taxes in connection with the tender, except that holders who instruct us to register new notes in the name of, or request that old notes not tendered or not accepted in the exchange offer be returned to, a person other than the registered tendering holder will be responsible for the payment of any applicable transfer tax thereon. Consequences Of Failure To Exchange; Resales Of New Notes Holders of old notes who do not exchange their old notes for new notes in the exchange offer will continue to be subject to the restrictions on transfer of the old notes as set forth in the legend on the old notes as a consequence of the issuance of the old notes in accordance with exemptions from, or in transactions not subject to, the registration requirements of, the Securities Act and applicable state securities laws. Old notes not exchanged in accordance with the exchange offer will continue to accrue interest at 11% per annum and will otherwise remain outstanding in accordance with their terms. Holders of old notes do not have any appraisal or dissenters' rights under the Delaware General Corporation Law in connection with the exchange offer. In general, the old notes may not be offered or sold unless registered under the Securities Act, except in accordance with an exemption from, or in a transaction not subject to, the Securities Act and applicable state securities laws. We do not currently anticipate that we will register the old notes under the Securities Act. However, (1) if because of any change in law or in applicable interpretations by the staff of the SEC, we are not permitted to effect the exchange offer, (2) if the exchange offer is not consummated by October 23, 2001, (3) if any initial purchaser so requests that the old notes not eligible be exchanged for new notes in the exchange offer and held by it following consummation of the exchange offer or (4) if any holder of old notes (other than a broker-dealer that receives new notes for its own account in exchange for old notes, where the old 61 notes were acquired by the broker-dealer as a result of market-making or other trading activities) is not eligible to participate in the exchange offer or, in the case of any holder of old notes (other than a broker-dealer that receives new notes for its own account in exchange for old notes, where the old notes were acquired by the broker-dealer as a result of market-making or other trading activities) that participates in the exchange offer, does not receive new notes in exchange for old notes that may be sold without restriction under state and federal securities laws, we are obligated to file a shelf registration statement on the appropriate form under the Securities Act relating to the old notes held by such persons. Based on interpretive letters issued by the staff of the SEC to third parties in unrelated transactions, we are of the view that new notes issued in accordance with the exchange offer may be offered for resale, resold or otherwise transferred by the holders (other than (1) any holder which is an "affiliate" of us within the meaning of Rule 405 under the Securities Act or (2) any broker-dealer that purchases notes from us to resell in accordance with Rule 144A or any other available exemption) without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that the new notes are acquired in the ordinary course of the holders' business and the holders have no arrangement or understanding with any person to participate in the distribution of the new notes. If any holder has any arrangement or understanding regarding the distribution of the new notes to be acquired in accordance with the exchange offer, the holder (1) could not rely on the applicable interpretations of the staff of the SEC and (2) must comply with the registration and prospectus delivery requirements of the Securities Act in connection with a secondary resale transaction. A broker-dealer who holds old notes that were acquired for its own account as a result of market- making or other trading activities may be deemed to be an "underwriter" within the meaning of the Securities Act and must, therefore, deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of new notes. Each broker-dealer that receives new notes for its own account in exchange for old notes, where the old notes were acquired by the broker-dealer as a result of market-making activities or other trading activities, must acknowledge in the letter of transmittal that it will deliver a prospectus in connection with any resale of the new notes. See "Plan of Distribution." We have not requested the staff of the SEC to consider the exchange offer in the context of a no-action letter, and there can be no assurance that the staff would take positions similar to those taken in the interpretive letters referred to above if we were to make a no-action request. In addition, to comply with the securities laws of applicable jurisdictions, the new notes may not be offered or sold unless they have been registered or qualified for sale in the applicable jurisdictions or an exemption from registration or qualification is available and is complied with. We have agreed, under the registration rights agreement and subject to specified limitations therein, to register or qualify the new notes for offer or sale under the securities or blue sky laws of the applicable jurisdictions in the United States as any selling holder of the notes reasonably requests in writing. 62 MANAGEMENT Directors, Executive Officers and Key Employees The following table sets forth the names and ages for each of our directors, executive officers and key employees and the positions they hold:
Name Age Position - ---- --- -------- Harold K. Sperlich...... 71 Chairman of the Board of Directors Thomas J. Snyder........ 56 President, Chief Executive Officer and Director J. Timothy Gargaro...... 47 Senior Vice President and Chief Financial Officer Joseph P. Felicelli..... 54 Group Vice President, Aftermarket Susan E. Goldy.......... 47 Senior Vice President and General Counsel Roderick English........ 49 Senior Vice President, Human Resources and Communication David E. Stoll.......... 58 Vice President, Treasurer and Secretary Steven P. Clemens....... 39 Vice President and Assistant Treasurer Richard L. Reinhart..... 46 Vice President and Corporate Controller Patrick C. Mobouck...... 47 Vice President--Managing Director, Europe Richard L. Stanley...... 45 President, Delco Remy America Allen R. Wilkie......... 51 Vice President and Operations Controller E.H. Billig............. 74 Vice Chairman of the Board of Directors Richard M. Cashin, Jr... 48 Director Michael A. Delaney...... 47 Director James R. Gerrity........ 59 Director Robert J. Schultz....... 71 Director Joseph M. Silvestri..... 40 Director
Set forth below is a brief description of the business experience of each of our directors, executive officers and key employees. Harold K. Sperlich, Chairman of the Board of Directors. Mr. Sperlich has been Chairman of the Board of Directors since our inception in 1994. Since retiring from Chrysler Corporation in 1988, having served as its President, Mr. Sperlich has served as a consultant to the automotive industry. Before joining Chrysler in 1977, Mr. Sperlich held several senior administrative and operating posts with Ford Motor Company. Thomas J. Snyder, President, Chief Executive Officer and Director. Mr. Snyder was elected Chief Executive Officer effective January 1, 2000. He was elected President, Chief Operating Officer and Director when we were founded in 1994. From 1973 to 1994, he held a variety of managerial and executive positions with the Delco Remy Division of General Motors Corporation. He is a member of the Board of the Indiana Chamber of Commerce and of Saint John's Health Systems. He is a member of the Board of Visitors of Hudson Institute and of Indiana University's Kelley School of Business in Indianapolis. J. Timothy Gargaro, Senior Vice President and Chief Financial Officer. Mr. Gargaro joined Delco Remy in May 2000 from Lear Corporation. At Lear since 1993, Mr. Gargaro held several senior level finance positions within the organization. He served as Vice President of Finance for Lear's Ford and Chrysler divisions and Chief Financial Officer of European Operations in Frankfurt, Germany. Prior to Lear, he was the Chief Financial Officer of Ring Screw Works since 1989. Joseph P. Felicelli, Group Vice President, Aftermarket. Mr. Felicelli has been Group Vice President since September 1997. Prior to joining us, Mr. Felicelli served in various management positions for Cooper Industries. 63 Susan E. Goldy, Esquire, Senior Vice President and General Counsel. Ms. Goldy has been Senior Vice President and General Counsel since February 2000. Prior to that, she had been Vice President and General Counsel since 1997. Before joining us, she was a partner in the Dechert law firm. Roderick English, Senior Vice President, Human Resources and Communications. Mr. English has been Senior Vice President of Human Resources and Communications since November 1997. Prior to that, Mr. English had been Senior Vice President of Human Resources and Communications at Delco Remy America since our inception in 1994. Mr. English joined the Delco Remy Division of GM in 1976 and became Plant Manager of plant 17 in 1992. Prior to that, Mr. English served as Divisional Manager of Labor Relations since 1989. David E. Stoll, Vice President, Treasurer and Secretary. Mr. Stoll was Vice President, Controller and Secretary since our inception in 1994. During fiscal year 2000, he was elected to the position of treasurer. Prior to joining us, he was Vice President of Finance of Dyneer Corporation since 1987 and, prior to that, served as corporate controller since 1973. Steven P. Clemens, Vice President and Assistant Treasurer. Mr. Clemens joined us in January 2001. Prior to joining us, Mr. Clemens had been Managing Director for Banc One Capital Markets, Inc. since 1997. Prior to that, he served as a loan officer for NBD Bank. Richard L. Reinhart, Vice President and Controller. Mr. Reinhart joined us in January 2001. Prior to that, Mr. Reinhart had been with Lear Corporation since November 1996, most recently as Financial Director of Lear's Ford European Group. Prior to Lear, Mr. Reinhart had been with Allied Signal since 1978 in various management positions, most recently as Group Controller of the Filter and Spark Plug Group in Allied Signal's Automotive Sector. Patrick C. Mobouck, Vice President-Managing Director, Europe. Mr. Mobouck has been Vice President-Managing Director, Europe since July 1997. He has also been Chairman of Autovill since August 1997. Before joining us, Mr. Mobouck was with Monroe Auto Equipment since 1987, most recently as Managing Director- Europe, Middle East and Africa. Richard L. Stanley, President, Delco Remy America. Mr. Stanley has been President of Delco Remy America since November 1998. Prior to that, Mr. Stanley had been Senior Vice President, Automotive Systems since our inception in 1994. Mr. Stanley joined the Delco Remy Division of GM in 1978, serving most recently as Director of Customer Programs since 1992 and as European Chief Engineer since 1988. Allen R. Wilkie, Vice President and Operations Controller. Mr. Wilkie has been Vice President and Operations Controller since June 2000 and Operations Controller since March 1996. Prior to that, Mr. Wilkie served as Vice President, Controller of Ameron International, Inc. from March 1994 through March 1996. E.H. Billig, Vice Chairman of the Board of Directors. Mr. Billig has been Vice Chairman of the Board of Directors since our inception in 1994. Mr. Billig has been Chairman of the Board of MSX International, Inc. since 1997, where he was also Chief Executive Officer until January 2000. He was formerly President and Chief Operating Officer of MascoTech, Inc. He is also a director of Titan Wheel International, Inc. Richard M. Cashin, Jr., Director. Mr. Cashin has been a director since our inception in 1994. Mr. Cashin was President from 1994 to April 2000 and a Managing Director of Citicorp Venture Capital Ltd., which we refer to as CVC, for more than five years. Since April, he is a partner of Cashin Capital Partners, a private equity investment firm. Mr. Cashin is the sole manager of DRI Group. In addition, Mr. Cashin serves as a director of Lifestyle Furnishings International Ltd., Fairchild Semiconductor Corporation, Freedom Forge, Euromax International, Plc., Hoover Group, Inc., Gerber Childrenswear Inc., JAC Holdings, GVC Holdings, MSX International, Inc. Titan Wheel International, Inc., and Flender AG. 64 Michael A. Delaney, Director. Mr. Delaney has been a director since our inception in 1994. Mr. Delaney has been a Managing Director of CVC since 1995 and a Vice President for more than the past five years. Mr. Delaney is Vice President and Managing Director of Court Square. Mr. Delaney is also a director of GVC Holdings, JAC Holdings, SC Processing, Inc., MSX International, Inc., International Knife and Saw Inc., Great Lakes Dredge and Dock Corporation, Trianon Industries Inc., ChipPac Inc. and Strategic Industries Inc. James R. Gerrity, Director. Mr. Gerrity has been a director since our inception in 1994. From 1986 to 1993, Mr. Gerrity was President and a director of Dyneer Corporation. Mr. Gerrity currently is a director of Wescor Graphics, Inc., Ballantrae Corporation and Flender AG. Robert J. Schultz, Director. Mr. Schultz became a director in 1997. Mr. Schultz retired as Vice Chairman and a member of the Board of Directors of GM in 1993. Mr. Schultz joined GM in 1955 and served as General Manager of GM's Delco Electronics Division and Group Executive of Chevrolet-Pontiac-GM of Canada . Mr. Schultz is also a director of MCT Corporation, and was Chairman of the Board of OEA, Inc. until its sale earlier this year. He is also a member of the Board of Trustees of California Institute of Technology. Joseph M. Silvestri, Director. Mr. Silvestri became a director in 2001. Mr. Silvestri has been Vice President of CVC since 1990. Mr. Silvestri is also Vice President of Court Square. Mr. Silvestri is also a director of Triumph Group, Euramax International, MacDermid and ISG Resources. Director Compensation and Arrangements Mr. Sperlich received $110,625 in directors fees during the five-month period ending December 31, 2000 for services related to special projects (in connection with acquisitions and strategic alliances) undertaken by him at the direction of the board of directors. In connection with the merger of DRI Acquisition into our company, the board of directors formed a special committee to evaluate the terms of the tender offer and merger. The members of the special committee were Mr. Sperlich and Mr. Schultz. In connection with Mr. Sperlich's and Mr. Schultz's service on the special committee, each received $1,000 per meeting of the special committee attended as compensation, plus reimbursement for all out of pocket expenses incurred in attending those meetings. We currently contemplate that those persons listed above as one of our directors may receive compensation for services performed as a director. 65 Executive Compensation The following table sets forth, for the five-month transition period ending December 31, 2000 and the three years ending July 31, 2000, the information regarding the cash compensation paid by us, as well as other compensation paid or accrued for that period, to each of our executive officers named below, in all capacities in which they served. Summary Compensation Table
Long Term Compensation(1) --------------- Compensation Securities Name and Principal ------------------ Underlying All Other Position Year Salary($) Bonus($) Options(#) Compensation($) ------------------ ---- --------- -------- --------------- --------------- (dollars in thousands) Harold K. Sperlich...... 2000(2) -- 206.3 -- 110.6(4) Chairman of the Board 2000 123.6 262.2 7,000 252.2(4) 1999 295.0 292.4 7,000 23.9(4) 1998 275.0 280.5 6,900 29.6(4) Thomas J. Snyder........ 2000(2) 158.3 244.7 52,100 5.5(5) President and Chief Executive Officer 2000 350.0 387.3 7,000 17.3(5) 1999 295.0 292.4 7,000 13.8(5) 1998 275.0 280.5 6,900 9.7(5) J. Timothy Gargaro(3)... 2000(2) 105.8 37.7 16,000 1.4(6) Senior Vice President and 2000 62.5 62.7 20,000 0.2(6) Chief Financial Officer 1999 -- -- -- -- 1998 -- -- -- -- Joseph P. Felicelli..... 2000(2) 110.3 80.4 16,575 5.8(7) Group Vice President, Aftermarket 2000 260.0 103.3 5,000 10.8(7) 1999 235.0 92.4 5,000 13.7(7) 1998 193.3 115.3 5,500 8.8(7) Richard L. Stanley...... 2000(2) 117.3 143.4 17,550 1.2(8) President, Delco Remy America 2000 275.0 218.6 5,000 11.2(8) 1999 220.0 135.6 5,000 7.0(8) 1998 175.0 127.3 4,400 4.9(8) Susan E. Goldy.......... 2000(2) 104.2 102.9 12,150 9.2(9) Senior Vice President 2000 245.0 162.8 3,500 22.5(9) and General Counsel 1999 230.0 136.7 3,500 23.1(9) 1998 225.2 125.3 5,300 22.6(9)
- --------------------- (1) All options held by our executive officers and directors listed in this table were subsequently cancelled on March 14, 2001. See the Section below entitled "Stock Options" for more information. (2) For the five-month transition period ending December 31, 2000. (3) Mr. Gargaro joined us in May 2000. (4) Includes the following: (i) $5,509 and $1,375 in matching contributions under our 401(k) Plan in fiscal years 1999 and 1998, respectively; (ii) $6,824, $2,000 and $3,146 in salaried medical retiree benefits in fiscal years 2000, 1999 and 1998 respectively; (iii) $9,601, $16,385 and $25,040 in premiums paid under a life insurance policy in fiscal years 2000, 1999 and 1998, respectively; and (iv) $110,625 and $235,733 in directors fees in the five-month transition period ending December 31, 2000 and fiscal year 2000, respectively. See the section above entitled "Director Compensation and Arrangements" for more information. (5) Includes the following: (i) $7,778, $5,875 and $2,578 in matching contributions under our 401(k) Plan in fiscal years 2000, 1999 and 1998, respectively; and (ii) $5,512, $9,542, $7,947 and $7,139 in premiums 66 paid under a life insurance policy in the five-month transition period ending December 31, 2000 and the fiscal years 2000, 1999 and 1998, respectively. (6) Includes the following: (i) $235 in salaried medical retiree benefits in the fiscal year 2000; and (ii) $1,365 in premiums paid under a life insurance policy in the five-month transition period ending December 31, 2000. (7) Includes the following in the five-month transition period ending December 31, 2000 and fiscal years 2000, 1999 and 1998, respectively: (i) $967, $3,821, $6,919 and $3,850 in matching contributions under our 401(k) Plan; (ii) $2,000, $2,000, $2,000 and $2,000 in salaried medical retiree benefits; and (iii) $2,799, $4,930, $4,759 and $2,967 in premiums paid under a life insurance policy. (8) Includes the following: (i) $9,216, $5,826 and $3,142 in matching contributions under our 401(k) Plan in fiscal years 2000, 1999 and 1998, respectively; and (ii) $1,178, $1,958, $1,138 and $1,797 in premiums paid under a life insurance policy in the five-month transition period ending December 31, 2000 and fiscal years 2000, 1999 and 1998 respectively. (9) Includes the following: (i) $3,683, $4,211 and $3,097 in matching contributions under our 401(k) Plan in fiscal years 2000, 1999 and 1998, respectively; (ii) $2,000, $2,000, $2,000 and $2,700 in salaried medical retiree benefits in the five-month transition period ending December 31, 2000 and fiscal years 2000, 1999 and 1998, respectively; (iii) $1,294, $2,310, $2,240 and $1,567 in premiums paid under a life insurance policy in the five-month transition period ending December 31, 2000 and fiscal years 2000, 1999 and 1998, respectively; and (iv) $5,939, $14,525, $14,622 and $15,233 in living allowances in the five-month transition period ending December 31, 2000 and fiscal years 2000, 1999 and 1998, respectively. Stock Options In conjunction with the merger of DRI Acquisition into our company on March 14, 2001, all previously existing stock options held by our executive officers and directors were cancelled and both of our previously existing stock option plans were terminated. There are currently no options outstanding to purchase securities of our company. Retirement Plans Delco Remy America, Inc., our wholly-owned subsidiary, established the Delco Remy America Salaried Retirement Plan primarily to provide eligible salaried employees with a monthly pension benefit after retirement for life. As of December 31, 2000, our named executive officers have been credited with the following amounts of service under the retirement plan: Harold K. Sperlich--6.4 years; Thomas J. Snyder--38.4 years; J. Timothy Gargaro--0.7 years; Joseph P. Felicelli--3.4 years; Richard L. Stanley--22.8 years, and Susan E. Goldy--4 years. Change of Control Agreements We executed change of control agreements with the following executive officers: Mr. Snyder, Mr. Gargaro, Mr. Felicelli, Mr. Stanley, Ms. Goldy, Mr. English and Mr. Mobouck. These agreements entitle each of the eligible executive officers to receive payments and benefits upon the occurrence of a change of control of our company followed by a termination of the executive's employment within the two years immediately following the change of control under specified circumstances. In the case of Mr. Snyder, the total payment will be equal to $2.7 million, and he will be entitled to receive continuation of medical, dental and life insurance benefits until his sixty-fifth birthday. Each eligible executive officer other than Mr. Snyder will receive a payment of $1.0 million (or if the termination occurs after the first two years following execution of the change of control agreements, three times his or her average compensation in the three full calendar years immediately preceding the termination of employment) and continuation of medical, dental and life insurance benefits for a period of one year after the termination of employment with us. Payments and other benefits received by Mr. Snyder will be subject to gross-up tax treatment so that we will compensate Mr. Snyder for any excise taxes applicable to payments and other benefits, including the gross- 67 up payment, received by him upon a change of control. Payments and other benefits received by the other eligible executives will be subject to cut-back treatment so that any payments or other benefits to be received by any of them will be reduced to a level which eliminates any excise taxes. Under some circumstances, the present value of the payments and other benefits to be provided to the executives in connection with a change of control will not be deductible by us. Amendments to Benefit Plans As a condition to the execution of the change of control agreements, we required the applicable executive officers to agree to amendments to our benefit plans. We amended the definition of "Change in Control" in the Delco Remy International, Inc. Supplemental Executive Retirement Plan, which we refer to as the executive retirement plan, to conform to the definition contained in the change of control agreements. In addition, we amended the executive retirement plan to provide that, upon a change in control, our company will not be required to place any funds in trust unless our board of directors determines in good faith that the change in control or any related or contemplated financing transaction will impair in any material respect the financial condition or creditworthiness of our company or any other surviving successor or entity. We further amended the executive retirement plan to remove the provision providing for accelerated vesting of benefits upon a change in control. All affected persons consented to the amendments. Split-Dollar Insurance Agreements We entered into Collateral Assignment Split-Dollar Insurance Agreements, effective as of August 1, 2000, with some of our key management employees. The employees own the life insurance policies. However, they have assigned the policies to us as security for the repayment of premiums paid by us. Our interest in the cash value of the policy is equal to the premium paid by us, and the employees have a remaining interest in the cash value. If an employee dies while the collateral assignment is in place, we have a right to receive a portion of the death benefit equal to the amount of the premiums previously paid by us, with any excess payable to designated beneficiaries of the employee. Under the agreements, the employee is provided with life insurance protection under a universal life insurance product. The collateral assignment will terminate on the first to occur of the following events: . total cessation of our business; . bankruptcy, receivership or dissolution of our company; . surrender or cancellation of the policy by the employee; . employee entering into competition with us or one of our affiliates; . the delivery by the employee of a written notice terminating the agreement; . death of the employee; . termination of the employee's employment with us for cause; or . as of the date the employee turns 65. Upon the occurrence of any of these events other than death of an employee, the employee has an option to tender an amount equal to the amount of the premiums paid by us under the agreements, and upon receipt of the repayment we will release the assignment of the policy by the employee. Messrs Snyder, Gargaro, Felicelli, English and Stanley and Ms. Goldy are parties to the agreements. As a condition to execution of the change of control agreements, we required the applicable executives to agree to amend the agreements to conform the definition of change in control to the definition included in the change of control agreements. We also amended the agreements to provide that our obligations to place substantial sums in trust for the benefit of the beneficiaries in connection with a change in control will be triggered only if our board of directors determines in good faith that the change in control or any related or 68 contemplated financing transaction will impair in any material respect the financial condition or creditworthiness of our company or any other surviving or successor entity. Employment Agreement We entered into an employment agreement with Mr. Snyder which provides for his employment until July 2001. Mr. Snyder's agreement will automatically extend for successive additional 12-month periods after July 2001 until notice by either us or Mr. Snyder. Mr. Snyder receives an annual base salary of $350,000, subject to merit increases as determined by our board of directors, plus annual performance bonuses as determined by the board of directors. The agreement provides that Mr. Snyder may not engage in any business competitive with us while employed by us and for a period of one year thereafter. 69 OWNERSHIP OF CAPITAL STOCK The following table sets forth certain information regarding the beneficial ownership of our preferred stock and common stock as of May 1, 2001.
Number and Percent of Shares ----------------------------------------------------------------------------------- Preferred Stock Class A Stock(1) Class B Stock(1) Class C Stock(1) ----------------------- ---------------- --------------------- -------------------- Name of Beneficial Owner Number Percent Number Percent Number Percent Number Percent - ------------------------ ------------ ------- -------- ------- ---------- ------- ------------ ------- Court Square Capital 1,741,317.00(3) 83.22% 1,000.00 100% 205,037.78(3) 29.64% 1,677,843.18 100% Limited(2)............. 399 Park Avenue New York, New York 10043 Berkshire Hathaway Inc. 460,404.96 22.00% -- -- 498,098.94 72.01% -- -- ...................... 1440 Keewit Plaza Omaha, Nebraska 68131 DRI Group LLC(4)........ 198,136.02 9.47% -- -- 214,357.68 30.99% -- -- c/o Court Square Capital Limited 399 Park Avenue New York, New York 10043 Harold K. Sperlich...... -- -- -- -- -- -- -- -- Thomas J. Snyder(5)..... 9,174.56 0.44% -- -- 51,425.69 7.43% -- -- J. Timothy Gargaro...... -- -- -- -- -- -- -- -- Joseph P. Felicelli..... 1,257.73 0.06% -- -- 13,465.97 1.95% -- -- Susan E. Goldy.......... 1,921.06 0.09% -- -- 14,078.34 2.04% -- -- Roderick English........ 2,618.84 0.13% -- -- 14,833.25 2.14% -- -- Patrick C. Mobouck...... 327.36 0.02% -- -- 13,354.16 1.93% -- -- Richard Stanley......... 5,728.72 0.27% -- -- 19,697.73 2.85% -- -- E.H. Billig............. -- -- -- -- -- -- -- -- Richard M. Cashin, Jr.(6)................. 8,614.61 0.41% -- -- 9,319.90 1.35% -- -- Michael A. Delaney...... -- -- -- -- -- -- -- -- James R. Gerrity(7)..... 4,307.30 0.21% -- -- 4,659.94 0.67% -- -- Robert J. Schultz....... -- -- -- -- -- -- -- -- Joseph M. Silvestri..... -- -- -- -- -- -- -- -- All directors and executive officers as a group (9 persons)...... 35,535.27 1.70% -- -- 145,149.84 20.98% -- --
- --------------------- (1) The original holders of the voting Class A Common Stock are entitled to a number of votes equal to 51% of the total number of votes entitled to be cast by the holders collectively owning all of the Class A Common Stock and the Class B Common Stock. The holders of Class B Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. Except as required by law, the holders of Class C Common Stock have no voting rights. The Class A Common is convertible into an equal number of shares of Class B Common Stock, the Class B Common Stock is convertible into an equal number of shares of Class C Common Stock and the Class C Common Stock is convertible into an equal number of shares of Class B Common Stock. (2) Court Square is a Delaware corporation principally engaged in the business of making leveraged acquisitions. Court Square is owned by Citicorp Banking Corporation, a Delaware corporation. Citicorp, a Delaware corporation, owns all of the outstanding capital stock of Citicorp Banking Corporation. Citigroup Holdings Company, a Delaware corporation, owns all of the outstanding common stock of Citicorp. Citigroup Inc., a Delaware corporation, or Citigroup, owns all the outstanding common stock of Citigroup Holdings Company. (3) All shares of Class B Common Stock and 189,521.41 shares of preferred stock reported for Court Square above are held by DRI Group. Court Square may be deemed to beneficially own these shares as a result of its affiliation with DRI Group. Court Square disclaims beneficial ownership of all shares held by DRI Group, except for those shares reported by Court Square above. (4) DRI Group is a Delaware limited liability company owned by Court Square and Richard M. Cashin, Jr., one of our directors. Court Square holds 2,200,000 Class B common units of DRI Group that it received in exchange for 2,200,000 shares of our Class A common stock prior to the going private transaction, which 70 we refer to as the Old Class A Common Stock. Mr. Cashin holds 100,000 Class A common units of DRI Group that he received in exchange for 100,000 shares of Old Class A Common Stock. (5) Includes 1,292.19 shares of Preferred Stock and 14,397.98 shares of Class B Common Stock held by Daisy Farm Limited Partnership of which Mr. Snyder is the general partner. (6) Richard M. Cashin, Jr., who is one of our directors, is affiliated with DRI Group in the capacities described under "Management--Directors, Executive Officers and Key Employees" and footnote (4) above. All shares reported for Mr. Cashin above are held by DRI Group. Mr. Cashin may be deemed to beneficially own these shares as a result of his affiliation with DRI Group. Mr. Cashin disclaims beneficial ownership of all shares held by DRI Group, except for those shares reported by Mr. Cashin above. (7) Includes 3,877 shares of preferred stock and 431 shares of preferred stock held by The James R. Gerrity Living Trust and The Susan Gerrity Living Trust, respectively, and 4,194 shares of Class B Common Stock and 466 shares of Class B Common Stock held by The James R. Gerrity Living Trust and The Susan Gerrity Living Trust, respectively. 71 DESCRIPTION OF CAPITAL STOCK Preferred Stock Our Amended and Restated Certificate of Incorporation provides that we may issue 3,500,000 shares of preferred stock, all of which will be designated as 12% Series A Cumulative Compounding Preferred Stock. The preferred stock will have a stated value of $100 per share and will be entitled to semi-annual dividends commencing September 15, 2001, when, as and if declared, which dividends are cumulative, whether or not earned or declared, and accrue at a rate of 12%, compounding annually. As of the date of this prospectus, 2,092,549.91 shares of our preferred stock were outstanding. The vote of a majority of the outstanding shares of the preferred stock, voting as a separate class, will be required to (1) create, authorize or issue any other class or series of stock entitled to a preference prior to the preferred stock upon any dividend or distribution or any liquidation, distribution of assets, dissolution or winding up of the Company, or increase the authorized amount of any such other class or series, or (2) amend our Certificate of Incorporation if the amendment would adversely affect the relative rights and preferences of the holders of the preferred stock. Except as described above or as otherwise required by law, the preferred stock is not entitled to vote. We may not pay any dividend upon capital stock junior to the preferred stock, except for a dividend payable in capital stock junior to the preferred stock (including the common stock or junior stock), or redeem or otherwise acquire shares of junior stock, unless all cumulative dividends on the preferred stock have been paid in full. Upon liquidation, dissolution or winding up, holders of preferred stock are entitled to receive out of our legally available assets, before any amount is paid to holders of junior stock, an amount equal to $100 per share of preferred stock, plus all accrued and unpaid dividends to the date of final distribution. If our available assets are insufficient to pay the holders of the outstanding shares of preferred stock in full, the assets, or the proceeds from the sale of the assets, will be distributed ratably among the holders of the preferred stock. The preferred stock is not mandatorily redeemable prior to April 16, 2021. We anticipate that the dividends on the preferred stock will be declared and accrued but not paid. Our ability to pay cash dividends, and to redeem the preferred stock, is subject to restrictions contained in the senior credit facility, the 8 5/8% Senior Notes Due 2007, the 10 5/8% Senior Subordinated Notes Due 2006 and the notes. Common Stock Our Amended and Restated Certificate of Incorporation provides that we may issue 12,001,000 shares of common stock, divided into three classes consisting of 1,000 shares of Class A Common Stock, 6,000,000 shares of Class B Common Stock and 6,000,000 shares of Class C Common Stock. As of the date of this prospectus, 2,370,575.05 shares of our common stock were outstanding. The holders of Class A Common Stock are entitled to vote on all matters submitted to a vote of the stockholders. The original holders of Class A Common Stock, or Court Square, Citicorp or Citibank, N.A. or any direct or indirect subsidiary of Citicorp or Citibank, N.A., in each case, to the extent that the entity is the owner of Class A Common Stock, are entitled to that number of votes equal to, in the aggregate, 51% of the total number of votes entitled to be cast by the holders collectively owning all of the outstanding shares of Class A Common Stock and Class B Common Stock. The number of votes to be cast by the holder of Class A Common Stock may vary and is determined, in each instance, prior to a vote of stockholders. If at any time the aggregate principal amount of indebtedness outstanding under our (1) Indenture dated August 1, 1996 among us, certain of our subsidiaries and National City Bank of Indiana; and (2) Indenture dated December 22, 1997 among us, certain of our subsidiary guarantors and United States Trust Company of New York is less than $50,000,000, the holder of Class A Common Stock will be entitled to one vote for each share of Class A Common Stock held. So long as the holders of the Class A Common Stock are entitled to more than one vote per share, in any election of our directors, 21% (rounded up to the nearest whole director) of the directors to be elected shall be elected by a majority of the votes cast by the holders of shares of outstanding Class B Common Stock other than Court Square or any person that is or is deemed to be in the consolidated tax group of which Court Square is a member. 72 The holders of Class B Common Stock are entitled to one vote for each share held of record on all matters submitted to a vote of the stockholders. We cannot amend our Amended and Restated Certificate of Incorporation, enter into any plan of liquidation, recapitalization, reorganization, reclassification, consolidation or merger, sell all or substantially all of our assets or stock or enter into any other business combination without the approval of a majority of the holders of Class B Common Stock. Except as required by law, the holders of Class C Common Stock have no voting rights. Under our Amended and Restated Certificate of Incorporation, shares of Class A Common Stock are convertible into an equal number of shares of Class B Common Stock. Shares of Class B Common Stock are convertible into an equal number of shares of Class C Common Stock. Shares of Class C Common Stock are convertible into an equal number of shares of Class B Common Stock. In the case of a conversion from Class C Common Stock, which is nonvoting, into Class B Common Stock, which is voting, the holder of shares to be converted would be permitted under applicable law to hold the total number of shares of Class B Common Stock which would be held upon conversion. Securities Transfer, Recapitalization and Holders Agreement In connection with our recapitalization, our stockholders entered into the Securities Transfer, Recapitalization and Holders Agreement dated March 14, 2001, which we refer to as the Stockholders Agreement, containing certain agreements among the stockholders regarding our capital stock and corporate governance. According to our Stockholders Agreement, so long as Court Square owns at least 5% of our common stock outstanding, Court Square has the right to designate observers to attend meetings of our Board of Directors. The Stockholders Agreement contains provisions which, with certain exceptions, restrict the ability of the stockholders to transfer any of our common stock or preferred stock. Subject to some conditions, if holders of at least 50% of our common stock approve the sale of the company, each stockholder has agreed to consent to the sale and, if the sale includes the sale of stock, each stockholder has agreed to sell all of the stockholder's common stock on the terms and conditions approved by holders of a majority of our common stock then outstanding. Subject to some limitations, neither Court Square nor DRI Group may sell any of their shares of our common stock without offering the other stockholders a pro rata opportunity to participate in the sale. The Stockholders Agreement also provides for certain additional restrictions on transfer of our shares by our executive officers and other employees, whom we refer to as our management investors, including our right to repurchase certain shares upon termination of the management investor's employment prior to March 14, 2006, at a formula price, and the grant of a right of first refusal in our favor in the event a management investor elects to transfer his shares of common stock. Preferred Stockholders Agreement In connection with our recapitalization, our stockholders entered into a Preferred Stockholders Agreement dated March 14, 2001, which we refer to as the Preferred Stockholders Agreement, containing additional agreements among the stockholders regarding our preferred stock. Subject to some limitations, neither Court Square nor DRI Group may sell any of their shares of our preferred stock without offering the other stockholders a pro rata opportunity to participate in the sale. Subject to some conditions, if holders of at least 50% of our common stock approve the sale of our company, each stockholder has agreed to consent to the sale and, if the sale includes the sale of stock, each stockholder has agreed to sell all of the stockholder's preferred stock on the terms and conditions approved by holders of a majority of our common stock then outstanding. Registration Rights Agreement In connection with their entry into the Stockholders Agreement, we, Court Square, World Equity Partners, L.P., DRI Group, the management investors and some of our other stockholders entered into a Registration 73 Rights Agreement dated March 14, 2001, which we refer to as the Registration Rights Agreement. According to the Registration Rights Agreement, upon the written request of Court Square we will prepare and file a registration statement with the SEC concerning the distribution of all or part of the shares held by that party and use our best efforts to cause the registration statement to become effective. If at any time we file a registration statement for common stock pursuant to a request by Court Square or otherwise, we will allow the other parties to the Registration Rights Agreement to have their shares of common stock (or a portion of their shares under certain circumstances) included in the registered offering of our common stock. We are not bound by this requirement if we are filing a registration statement on Form S-8, Form S- 4 or any similar form, a registration statement filed in connection with a share exchange or an offering solely to our employees or existing stockholders, or a registration statement registering a unit offering. We will pay the registration expenses of the selling stockholders (other than underwriting commissions, brokerage fees and transfer taxes applicable to the shares sold by the stockholders or the fees and expenses of any accountants or other representatives retained by a selling stockholder). 74 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS On February 7, 2001, we entered into an Agreement and Plan of Merger with Court Square and DRI Acquisition LLC, which we refer to as DRI Acquisition, which provided for the consummation of a cash tender offer for 9,716,135 shares of our Old Class A Common Stock not then owned by Court Square at $9.50 per share and the merger of DRI Acquisition with and into our company. On February 23, 2001, at 12:00 midnight New York City time, the tender offer terminated and, after giving effect to the tender offer, DRI Acquisition and Court Square owned more than 90% of the issued and outstanding Old Class A Common Stock. Court Square contributed shares of Old Class A Common Stock to enable DRI Acquisition to consummate the merger without the need for action by our other stockholders. On March 14, 2001, DRI Acquisition merged with and into us and we became the surviving corporation in the merger. In connection with the completion of the merger, we amended our Certificate of Incorporation to recapitalize our capital stock into three classes of common stock, Class A, Class B and Class C, and one class of preferred stock. See "Description of Capital Stock." We also entered into the Stockholders Agreement, the Preferred Stockholders Agreement, and the Registration Rights Agreement, together with DRI Acquisition, Court Square, DRI Group, World Equity Partners, L.P. and some of our managers and directors. See "Description of Capital Stock--Securities Transfer, Recapitalization and Holders Agreement," "--Preferred Stockholders Agreement," "--Registration Rights Agreement" and "Ownership of Capital Stock." Also in connection with the merger, we: . issued a new warrant to World Equity Partners, L.P., which has since been exercised and the shares obtained have been sold to Berkshire Hathaway Inc.; . executed change of control agreements with some of our executive officers; . amended some of our benefit plans; and . entered into Collateral Assignment Split-Dollar Insurance Agreements with some members of our key management. See "Description of Capital Stock--Warrant to Purchase Preferred Stock and Class B Common Stock," "Management--Change of Control Agreements," "-- Amendments to Benefit Plans," "--Split-Dollar Insurance Agreements." As a result of these transactions, Court Square and DRI Group together own beneficially about 94.3% of our outstanding common stock. However, either entity may from time to time consider selling a portion of its holdings. In connection with our separation from GM in July 1994, Thomas J. Snyder, President, Chief Executive Officer and a director, received a loan from us to purchase Old Class A Common Stock. The outstanding balance of the loan and accrued interest was about $89,000 and was fully repaid in March 2001. Court Square has agreed to provide advisory services to us. Pursuant to the terms of the advisory agreement, Court Square was paid about $300,000 upon consummation of the offering of the old notes. An investment fund administered by an affiliate of Court Square acquired an aggregate principal amount of $15 million of the old notes in connection with the offering of the old notes. 75 DESCRIPTION OF OTHER INDEBTEDNESS Senior Credit Facility General. On December 16, 1997, we entered into a fourth amended and restated financing agreement with a syndicate of lenders led by Bank One, Indiana, N.A., which we refer to as Bank One. The amended and restated financing agreement, as further amended in connection with the sale of the old notes, provides for up to $300 million of revolving credit availability, which we refer to as the Senior Credit Facility. Each of our domestic operating subsidiaries are parties to the Senior Credit Facility. The obligations under the Senior Credit Facility of each domestic operating subsidiary is unconditionally guaranteed by each other domestic operating subsidiary and each of our company and our domestic subsidiaries which are holding companies. The obligations under the Senior Credit Agreement are secured by a first lien on substantially all of our assets and the assets of our domestic subsidiaries, including a pledge of the stock of our domestic subsidiaries. The obligations and the guarantees arising under the Senior Credit Agreement rank pari passu with the 8 5/8% Senior Notes Due 2007 and rank senior to all our other indebtedness. The amount available to us for borrowing under the Senior Credit Facility is $300 million, which is available for general corporate purposes, including acquisitions, and is referred to as the Commitment Amount. Our available borrowings under the Senior Credit Facility are subject to satisfaction of specific requirements, including compliance with financial covenants in the facility and specific debt incurrence tests under the indentures governing the 8 5/8% Senior Notes Due 2007, the 10 5/8% Senior Subordinated Notes Due 2006 and these notes. The Senior Credit Facility terminates on October 31, 2003. There is a sub-limit for letters of credit equal to the lesser of (1) the Line of Credit less all Revolving Loans (as defined in the Senior Credit Facility) at the time of the issuance of a letter of credit and (2) $30 million. Interest Rates. Generally, interest on outstanding borrowings under the Senior Credit Facility is payable monthly and accrues at an annual rate equal to, at our option, either the Base Rate or the LIBOR-Based Rate. The "Base Rate" is equal to the higher of (1) the rate of interest established and quoted from time to time by Bank One as its prime rate and (2) 0.5% per annum above the latest federal funds rate, plus the Applicable Spread. The "LIBOR-Based Rate" means a rate of interest equal to the sum of the London Interbank Offered Rate, plus the Applicable Spread. The "London Interbank Offered Rate" means the rate of interest at which dollar deposits in immediately available funds are offered to the principal banks in the London interbank market by other principal banks in that market two business days prior to the beginning of the applicable interest period, plus the increased costs in maintaining the deposits. The "Applicable Spread" will range from 1.25% to 2.50%, if determining a LIBOR-Based Rate, and from 0.00% to 0.75%, if determining a prime-based rate or a fed funds-based rate, depending upon our ratio of total funded debt to EBITDA (as defined in the Senior Credit Facility). Maturity and Optional Prepayments. All borrowings under the Senior Credit Facility will mature on October 31, 2003, except that the aggregate principal amount outstanding may not exceed the Commitment Amount at any time. Borrowings under the Senior Credit Facility are prepayable at any time without premium or penalty, except that any prepayment of a LIBOR-Based Rate loan that is made prior to the end of the applicable interest period will be subject to reimbursement of breakage costs. Covenants. The Senior Credit Facility contains certain customary covenants, including: . reporting and other affirmative covenants; . financial covenants, including ratio of senior funded debt to EBITDA, ratio of funded debt to EBITDA, ratio of EBIT (as defined in the Senior Credit Facility) to cash interest, fixed charge coverage ratio and minimum current ratio; and . negative covenants, including restrictions on incurrence of other indebtedness, amendments with respect to other indebtedness (including the notes), payment of cash dividends and other distributions to 76 stockholders, liens in favor of parties other than the lenders under the Senior Credit Facility, certain guarantees of obligations of or advances to others, sales of material assets not in the ordinary course of business, certain acquisitions of assets, engaging in transactions with affiliates, repayment of subordinated debt, making of certain investments and capital expenditures. Events of Default. The Senior Credit Facility also contains customary events of default, including: . non-payment of principal, interest or fees; . violation of covenants; inaccuracy of representations or warranties; . cross-default to certain other indebtedness including the notes; . bankruptcy; . a change of control of our company or specific domestic subsidiaries of our company; and . any failure to apply proceeds of an underwritten public offering of our equity securities as required by the Senior Credit Facility. Fees. We will pay, on a quarterly basis, a per annum fee on the unused commitment amount ranging from 0.25% to 0.50% based on the ratio of total funded debt to EBITDA. 8 5/8% Senior Notes Due 2007 On December 22, 1997, we issued 8 5/8% Senior Notes Due 2007, which we refer to as the senior notes, in an aggregate principal amount of $145 million. The senior notes accrue interest at the rate of 8 5/8% per annum, are payable in cash semi-annually on June 15 and December 15, and are due December 15, 2007. The senior notes are fully and unconditionally guaranteed on a senior basis by our material domestic subsidiaries. The senior notes were issued under an indenture dated as of December 22, 1997. The indenture contains covenants by us in favor of the holders of the senior notes, who we refer to as the senior note holders. These covenants include certain restrictions on our ability and the ability of certain of our subsidiaries to: . incur indebtedness, except for permitted indebtedness; . pay dividends or purchase or redeem stock or repay before maturity any obligation subordinate to the senior notes; . incur future restrictions on the ability to pay dividends and transfer assets; . sell assets and capital stock of subsidiaries; . engage in transactions with affiliates; . incur or permit to exist liens on their assets, except for permitted liens; and . engage in mergers, consolidations or transfers of all or substantially all their assets. The senior notes are effectively subordinate in right of payment to all our senior secured indebtedness, including the Senior Credit Facility. The senior notes are redeemable in whole or in part at our option at any time on or after December 15, 2002, at a price beginning at 104.313% of the aggregate principal amount to be redeemed, declining ratably to 100% on and after December 15, 2005. Upon the occurrence of specific changes in control of our company, each senior note holder has the right to require us to purchase all or a portion of the senior note holder's notes at a price equal to 101% of the aggregate principal amount of the senior notes. Our and some of our subsidiaries' failure to pay specific 77 indebtedness when due constitutes, among other things, an event of default under the senior notes and can lead to the acceleration of the payment of the senior notes. 10 5/8% Senior Subordinated Notes Due 2006 On August 2, 1996, we issued $140 million aggregate principal amount of 10 5/8% Senior Subordinated Notes Due 2006, which we refer to as the 1996 senior subordinated notes. Interest on the 1996 senior subordinated notes accrues at 10 5/8% per annum and is payable in cash semi-annually on February 1 and August 1 and are due August 1, 2006. The 1996 senior subordinated notes are fully and unconditionally guaranteed on a senior subordinated basis by our material domestic subsidiaries. The 1996 senior subordinated notes are subordinate in right of payment to all our senior indebtedness, including the Senior Credit Facility and the 8 5/8% Senior Notes Due 2007, and will rank pari passu with the new notes, like the old notes. The 1996 senior subordinated notes were issued under an indenture dated as of August 1, 1996. The indenture contains covenants by us in favor of the holders of the 1996 senior subordinated notes, who we refer to as the 1996 note holders. These covenants include certain restrictions on our ability and the ability of certain of our subsidiaries to: . incur indebtedness, except for permitted indebtedness; . pay dividends or purchase or redeem stock or repay before maturity any obligation subordinate to the 1996 senior subordinated notes; . incur future restrictions on the ability to pay dividends and transfer assets; . sell assets and capital stock of subsidiaries; . engage in transactions with affiliates; . incur or permit to exist liens on assets, except for permitted liens; and . engage in mergers, consolidations or transfers of all or substantially all their assets. The 1996 senior subordinated notes are redeemable in whole or in part at our option at any time on or after August 1, 2001, at a price beginning at 105.313% of the aggregate principal amount to be redeemed, declining ratably to 100% on and after August 1, 2004. Upon the occurrence of specific changes in control of our company, each 1996 note holder has the right to require us to purchase all or a portion of the 1996 note holder's notes at a price equal to 101% of the aggregate principal amount of the 1996 senior subordinated notes. Our and some of our subsidiaries' failure to pay specific indebtedness when due constitutes, among other things, an event of default under the 1996 senior subordinated notes and can lead to the acceleration of the payment of the 1996 senior subordinated notes. GM Contingent Purchase Price Note General. In connection with our separation from GM in July 1994, Delco Remy America issued to GM a contingent purchase price note, which we refer to as the GM note. The GM note is payable in five equal consecutive annual installments commencing on July 31, 2004. The amount of the payment will be based on a percentage of our average earnings in the three year period ending December 31, 2003 in excess of certain imputed earnings. Amount Payable. The principal amount of this GM note is calculated by: . multiplying five by (1) the sum of EBIT (as defined below) for the three years ended December 31, 2001, 2002 and 2003 divided by three minus (2) the average three-year Imputed Return (as defined below) on any additional investment made by us (whether financed in the form of debt or equity) to fund any acquisition we made after June 31, 1994 and on our balance sheet for any one or more of December 31, 78 2001, 2002 and 2003, which we refer to as the additional investments. For purposes of the GM note, "EBIT" means net income plus the provision for income taxes and interest expense, plus or minus any extraordinary charges or credits or nonrecurring charges or credits, as the case may be, included in the determination of net income, as reflected on our company's audited consolidated financial statements for the period in question, and "Imputed Return" for any year means an amount determined by multiplying (A) 0.175 times the additional investment times (B) the number of days the investment(s) was outstanding during that year divided by 365 days; . subtracting from the total in (A) above, the sum of the outstanding principal plus accrued but unpaid interest thereon of all senior, mezzanine, subordinated and all other debt and redeemable preferred stock as reflected on our company's audited consolidated balance sheet as of December 31, 2003, which we refer to as the senior obligations. The senior obligations do not include the outstanding balance of any of the foregoing as of December 31, 2003 to the extent that the original proceeds from the debt or redeemable preferred stock was accounted for as an additional investment; and . multiplying the result by the percentage obtained by dividing 100,000 (as adjusted for stock splits, reverse stock splits and stock dividends) by the total number of shares of all classes of our common stock outstanding on a fully diluted basis as of the date of determination, excluding any shares issued subsequent to July 31, 1994 to the extent the proceeds therefrom have been accounted for as an additional investment. Interest Rate. No interest accrues on the contingent payment. Subordination Terms. The GM note is subordinated in right of payment to our senior credit facility under the terms of a subordination agreement, by and among Delco Remy America and the lenders under the senior credit facility. Under the terms of the subordination agreement, Delco Remy America may make payments of interest and principal on the GM note when due unless a representative of the lenders under the senior credit facility gives notice to GM that an event of default has occurred under the senior credit facility, which we refer to as a suspension notice. GM may not receive any payments or take any legal action for the collection of the GM note during the 179-day period on or from the receipt of a suspension notice (or a shorter period if the event of default under the senior credit facility is waived or cured). Ballantrae Subordinated Debt In 1996, Tractech Inc. issued a note, which we refer to as the Ballantrae subordinated debt, in favor of Dyneer Corporation, which we refer to as Dyneer, in the original principal amount of $10.0 million. Tractech has repaid all but $750,000 of the outstanding principal amount of the Ballantrae subordinated debt. The Ballantrae subordinated debt: . matures on October 31, 2006; and . bears interest at a rate of 11% per annum. Tractech may prepay the remaining balance of the Ballantrae subordinated debt at any time in whole or in part without premium or penalty. Tractech has the right to set-off $750,000 against the outstanding amount of the Ballantrae subordinated debt within 30 days of the entry of a final non-appealable order by a court of competent jurisdiction in specific patent litigation, if the order fails to grant Tractech the unfettered and exclusive right to make, manufacture, have made, market and sell a particular line of differentials without geographic or other restrictions and without cash payments. Tractech's obligations under the Ballantrae subordinated debt are guaranteed by Ballantrae Corporation, which we call Ballantrae, and the Ballantrae subordinated debt is subject to the Subordination Agreement dated as of October 24, 1996, among Tractech, Dyneer, Ballantrae Corporation and Bank One, Indiana, N.A. and the Subordination Pledge Agreement dated as of October 24, 1996 between Ballantrae and Dyneer, by which Ballantrae pledged all of the capital stock of Tractech to Dyneer. 79 DESCRIPTION OF NOTES Delco Remy International, Inc. issued the Notes under an Indenture (the "Indenture") among itself, its material domestic subsidiaries and First Union National Bank, as trustee (the "Trustee"). The terms of the Notes include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). Certain terms used in this description are defined under the subheading "-- Certain Definitions." In this description, the word "Company" refers only to Delco Remy International, Inc. and not to any of its subsidiaries. The following description is only a summary of the material provisions of the Indenture and the Registration Rights Agreement. We urge you to read the Indenture and the Registration Rights Agreement because they, not this description, define your rights as Holders of these Notes. You may request copies of these agreements at our address set forth under the heading "Notice to Investors." Brief Description of the Notes These Notes: . are unsecured senior subordinated obligations of the Company; . are subordinated in right of payment to all existing and future Senior Indebtedness of the Company; . are senior in right of payment to any future Subordinated Obligations of the Company; . are guaranteed by each Subsidiary Guarantor; and . are subject to registration with the SEC pursuant to the Registration Rights Agreement. Principal, Maturity and Interest The Company issued the Notes initially with a maximum aggregate principal amount of $165.0 million. The Company will issue the Notes in denominations of $1,000 and any integral multiple of $1,000. The Notes will mature on May 1, 2009. Subject to our compliance with the covenant described under the subheading "--Certain Covenants--Limitation on Indebtedness," we are permitted to issue more Notes under the Indenture (the "Additional Notes"). The Notes and the Additional Notes, if any, will be treated as a single class for all purposes of the Indenture, including waivers, amendments, redemptions and offers to purchase. Unless the context otherwise requires, for all purposes of the Indenture and this "Description of Notes," references to the Notes include any Additional Notes actually issued. Interest on the Notes will accrue at the rate of 11% per annum and will be payable semi-annually in arrears on May 1 and November 1, commencing on November 1, 2001. We will make each interest payment to the Holders of record of these Notes on the immediately preceding April 15 and October 15. We will pay interest on overdue principal at 1% per annum in excess of the above rate and will pay interest on overdue installments of interest at such higher rate to the extent lawful. Interest on these Notes will accrue from the date of original issuance or, if interest has already been paid, from the date it was most recently paid. Interest will be computed on the basis of a 360-day year comprised of twelve 30-day months. Additional interest may accrue on the Notes in certain circumstances pursuant to the Registration Rights Agreement. Optional Redemption Except as set forth below, we will not be entitled to redeem the Notes at our option prior to May 1, 2005. 80 On and after May 1, 2005, we will be entitled at our option to redeem all or a portion of the Notes upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on May 1 of the years set forth below:
Redemption Period Price ------ ---------- 2005........................................................... 105.500% 2006........................................................... 103.667% 2007........................................................... 101.833% 2008 and thereafter............................................ 100.000%
In addition, before May 1, 2004, we may at our option on one or more occasions redeem Notes (which includes Additional Notes, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Notes (which includes Additional Notes, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 111%, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more Public Equity Offerings; provided, however, that (1) at least 65% of such aggregate principal amount of Notes (which includes Additional Notes, if any) remains outstanding immediately after the occurrence of each such redemption (other than Notes held, directly or indirectly, by the Company or its Affiliates); and (2) each such redemption occurs within 90 days after the date of the related Public Equity Offering. Selection and Notice of Redemption If we are redeeming less than all the Notes at any time, the Trustee will select Notes on a pro rata basis, by lot or by any other method as the Trustee in its sole discretion deems to be fair and appropriate. We will redeem Notes of $1,000 or less in whole and not in part. We will cause notices of redemption to be mailed by first-class mail at least 30 but not more than 60 days before the redemption date to each Holder of Notes to be redeemed at its registered address. If any Note is to be redeemed in part only, the notice of redemption that relates to that Note will state the portion of the principal amount thereof to be redeemed. We will issue a new Note in a principal amount equal to the unredeemed portion of the original Note in the name of the Holder upon cancellation of the original Note. Notes called for redemption become due on the date fixed for redemption. On and after the redemption date, interest ceases to accrue on Notes or portions of them called for redemption. Mandatory Redemption; Offers to Purchase; Open Market Purchases We are not required to make any mandatory redemption or sinking fund payments with respect to the Notes. However, under certain circumstances, we may be required to offer to purchase Notes as described under the captions "-- Change of Control" and "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock." We may at any time and from time to time purchase Notes in the open market or otherwise. Guarantees The Subsidiary Guarantors will jointly and severally guarantee, on a senior subordinated basis, our obligations under the Notes. The obligations of each Subsidiary Guarantor under its Subsidiary Guarantee will be limited as necessary to prevent that Subsidiary Guarantee from constituting a fraudulent conveyance under applicable law. See "Risk Factors--A subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy laws or comparable state laws, which could result in the holders of notes not being able to rely on that subsidiary guarantor to satisfy claims." 81 Each Subsidiary Guarantor that makes a payment under its Subsidiary Guarantee will be entitled to a contribution from each other Subsidiary Guarantor in an amount equal to such other Subsidiary Guarantor's pro rata portion of such payment based on the respective net assets of all the Subsidiary Guarantors at the time of such payment determined in accordance with GAAP. If a Subsidiary Guarantee were rendered voidable, it could be subordinated by a court to all other indebtedness (including guarantees and other contingent liabilities) of the applicable Subsidiary Guarantor, and, depending on the amount of such indebtedness, a Subsidiary Guarantor's liability on its Subsidiary Guarantee could be reduced to zero. See "Risk Factors--A subsidiary guarantee could be voided if it constitutes a fraudulent transfer under U.S. bankruptcy laws or comparable state laws, which could result in the holders of notes not being able to rely on that subsidiary guarantor to satisfy claims." The Subsidiary Guarantee of a Subsidiary Guarantor will be released: (1) upon the sale or other disposition (including by way of consolidation or merger) of a Subsidiary Guarantor; or (2) upon the sale or disposition of all or substantially all of the assets of a Subsidiary Guarantor; in each case other than to the Company or a Restricted Subsidiary and as permitted by the Indenture. Ranking Senior Indebtedness versus Notes The payment of the principal of, premium, if any, and interest on the Notes and the payment of any Subsidiary Guarantee will be subordinate in right of payment, as set forth in the Indenture, to the prior payment in full of all Senior Indebtedness of the Company or the relevant Subsidiary Guarantor, as the case may be, whether outstanding on the Issue Date or thereafter incurred, including the obligations of the Company and such Subsidiary Guarantor with respect to the Senior Credit Facility and the Company's 8 5/8% Senior Notes Due 2007 (the "8 5/8% Senior Notes"). As of March 31, 2001, after giving pro forma effect to the sale of the Notes and the use of the net proceeds as described under the heading "Use of Proceeds:" (1) the Company's Senior Indebtedness would have been about $200.1 million, including its guarantee of about $55.1 million of secured Senior Indebtedness of its subsidiaries under the Senior Credit Facility and $145 million of Senior Indebtedness of the Company represented by the 8 5/8% Senior Notes; and (2) the Senior Indebtedness of the Subsidiary Guarantors would have been about $220.4 million, including their secured Senior Indebtedness under the Senior Credit Facility and their guarantees of Senior Indebtedness of the Company under the 8 5/8% Senior Notes. Although the Indenture contains limitations on the amount of additional Indebtedness that the Company and the Subsidiary Guarantors may incur, under certain circumstances the amount of such Indebtedness could be substantial and, in any case, such Indebtedness may be Senior Indebtedness. See "--Certain Covenants--Limitation on Indebtedness." Liabilities of Subsidiaries versus Notes All of our operations are conducted through our subsidiaries. Our foreign subsidiaries and some of our immaterial domestic subsidiaries are not guaranteeing the Notes. Claims of creditors of such non-guarantor subsidiaries, including trade creditors holding indebtedness or guarantees issued by such non-guarantor subsidiaries, and claims of preferred stockholders of such non- guarantor subsidiaries generally will have 82 priority with respect to the assets and earnings of such non-guarantor subsidiaries over the claims of our creditors, including Holders of the Notes, even if such claims do not constitute Senior Indebtedness. Accordingly, the Notes will be effectively subordinated to creditors (including trade creditors) and preferred stockholders, if any, of such non-guarantor subsidiaries. At March 31, 2001, after giving pro forma effect to the sale of the Notes and the use of the net proceeds as described under the heading "Use of Proceeds," the total liabilities of our subsidiaries (other than the Subsidiary Guarantors) would have been about $70.7 million, including trade payables. Although the Indenture limits the incurrence of Indebtedness and preferred stock of certain of our subsidiaries, such limitation is subject to a number of significant qualifications. Moreover, the Indenture does not impose any limitation on the incurrence by such subsidiaries of liabilities that are not considered Indebtedness under the Indenture. See "--Certain Covenants-- Limitation on Indebtedness." Other Senior Subordinated Indebtedness versus Notes Only Indebtedness of the Company or a Subsidiary Guarantor that is Senior Indebtedness will rank senior to the Notes and the relevant Subsidiary Guarantee in accordance with the provisions of the Indenture. The Notes and each Subsidiary Guarantee will in all respects rank pari passu with all other Senior Subordinated Indebtedness of the Company and the relevant Subsidiary Guarantor, respectively, including the obligations of the Company and such Subsidiary Guarantor with respect to the Company's 10 5/8% Senior Subordinated Notes Due 2006 (the "10 5/8% Senior Subordinated Notes") and the GM Note. As of March 31, 2001, after giving pro forma effect to the sale of the Notes and the use of the net proceeds as described under the heading "Use of Proceeds:" (1) the Company's Senior Subordinated Indebtedness would have been about $302.9 million, consisting of the Notes and $140.0 million of Senior Subordinated Indebtedness represented by the 10 5/8% Senior Subordinated Notes; and (2) the Senior Subordinated Indebtedness of the Subsidiary Guarantors would have been about $302.9 million, consisting of the GM Note and their respective guarantees of Senior Subordinated Indebtedness of the Company represented by the Notes and the 10 5/8% Senior Subordinated Notes. We and the Subsidiary Guarantors have agreed in the Indenture that we and they will not Incur, directly or indirectly, any Indebtedness that is contractually subordinated or junior in right of payment to our Senior Indebtedness or the Senior Indebtedness of such Subsidiary Guarantors, unless such Indebtedness is Senior Subordinated Indebtedness of the applicable Person or is expressly subordinated in right of payment to Senior Subordinated Indebtedness of such Person. The Indenture does not treat unsecured Indebtedness as subordinated or junior to Secured Indebtedness merely because it is unsecured. Payment of Notes We are not permitted to pay principal of, premium, if any, or interest on the Notes or make any deposit pursuant to the provisions described under "-- Defeasance" below and may not purchase, redeem or otherwise retire any Notes (collectively, "pay the Notes") if either of the following occurs (a "Payment Default"): (1) any Senior Indebtedness of the Company is not paid in full in cash when due; or (2) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms; unless, in either case, the Payment Default has been cured or waived and any such acceleration has been rescinded or such Senior Indebtedness has been paid in full in cash. Regardless of the foregoing, we are permitted to pay the Notes if we and the Trustee receive written notice approving such payment from the 83 Representatives of all Senior Indebtedness with respect to which the Payment Default has occurred and is continuing. During the continuance of any default (other than a Payment Default) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, we are not permitted to pay the Notes for a period (a "Payment Blockage Period") commencing upon the receipt by the Trustee (with a copy to us) of written notice (a "Blockage Notice") of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter. The Payment Blockage Period will end earlier if such Payment Blockage Period is terminated: (1) by written notice to the Trustee and us from the Person or Persons who gave such Blockage Notice; (2) because the default giving rise to such Blockage Notice is cured, waived or otherwise no longer continuing; or (3) because such Designated Senior Indebtedness has been discharged or repaid in full in cash. Notwithstanding the provisions described above, unless the holders of such Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness have accelerated the maturity of such Designated Senior Indebtedness, we are permitted to resume paying the Notes after the end of such Payment Blockage Period. The Notes shall not be subject to more than one Payment Blockage Period in any consecutive 360-day period irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. Upon any payment or distribution of the assets of the Company upon a total or partial liquidation or dissolution or reorganization of or similar proceeding relating to the Company or its property: (1) the holders of Senior Indebtedness of the Company will be entitled to receive payment in full in cash of such Senior Indebtedness before the Holders of the Notes are entitled to receive any payment; (2) until the Senior Indebtedness of the Company is paid in full in cash, any payment or distribution to which Holders of the Notes would be entitled but for the subordination provisions of the Indenture will be made to holders of such Senior Indebtedness as their interests may appear, except that Holders of Notes may receive certain Capital Stock and subordinated debt obligations; and (3) if a distribution is made to Holders of the Notes that, due to the subordination provisions, should not have been made to them, such Holders of the Notes are required to hold it in trust for the holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. If payment of the Notes is accelerated because of an Event of Default, the Company or the Trustee must promptly notify the holders of Designated Senior Indebtedness or the Representative of such Designated Senior Indebtedness of the acceleration. If any Designated Senior Indebtedness is outstanding, neither the Company nor any Subsidiary Guarantor may pay the Notes until five Business Days after the Representatives of all the issues of Designated Senior Indebtedness receive notice of such acceleration and, thereafter, may pay the Notes only if the Indenture otherwise permits payment at that time. A Subsidiary Guarantor's obligations under its Subsidiary Guarantee are senior subordinated obligations. As such, the rights of Noteholders to receive payment by a Subsidiary Guarantor pursuant to its Subsidiary Guarantee will be subordinated in right of payment to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor. The terms of the subordination provisions described above with respect to the Company's obligations under the Notes apply equally to a Subsidiary Guarantor and the obligations of such Subsidiary Guarantor under its Subsidiary Guarantee. 84 By reason of the subordination provisions contained in the Indenture, in the event of a liquidation or insolvency proceeding, creditors of the Company or a Subsidiary Guarantor who are holders of Senior Indebtedness of the Company or a Subsidiary Guarantor, as the case may be, may recover more, ratably, than the Holders of the Notes, and creditors of ours who are not holders of Senior Indebtedness may recover less, ratably, than holders of Senior Indebtedness and may recover more, ratably, than the Holders of the Notes. The terms of the subordination provisions described above will not apply to payments from money or the proceeds of U.S. Government Obligations held in trust by the Trustee for the payment of principal of and interest on the Notes pursuant to the provisions described under "--Defeasance." Registered Exchange Offer; Registration Rights We have agreed pursuant to the Registration Rights Agreement that we will, subject to certain exceptions, (1) within 90 days after the Issue Date, file a registration statement (the "Exchange Offer Registration Statement") with the SEC with respect to a registered offer (the "Registered Exchange Offer") to exchange the Notes for new notes of the Company (the "Exchange Notes") having terms substantially identical in all material respects to the Notes (except that the Exchange Notes will not contain terms with respect to transfer restrictions); (2) to use our best efforts to cause the Exchange Offer Registration Statement to be declared effective under the Securities Act within 150 days after the Issue Date; (3) as soon as practicable after the effectiveness of the Exchange Offer Registration Statement (the "Effectiveness Date"), to offer the Exchange Notes in exchange for surrender of the Notes; and (4) to keep the Registered Exchange Offer open for not less than 30 days (or longer if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders of the Notes. For each Note tendered to us pursuant to the Registered Exchange Offer, we will issue to the Holder of such Note an Exchange Note having a principal amount equal to that of the surrendered Note. Interest on each Exchange Note will accrue from the last interest payment date on which interest was paid on the Note surrendered in exchange therefor, or, if no interest has been paid on such Note, from the date of its original issue. Under existing SEC interpretations, the Exchange Notes will be freely transferable by Holders other than our affiliates after the Registered Exchange Offer without further registration under the Securities Act if the holder of the Exchange Notes represents to us in the Registered Exchange Offer that it is acquiring the Exchange Notes in the ordinary course of its business, that it has no arrangement or understanding with any person to participate in the distribution of the Exchange Notes and that it is not an affiliate of the Company, as such terms are interpreted by the SEC; provided, however, that broker-dealers ("Participating Broker-Dealers") receiving Exchange Notes in the Registered Exchange Offer will have a prospectus delivery requirement with respect to resales of such Exchange Notes. The SEC has taken the position that Participating Broker-Dealers may fulfill their prospectus delivery requirements with respect to Exchange Notes (other than a resale of an unsold allotment from the original sale of the Notes) with the prospectus contained in the Exchange Offer Registration Statement. Under the Registration Rights Agreement, the Company is required to allow Participating Broker-Dealers and other persons, if any, with similar prospectus delivery requirements to use the prospectus contained in the Exchange Offer Registration Statement in connection with the resale of such Exchange Notes for 180 days following the effective date of such Exchange Offer Registration Statement (or such shorter period during which Participating Broker-Dealers are required by law to deliver such prospectus). 85 A Holder of Notes (other than certain specified Holders) who wishes to exchange such Notes for Exchange Notes in the Registered Exchange Offer will be required to represent that any Exchange Notes to be received by it will be acquired in the ordinary course of its business and that at the time of the commencement of the Registered Exchange Offer it has no arrangement or understanding with any person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Notes and that it is not an "affiliate" of the Company, as defined in Rule 405 of the Securities Act, or if it is an affiliate, that it will comply with the registration and prospectus delivery requirements of the Securities Act to the extent applicable. In the event that: (1) applicable interpretations of the staff of the SEC do not permit us to effect such a Registered Exchange Offer; (2) for any other reason we do not consummate the Registered Exchange Offer within 180 days of the Issue Date; (3) an initial purchaser shall notify us following consummation of the Registered Exchange Offer that Notes held by it are not eligible to be exchanged for Exchange Notes in the Registered Exchange Offer; or (4) certain Holders are prohibited by law or SEC policy from participating in the Registered Exchange Offer or may not resell the Exchange Notes acquired by them in the Registered Exchange Offer to the public without delivering a prospectus, then, we will, subject to certain exceptions, (1) promptly file a shelf registration statement (the "Shelf Registration Statement") covering resales of the Notes or the Exchange Notes, as the case may be; (2) (A) in the clause (1) above, use our best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the 150th calendar day following the Issue Date and (B) in the case of clause (2), (3) or (4) above, use our best efforts to cause the Shelf Registration Statement to be declared effective under the Securities Act on or prior to the 60th day after the date on which the Shelf Registration Statement is required to be filed; and (3) keep the Shelf Registration Statement effective until the earliest of (A) the time when the Notes covered by the Shelf Registration Statement can be sold pursuant to Rule 144 without any limitations under clauses (c), (e), (f) and (h) of Rule 144, (B) two years from the effective date of the Shelf Registration Statement (or until one year from the effective date of the Shelf Registration Statement if the Shelf Registration Statement is filed at the request of an initial purchaser) and (C) the date on which all Notes registered thereunder are disposed of in accordance therewith. We will, in the event a Shelf Registration Statement is filed, among other things, provide to each Holder for whom such Shelf Registration Statement was filed copies of the prospectus which is a part of the Shelf Registration Statement, notify each such Holder when the Shelf Registration Statement has become effective and take certain other actions as are required to permit unrestricted resales of the Notes or the Exchange Notes, as the case may be. A Holder selling such Notes or Exchange Notes pursuant to the Shelf Registration Statement generally would be required to be named as a selling security holder in the related prospectus and to deliver a prospectus to purchasers, will be subject to certain of the civil liability provisions under the Securities Act in connection with such sales and will be bound by the provisions of the Registration Rights Agreement that are applicable to such Holder (including certain indemnification obligations). We will pay additional cash interest on the applicable Notes and Exchange Notes, subject to certain exceptions, (1) if the Company fails to file an Exchange Offer Registration Statement with the SEC on or prior to the 90th day after the Issue Date; 86 (2) if the Exchange Offer Registration Statement or, if obligated to file a Shelf Registration Statement pursuant to clause 2(A) above, a Shelf Registration Statement is not declared effective by the SEC on or prior to the 150th day after the Issue Date; (3) if the Exchange Offer is not consummated on or before the 40th day after the Exchange Offer Registration Statement is declared effective; (4) if obligated to file the Shelf Registration Statement, the Company fails to file the Shelf Registration Statement with the SEC on or prior to the 45th day after the date (the "Shelf Filing Date") on which the obligation to file a Shelf Registration Statement arises; (5) if obligated to file a Shelf Registration Statement pursuant to clause 2(B) above, the Shelf Registration Statement is not declared effective on or prior to the 60th day after the Shelf Filing Date; or (6) after the Exchange Offer Registration Statement or the Shelf Registration Statement, as the case may be, is declared effective, such Registration Statement thereafter ceases to be effective or usable (subject to certain exceptions) in accordance with and during the periods specified in the Registration Rights Agreement; (each such event referred to in the preceding clauses (1) through (6) a "Registration Default"), from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The rate of the additional interest will be 0.50% per annum for the first 90-day period immediately following the occurrence of a Registration Default, and such rate will increase by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum additional interest rate of 2.0% per annum. We will pay such additional interest on regular interest payment dates. Such additional interest will be in addition to any other interest payable from time to time with respect to the Notes and the Exchange Notes. All references in the Indenture, in any context, to any interest or other amount payable on or with respect to the Notes shall be deemed to include any additional interest pursuant to the Registration Rights Agreement. If we effect the Registered Exchange Offer, we will be entitled to close the Registered Exchange Offer 30 days after the commencement thereof provided that we have accepted all Notes theretofore validly tendered in accordance with the terms of the Registered Exchange Offer. Change of Control Upon the occurrence of any of the following events (each a "Change of Control"), each Holder shall have the right to require that the Company repurchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date): (1) prior to the first public offering of common stock of the Company after the Issue Date, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by the Permitted Holders or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of any Person (the "specified entity") held by any other Person (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); 87 (2) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above, except that for purposes of this clause (2) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in this clause (2)), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); (3) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; (4) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person (other than any merger or consolidation with or into, or any sale to, a Person that is controlled by the Permitted Holders), other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or consolidation transaction immediately after such transaction and (B) in the case of a sale of assets transaction, the transferee Person becomes the obligor in respect of the Notes and a Subsidiary of the transferor of such assets; or (5) the adoption of a plan relating to the liquidation or dissolution of the Company. Within 30 days following any Change of Control (but subject to compliance with the immediately succeeding paragraph), we will mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: (1) that a Change of Control has occurred and that such Holder has the right to require us to purchase such Holder's Notes at a purchase price in cash equal to 101% of the principal amount thereof on the date of purchase, plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) the circumstances and relevant facts regarding such Change of Control (including relevant financial information); (3) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (4) the instructions, as determined by us, consistent with the covenant described hereunder, that a Holder must follow in order to have its Notes purchased. 88 We will not be required to make a Change of Control Offer following a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in the Indenture applicable to a Change of Control Offer made by us and purchases all Notes validly tendered and not withdrawn under such Change of Control Offer. We will comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Notes as a result of a Change of Control. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, we will comply with the applicable securities laws and regulations and shall not be deemed to have breached our obligations under the covenant described hereunder by virtue of our compliance with such securities laws or regulations. The Change of Control purchase feature of the Notes may in certain circumstances make more difficult or discourage a sale or takeover of the Company and, thus, the removal of incumbent management. The Change of Control purchase feature is a result of negotiations between the Company and the initial purchasers. We have no present intention to engage in a transaction involving a Change of Control, although it is possible that we could decide to do so in the future. Subject to the limitations discussed below, we could, in the future, enter into certain transactions, including acquisitions, refinancings or other recapitalizations, that would not constitute a Change of Control under the Indenture, but that could increase the amount of indebtedness outstanding at such time or otherwise affect our capital structure or credit ratings. Restrictions on our ability to Incur additional Indebtedness are contained in the covenants described under "--Certain Covenants--Limitation on Indebtedness" and "--Limitation on Liens." Such restrictions can only be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. Except for the limitations contained in such covenants, however, the Indenture will not contain any covenants or provisions that may afford holders of the Notes protection in the event of a highly leveraged transaction. The occurrence of certain of the events which would constitute a Change of Control would constitute a default under the Senior Credit Facility. Future indebtedness that we may incur may contain prohibitions on the occurrence of certain events that would constitute a Change of Control or require the repurchase of such indebtedness upon a Change of Control. Moreover, the exercise by the Holders of their right to require us to repurchase the Notes could cause a default under such indebtedness, even if the Change of Control itself does not, due to the financial effect of such repurchase on us. Finally, our ability to pay cash to the Holders of Notes following the occurrence of a Change of Control may be limited by our then existing financial resources. There can be no assurance that sufficient funds will be available when necessary to make any required repurchases. The Company's failure to purchase the Notes in connection with a Change of Control would result in a default under the Indenture which would, in turn, constitute a default under the Senior Credit Facility. In those circumstances, the subordination provisions in the Indenture would likely restrict payment to the Holders of the Notes. The provisions under the Indenture relative to our obligation to make an offer to repurchase the Notes as a result of a Change of Control may be waived or modified with the written consent of the Holders of a majority in principal amount of the Notes. Book-Entry, Delivery and Form We will initially issue the Notes in the form of one or more global notes (the "Global Note"). The Global Note will be deposited with, or on behalf of, the Depository and registered in the name of the Depository or its nominee. Except as set forth below, the Global Note may be transferred, in whole and not in part, only to the Depository or another nominee of the Depository. You may hold your beneficial interests in the Global Note directly through the Depository if you have an account with the Depository or indirectly through organizations which have accounts with the Depository. 89 The Depository has advised the Company as follows: the Depository is a limited-purpose trust company organized under the laws of the State of New York, a member of the Federal Reserve System, a "clearing corporation" within the meaning of the New York Uniform Commercial Code, and "a clearing agency" registered pursuant to the provisions of Section 17A of the Exchange Act. The Depository was created to hold securities of institutions that have accounts with the Depository ("participants") and to facilitate the clearance and settlement of securities transactions among its participants in such securities through electronic book-entry changes in accounts of the participants, thereby eliminating the need for physical movement of securities certificates. The Depository's participants include securities brokers and dealers (which may include the initial purchasers), banks, trust companies, clearing corporations and certain other organizations. Access to the Depository's book-entry system is also available to others such as banks, brokers, dealers and trust companies (collectively, the "indirect participants") that clear through or maintain a custodial relationship with a participant, whether directly or indirectly. The Company expects that pursuant to procedures established by the Depository, upon the deposit of the Global Note with the Depository, the Depository will credit, on its book-entry registration and transfer system, the principal amount of Notes represented by such Global Note to the accounts of participants. The accounts to be credited shall be designated by the initial purchasers. Ownership of beneficial interests in the Global Note will be limited to participants or persons that may hold interests through participants. Ownership of beneficial interests in the Global Note will be shown on, and the transfer of those ownership interests will be effected only through, records maintained by the Depository (with respect to participants' interests), the participants and the indirect participants (with respect to the owners of beneficial interests in the Global Note other than participants). The laws of some jurisdictions may require that certain purchasers of securities take physical delivery of such securities in definitive form. Such limits and laws may impair the ability to transfer or pledge beneficial interests in the Global Note. So long as the Depository, or its nominee, is the registered holder and owner of the Global Note, the Depository or such nominee, as the case may be, will be considered the sole legal owner and holder of any related Notes evidenced by the Global Note for all purposes of such Notes and the Indenture. Except as set forth below, as an owner of a beneficial interest in the Global Note, you will not be entitled to have the Notes represented by the Global Note registered in your name, will not receive or be entitled to receive physical delivery of certificated Notes and will not be considered to be the owner or holder of any Notes under the Global Note. We understand that under existing industry practice, in the event an owner of a beneficial interest in the Global Note desires to take any action that the Depository, as the holder of the Global Note, is entitled to take, the Depository would authorize the participants to take such action, and the participants would authorize beneficial owners owning through such participants to take such action or would otherwise act upon the instructions of beneficial owners owning through them. We will make payments of principal of, premium, if any, and interest on Notes represented by the Global Note registered in the name of and held by the Depository or its nominee to the Depository or its nominee, as the case may be, as the registered owner and holder of the Global Note. We expect that the Depository or its nominee, upon receipt of any payment of principal of, premium, if any, or interest on the Global Note will credit participants' accounts with payments in amounts proportionate to their respective beneficial interests in the principal amount of the Global Note as shown on the records of the Depository or its nominee. We also expect that payments by participants or indirect participants to owners of beneficial interests in the Global Note held through such participants or indirect participants will be governed by standing instructions and customary practices and will be the responsibility of such participants or indirect participants. We will not have any responsibility or liability for any aspect of the records relating to, or payments made on account of, beneficial ownership interests in the Global Note for any Note or for maintaining, supervising or reviewing any records relating to such beneficial ownership interests or for any other aspect of the relationship between the Depository and its participants or indirect participants or the relationship between such participants or indirect participants and the owners of beneficial interests in the Global Note owning through such participants. 90 Although the Depository has agreed to the foregoing procedures in order to facilitate transfers of interests in the Global Note among participants of the Depository, it is under no obligation to perform or continue to perform such procedures, and such procedures may be discontinued at any time. Neither the Trustee nor the Company will have any responsibility or liability for the performance by the Depository or its participants or indirect participants of their respective obligations under the rules and procedures governing their operations. Certificated Notes Subject to certain conditions, the Notes represented by the Global Note are exchangeable for certificated Notes in definitive form of like tenor in denominations of $1,000 and integral multiples thereof if: (1) the Depository notifies us that it is unwilling or unable to continue as Depository for the Global Note or the Depository ceases to be a clearing agency registered under the Exchange Act and, in either case, we are unable to locate a qualified successor within 90 days; (2) we in our discretion at any time determine not to have all the Notes represented by the Global Note; or (3) a default entitling the Holders of the Notes to accelerate the maturity thereof has occurred and is continuing. Any Note that is exchangeable as above is exchangeable for certificated Notes issuable in authorized denominations and registered in such names as the Depository shall direct. Subject to the foregoing, the Global Note is not exchangeable, except for a Global Note of the same aggregate denomination to be registered in the name of the Depository or its nominee. In addition, such certificates will bear the legend referred to under "Transfer Restrictions" (unless we determine otherwise in accordance with applicable law), subject, with respect to such certificated Notes, to the provisions of such legend. Same-Day Payment The Indenture requires us to make payments in respect of Notes (including principal, premium and interest) by wire transfer of immediately available funds to the U.S. dollar accounts with banks in the United States specified by the Holders thereof or, if no such account is specified, by mailing a check to each such Holder's registered address. Certain Covenants The Indenture contains covenants including, among others, the following: Limitation on Indebtedness (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, on the date of such Incurrence, the Consolidated Coverage Ratio exceeds 2.00 to 1. (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1) Indebtedness Incurred pursuant to the Senior Credit Facility or any Permitted Receivables Financing; provided, however, that, after giving effect to any such Incurrence, the aggregate principal amount of such Indebtedness then outstanding does not exceed the greater of (A) $300.0 million (less any permanent reductions in the amount of available borrowings thereunder) and (B) the sum of (i) 75% of the book value of the inventory of the Company and its Restricted Subsidiaries and (ii) 85% of the book value of the accounts receivable of the Company and its Restricted Subsidiaries, in each case determined in accordance with GAAP; 91 (2) Indebtedness of the Company owed to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or a Wholly Owned Subsidiary; provided, however, that any subsequent issuance or transfer of any Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness of the issuer thereof; (3) Indebtedness of the Company or a Restricted Subsidiary owed to and held by any Non-Wholly Owned Subsidiary; provided, however, that (A) any such Indebtedness shall be unsecured Subordinated Obligations of the Company or such Restricted Subsidiary, as applicable, and (B) any subsequent issuance or transfer of any Capital Stock of such Non-Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company, a Wholly Owned Subsidiary or another Non-Wholly Owned Subsidiary) shall be deemed to constitute the Incurrence of such Indebtedness by the issuer thereof; (4) Indebtedness represented by the Notes and the Exchange Notes (other than any Additional Notes); (5) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1), (2) or (3) of this covenant); (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to paragraph (a) or pursuant to clause (4), (5), (9), (12) or this clause (6); (7) Indebtedness in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds entered into by the Company and the Restricted Subsidiaries in the ordinary course of their business; (8) Hedging Obligations consisting of Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business and not for the purpose of speculation; provided, however, that such Interest Rate Agreements and Currency Agreements do not increase the Indebtedness of the Company outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; (9) Purchase Money Indebtedness and Capital Lease Obligations Incurred to finance the acquisition by the Company or a Restricted Subsidiary of any assets in the ordinary course of business and which, together with all Refinancing Indebtedness Incurred in respect of Indebtedness previously Incurred pursuant to this clause (9), do not exceed $50.0 million in the aggregate at any time outstanding; (10) Indebtedness represented by the Subsidiary Guarantees and Guarantees of Indebtedness Incurred pursuant to clauses (1), (4), (5) and (6) above; (11) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness is extinguished within five Business Days of Incurrence; (12) Indebtedness of the Company and its Restricted Subsidiaries, to the extent the proceeds thereof are immediately used after the Incurrence thereof to purchase Notes tendered in an offer to purchase made as a result of a Change of Control; (13) Indebtedness of the Company and its Restricted Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, in any case Incurred in connection with the disposition of any assets of the Company or any Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; and 92 (14) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (13) above or paragraph (a) above) does not exceed $100.0 million. (c) Notwithstanding the foregoing, the Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to the foregoing paragraph (b) if the proceeds thereof are used, directly or indirectly, to Refinance (1) any Subordinated Obligations unless such Indebtedness shall be subordinated to the Notes and the Subsidiary Guarantees, as applicable, to at least the same extent as such Subordinated Obligations or (2) any Senior Subordinated Indebtedness unless such Indebtedness shall be Senior Subordinated Indebtedness or shall be subordinated to the Notes and the Subsidiary Guarantees, as applicable; provided, however, that clause (2) above shall not prohibit the Refinancing of all or any part of the GM Note with Refinancing Indebtedness if, at the time of such Incurrence, no Default shall have occurred and be continuing (or would result therefrom). (d) For purposes of determining compliance with the foregoing covenant, (1) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described above, the Company, in its sole discretion, will classify such item of Indebtedness at the time of Incurrence and only be required to include the amount and type of such Indebtedness in one of the above clauses (provided that any Indebtedness classified as Incurred pursuant to clause (b)(14) above may later be reclassified as having been Incurred pursuant to paragraph (a) above to the extent that such reclassified Indebtedness could be Incurred pursuant to paragraph (a) above at the time of such reclassification) and (2) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described above. (e) Notwithstanding paragraphs (a) and (b) above, the Company shall not, and shall not permit any Subsidiary Guarantor to, Incur (1) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any respect to any Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness or (2) any Secured Indebtedness that is not Senior Indebtedness of the Company or such Subsidiary Guarantor, as applicable, unless contemporaneously therewith effective provision is made to secure the Notes or the Subsidiary Guarantee, as applicable, equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. Limitation on Restricted Payments (a) The Company shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "--Limitation on Indebtedness"; or (3) the aggregate amount of such Restricted Payment together with all other Restricted Payments (the amount of any payments made in property other than in cash to be valued at the fair market value of such property, as determined in good faith by the Board of Directors) declared or made since the Issue Date would exceed the sum (without duplication) of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Notes are originally issued to the end of the most recent fiscal quarter ending at least 45 days (or, if less, the number of days after the end of such fiscal quarter as the consolidated financial statements of the Company shall be provided to the Noteholders pursuant to the Indenture) prior to the date of such Restricted Payment (or, in case such Consolidated Net Income accrued during such period (treated as one accounting period) shall be a deficit, minus 100% of such deficit); 93 (B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees to the extent that the purchase by such plan or trust is financed by Indebtedness of such plan or trust to the Company or any Subsidiary or for which the Company or any Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date, of any Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); and (D) an amount equal to the sum of (i) the net reduction in Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investments and proceeds representing the return of capital (excluding dividends and distributions), in each case received by the Company or any Restricted Subsidiary, and (ii) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not exceed, in the case of any Person or Unrestricted Subsidiary, the amount of Investments (other than Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. (b) The provisions of the foregoing paragraph (a) shall not prohibit: (1) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company or any Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees to the extent that the purchase by such plan or trust is financed by Indebtedness of such plan or trust to the Company or any Subsidiary or for which the Company or any Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); provided, however, that (A) such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under clause (3)(B) of paragraph (a) above; (2) any purchase or redemption of (A) Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to paragraphs (b) and (c) of the covenant described under "--Limitation on Indebtedness" or (B) Subordinated Obligations of a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of such Restricted Subsidiary or the Company which is permitted to be Incurred pursuant to paragraphs (b) and (c) of the covenant described under "--Limitation on Indebtedness"; provided, however, that such purchase or redemption shall be excluded in the calculation of the amount of Restricted Payments; (3) any purchase or redemption of (A) Disqualified Stock of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Company or (B) Disqualified Stock of a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of such Restricted Subsidiary or the Company; 94 provided, however, that (i) at the time of such exchange, no Default shall have occurred and be continuing or would result therefrom and (ii) such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments; (4) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by the covenant described under "-- Limitation on Sales of Assets and Subsidiary Stock"; provided, however, that such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments; (5) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the Notes pursuant to the covenant described under "--Change of Control" above (including the purchase of all Notes tendered), any purchase or redemption of Subordinated Obligations required pursuant to the terms thereof as a result of such Change of Control at a purchase or redemption price not to exceed the outstanding principal amount thereof, plus accrued and unpaid interest thereon, if any; provided, however, that (A) at the time of such purchase or redemption, no Default shall have occurred and be continuing (or would result therefrom), (B) the Company would be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "--Limitation on Indebtedness" after giving pro forma effect to such Restricted Payment, (C) such purchase or redemption is not made, directly or indirectly, from the proceeds of (or made in anticipation of) any Issuance of Indebtedness by the Company or any Subsidiary and (D) such purchase or redemption will be included in the calculation of the amount of Restricted Payments; (6) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with this covenant; provided, however, that at the time of payment of such dividend, no other Default shall have occurred and be continuing (or would result therefrom); provided further, however, that such dividend shall be included in the calculation of the amount of Restricted Payments; (7) the repurchase of shares of, or options to purchase shares of, common stock of the Company or any of its Subsidiaries from employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such common stock; provided, however, that the aggregate amount of such repurchases shall not exceed the sum of (A) $10.0 million and (B) the aggregate amount of cash received by the Company after the Issue Date from the sale of such shares to, or the exercise of options to purchase such shares by, employees or directors of the Company or any of its Subsidiaries; provided further, however, that such repurchases shall be included in the calculation of the amount of Restricted Payments; (8) any Investment in any Person engaged in a Related Business in an aggregate amount which, when added together with the amount of all the Investments made pursuant to this clause (8) which at such time have not been repaid through repayments of loans or advances or other transfers of assets, does not exceed the greater of $35.0 million or 3.5% of Total Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); provided, however, that such Investments shall be excluded in the calculation of the amount of Restricted Payments; or (9) the distribution, as a dividend or otherwise, of shares of Capital Stock or assets of an Unrestricted Subsidiary provided that the fair market value (as determined in good faith by the Board of Directors of the Company) of such shares of Capital Stock or assets shall not exceed the amount of the Investments that were made (and not subsequently reduced pursuant to clause 3(D) of paragraph (a) above) by the Company in such Unrestricted Subsidiary (and its Subsidiaries after giving effect to such distribution) and were treated as Restricted Payments or were included in the calculation of the amount of the Restricted Payments previously made; provided, however, that (A) such distributions shall be excluded in the 95 calculation of the amount of Restricted Payments, and (B) any net reduction in Investments in such Unrestricted Subsidiary resulting from such distribution shall be excluded from the calculation of amounts under clause 3(D) of paragraph (a) above. Limitation on Restrictions on Distributions from Restricted Subsidiaries The Company shall not, and shall not permit any Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary (a) to pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (b) to make any loans or advances to the Company or (c) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary which was entered into on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this covenant (or effecting a Refinancing of such Refinancing Indebtedness pursuant to this clause (3)) or contained in any amendment to an agreement referred to in clause (1) or (2) of this covenant or this clause (3); provided, however, that the encumbrances and restrictions with respect to such Restricted Subsidiary contained in any such refinancing agreement or amendment are no more restrictive in any material respect than the encumbrances and restrictions with respect to such Restricted Subsidiary contained in such agreements; (4) any encumbrance or restriction consisting of customary non- assignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder; (5) in the case of clause (c) above, any restriction contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; (6) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (7) any encumbrance or restriction with respect to any Receivables Subsidiary pursuant to an agreement related to Indebtedness of the Receivables Subsidiary which is permitted under the covenant described under "--Limitation on Indebtedness" or pursuant to any agreement relating to a Financing Disposition to or by the Receivables Subsidiary; (8) any encumbrance or restriction with respect to the disposition or distribution of assets or property and contained in joint venture agreements and other similar agreements entered into in the ordinary course of business; and (9) any restriction contained in any agreement or instrument governing Capital Stock (other than Disqualified Stock) of any Restricted Subsidiary that is in effect on the date such Restricted Subsidiary is acquired by the Company or a Restricted Subsidiary. 96 Limitation on Sales of Assets and Subsidiary Stock The Company shall not, and shall not permit any Restricted Subsidiary to, consummate any Asset Disposition unless the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all non-cash consideration), as determined in good faith by the Board of Directors, of the shares and assets subject to such Asset Disposition and at least 75% (or 100% in the case of lease payments) of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents. In the event and to the extent that the Net Available Cash received by the Company or any Restricted Subsidiary from one or more Asset Dispositions occurring on or after the Issue Date exceeds $10.0 million, then the Company or such Restricted Subsidiary shall: (1) within 360 days after the date such Net Available Cash so received exceeds $10.0 million and to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness) to (A) apply an amount equal to such excess Net Available Cash to prepay, repay or purchase Senior Indebtedness of the Company or such Restricted Subsidiary, in each case owing to a Person other than the Company or any Affiliate of the Company, or (B) invest (or enter into a binding commitment to invest, provided that such commitment shall be subject only to customary conditions (other than financing) and such investment shall be consummated within 360 days after the end of such 360-day period) an equal amount, or the amount not so applied pursuant to clause (A), in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary); and (2) apply such excess Net Available Cash (to the extent not applied pursuant to clause (1)) as provided in the following paragraphs of the covenant described hereunder; provided, however, that in connection with any prepayment, repayment or purchase of Senior Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary shall retire such Senior Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. The amount of such excess Net Available Cash required to be applied pursuant to clause (2) above and not theretofore so applied shall constitute "Excess Proceeds." Pending application of Net Available Cash pursuant to this provision, such Net Available Cash shall be invested in Temporary Cash Investments. If at any time the aggregate amount of Excess Proceeds not theretofore subject to an Excess Proceeds Offer (as defined below) totals at least $10.0 million, the Company shall, not later than 30 days after the end of the period during which the Company is required to apply such Excess Proceeds pursuant to clause (1) of the immediately preceding paragraph (or, if the Company so elects, at any time within such period), make an offer (an "Excess Proceeds Offer") to purchase from the Holders (and to holders of other Senior Subordinated Indebtedness designated by the Company) on a pro rata basis an aggregate principal amount of Notes (and such other Senior Subordinated Indebtedness) equal to the Excess Proceeds (rounded down to the nearest multiple of $1,000) on such date, pursuant to and subject to the conditions (including prorationing in the event of over-subscription) contained in the Indenture. Upon completion of an Excess Proceeds Offer, the amount of Excess Proceeds remaining after application pursuant to such Excess Proceeds Offer (including payment of the purchase price for Notes duly tendered) may be used by the Company for any corporate purpose (to the extent not otherwise prohibited by the Indenture). For the purposes of this covenant, the following are deemed to be cash: (x) the assumption of Senior Indebtedness of the Company or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition and (y) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations thereunder in the event that such Excess Proceeds 97 are received by the Company under the covenant described hereunder and the Company is required to repurchase Notes as described above. To the extent that the provisions of any securities laws or regulations conflict with the provisions of the covenant described hereunder, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under the covenant described hereunder by virtue thereof. Limitation on Affiliate Transactions (a) The Company shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless: (1) the terms thereof are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate; (2) if such Affiliate Transaction involves an amount in excess of $5.0 million, the terms thereof (A) are set forth in writing, (B) comply with clause (1) and (C) have been approved by a majority of the disinterested members of the Board of Directors; and (3) if such Affiliate Transaction involves an amount in excess of $10.0 million, the terms thereof (A) comply with clause (2) and (B) have been determined by a nationally recognized investment banking firm to be fair, from a financial standpoint, to the Company or such Restricted Subsidiary, as the case may be; provided, however, that no such opinion shall be required with respect to any Financing Disposition. (b) The provisions of the foregoing paragraph (a) shall not prohibit: (1) any Restricted Payment permitted to be paid pursuant to the covenant described under "--Limitation on Restricted Payments;" (2) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans in the ordinary course of business and approved by the Board of Directors; (3) the grant of stock options or similar rights to employees and directors of the Company in the ordinary course of business and pursuant to plans approved by the Board of Directors; (4) loans or advances to employees in the ordinary course of business of the Company or its Restricted Subsidiaries; (5) fees, compensation or employee benefit arrangements paid to and indemnity provided for the benefit of directors, officers or employees of the Company or any Subsidiary in the ordinary course of business; (6) management fees or compensation paid to any CVC Investor; provided, however, that the amount of such fees and compensation payable to all CVC Investors in any twelve-month period shall not exceed $1.5 million in the aggregate; (7) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company; or (8) any Affiliate Transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries in the ordinary course of business (so long as the other stockholders of any participating Restricted Subsidiaries which are not Wholly Owned Restricted Subsidiaries are not themselves Affiliates of the Company). 98 Limitation on the Issuance or Sale of Capital Stock of Restricted Subsidiaries The Company shall not: (1) sell, pledge, hypothecate or otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary (other than pledges of Capital Stock securing Indebtedness under paragraph (b)(1) of the covenant described under "--Limitation on Indebtedness"); or (2) permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any shares of its Capital Stock other than (A) to the Company or a Wholly Owned Subsidiary, (B) directors' qualifying shares, (C) if, immediately after giving effect to such issuance or sale, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary or (D) with respect to the common stock of any Restricted Subsidiary, in a Public Equity Offering as a result of or after which a Public Market exists; provided, however, that, in the case of clauses (C) and (D), such issuance, sale or disposition or Public Equity Offering complies with the covenant described under "--Limitation on Sales of Assets and Subsidiary Stock." Upon any issuance or sale of Capital Stock pursuant to clause (C) above and delivery of a supplemental indenture to the Trustee in accordance with the terms of the Indenture, any such Restricted Subsidiary that is a Subsidiary Guarantor shall be released from all its obligations under its Subsidiary Guarantee. Limitation on Liens The Company shall not, and shall not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any nature whatsoever on any property of the Company or any Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, which secures Indebtedness that ranks pari passu with or subordinated to the Notes or the Subsidiary Guarantee unless: (1) if such Lien secures Indebtedness that ranks pari passu with the Notes and the Subsidiary Guarantee, the Notes are secured on an equal and ratable basis with the obligations so secured until such time as such obligation is no longer secured by a Lien; or (2) if such Lien secures Indebtedness that is subordinated to the Notes and the Subsidiary Guarantee, such Lien shall be subordinated to a Lien granted to the Holders in the same collateral as that securing such Lien to the same extent as such subordinated Indebtedness is subordinated to the Note and the Subsidiary Guarantee. Merger and Consolidation The Company shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to, any Person, unless: (1) the resulting, surviving or transferee Person (the "Successor Company") shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental thereto, executed and delivered to the Trustee, in form satisfactory to the Trustee, all the obligations of the Company under the Notes and the Indenture; (2) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by such Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (3) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the covenant described under "--Limitation on Indebtedness"; and 99 (4) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. Notwithstanding the foregoing clauses (2) and (3), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under the Indenture, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Notes. The Company shall not permit any Subsidiary Guarantor to consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to, any Person, unless: (1) the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the United States of America, any State thereof or the District of Columbia and the Successor Company (if not such Subsidiary) shall expressly assume, by a supplemental indenture, in form satisfactory to the Trustee, all the obligations of such Subsidiary under its Subsidiary Guarantee; (2) immediately after giving effect to such transaction on a pro forma basis (and treating any Indebtedness which becomes an obligation of the resulting, surviving or transferee Person as a result of such transaction as having been Incurred by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (3) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with the Indenture. The provisions of clauses (1) and (3) above shall not apply to any transactions which constitute an Asset Disposition if the Company has complied with the applicable provisions of the covenant described under "--Limitation on Sales of Assets and Subsidiary Stock" above. Future Guarantors The Company shall cause each Domestic Restricted Subsidiary to execute and deliver to the Trustee a supplemental indenture pursuant to which such Restricted Subsidiary will Guarantee payment of the Notes on the same terms and conditions as those set forth in the Indenture. Each Subsidiary Guarantee will be limited in amount to an amount not to exceed the maximum amount that can be Guaranteed by the applicable Subsidiary Guarantor without rendering such Subsidiary Guarantee voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SEC Reports Notwithstanding that the Company may not be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Note Holders with annual reports and information, documents and other reports as are specified in those Sections and applicable to a U.S. corporation subject to those Sections, the information, documents and other reports to be so filed and provided at the times specified for the filing of the information, documents and reports under those Sections; provided, however, that the Company shall not be required to file any report, document or other information with the SEC if the SEC does not permit the filing. In addition, the Company shall furnish to the Holders of the Notes and to prospective investors, upon the requests of such Holders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as the Notes are not freely transferable under the Securities Act. 100 Defaults An Event of Default is defined in the Indenture as: (1) a default in the payment of interest on the Notes when due (whether or not such payment is prohibited by the provisions described under "Subordination" above), continued for 30 days; (2) a default in the payment of principal of any Note when due at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise (whether or not such payment is prohibited by the provisions described under "Subordination" above); (3) the failure by the Company to comply with its obligations under "-- Certain Covenants--Merger and Consolidation" above; (4) the failure by the Company to comply for 30 days after notice with any of its obligations under the covenants described above under "--Change of Control" or "--Certain Covenants" (other than a failure to purchase Notes); (5) the failure by the Company to comply for 30 days after notice with its other agreements contained in the Indenture; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated exceeds $10.0 million and such failure continues for 10 days after notice (the "cross acceleration provision"); (7) certain events of bankruptcy, insolvency or reorganization of the Company or a Significant Subsidiary (the "bankruptcy provisions"); (8) any judgment or decree for the payment of money in excess of $10.0 million is rendered against the Company or a Significant Subsidiary, remains outstanding for a period of 60 days following such judgment and is not discharged, waived or stayed within 10 days after notice (the "judgment default provision"); or (9) a Subsidiary Guarantee ceases or otherwise fails to be in full force and effect (other than in accordance with the terms of such Subsidiary Guarantee) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guarantee and such Default continues for 10 days. However, a default under clause (4), (5), (6) or (8) will not constitute an Event of Default until the Trustee or the Holders of 25% in principal amount of the outstanding Notes notify the Company of the default and the Company does not cure such default within the time specified in clauses (4), (5), (6) and (8) hereof after receipt of such notice. If an Event of Default occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the outstanding Notes may declare the principal of and accrued but unpaid interest on all the Notes to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default relating to certain events of bankruptcy, insolvency or reorganization of the Company occurs and is continuing, the principal of and interest on all the Notes will ipso facto become and be immediately due and payable without any declaration or other act on the part of the Trustee or any Holders of the Notes. Under certain circumstances, the Holders of a majority in principal amount of the outstanding Notes may rescind any such acceleration with respect to the Notes and its consequences. Subject to the provisions of the Indenture relating to the duties of the Trustee, in case an Event of Default occurs and is continuing, the Trustee will be under no obligation to exercise any of the rights or powers under the Indenture at the request or direction of any of the Holders unless such Holders have offered to the Trustee reasonable indemnity or security against any loss, liability or expense. Except to enforce the right to receive 101 payment of principal, premium (if any) or interest when due, no Holder may pursue any remedy with respect to the Indenture or the Notes unless: (1) such Holder has previously given the Trustee notice that an Event of Default is continuing; (2) Holders of at least 25% in principal amount of the outstanding Notes have requested the Trustee to pursue the remedy; (3) such Holders have offered the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee has not complied with such request within 60 days after the receipt thereof and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the outstanding Notes have not given the Trustee a direction inconsistent with such request within such 60-day period. Subject to certain restrictions, the Holders of a majority in principal amount of the outstanding Notes are given the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. The Trustee, however, may refuse to follow any direction that conflicts with law or the Indenture or that the Trustee determines is unduly prejudicial to the rights of any other Holder or that would involve the Trustee in personal liability. The Indenture provides that if a Default occurs and is continuing and is known to the Trustee, the Trustee must mail to each Holder notice of the Default within 90 days after it occurs. Except in the case of a Default in the payment of principal of or interest on any Note, the Trustee may withhold notice if and so long as a committee of its trust officers determines that withholding notice is not opposed to the interest of the Holders. In addition, the Company is required to deliver to the Trustee, within 120 days after the end of each fiscal year, a certificate indicating whether the signers thereof know of any Default that occurred during the previous year. The Company also is required to deliver to the Trustee, within 30 days after the occurrence thereof, written notice of any event which would constitute certain Defaults, their status and what action the Company is taking or proposes to take in respect thereof. Amendments and Waivers Subject to certain exceptions, the Indenture may be amended with the consent of the Holders of a majority in principal amount of the Notes then outstanding (including consents obtained in connection with a tender offer or exchange for the Notes) and any past default or compliance with any provisions may also be waived with the consent of the Holders of a majority in principal amount of the Notes then outstanding. However, without the consent of each Holder of an outstanding Note affected thereby, no amendment may, among other things: (1) reduce the amount of Notes whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Note; (3) reduce the principal of or extend the Stated Maturity of any Note; (4) reduce the amount payable upon the redemption of any Note or change the time at which any Note may be redeemed as described under "--Optional Redemption" above; (5) make any Note payable in money other than that stated in the Note; (6) impair the right of any Holder to institute suit for the enforcement of any payment on or with respect to such Holder's Notes or any Subsidiary Guarantee; (7) make any change in the amendment provisions which require each Holder's consent or in the waiver provisions; (8) make any change to the subordination provisions of the Indenture that would adversely affect the Noteholders; or 102 (9) make any change in any Subsidiary Guaranty that would adversely affect the Noteholders. Without the consent of any Holder, the Company and Trustee may amend the Indenture to cure any ambiguity, omission, defect or inconsistency, to provide for the assumption by a successor corporation of the obligations of the Company under the Indenture, to provide for uncertificated Notes in addition to or in place of certificated Notes (provided that the uncertificated Notes are issued in registered form for purposes of Section 163(f) of the Code, or in a manner such that the uncertificated Notes are described in Section 163(f)(2)(B) of the Code), to add guarantees with respect to the Notes, to release Subsidiary Guarantors when permitted by the Indenture, to secure the Notes, to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power conferred upon the Company, to make any change that does not adversely affect the rights of any Holder or to comply with any requirement of the SEC in connection with the qualification of the Indenture under the Trust Indenture Act. However, no amendment may be made to the subordination provisions of the Indenture that adversely affects the rights of any holder of Senior Indebtedness then outstanding unless the holders of such Senior Indebtedness (or their Representative) consent to such change. The consent of the Holders is not necessary under the Indenture to approve the particular form of any proposed amendment. It is sufficient if such consent approves the substance of the proposed amendment. After an amendment under the Indenture becomes effective, the Company is required to mail to Holders a notice briefly describing such amendment. However, the failure to give such notice to all Holders, or any defect therein, will not impair or affect the validity of the amendment. Transfer Certificated Notes will be issued in registered form and will be transferable only upon the surrender of the Notes being transferred for registration of transfer. The Company may require payment of a sum sufficient to cover any tax, assessment or other governmental charge payable in connection with certain transfers and exchanges. Defeasance The Company at any time may terminate all its obligations under the Notes and the Indenture ("legal defeasance"), except for certain obligations, including those respecting the defeasance trust and obligations to register the transfer or exchange of the Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a registrar and paying agent in respect of the Notes. The Company at any time may terminate its obligations under "--Change of Control" and under the covenants described under "--Certain Covenants" (other than the covenant described under "--Merger and Consolidation"), the operation of the cross acceleration provision, the bankruptcy provisions with respect to Significant Subsidiaries and the judgment default provision described under "-- Defaults" above and the limitations contained in clause (3) of the first paragraph under "--Certain Covenants--Merger and Consolidation" above ("covenant defeasance"). The Company may exercise its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Notes may not be accelerated because of an Event of Default with respect thereto. If the Company exercises its covenant defeasance option, payment of the Notes may not be accelerated because of an Event of Default specified in clause (4), (6), (7) (with respect only to Significant Subsidiaries) or (8) under "--Defaults" above or because of the failure of the Company to comply with clause (3) of the first paragraph under "--Certain Covenants--Merger and Consolidation" above. If the Company exercises its legal defeasance option or its covenant defeasance option, each Subsidiary Guarantor will be released from all of its obligations with respect to its Subsidiary Guarantee. In order to exercise either defeasance option, the Company must irrevocably deposit in trust (the "defeasance trust") with the Trustee money or U.S. Government Obligations for the payment of principal and 103 interest on the Notes to redemption or maturity, as the case may be, and must comply with certain other conditions, including delivery to the Trustee of an Opinion of Counsel to the effect that Holders of the Notes will not recognize income, gain or loss for Federal income tax purposes as a result of such deposit and defeasance and will be subject to Federal income tax on the same amount and in the same manner and at the same times as would have been the case if such deposit and defeasance had not occurred (and, in the case of legal defeasance only, such Opinion of Counsel must be based on a ruling of the Internal Revenue Service or other change in applicable Federal income tax law). Concerning the Trustee First Union National Bank is to be the Trustee under the Indenture and has been appointed by the Company as Registrar and Paying Agent with regard to the Notes. The Indenture contains certain limitations on the rights of the Trustee, should it become a creditor of the Company, to obtain payment of claims in certain cases, or to realize on certain property received in respect of any such claim as security or otherwise. The Trustee will be permitted to engage in other transactions; provided, however, if it acquires any conflicting interest it must either eliminate such conflict within 90 days, apply to the SEC for permission to continue or resign. The Holders of a majority in principal amount of the outstanding Notes will have the right to direct the time, method and place of conducting any proceeding for exercising any remedy available to the Trustee, subject to certain exceptions. The Indenture provides that if an Event of Default occurs (and is not cured), the Trustee will be required, in the exercise of its power, to use the degree of care of a prudent man in the conduct of his own affairs. Subject to such provisions, the Trustee will be under no obligation to exercise any of its rights or powers under the Indenture at the request of any Holder of Notes, unless such Holder shall have offered to the Trustee security and indemnity satisfactory to it against any loss, liability or expense and then only to the extent required by the terms of the Indenture. No Personal Liability of Directors, Officers, Employees and Stockholders No director, officer, employee, incorporator or stockholder of the Company or any Subsidiary Guarantor will have any liability for any obligations of the Company or any Subsidiary Guarantor under the Notes, any Subsidiary Guarantee or the Indenture or for any claim based on, in respect of, or by reason of such obligations or their creation. Each Holder of the Notes by accepting a Note waives and releases all such liability. The waiver and release are part of the consideration for issuance of the Notes. Such waiver and release may not be effective to waive liabilities under the U.S. federal securities laws, and it is the view of the SEC that such a waiver is against public policy. Governing Law The Indenture provides that it and the Notes will be governed by, and construed in accordance with, the laws of the State of New York without giving effect to applicable principles of conflicts of law to the extent that the application of the law of another jurisdiction would be required thereby. Certain Definitions "Additional Assets" means: (1) any property or assets (other than Indebtedness and Capital Stock) in a Related Business; (2) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (3) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; 104 provided, however, that any such Restricted Subsidiary described in clause (2) or (3) above is primarily engaged in a Related Business. "Affiliate" of any specified Person means any other Person, directly or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of the provisions described under "--Certain Covenants--Limitation on Restricted Payments," "--Certain Covenants--Limitation on Affiliate Transactions" and "--Certain Covenants--Limitations on Sales of Assets and Subsidiary Stock" only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, transfer or other disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of: (1) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders); (2) all or substantially all the assets of any division, business segment or comparable line of business of the Company or any Restricted Subsidiary; or (3) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (1), (2) and (3) above, (A) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary; and (B) for purposes of the covenant described under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, (i) a disposition that constitutes a Permitted Investment or a Restricted Payment permitted by the covenant described under "--Certain Covenants--Limitation on Restricted Payments" and (ii) a disposition of accounts receivable (and related assets) in connection with a Permitted Receivables Financing). "Asset Purchase Agreement" means the Asset Purchase Agreement dated July 13, 1994, by and among the Company, DRA and General Motors Corporation. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, as at the time of determination, the present value (discounted at the interest rate borne by the Notes, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to any Indebtedness or Preferred Stock, the quotient obtained by dividing: (1) the sum of the products of numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multiplied by the amount of such payment by 105 (2) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in respect of the Senior Credit Facility including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. "Capital Lease Obligations" means an obligation that is required to be classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Code" means the Internal Revenue Code of 1986, as amended. "Consolidated Coverage Ratio" as of any date of determination means the ratio of (x) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days (or, if less, the number of days after the end of such fiscal quarter as the consolidated financial statements of the Company shall be provided to the Noteholders pursuant to the Indenture) prior to the date of such determination to (y) Consolidated Interest Expense for such four fiscal quarters; provided, however, that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that, in the case of Indebtedness used to finance working capital needs incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four- fiscal-quarter period); (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person (to the extent the Company and its Restricted Subsidiaries are no longer liable for such Indebtedness) or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the 106 Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (3) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, which acquisition constitutes all or substantially all of an operating unit of a business, including any such Investment or acquisition occurring in connection with a transaction requiring a calculation to be made hereunder, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking into account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total interest expense of the Company and its consolidated Restricted Subsidiaries, plus, (a) to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries: (1) interest expense attributable to Capital Lease Obligations; (2) amortization of debt discount; (3) capitalized interest; (4) non-cash interest expenses; (5) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing; (6) net costs associated with Hedging Obligations (including amortization of fees); (7) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary; 107 (8) interest incurred in connection with Investments in discontinued operations; (9) interest actually paid on any Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary; and (10) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or any Wholly Owned Subsidiary) in connection with Indebtedness Incurred by such plan or trust; minus, (b) to the extent included in such total interest expense, amortization of deferred financing costs, fees and expenses. "Consolidated Net Income" means, for any period, the net income of the Company and its consolidated Subsidiaries; provided, however, that there shall not be included in such Consolidated Net Income: (1) any net income (or loss) of any Person if such Person is not a Restricted Subsidiary, except that subject to the exclusion contained in clause (4) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (3) below); (2) for purposes of subclause (a)(3)(A) of the covenant described under "--Certain Covenants--Limitation on Restricted Payments" only, any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (3) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (4) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary consistent with such restriction during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (4) any gain (or loss) realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (or loss) realized upon the sale or other disposition of any Capital Stock of any Person; (5) extraordinary gains or losses; (6) the cumulative effect of a change in accounting principles; and (7) any noncash compensation expense realized for grants of performance shares, stock options or other stock awards to officers, directors and employees of the Company or any Restricted Subsidiary. Notwithstanding the foregoing, for the purposes of the covenant described under "--Certain Covenants-- Limitation on Restricted Payments" only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof. "Court Square" means Court Square Capital Limited, a Delaware corporation. 108 "Currency Agreement" means, with respect to any Person, any foreign exchange contract, currency swap agreement or other similar agreement to which such Person is a party or a beneficiary. "CVC" means (i) any Subsidiary of Citigroup Inc., a Delaware corporation, including Citicorp Venture Capital Ltd., a New York corporation, and Court Square; or (ii) any investment vehicle that (A) is sponsored or managed (whether through ownership of securities having a majority of the voting power or through the management of investments) by any Subsidiary included in clause (i) hereof and (B) contains, as a part of its name, "Citigroup," "CVC" or any variant thereof; or (iii) World Equity Partners, L.P., a Delaware limited partnership. "CVC Investor" means (i) CVC; (ii) any officer, employee, director or general partner of CVC or the general partner of any investment vehicle included in the definition of CVC; and (iii) any trust, partnership or other entity established solely for the benefit of the Persons included in (i) or (ii) hereof. "Default" means any event which is, or after notice or passage of time or both would be, an Event of Default. "Designated Senior Indebtedness" means: (1) the Bank Indebtedness; and (2) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $10.0 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the Indenture. "Disqualified Stock" means, with respect to any Person, any Capital Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event: (1) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise; (2) is convertible or exchangeable, at the option of the holder thereof, for Indebtedness or Disqualified Stock; or (3) is redeemable at the option of the holder thereof, in whole or in part; in each case on or prior to the first anniversary of the Stated Maturity of the Notes. "Domestic Restricted Subsidiary" means any Restricted Subsidiary of the Company other than a Foreign Restricted Subsidiary. "DRA" means Delco Remy America, Inc., a Delaware corporation and a Wholly Owned Subsidiary. "EBITDA" for any period means the sum of Consolidated Net Income plus Consolidated Interest Expense plus, without duplication, the following to the extent deducted in calculating such Consolidated Net Income: (1) income tax expense; (2) depreciation expense; (3) amortization expense; and (4) all other non-cash items reducing Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made, other than accruals for post-retirement benefits other than pensions) less all non-cash items increasing Consolidated Net Income; 109 in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income. "Exchange Act" means the Securities Exchange Act of 1934, as amended. "Financing Disposition" means any sale of any accounts receivable, or interest therein, by the Company or any Subsidiary to any Receivables Subsidiary, or by the Receivables Subsidiary, pursuant to a Permitted Receivables Financing. "Foreign Restricted Subsidiary" means any Restricted Subsidiary of the Company which is not organized under the laws of the United States of America or any State thereof or the District of Columbia. "GAAP" means generally accepted accounting principles in the United States of America as in effect as of the Issue Date, including those set forth in: (1) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants; (2) statements and pronouncements of the Financial Accounting Standards Board; and (3) such other statements by such other entity as approved by a significant segment of the accounting profession. "GM Note" means the Contingent Purchase Price Note issued by DRA pursuant to the Asset Purchase Agreement. "Guarantee" means any obligation, contingent or otherwise, of any Person directly or indirectly guaranteeing any Indebtedness or other obligation of any Person and any obligation, direct or indirect, contingent or otherwise, of such Person: (1) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep- well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise); or (2) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" or "Noteholder" means the Person in whose name a Note is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become liable for; provided, however, that any Indebtedness or Capital Stock of a Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary; provided further, however, that in the case of a discount security, neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness, but the entire face amount of such security shall be deemed Incurred upon the issuance of such security. The term "Incurrence" when used as a noun shall have a correlative meaning. 110 "Indebtedness" means, with respect to any Person on any date of determination (without duplication): (1) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (2) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; (3) all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payables arising in the ordinary course of business), which purchase price or obligation is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services (provided that, in the case of obligations of an acquired Person assumed in connection with an acquisition of such Person, such obligations would constitute Indebtedness of such Person); (4) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (1) through (3) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (5) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (6) all obligations of the type referred to in clauses (1) through (5) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (7) all obligations of the type referred to in clauses (1) through (6) of other Persons secured by any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and (8) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations as described above at such date; provided, however, that the amount outstanding at any time of any Indebtedness issued with original issue discount shall be deemed to be the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP; provided further, however, that the outstanding principal amount of the GM Note shall be deemed to be zero until the last day of the fiscal year or other period with respect to which the amount due thereunder shall be determined. "Interest Rate Agreement" means any interest rate swap agreement, interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to 111 (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary," the definition of "Restricted Payment" and the covenant described under "--Certain Covenants-- Limitation on Restricted Payments:" (1) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (2) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means the date on which the Notes are originally issued. "Joint Venture" means, in respect of any Person, any corporation, association, partnership or other business entity of which not less than 20% and not more than 80% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (1) such Person, (2) such Person and one or more Subsidiaries of such Person or (3) one or more Subsidiaries of such Person. "Legal Holiday" means a Saturday, a Sunday or a day on which banking institutions are not required to be open in the State of New York. "Lien" means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Management Investors" means each of the officers, employees and directors of the Company who own Voting Stock of the Company, in each case so long as such person shall remain an officer, employee or director of the Company. "Net Available Cash" from an Asset Disposition means cash payments received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form) in each case net of: (1) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition; (2) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be, repaid out of the proceeds from such Asset Disposition; (3) all distributions and other payments required to be made to minority interest holders in Subsidiaries or Joint Ventures as a result of such Asset Disposition; and 112 (4) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds," with respect to any issuance or sale of Capital Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Non-Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock (other than, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders) of which is owned by (i) the Company or one or more Wholly Owned Subsidiaries and (ii) any of the directors, officers, employees or former owners of such Restricted Subsidiary. "Permitted Holders" means the CVC Investors, the Management Investors and, in the case of any individual who is a Permitted Holder, any Permitted Transferee (as defined in the Stockholders Agreement except a Permitted Transferee by virtue of Section 3.5(b)(iv) of the Stockholders Agreement) of such individual; provided, however, that in no event shall any Persons (other than CVC), collectively, be deemed "Permitted Holders" with respect to more than 30% of the total voting power of all classes of Voting Stock of the Company. "Permitted Investment" means an Investment by the Company or any Restricted Subsidiary in: (1) the Company; (2) a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted Subsidiary is a Related Business; (3) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Domestic Restricted Subsidiary; provided, however, that such Person's primary business is a Related Business; (4) Temporary Cash Investments; (5) receivables owing to the Company or any Restricted Subsidiary if created or acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms may include such concessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (6) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (7) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary and not exceeding $2.0 million in the aggregate outstanding at any time; (8) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; and (9) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to the covenant described under "--Certain Covenants--Limitation on Sales of Assets and Subsidiary Stock." "Permitted Receivables Financing" means any financing pursuant to which the Company or any Restricted Subsidiary may sell, convey or otherwise transfer to a Receivables Subsidiary or any other Person 113 (in the case of a transfer by a Receivables Subsidiary), or grant a security interest in, any accounts receivable (and related assets) of the Company or any Restricted Subsidiary; provided, however, that: (1) the covenants, events of default and other provisions applicable to such financing shall be customary for such transactions and shall be on market terms (as determined in good faith by the Board of Directors) at the time such financing is entered into; (2) the interest rate applicable to such financing shall be a market interest rate (as determined in good faith by the Board of Directors) at the time such financing is entered into; and (3) such financing shall be non-recourse to the Company and its Subsidiaries (other than a Receivables Subsidiary) except to a limited extent customary for such transactions. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock," as applied to the Capital Stock of any corporation, means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Note means the principal of the Note plus the premium, if any, payable on the Note which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering of common stock of the Company (or, for purposes of the covenant described under "--Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries," any Restricted Subsidiary) pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after (i) a Public Equity Offering has been consummated with respect to a Restricted Subsidiary and (ii) at least 10% of the total issued and outstanding common stock of such Restricted Subsidiary has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "Purchase Money Indebtedness" mean Indebtedness: (1) consisting of the deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds or similar Indebtedness, in each case where the maturity of such Indebtedness does not exceed the anticipated useful life of the asset being financed; and (2) incurred to finance the acquisition by the Company or a Restricted Subsidiary of such asset, including additions and improvements; provided, however, that any Lien arising in connection with any such Indebtedness shall be limited to the specified asset being financed or, in the case of real property or fixtures, including additions and improvements, the real property on which such asset is attached; and provided further, however, that such Indebtedness is Incurred within 90 days after such acquisition of such asset by the Company or Restricted Subsidiary. "Receivables Subsidiary" means a bankruptcy-remote, special-purpose Wholly Owned Subsidiary formed in connection with a Permitted Receivables Financing. "Refinance" means, in respect of any Indebtedness, to refinance, extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. 114 "Refinancing Indebtedness" means Indebtedness that Refinances any Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with the Indenture; provided, however, that: (1) such Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced; (2) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life of the Indebtedness being Refinanced; (3) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided further, however, that Refinancing Indebtedness shall not include (x) Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. For purposes of this definition, the Average Life and the aggregate principal amount of the GM Note at the time of any Refinancing thereof shall be determined by a responsible financial or accounting Officer of the Company based on a good faith estimate of the amount of the contingent payment that will become due and payable under such note and the timing of the scheduled installments thereof in accordance with the terms of such note. "Related Business" means any business related, ancillary or complementary (as determined in good faith by the Board of Directors) to the businesses of the Company and the Restricted Subsidiaries on the Issue Date. "Representative" means any trustee, agent or representative (if any) for an issue of Senior Indebtedness of the Company. "Restricted Payment" means, with respect to any Person: (1) the declaration or payment of any dividends or any other distributions on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the holders of its Capital Stock, except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock) and except dividends or distributions payable solely to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary is not wholly owned, to its other shareholders on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis); (2) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock); (3) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment, of any Subordinated Obligations (other than the purchase, repurchase or other acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition); or (4) the making of any Investment in any Person (other than a Permitted Investment). "Restricted Subsidiary" means any Subsidiary of the Company that is not an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. 115 "SEC" means the Securities and Exchange Commission. "Secured Indebtedness" means any Indebtedness of the Company secured by a Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative meaning. "Senior Credit Facility" means the revolving credit facility made available pursuant to the Fourth Amended and Restated Financing Agreement, as amended as of April 19, 2001, among certain subsidiaries of the Company, as borrowers, the Company and certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto and Bank One, Indiana, National Association, as agent, as the same may be amended, waived, modified, Refinanced or replaced from time to time (except to the extent that any such amendment, waiver, modification, replacement or Refinancing would be prohibited by the terms of the Indenture). "Senior Indebtedness" of the Company means: (1) Indebtedness of the Company, whether outstanding on the Issue Date or thereafter Incurred, including the Guarantees by the Company of all Bank Indebtedness; and (2) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which the Company is responsible or liable; unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate or pari passu in right of payment to the Notes; provided, however, that Senior Indebtedness shall not include: (1) any obligation of the Company to any Subsidiary; (2) any liability for Federal, state, local or other taxes owed or owing by the Company; (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business (including guarantees thereof or instruments evidencing such liabilities); (4) any Indebtedness of the Company (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect (other than as a result of the Indebtedness being unsecured) to any other Indebtedness or other obligation of the Company, including any Senior Subordinated Indebtedness and any Subordinated Obligations; (5) any obligations with respect to any Capital Stock; or (6) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of the Indenture. "Senior Indebtedness" of any Subsidiary Guarantor has a correlative meaning. "Senior Subordinated Indebtedness" of the Company means the Notes, the 10 5/8% Senior Subordinated Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Notes in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any Subsidiary Guarantor has a correlative meaning; provided, however, that "Senior Subordinated Indebtedness" of DRA shall specifically include (1) the Subsidiary Guarantee of DRA and (2) the GM Note (and any Senior Subordinated Indebtedness Incurred to Refinance such note). "Significant Subsidiary" means any Restricted Subsidiary that would be a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. 116 "Stated Maturity" means, with respect to any security, the date specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Stockholders Agreement" means the Securities Transfer, Recapitalization and Holders Agreement among the stockholders of the Company as in effect on the Issue Date. "Subordinated Obligation" means any Indebtedness of the Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Notes pursuant to a written agreement to that effect. "Subordinated Obligation" of any Subsidiary Guarantor has a correlative meaning. "Subsidiary" means, in respect of any Person, any corporation, association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by: (1) such Person; (2) such Person and one or more Subsidiaries of such Person; or (3) one or more Subsidiaries of such Person. "Subsidiary Guarantee" means the Guarantee by a Subsidiary Guarantor of the Company's obligations with respect to the Notes. "Subsidiary Guarantor" means each Subsidiary designated as such on the signature pages of the Indenture and any other Subsidiary that has issued a Subsidiary Guarantee. "Temporary Cash Investments" means any of the following: (1) any investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof; (2) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50.0 million (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by an registered broker dealer or mutual fund distributor; (3) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (1) above entered into with a bank meeting the qualifications described in clause (2) above; (4) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any State thereof or the District of Columbia or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Group; and (5) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any 117 political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. "Total Assets" means at any time the total consolidated assets (determined in accordance with GAAP) of the Company and the Restricted Subsidiaries, as of the most recent date for which the Company prepares a consolidated balance sheet in the ordinary course of business. "Unrestricted Subsidiary" means: (1) any Subsidiary of the Company that at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; (2) any Subsidiary of an Unrestricted Subsidiary; and (3) Autovill Holdings, Inc., Remy Mexico Holdings, Inc., Remy South America Holdings, Inc., Remy Korea Holdings, Inc., Kraftube, Inc. and Electro Diesel Rebuild bvba (in each case as to which the Company represents and warrants that such Subsidiary is an Unrestricted Subsidiary under the indentures for the 8 5/8% Senior Notes and the 10 5/8% Senior Subordinated Notes). The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under the covenant described under "--Certain Covenants--Limitation on Restricted Payments." The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under paragraph (a) of the covenant described under "--Certain Covenants--Limitation on Indebtedness" and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be by the Company to the Trustee by promptly filing with the Trustee a copy of the board resolution giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. "U.S. Government Obligations" means direct obligations (or certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the Capital Stock of which (other than directors' qualifying shares) is owned by the Company and/or one or more Wholly Owned Subsidiaries. 118 UNITED STATES FEDERAL INCOME TAX CONSEQUENCES The following is a summary of the material United States federal income tax consequences of the exchange offer and the ownership and disposition of the new notes. Unless otherwise stated, this summary deals only with the new notes received in the exchange offer in exchange for the old notes that were purchased for cash on original issue. This summary assumes that the old notes were and the new notes are held as capital assets. For purposes of this summary, U.S. holders are holders of new notes that are: (1) citizens or residents of the United States, (2) corporations or other entities taxable as corporations created or organized in or under the laws of the United States, any state thereof or the District of Columbia, (3) estates, the income of which is subject to United States federal income taxation regardless of its source, or (4) trusts if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and (B) one or more United States persons have the authority to control all substantial decisions of the trust. For purposes of this summary, non-U.S. holders are holders of new notes that are not U.S. holders. If a partnership or other entity treated as a partnership for United States federal income tax purposes holds new notes, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding notes, we suggest that you consult your tax advisor. This summary does not deal with special classes of holders such as banks, thrifts, real estate investment trusts, regulated investment companies, insurance companies, dealers in securities or currencies, or tax-exempt investors and does not discuss securities held as part of a hedge, straddle, "synthetic security" or other integrated transaction. This summary also does not address the tax consequences to persons that have a functional currency other than the U.S. dollar or the tax consequences to shareholders, partners or beneficiaries of a holder of securities. Further, it does not include any description of any alternative minimum tax consequences or the tax laws of any state or local government or of any foreign government that may be applicable to the notes. This summary is based on the Internal Revenue Code, the Treasury regulations promulgated thereunder and administrative and judicial interpretations thereof, all as of the date hereof, and all of which are subject to change, possibly on a retroactive basis. You should consult with your own tax advisor regarding the federal, state, local and foreign income, franchise, personal property, and any other tax consequences of the exchange offer and the ownership and disposition of the new notes. Tax Consequences to U.S. Holders This subsection describes the material United States federal income tax consequences of the exchange after and of owning, selling and disposing of the new notes. The Exchange Offer The exchange of old notes for new notes in the exchange offer should not be a taxable event for holders because there should not be a significant modification of the terms of the notes. Instead, the notes will be treated as a continuation of the old notes for federal income tax purposes. Therefore, if you exchange your old note for new notes pursuant to the exchange offer: (1) you will not recognize gain or loss in connection with the exchange offer; 119 (2) you will have the same tax basis in the new notes that you had in the old notes immediately prior to the exchange offer; (3) you will have the same holding period in the new notes that you had in the old notes immediately prior to the exchange; and (4) the federal income tax consequences associated with owning the old notes will continue to apply to the new notes. Interest Income Under applicable Treasury Regulations, the old notes are not treated as having been issued with original issue discount because the difference between the old note's stated redemption price at maturity ($1,000 per note) and its issue price ($986.98) is considered to be de minimis. Because the new notes are treated as a continuation of the old notes, a new note received in the exchange offer for an old note will have the same original issue discount characteristics as the old note for which it is exchanged. As a result: . If you are a cash method taxpayer, you must report the stated interest on the new note in your income when it is received by you. . If you are an accrual method taxpayer, you must report the stated interest on the new note as it accrues. . You will not be required to include the de minimis original issue discount in your income as it accrues. Instead, you will include such discount in your computation of gain or loss when you sell, exchange or otherwise dispose of the new note (including by way of retirement or redemption). Sale or Exchange of Notes A holder will generally recognize taxable gain or loss equal to the difference between the amount realized on the sale, exchange or other disposition of the new note and the holder's adjusted tax basis in the new note. A holder's adjusted tax basis in the new note generally will be the initial purchase price paid therefor. A holder who exchanged old notes for new notes in the exchange offer will have the same basis in the new note that the holder had in the old note. Gain recognized on the sale of a new note will be long term capital gain provided the holder's holding period for the new note exceeds one year. A holder's holding period for the old notes will be added to the holder's holding period in the new notes, if the holder participates in the exchange offer. In the case of a holder other than a corporation, the current maximum marginal United States federal income tax rate applicable to long term capital gain recognized on the sale of a note is 20%. If the selling price is less than the holder's adjusted tax basis, the holder will recognize a capital loss. Subject to certain limited exceptions, capital losses cannot be applied to offset ordinary income for United States federal income tax purposes. Information Reporting and Backup Withholding Tax In general, information reporting requirements will apply to payments of principal and interest on the new notes and payments of the proceeds of the sale of the notes, and a backup withholding tax (at varying rates up to 31%) may apply to those payments if: (1) the holder fails to furnish or certify his correct taxpayer identification number to us in the manner required, (2) we are notified by the Internal Revenue Service that the holder has failed to report payments of interest and dividends properly, or 120 (3) under certain circumstances, the holder fails to certify that the holder has not been notified by the Internal Revenue Service that the holder is subject to backup withholding for failure to report interest and dividend payments. Any amounts withheld under the backup withholding rules from a payment to a holder will be allowed as a credit against the holder's United States federal income tax and may entitle the holder to a refund, provided that the required information is furnished to the Internal Revenue Service. Non-U.S. Holders of New Notes The rules governing United States federal income taxation of a beneficial owner of new notes that, for United States federal income tax purposes, is a holder who is not a United States person as that term is defined in the Internal Revenue Code are complex and no attempt will be made herein to provide more than a summary of those rules. Non-U.S. holders should consult with their own tax advisors to determine the effect of federal, state, local and foreign income tax laws, as well as treaties, with regard to an investment in the notes, including any reporting requirements. This discussion assumes that the note or interest payment is not subject to the rules of Section 871(h)(4)(A) of the Internal Revenue Code, relating to interest payments that are determined by reference to income, profits, changes in value of property or other attributes of Delco Remy or a related party. Interest Income Generally, interest income of a non-U.S. holder that is not effectively connected with a United States trade or business will be subject to a withholding tax at a 30% rate (or, if applicable, a lower tax rate specified by a treaty). However, interest income earned on a new note held by a non-U.S. holder will qualify for the "portfolio interest" exemption and therefore will not be subject to United States federal income tax or withholding tax, provided that the interest income is not effectively connected with a United States trade or business of the non-U.S. holder and provided that: (1) the non-U.S. holder does not actually or constructively own 10% of more of the total combined voting power of all classes of our stock entitled to vote; (2) the non-U.S. holder is not a controlled foreign corporation that is related to us through stock ownership; (3) the non-U.S. holder is not a bank which acquired the note in consideration for an extension of credit made pursuant to a loan agreement entered into in the ordinary course of business; and (4) either (A) the non-U.S. holder certifies to us or our or its agent, under penalties of perjury, that it is not a United States person and provides its name and address or (B) an authorized representative of a securities clearing organization, bank or other financial institution that holds customer securities in the ordinary course of its trade or business and holds the notes in that capacity, certifies to us or our agent, under penalties of perjury, that such a statement on Form W-8BEN or a similar substitute has been received from the beneficial owner by it or by a financial institution between it and the beneficial owner and furnishes to us or our agent a copy thereof. Except to the extent that an applicable treaty otherwise provides, a non- U.S. holder generally will be taxed with respect to interest in the same manner as a holder that is a United States person if the interest is effectively connected with a United States trade or business of the non-U.S. holder. Effectively connected interest income received or accrued by a corporate non- U.S. holder may also, under certain circumstances, be subject to an additional "branch profits" tax at a 30% rate (or, if applicable, at a lower tax rate specified by a treaty). Even though such effectively connected income is subject to income tax, and may be subject to the branch profits tax, it is not subject to withholding tax if the non-U.S. holder delivers a properly executed Internal Revenue Service Form W-8ECI (or successor form) to the payor. 121 Sale or Exchange of New Notes A non-U.S. holder generally will not be subject to United States federal income tax or withholding tax on any gain realized on the sale, exchange or other disposition of a new note unless: (1) the gain is effectively connected with the conduct of a United States trade or business of the non-U.S. holder, (2) in the case of a non-U.S. holder who is an individual, such holder is present in the United States for a period or periods aggregating 183 days or more during the taxable year of the disposition, or (3) the non-U.S. holder is subject to tax pursuant to the provisions of the Internal Revenue Code applicable to certain United States expatriates. Information Reporting and Backup Withholding Tax United States backup withholding tax will not apply to payments on the new notes to a non-U.S. holder if the statement described in "Interest Income" is duly provided by such holder, provided that the payor does not have actual knowledge that the holder is a United States person. Information reporting may still apply with respect to payments of interest. Information reporting and backup withholding tax will not apply to payments of the proceeds of the sale of new notes to a non-U.S. holder effected by a broker, provided that either a sale occurs through a foreign office of a foreign broker that has no connection with the United States, as described in applicable regulations or such broker has in its records certain documentary evidence allowed by Treasury regulations that the beneficial owner is a non-U.S. holder, certain other conditions are met, and the broker does not have actual knowledge that the holder is a United States person. The United States federal income tax discussion set forth above is included for general information only and may not be applicable depending upon a holder's particular situation. Holders should consult their tax advisors with respect to the tax consequences to them of the purchase, ownership and disposition of the notes, including the tax consequences under state, local, foreign and other tax laws and the possible effects of changes in United States federal or other tax laws. 122 PLAN OF DISTRIBUTION Each broker-dealer that receives new notes for its own account pursuant to the exchange offer must acknowledge that it will deliver a prospectus in connection with any resale of the new notes. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new notes received in exchange for old notes where the old notes were acquired as a result of market-making activities or other trading activities. We have agreed that, for a period of 180 days after the expiration date of the exchange offer, we will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 2001 (90 days after the date of this prospectus), all dealers effecting transactions in the new notes may be required to deliver a prospectus. We will not receive any proceeds from any sale of new notes by broker- dealers. New notes received by broker-dealers for their own account pursuant to the exchange offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new notes or a combination of those methods of resale, at market prices prevailing at the time of resale, at prices related to prevailing market prices or negotiated prices. Any resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any of the new notes. Any broker-dealer that resells new notes that were received by it for its own account pursuant to the exchange offer and any broker or dealer that participates in a distribution of the new notes may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any resale of new notes and any commissions or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The letter of transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the expiration date of the exchange offer, we will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any broker-dealer that requests such documents in the letter of transmittal. We have agreed to pay all expenses incident to the exchange offer (including the expenses of one counsel for the holders of the notes) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. LEGAL MATTERS Certain legal matters regarding the validity of the new notes offered by this prospectus will be passed upon for the Company by Dechert, Philadelphia, Pennsylvania. EXPERTS The consolidated financial statements of the Company as of December 31, 2000 and July 31, 2000 and 1999 and for the five months ended December 31, 2000 and for each of the three years in the period ended July 31, 2000 included in this prospectus and registration statement have been audited by Ernst & Young LLP, independent auditors, as stated in their report thereon appearing herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing. 123 INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Page ---- Financial Statements of Delco Remy International, Inc.: Audited Financial Statements Report of Independent Auditors.......................................... F-2 Consolidated Statements of Operations for the five months ended December 31, 2000 and 1999 and three years ended July 31, 2000.................. F-3 Consolidated Balance Sheets at December 31, 2000, July 31, 2000 and July 31, 1999............................................................... F-4 Consolidated Statements of Stockholders' Equity (Deficit) for the five months ended December 31, 2000 and three years ended July 31, 2000..... F-5 Consolidated Statements of Cash Flows for the five months ended December 31, 2000 and 1999 and three years ended July 31, 2000.................. F-6 Notes to Consolidated Financial Statements.............................. F-7 Unaudited Quarterly Financial Statements Condensed Consolidated Statements of Operations for the three months ended March 31, 2001 and 2000.......................................... F-43 Condensed Consolidated Balance Sheets as of March 31, 2001 and December 31, 2000............................................................... F-44 Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2001 and 2000.......................................... F-45 Notes to Condensed Consolidated Financial Statements.................... F-46
F-1 REPORT OF INDEPENDENT AUDITORS To the Shareholders and Board of Directors of Delco Remy International, Inc.: We have audited the accompanying consolidated balance sheets of Delco Remy International, Inc. as of December 31, 2000 and July 31, 2000 and 1999, and the related consolidated statements of operations, stockholders' equity (deficit), and cash flows for the five months ended December 31, 2000 and for each of the three years in the period ended July 31, 2000. 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 auditing standards generally accepted in the 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Delco Remy International, Inc. at December 31, 2000 and July 31, 2000 and 1999, and the consolidated results of its operations and cash flows for the five months ended December 31, 2000 and for each of the three years in the period ended July 31, 2000, in conformity with accounting principles generally accepted in the United States. ERNST & YOUNG LLP Indianapolis, Indiana February 22, 2001, except for Notes 1, 2, 8 and 18, as to which the date is March 15, 2001 F-2 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (in thousands, except for per share data)
Five Months Ended December 31 Year Ended July 31 --------------------- ------------------------------ 2000 1999 2000 1999 1998 -------- ----------- ---------- -------- -------- (Unaudited) Net sales................ $443,066 $446,806 $1,090,938 $953,706 $815,313 Cost of goods sold....... 355,515 356,369 862,172 770,902 667,798 -------- -------- ---------- -------- -------- Gross profit............. 87,551 90,437 228,766 182,804 147,515 Selling, general and administrative expenses................ 44,146 45,460 108,051 88,795 76,937 Amortization of goodwill and intangibles......... 2,625 2,475 6,043 5,203 3,478 Non-recurring charges.... -- -- 35,222 -- 26,515 -------- -------- ---------- -------- -------- Operating income......... 40,780 42,502 79,450 88,806 40,585 Interest expense......... (21,790) (19,650) (48,766) (45,505) (40,291) Non-operating income (expense)............... 48 (147) 288 -- (428) -------- -------- ---------- -------- -------- Income (loss) before income taxes (benefit), minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures, preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion and extraordinary item...... 19,038 22,705 30,972 43,301 (134) Income taxes (benefit)... 6,094 8,605 11,460 16,454 (52) Minority interest in income of subsidiaries.. (2,778) (2,841) (6,742) (3,921) (2,389) Income (loss) from unconsolidated joint ventures................ (467) (13) (352) 5,420 2,568 Preferred dividend requirement of subsidiary.............. -- -- -- -- (645) Deemed dividend on preferred stock conversion.............. -- -- -- -- (1,639) -------- -------- ---------- -------- -------- Income (loss) before extraordinary item...... 9,699 11,246 12,418 28,346 (2,187) Extraordinary item: Write-off of debt issuance costs (less applicable income tax benefit of $1,172).... -- -- -- -- (1,833) -------- -------- ---------- -------- -------- Net income (loss)........ $ 9,699 $ 11,246 $ 12,418 $ 28,346 $ (4,020) ======== ======== ========== ======== ======== Basic earnings (loss) per share: Income (loss) before extraordinary item.... $ .40 $ .46 $ .51 $ 1.19 $ (.11) Extraordinary item..... -- -- -- -- (.09) -------- -------- ---------- -------- -------- Net income (loss)...... $ .40 $ .46 $ .51 $ 1.19 $ (.20) ======== ======== ========== ======== ======== Diluted earnings (loss) per share: Income (loss) before extraordinary item.... $ .37 $ .43 $ .48 $ 1.09 $ (.11) Extraordinary item..... -- -- -- -- (.09) -------- -------- ---------- -------- -------- Net income (loss)...... $ .37 $ .43 $ .48 $ 1.09 $ (.20) ======== ======== ========== ======== ========
See Accompanying Notes F-3 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (in thousands, except for share and per share data)
July 31 December 31, ------------------ 2000 2000 1999 ------------ -------- -------- ASSETS Current assets: Cash and cash equivalents................... $ 24,380 $ 17,822 $ 15,309 Trade accounts receivable (less allowance for doubtful accounts of $3,115, $2,970 and $2,105).................................... 173,466 169,563 147,988 Other receivables........................... 16,205 15,233 15,496 Inventories................................. 293,824 268,153 232,165 Deferred income taxes....................... 16,539 18,145 14,997 Other current assets........................ 8,909 8,864 2,903 -------- -------- -------- Total current assets...................... 533,323 497,780 428,858 Property and equipment........................ 305,583 297,574 258,727 Less accumulated depreciation................. 105,743 95,663 63,532 -------- -------- -------- Property and equipment, net................... 199,840 201,911 195,195 Deferred financing costs...................... 8,694 9,432 11,192 Goodwill (less accumulated amortization of $23,485, $20,891 and $15,296)................ 169,238 171,032 137,429 Investments in joint ventures................. 7,016 5,333 4,756 Other assets.................................. 6,359 3,752 5,233 -------- -------- -------- Total assets.............................. $924,470 $889,240 $782,663 ======== ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................ $156,075 $141,944 $119,339 Accrued interest payable.................... 9,133 10,858 11,603 Accrued non-recurring charges............... 7,692 24,778 5,866 Other liabilities and accrued expenses...... 33,790 40,085 37,105 Current debt................................ 8,107 7,454 12,596 -------- -------- -------- Total current liabilities................. 214,797 225,119 186,509 Deferred income taxes......................... 10,155 10,027 4,568 Long-term debt, less current portion.......... 519,284 484,270 434,931 Post-retirement benefits other than pensions.. 22,794 21,639 21,050 Accrued pension benefits...................... 4,424 1,286 2,719 Other non-current liabilities................. 3,884 3,886 3,545 Commitments and contingencies................. Minority interest in subsidiaries............. 28,014 25,187 19,821 Stockholders' equity: Common stock: Class A Shares (par value $.01; authorized 49,400,000; issued 18,118,056 in 2000 and 1999).................................... 182 182 182 Class B Shares (par value $.01; authorized 17,600,000; issued 6,278,055 in 2000 and 1999).................................... 63 63 63 Paid-in capital............................. 104,176 104,176 104,176 Retained earnings........................... 34,269 24,570 12,152 Accumulated other comprehensive loss........ (17,236) (10,837) (6,516) Stock purchase plan......................... (336) (328) (537) -------- -------- -------- Total stockholders' equity................ 121,118 117,826 109,520 -------- -------- -------- Total liabilities and stockholders' equity................................... $924,470 $889,240 $782,663 ======== ======== ========
See Accompanying Notes F-4 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) (in thousands)
Class Class Accumulated A B Retained Other Stock Common Common Paid-In Earnings Comprehensive Purchase Stock Stock Capital (Deficit) Loss Plan Total ------ ------ -------- --------- ------------- -------- -------- Balance at August 1, 1997................... $ 88 $65 $ 6,677 $(12,174) $ (1,752) $(2,701) $ (9,797) Issuance of common stock................. 92 -- 99,715 -- -- -- 99,807 Repurchase of common stock................. -- -- -- -- -- 572 572 Conversion of Class B common stock to Class A common stock........ 2 (2) -- -- -- -- -- Net loss............... -- -- -- (4,020) -- -- (4,020) Currency translation adjustment............ -- -- -- -- (2,322) -- (2,322) -------- Comprehensive loss..... -- -- -- -- -- -- (6,342) ---- --- -------- -------- -------- ------- -------- Balance at July 31, 1998................... 182 63 106,392 (16,194) (4,074) (2,129) 84,240 Repurchase of common stock................. -- -- (340) -- -- (284) (624) Other.................. -- -- (1,876) -- -- 1,876 -- Net income............. -- -- -- 28,346 -- -- 28,346 Currency translation adjustment............ -- -- -- -- (2,442) -- (2,442) -------- Comprehensive income... -- -- -- -- -- -- 25,904 ---- --- -------- -------- -------- ------- -------- Balance at July 31, 1999................... 182 63 104,176 12,152 (6,516) (537) 109,520 Other.................. -- -- -- -- -- 209 209 Net income............. -- -- -- 12,418 -- -- 12,418 Currency translation adjustment............ -- -- -- -- (4,321) -- (4,321) -------- Comprehensive income... -- -- -- -- -- -- 8,097 ---- --- -------- -------- -------- ------- -------- Balance at July 31, 2000................... 182 63 104,176 24,570 (10,837) (328) 117,826 Cumulative effect of accounting change for derivative instruments........... -- -- -- -- 241 -- 241 Other.................. -- -- -- -- -- (8) (8) Net income............. -- -- -- 9,699 -- -- 9,699 Currency translation adjustment............ -- -- -- -- (1,747) -- (1,747) Unrealized losses on derivative instruments........... -- -- -- -- (4,893) -- (4,893) -------- Comprehensive income... -- -- -- -- -- -- 3,059 ---- --- -------- -------- -------- ------- -------- Balance at December 31, 2000................... $182 $63 $104,176 $ 34,269 $(17,236) $ (336) $121,118 ==== === ======== ======== ======== ======= ========
See Accompanying Notes F-5 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands)
Five Months Ended December 31 Year Ended July 31 -------------------- --------------------------- 2000 1999 2000 1999 1998 ------- ----------- -------- ------- -------- (Unaudited) Operating Activities: Net income (loss)........... $ 9,699 $11,246 $ 12,418 $28,346 $ (4,020) Extraordinary item.......... -- -- -- -- 2,095 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation................ 10,978 11,147 26,126 18,358 13,591 Amortization................ 2,625 2,475 6,043 5,203 3,478 Minority interest in income of subsidiaries............ 2,778 2,841 6,742 3,921 2,389 (Income) loss from unconsolidated joint ventures................... 467 13 352 (5,420) (2,568) Deferred income taxes-- current.................... 1,606 -- (3,148) 6,656 1,713 Post-retirement benefits other than pensions........ 1,155 1,646 589 4,555 3,818 Accrued pension benefits.... 3,138 (133) (1,433) (1,909) 86 Non-cash interest expense... 740 733 1,763 1,648 2,387 Deemed dividend on preferred stock conversion................. -- -- -- -- 1,639 Preferred dividend requirement of subsidiary................. -- -- -- -- 645 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable........ (3,903) (18,575) (1,580) 4,621 (8,432) Inventories................ (25,671) (9,019) (18,212) (17,705) (17,400) Accounts payable........... 14,131 11,140 15,835 13,634 (7,573) Other current assets and liabilities............... (9,300) 1,542 (15,391) (6,645) (4,888) Non-recurring charges...... -- -- 35,222 -- 26,515 Cash payments for non- recurring charges......... (16,839) (717) (8,900) (14,941) (19,204) Other non-current assets and liabilities, net...... (7,000) 2,216 13,292 2,764 (5,577) ------- ------- -------- ------- -------- Net cash provided by (used in) operating activities............... (15,396) 16,555 69,718 43,086 (11,306) Investing Activities: Acquisitions, net of cash acquired................... -- (5,733) (68,005) (48,321) (35,722) Purchases of property and equipment.................. (11,824) (20,175) (38,371) (25,066) (24,190) Investments in joint ventures................... -- -- -- -- (9,355) ------- ------- -------- ------- -------- Net cash used in investing activities............... (11,824) (25,908) (106,376) (73,387) (69,267) Financing Activities: Proceeds from initial public offering................... -- -- -- -- 51,336 Proceeds from issuance of long-term debt............. -- -- -- -- 141,375 Payments on long-term debt.. -- -- -- -- (145,786) Net borrowings under revolving line of credit and other.................. 35,305 5,514 41,006 38,048 32,198 Distributions to minority interests.................. (322) -- (1,200) -- -- ------- ------- -------- ------- -------- Net cash provided by financing activities..... 34,983 5,514 39,806 38,048 79,123 Effect of exchange rate changes on cash............. (1,205) (108) (635) (551) (487) ------- ------- -------- ------- -------- Net increase (decrease) in cash and cash equivalents... 6,558 (3,947) 2,513 7,196 (1,937) Cash and cash equivalents at beginning of year........... 17,822 15,309 15,309 8,113 10,050 ------- ------- -------- ------- -------- Cash and cash equivalents at end of year................. $24,380 $11,362 $ 17,822 $15,309 $ 8,113 ======= ======= ======== ======= ========
See Accompanying Notes F-6 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2000 (dollars in thousands) 1. ORGANIZATION AND ACQUISITIONS See Note 18 for a discussion of the Company's acquisition by Court Square Capital Limited ("Court Square"), the subsequent merger of a subsidiary of Court Square into the Company and the Company's recapitalization, all effective March 14, 2001. Delco Remy America Acquisition On July 31, 1994, Delco Remy International, Inc. (the "Company" or "DRI") through a wholly-owned subsidiary, Delco Remy America, Inc. ("DRA"), purchased substantially all of the assets, other than facilities, and assumed certain liabilities of specific business activities of the Delco Remy Division of General Motors Corporation (the "GM Acquisition"). The specific business activities purchased are engaged in the design, manufacture, remanufacture and sale of heavy duty starter motors and generators, automotive starter motors, and related components. The aggregate purchase price of the GM Acquisition of $155,665 (including fees and expenses) was accounted for as a purchase. The Company issued (i) common stock of $1,531, (ii) preferred stock of $11,507 and (iii) debt of $158,200 to fund the purchase and provide capital for general corporate purposes. The GM Acquisition resulted in the recording of approximately $17,600 of goodwill which is being amortized over 15 years. While the GM Acquisition was recorded based on the best estimates available, certain purchase price adjustments as of the July 31, 1994 purchase date have not been determined or agreed to by General Motors Corporation ("GM") and DRI. When finalized, the resolution of these items could result in a charge or credit to operations, which the Company does not expect to be material. The accompanying consolidated financial statements reflect the consolidated results of operations and cash flows for the Company subsequent to the GM Acquisition. The Company had no operations prior to July 31, 1994. GM is entitled to receive an additional contingent purchase payment which will be paid beginning in 2004 and will be based upon a percentage of average earnings of the Company in the three year period ending December 31, 2003 in excess of certain imputed earnings. Since the additional contingent purchase price, if any, is based upon future operations of the Company which cannot be determined at this time, no provision for such payment has been made in the accompanying consolidated financial statements. The additional contingent purchase price, if any, will increase the goodwill recorded for the GM Acquisition and will be amortized over the remaining useful life of the GM Acquisition goodwill. Concurrent with the GM Acquisition, the Company entered into certain supply agreements with GM whereby the Company would be the sole-source supplier to GM for component parts manufactured by the Company at the date of the GM Acquisition. The supply agreement for automotive starter motors has an initial term of ten years, while the supply agreement for heavy duty starter motors and generators had an initial term of six years. In fiscal year 1999, the Company and GM amended the agreement for the Company's price of automotive products and extended the agreement term to August 31, 2008. The Supply Agreement for heavy duty products terminated on July 31, 2000. Sales to GM were not adversely affected and the Company now has the ability to provide an expanded heavy duty product offering to GM and other customers. GM's obligations to distribute the Company's automotive aftermarket products terminates on July 31, 2009. Fiscal Year 2000 Acquisitions In August 1999, the Company, through a wholly-owned subsidiary, purchased the assets of Engine Master, a remanufacturer of gasoline engines located in Dallas, Texas, for $5,844 in cash. The acquisition was treated F-7 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) as a purchase for accounting purposes and resulted in goodwill of $1,076 which is being amortized over 35 years. In March 2000, the Company, through a wholly-owned subsidiary, purchased 100% of the capital shares of M&M Knopf Auto Parts, Inc. ("Knopf") from certain shareholders. The purchase price of $61,322, net of cash acquired and including the payoff of certain debt of Knopf, was funded through proceeds from the Company's Senior Credit Facility and is subject to certain adjustments. The acquisition was accounted for as a purchase. Resulting goodwill of approximately $37,000 is being amortized over 30 years. The purchase price is subject to an additional contingent payment of cash and/or common stock of the Company in fiscal year 2005, subject to the achievement by Knopf of certain earnings goals. The amount of this payment cannot currently be determined. This additional contingent purchase price, if any, will increase the goodwill recorded for the acquisition and will be amortized over its remaining useful life. Results of operations for Knopf are included in the Company's financial statements effective March 10, 2000. Knopf is engaged in automotive component recovery and exchange. In April 2000, the Company, through a wholly-owned subsidiary, purchased 100% of the capital shares of Elmot-DR Sp z.o.o, a Polish manufacturer of starters and alternators for the OEM and aftermarket in Europe, for $839 in cash, net of cash acquired. The acquisition was treated as a purchase for accounting purposes with no resulting goodwill. Fiscal Year 1999 Acquisitions On November 13, 1998, the Company, through a wholly-owned subsidiary, purchased all of the common stock of Williams Technologies, Inc. ("Williams") for $38,840 in cash, net of cash acquired and less Williams' intercompany and third-party debt. The purchase was funded through proceeds from the Company's Senior Credit Facility. The acquisition was treated as a purchase for accounting purposes and resulted in goodwill of $21,104 which is being amortized over 35 years. Williams is a remanufacturer of automatic transmissions and torque converters for automotive and medium and heavy duty truck applications. Its primary market is the dealer network of major North American and foreign original equipment vehicle manufacturers. Results of operations for Williams are included in the Company's consolidated results from the acquisition date. On June 25, 1999, the Company, through a wholly-owned subsidiary, purchased 31% of the capital shares of Delco Remy Korea (formerly Remy Korea Limited) from certain shareholders for $6,204 in cash, net of cash acquired. The purchase was funded through proceeds from the Company's Senior Credit Facility. This investment increased the Company's ownership position in Delco Remy Korea to 81%. The acquisition was treated as a purchase for accounting purposes with no resulting goodwill. During fiscal year 1997, the Company acquired a 50% interest in Delco Remy Korea for approximately $5,300. Effective June 25, 1999, the Company accounted for Delco Remy Korea as a consolidated subsidiary. It was accounted for under the equity method prior to that date. Delco Remy Korea is a manufacturer of automotive starter motors and parts for the U.S. original equipment market, as well as customers in Asian markets. Fiscal Year 1998 Acquisitions and Investments On December 22, 1997, the Company acquired all of the capital stock of Ballantrae for $53,900, including assumed debt, a working capital adjustment and fees and expenses. The Company exchanged 1,918,623 shares of its Common Stock with a value of approximately $23,023 for the equity of Ballantrae and repaid approximately $29,500 of Ballantrae's debt. The acquisition was treated as a purchase for accounting purposes and is included in the consolidated financial statements of the Company beginning with the acquisition date. The acquisition resulted in goodwill of $24,580, which is being amortized over 35 years. Ballantrae operates F-8 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) through two subsidiaries: Tractech, a leading producer of traction control systems for heavy duty original equipment manufacturers and the aftermarket; and Kraftube, Inc., a tubing assembly business which sells products to compressor manufacturers for commercial air conditioners and refrigeration equipment. On March 5, 1998, the Company acquired certain assets from Atlantic Reman Limited, which is a Canadian Ford Authorized Remanufacturer for the Maritime Provinces in Canada, for $1,277. It remanufactures and distributes engines, starters, alternators and water pumps to Ford, General Motors, and Chrysler dealers in Canada. In March 1998, the Company acquired 37% of Sahney Paris Rhone Ltd. ("SPR"), an Indian remanufacturer of starters and alternators which sells principally to the Indian market. SPR is accounted for under the equity method. The Company acquired the starter and alternator remanufacturing operations of Lucas Varity in the United Kingdom on April 6, 1998. The purchase price was $4,773 (including fees and expenses), and resulting goodwill of $535 is being amortized over 35 years. The acquisition was accounted for as a purchase and is included in the consolidated financial statements from date of acquisition. Located in England, the Lucas line of remanufactured starters and alternators is a market leader in the U.K. independent aftermarket. On July 16, 1998, the Company acquired Electro Diesel Rebuild ("EDR") in Belgium and Electro Rebuild Tunisia located in Tunisia, which produce heavy duty and automotive starters and alternators for the European replacement market. The purchase price was $7,586 (including fees and expenses) and was funded by the proceeds from a loan facility. Resulting goodwill of $4,663 is being amortized over 35 years. The acquisition is being accounted for as a purchase and is included in the consolidated financial statements from the date of acquisition. Unaudited Pro Forma Results of Operations The unaudited pro forma consolidated results of operations, assuming the Williams, Delco Remy Korea and Knopf acquisitions had been consummated as of the beginning of the preceding fiscal year, are as follows:
Year Ended July 31 --------------------- 2000 1999 ---------- ---------- Net sales.......................................... $1,132,506 $1,052,335 Operating income................................... 87,190 114,965 Net income......................................... 15,123 32,270 Basic earnings per share........................... 0.62 1.35 Diluted earnings per share......................... 0.58 1.24
There were no acquisitions in the five month period ended December 31, 2000. The pro forma consolidated financial information has been prepared for comparative purposes only and does not purport to present what the Company's consolidated results of operations would actually have been if the operations were combined during the periods presented and is not intended to project future results or trends of operations. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The consolidated financial statements include the accounts of DRI and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Certain prior year amounts have been reclassified to conform to the current year's presentation. F-9 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The Company changed its fiscal year to December 31, effective August 1, 2000. Prior to August 1, 2000, the fiscal year ended on July 31. Accordingly, the Company's audited financial statements include a balance sheet at December 31, 2000 and statements of operations, stockholders' equity and cash flows for the five-month transition period ended December 31, 2000. For comparative purposes, the Company has included unaudited statements of operations and cash flows for the five-month period ended December 31, 1999. Nature of Operations The Company designs, manufactures, remanufactures and distributes electrical, powertrain/drivetrain and related components and provides core exchange services for automobiles and light trucks, medium- and heavy-duty trucks and other heavy-duty and industrial applications. Products include starter motors, alternators, engines, transmissions, torque converters, fuel systems and traction control systems. The Company serves the aftermarket and original equipment manufacturer market, principally in North America, as well as Europe, Latin America and Asia Pacific. Cash and Cash Equivalents Cash and cash equivalents includes all cash balances and highly liquid investments held primarily in repurchase agreements collateralized by U.S. Government securities with a maturity of ninety days or less when purchased. The carrying amount of cash equivalents approximates fair value. Concentrations of Credit Risk and Other Risks Substantially all of the Company's accounts receivable are due from customers in the original equipment and aftermarket automotive industries, both in the U.S. and internationally. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Credit losses are provided for in the financial statements and have been consistently within management's expectations. The Company invests its temporary cash in high credit quality financial institutions and investment grade short-term investments and limits the amount of credit exposure to any one entity. The percentage of the Company's labor force covered by a collective bargaining agreement is 25.8%. None of the agreements expire within one year. The Company conducts a significant portion of its business with GM. See Note 11. Derivative Financial Instruments Effective August 1, 2000, the Company adopted Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities. This statement establishes accounting and reporting standards for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities. It requires that all derivatives be recognized on the balance sheet at fair value. Changes in fair values of derivatives are accounted for based upon their intended use and designation. In the normal course of business, operations of the Company are exposed to continuing fluctuations in foreign currency values, interest rates and commodity prices that can affect the cost of operating, investing and financing. Accordingly, the Company addresses a portion of these risks through a controlled program of risk management that includes the use of derivative financial instruments. The Company's objective is to reduce earnings and cash flow volatility associated with these fluctuations. The Company's derivative activities, all of which are for purposes other than trading, are initiated within the guidelines of established policies and procedures designed to manage market risk. The Company does not enter into any derivative transactions for F-10 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) speculative purposes. From time to time, the Company enters into foreign currency exchange agreements to manage its exposure arising from fluctuating exchange rates related to specific transactions. In order to hedge anticipated U.S. dollar-denominated intercompany sales of inventory by its South Korean subsidiary to a U.S. subsidiary against fluctuations between the South Korean Won and U.S. dollar, the Company has entered into a series of non-deliverable currency forward contracts. At maturity, each contract is settled at the difference between fair value and contract value. These derivative contracts have been designated as a cash flow hedge and, accordingly, changes in fair value are charged to other comprehensive income (see Note 10). Realized gains and losses recorded upon settlement are charged to earnings in the periods in which earnings are impacted by the variability of the cash flows of the settled intercompany sale. In November 2000, the Company entered into an interest rate swap to hedge the exposure on a portion of the variable rate debt. The swap converts the libor- based rate to a fixed rate of 6.51% on debt of $100,000 for a period of two years. This swap has been designated as a cash flow hedge and changes in fair value are charged to other comprehensive income (see Note 10). Realized gains and losses are charged to earnings as interest expense in the periods in which earnings are impacted by the variability of the cash flows of the interest paid. The notional amounts of the Company's foreign exchange contracts are summarized as follows:
July 31 December 31, ----------------------------- 2000 2000 1999 --------------- --------------- ------------- Book Fair Book Fair Book Fair Value Value Value Value Value Value ------- ------- ------- ------- ------ ------ Forwards........................ $ 6,353 $ 5,914 $ 6,436 $ 6,048 $6,179 $6,259 Non-deliverable forwards........ 37,536 33,152 62,602 62,829 -- --
The market value of the interest rate swap at December 31, 2000 was $(1,500). Inventories Inventories are carried at lower of cost or market determined on the first- in, first-out (FIFO) method. Raw materials also include supplies and repair parts which consist of materials consumed in the manufacturing process but not directly incorporated into the finished products. Inventories at December 31, 2000 and July 31, 2000 and 1999 consist of the following:
July 31 December 31, ----------------- 2000 2000 1999 ------------ -------- -------- Raw materials................................. $154,550 $132,713 $121,725 Work-in-process............................... 51,668 52,605 50,725 Finished goods................................ 87,606 82,835 59,715 -------- -------- -------- $293,824 $268,153 $232,165 ======== ======== ========
Property and Equipment Property and equipment are stated at cost and include certain expenditures for leased facilities. Depreciation is calculated primarily using the straight- line method over the estimated useful lives of the related assets (15 to 40 years for buildings and 3 to 15 years for machinery and equipment). Goodwill Goodwill represents the excess of purchase price over fair value of the net assets acquired and is being amortized by the straight-line method over 15 to 35 years. F-11 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The carrying amount of goodwill is regularly reviewed for indicators of impairment in value, which in the view of management are other than temporary, including unexpected or adverse changes in the following: (i) the economic or competitive environments in which the Company operates; (ii) profitability analysis and (iii) cash flow analysis. If facts and circumstances suggest that a subsidiary's net assets are impaired, the Company assesses the fair value of the underlying business and reduces goodwill to an amount that results in the book value of the subsidiary approximating fair value. Investments in Joint Ventures Investments in companies representing an ownership interest of 20% to 50% are accounted for by the equity method. Joint ventures consisted of a 37% interest in Sahney Paris Rhone Ltd. ("SPR") in fiscal 1999 and fiscal 2000 and a 50% interest in Delco Remy Korea through June 25, 1999. Subsequent to that date, Delco Remy Korea was accounted for as a consolidated subsidiary (see Note 1). The Company's investment in SPR and its share of SPR's earnings were not significant relative to consolidated assets and earnings for the five months ended December 31, 2000 and in fiscal years 2000 and 1999. Long-Term Assets The Company records impairment losses on long-lived assets used in operations when events and circumstances indicate that the assets might be impaired and the undiscounted cash flows estimated to be generated by those assets are less than the carrying amounts of those assets. Recognition of Revenue Substantially all of the Company's revenue is recognized at the time product is shipped. The Company's remanufacturing operations obtain used diesel and gasoline engines, fuel systems, transmissions, starter motors and generators, commonly known as cores, from its customers as trade-ins. Net sales and cost of goods sold are reduced by $83,558, $185,324, $156,383, and $160,731 for the five months ended December 31, 2000 and fiscal years 2000, 1999 and 1998, respectively, to reflect the cost of cores for remanufactured product shipped. Foreign Currency Translation Financial statements of foreign subsidiaries are translated into U.S. dollars using the exchange rate at each balance sheet date for assets and liabilities and at the average exchange rate for each year for revenue and expenses. Translation adjustments are recorded as a separate component of stockholders' equity and reflected in comprehensive income (loss). Earnings Per Share Basic earnings per share is computed by dividing net income available to common stockholders by the weighted average number of common stock shares outstanding during the year. Diluted earnings per share is computed by dividing net income available to common stockholders by the weighted-average number of common stock shares outstanding during the year plus potential dilutive instruments including stock options, warrants and the Company's stock purchase plan. The effect of warrants and the stock purchase plan on diluted earnings per share is determined through the application of the treasury stock method, whereby proceeds received by the Company based on assumed exercises are hypothetically used to repurchase the Company's common stock at the average market price during the period. Stock options did not affect the calculation of diluted earnings per share in fiscal years 2000 and 1999 because the exercise price of stock options outstanding was greater than the market price. Stock options, warrants, and stock purchase plans did not affect the F-12 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) calculation of the weighted average shares for the diluted loss per share in fiscal year 1998 because their effect would have been antidilutive. The following table sets forth the computation of basic and diluted earnings (loss) per share:
Five Months Ended Year Ended July 31 December 31, -------------------------------- 2000 2000 1999 1998 ------------ ---------- ---------- ---------- Numerator: Income (loss) from continuing operations...... $ 9,699 $ 12,418 $ 28,346 $ (2,187) Extraordinary item.......... -- -- -- (1,833) ---------- ---------- ---------- ---------- Numerator for basic and diluted earnings (loss) per share...................... $ 9,699 $ 12,418 $ 28,346 $ (4,020) ========== ========== ========== ========== Denominator: Denominator for basic earnings (loss) per share-- weighted average shares.... 24,317,713 24,243,163 23,913,848 19,981,240 Effect of dilutive securities: Warrants................... 1,679,728 1,679,757 1,679,804 -- Stock options.............. 2,574 -- -- -- Stock purchase plan........ 64,540 79,286 351,335 -- ---------- ---------- ---------- ---------- Denominator for diluted earnings (loss) per share.. 26,064,555 26,002,206 25,944,987 19,981,240 ========== ========== ========== ==========
On November 20, 1997, the Company authorized a 16.8-to-1 stock split which was effective on December 19, 1997. All share and per share amounts have been adjusted to reflect this split. See Note 18 for a discussion of the Company's acquisition by Court Square Capital Limited ("Court Square"), the subsequent merger of a subsidiary of Court Square into the Company and the Company's recapitalization, all effective March 14, 2001. Comprehensive Income The Company's other comprehensive income consists of unrealized gains and losses on the translation of the assets and liabilities of its foreign operations and unrealized gains and losses on currency instruments and interest rate swaps. See Note 10. Fair Value of Financial Instruments The Company's financial instruments generally consist of cash and cash equivalents, trade and other receivables, accounts payable and long-term debt. The fair value of the Company's fixed rate debt was estimated using a discounted cash flow analysis based upon the Company's current incremental borrowing rates. With the exception of the Senior Notes and the Senior Subordinated Notes, the carrying amounts of these financial instruments approximated their fair value at December 31, 2000 and at July 31, 2000 and 1999. At December 31, 2000, the Senior Notes have a face value of $145,000 and a fair value of $133,067 and the Senior Subordinated Notes have a face value of $140,000 and a fair value of $118,146. Use of Estimates Preparation of the consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at F-13 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) the date of the consolidated financial statements, and the reported amounts of revenue and expense during the year. Actual results could differ from those estimates. Impact of Recently Issued Accounting Standards The Emerging Issues Task Force ("EITF") of the Financial Accounting Standards Board issued a final consensus on EITF 00-10, Accounting for Shipping and Handling Fees and Costs. This standard addresses the income statement classification for shipping and handling fees and costs. The Company adopted the provisions of this standard in the transition period ended December 31, 2000. Adoption did not have a material effect on the Company's financial statements. 3. NON-RECURRING CHARGES In May 2000, the Company completed plans for the realignment of certain manufacturing facilities in the United States, Canada and the United Kingdom. A one-time charge of $35,222 was recorded in June 2000 for the estimated cost of the plan. The reserve included $27,098 for the estimated cost of various voluntary and involuntary employee separation programs associated with the resulting workforce reductions. A total of $5,011 was paid in fiscal year 2000, $15,961 was paid in the five months ended December 31, 2000 and $3,100, $2,842 and $184 are estimated to be paid in calendar years 2001, 2002 and 2003, respectively. The reserve also includes $8,124, net of salvage value, for the write-down of certain production assets which will no longer be used as a result of the realignment. Additionally, a reserve of $1,050 was established in connection with the acquisition of Elmot in March 2000. In May 1998, the Company offered an incentive separation payment to DRA hourly employees through an employee termination program. A total of 337 employees accepted the Company's offer. A reserve of $26,515 was established for these separation costs, $9,974 of which were paid in fiscal year 1998, $11,565 of which were paid in fiscal year 1999, and $3,889 of which were paid in fiscal year 2000. An additional $900 was paid in the five months ended December 31, 2000 and $187 will be paid in calendar year 2001. In May 1997, the Company decided to realign the manufacturing operations of DRA to utilize focus factory manufacturing concepts and to close the Company's operations in the old vertically-integrated factories that were leased from GM. These decisions resulted in the impairment of certain production assets with a carrying amount of $30,321 ($25,279 of which was property and equipment and $5,042 of which was related tooling and other supplies) which the Company sold or otherwise disposed of. In fiscal year 1998, the reserve established for this charge was reduced $5,366 to reflect the utilization of certain assets previously targeted for disposal. The Company estimated the loss on disposal including related costs at $26,260. In addition, the Company estimated a cost of $8,240 for reducing its workforce through several transition programs. In fiscal year 1998, this reserve was increased $5,232 to reflect greater than anticipated participation in the various workforce transition programs. Some of the operations for the closed facilities were transferred to the new focus factories and others were outsourced. F-14 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The following table summarizes the provisions and reserves for non-recurring charges:
Termination Exit/Impairment Benefits Costs Total ----------- --------------- ------- Reserve at August 1, 1997............. $ 8,240 $29,137 $37,377 Provision in 1998..................... 26,515 -- 26,515 Change in estimate.................... 5,232 (5,366) (134) Payments and charges in 1998.......... (19,204) (9,035) (28,239) ------- ------- ------- Reserve at July 31, 1998.............. 20,783 14,736 35,519 Payments and charges in 1999.......... (15,808) (13,845) (29,653) ------- ------- ------- Reserve at July 31, 1999.............. 4,975 891 5,866 Provision in 2000..................... 27,098 8,124 35,222 Payments and charges in 2000.......... (8,900) (8,460) (17,360) Reserve established in acquisition of business............................. 1,050 -- 1,050 ------- ------- ------- Reserve at July 31, 2000.............. 24,223 555 24,778 Payments and charges in the five month transition period.................... (16,861) (225) (17,086) ------- ------- ------- Reserve at December 31, 2000.......... $ 7,362 $ 330 $ 7,692 ======= ======= =======
4. ALLOWANCE FOR DOUBTFUL ACCOUNTS The activity in the allowance for doubtful accounts is as follows:
Five Months Ended Year Ended July 31 December 31, ---------------------- 2000 2000 1999 1998 ------------ ------ ------ ------ Balance at beginning of period........ $2,970 $2,105 $2,083 $2,935 Additions charged to costs and ex- penses............................... 1,334 1,401 1,984 1,037 Acquisition of certain businesses..... -- 1,049 50 28 Uncollectible accounts written off, net of recoveries.................... (1,189) (1,585) (2,012) (1,917) ------ ------ ------ ------ Balance at end of period.............. $3,115 $2,970 $2,105 $2,083 ====== ====== ====== ======
5. PROPERTY AND EQUIPMENT Property and equipment consists of the following:
July 31 December 31, ----------------- 2000 2000 1999 ------------ -------- -------- Land and buildings........................... $ 21,228 $ 19,231 $ 16,281 Buildings under capital leases............... 25,585 25,312 22,304 Leasehold improvements....................... 10,459 10,409 10,737 Machinery and equipment...................... 248,311 242,622 209,405 -------- -------- -------- $305,583 $297,574 $258,727 ======== ======== ========
F-15 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 6. LONG-TERM DEBT Borrowings under long-term debt arrangements consist of the following:
July 31 December 31, ----------------- 2000 2000 1999 ------------ -------- -------- Senior Credit Facility: Revolving acquisition loans................. $182,403 $146,884 $ 96,784 Senior Subordinated Notes.................... 140,000 140,000 140,000 Senior Notes................................. 145,000 145,000 145,000 GM Subordinated Debenture.................... 18,873 18,802 18,630 Other, including capital lease obligations... 41,115 41,038 47,113 -------- -------- -------- 527,391 491,724 447,527 Less current portion......................... 8,107 7,454 12,596 -------- -------- -------- $519,284 $484,270 $434,931 ======== ======== ========
Senior Credit Facility On November 13, 1998, the Company amended its Senior Credit Facility. Pursuant to the Senior Credit Facility, as amended, revolving loans are available in the aggregate principal amount of $300,000 for general purposes (including acquisitions). The Senior Credit Facility terminates on October 31, 2003. The Company has the option of paying an interest rate of one bank's prime rate or a LIBOR-based rate. The weighted average interest on amounts outstanding at December 31, 2000, July 31, 2000 and 1999 was 8.67%, 8.15% and 7.21%, respectively. At December 31, 2000, approximately $105,700 was available under the Senior Credit Facility. The Senior Credit Facility contains various covenants which include, among other things: (i) limitations on additional borrowings and encumbrances; (ii) the maintenance of certain financial ratios and compliance with certain financial tests and limitations; (iii) limitations on cash dividends paid; (iv) limitations on investments and capital expenditures; and (v) limitations on leases and sales of assets. The Senior Credit Facility is collateralized by a lien on substantially all assets of the Company and its domestic subsidiaries and by all the capital stock of such subsidiaries held by the Company or any such other subsidiary. Senior Subordinated Notes On August 2, 1996, the Company issued $140,000 of 10 5/8% Senior Subordinated Notes due August 1, 2006 (the "Senior Subordinated Notes"). The Senior Subordinated Notes are unsecured senior subordinated obligations of the Company and are subordinated in right of payment to the prior payment in full of all existing and future senior indebtedness, pari passu with all present and future senior subordinated indebtedness and senior to all present and future subordinated indebtedness of the Company or the relevant subsidiary guarantors, as defined in the indenture. The Senior Subordinated Notes will also be effectively subordinated to any secured indebtedness to the extent of the value of the assets securing such indebtedness. The Senior Subordinated Notes are redeemable at the option of the Company, in whole or in part, on or after August 1, 2001, at the redemption prices set forth in the note agreement plus accrued and unpaid interest, if any, to the redemption date. Interest is payable semi-annually on February 1 and August 1 of each year. F-16 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Upon the occurrence of a change of control, each holder of the Senior Subordinated Notes will have the right to require the Company to purchase all or a portion of such holder's notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase. The indenture pursuant to which the Senior Subordinated Notes were issued contains certain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or make other distributions with respect to capital stock (as defined) of the Company and its restricted subsidiaries, (iii) sell assets of the Company or its restricted subsidiaries, (iv) issue or sell restricted subsidiary stock, (v) enter into certain transactions with affiliates, (vi) create certain liens, (vii) enter into certain mergers and consolidations and (viii) incur indebtedness which is subordinate to senior indebtedness and senior to the Senior Subordinated Notes. Senior Notes On December 22, 1997, the Company issued $145,000 of 8 5/8% Senior Notes due December 15, 2007 (the "Senior Notes"). The proceeds from the Senior Notes were $141,375, net of issuance costs. The proceeds were used to repay higher interest bearing debt. The Senior Notes are general unsecured senior obligations of the Company and rank pari passu in right of payment with all existing and future senior indebtedness of the Company and senior in right of payment to all existing and future subordinated obligations of the Company. In addition, the obligations of the Company under the Senior Notes will be fully and unconditionally guaranteed on a joint and several basis by each of the Company's existing and future domestic restricted subsidiaries. The subsidiary guarantees will rank pari passu in right of payment with all existing and future senior indebtedness of the subsidiary guarantors and senior in right of payment to all existing and future subordinate obligations of the subsidiary guarantors. The Senior Notes and the subsidiary guarantees will be effectively subordinated to all existing and future secured indebtedness of the Company and the subsidiary guarantors as well as to any liabilities of subsidiaries other than subsidiary guarantors. The Senior Notes are redeemable at the option of the Company, in whole or in part, at any time on or after December 15, 2002, at the redemption prices set forth in the note agreement plus accrued and unpaid interest, if any, to the date of redemption. Interest is payable semi-annually on June 15 and December 15 of each year. Upon the occurrence of a change of control (as defined), each holder of the Senior Notes will have the right to require the Company to purchase all or a portion of such holder's notes at a purchase price equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the date of purchase. The indenture pursuant to which the Senior Notes were issued contains certain covenants that, among other things, limit the ability of the Company and its restricted subsidiaries to (i) incur additional indebtedness, (ii) pay dividends or make other distributions with respect to capital stock (as defined) of the Company and its restricted subsidiaries, (iii) sell assets of the Company or its restricted subsidiaries, (iv) issue or sell restricted subsidiary stock, (v) enter into certain transactions with affiliates, (vi) create certain liens, (vii) enter into certain mergers and consolidations and (viii) incur indebtedness which is subordinate to senior indebtedness and senior to the Senior Subordinated Notes. GM Subordinated Debenture On December 22, 1997, the Company converted preferred stock into a subordinated debenture with General Motors (the "GM Subordinated Debenture"). The debenture bears interest at the rate of 8% annually F-17 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) and will mature on July 31, 2004. The Company is amortizing the discount from the maturity value of $19,488 using the straight-line method. Capital Lease Obligations Capital leases have been capitalized using interest rates ranging from 8.1% to 15.2%. The net book value of assets under capital leases were $15,322, $16,026 and $17,832 at December 31, 2000 and July 31, 2000 and 1999, respectively. Other Total cash interest paid for the transition period and fiscal years 2000, 1999 and 1998 was $22,636, $46,835, $41,502, and $33,397, respectively. Required principal payments of long-term debt and capitalized leases are as follows: 2001................................ $ 8,107 2002................................ 4,240 2003................................ 186,350 2004................................ 23,648 2005................................ 4,434 Thereafter.......................... 300,612 -------- $527,391 ========
7. EMPLOYEE BENEFIT PLANS Agreements with GM In connection with the GM Acquisition, the Company and GM agreed to allocate the responsibility for employee pension benefits and post-retirement health care and life insurance on a pro-rata basis between DRA and GM. The allocation is primarily determined upon years of service with DRA and aggregate years of service with DRA and GM. Effective August 1, 1994, DRA established hourly and salaried pension and post-retirement health care and life insurance plans which are similar to the respective GM plans. Pension and Post-Retirement Health Care and Life Insurance Plans DRA has defined benefit pension plans covering substantially all employees. The plan covering salaried employees provides benefits that are based upon years of service and final estimated average compensation. Benefits for hourly employees are based on stated amounts for each year of service. DRA's funding policy is to contribute amounts to provide the plans with sufficient assets to meet future benefit payment requirements consistent with actuarial determinations of the funding requirements of federal laws. Plan assets are primarily invested in mutual funds which invest in both debt and equity instruments. DRA maintains hourly and salaried benefit plans that provide post-retirement health care and life insurance to retirees and eligible dependents. The benefits are payable for life, although DRA retains the right to modify or terminate the plans providing these benefits. The salaried plan has cost sharing features such as deductibles and co-payments. Salaried employees who were not GM employees prior to 1992 are not eligible for the above described post-retirement benefits. It is DRA's policy to fund these benefits as claims are incurred. F-18 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) The changes in benefit obligations and plan assets, components of expense, and assumptions for the plans are as follows:
Post-Retirement Health Care Pension Benefits and Life Insurance Plans -------------------------------------- ----------------------------------------- Five Months Five Months Ended Year Ended July 31 Ended Year Ended July 31 December 31, ------------------------- December 31, ---------------------------- 2000 2000 1999 1998 2000 2000 1999 1998 ------------ ------- ------- ------- ------------ -------- -------- -------- Change in benefit obligation Benefit obligation at beginning of year...... $24,444 $18,406 $17,656 $12,575 $ 15,734 $ 15,040 $ 13,006 $ 11,619 Service cost............ 711 2,618 2,111 2,012 959 2,782 3,538 3,384 Interest cost........... 749 1,584 1,237 930 524 1,028 924 637 Amendments.............. 636 2,496 -- (430) -- -- -- -- Actuarial (gain)/loss... (334) 752 (1,636) 3,077 1,021 (404) (2,428) (2,634) Benefits paid........... (759) (1,202) (962) (508) (238) (330) -- -- Curtailment gains....... -- (210) -- -- -- (2,382) -- -- ------- ------- ------- ------- -------- -------- -------- -------- Benefit obligation at end of year............ $25,447 $24,444 $18,406 $17,656 $ 18,000 $ 15,734 $ 15,040 $ 13,006 ======= ======= ======= ======= ======== ======== ======== ======== Change in plan assets Fair value of plan assets at beginning of year................... $21,551 $16,749 $12,516 $ 9,663 $ -- $ -- $ -- $ -- Actual return on plan assets................. (170) 1,687 1,635 1,158 -- -- -- -- Employer contributions.. -- 4,317 3,560 2,203 238 -- -- -- Benefits paid........... (645) (1,202) (962) (508) (238) -- -- -- ------- ------- ------- ------- -------- -------- -------- -------- Fair value of plan assets at end of year.. $20,736 $21,551 $16,749 $12,516 $ -- $ -- $ -- $ -- ======= ======= ======= ======= ======== ======== ======== ======== Funded status........... $(4,711) $(2,893) $(1,657) $(5,140) $(18,000) $(15,734) $(15,040) $(13,006) Unrecognized actuarial gain................... (304) (1,014) (1,819) (322) (4,794) (5,905) (6,010) (3,488) Unrecognized prior service cost........... 3,276 2,621 757 834 -- -- -- -- ------- ------- ------- ------- -------- -------- -------- -------- Net amount recognized... $(1,739) $(1,286) $(2,719) $(4,628) $(22,794) $(21,639) $(21,050) $(16,494) ======= ======= ======= ======= ======== ======== ======== ======== Amounts recognized in the consolidated balance sheet consist of: Accrued benefit liability.............. $(4,424) $(3,262) $(2,719) $(4,206) $(22,794) $(21,639) $(21,050) $(16,494) Minimum pension liability adjustment... 2,685 1,976 -- (422) -- -- -- -- ------- ------- ------- ------- -------- -------- -------- -------- Net amount recognized... $(1,739) $(1,286) $(2,719) $(4,628) $(22,794) $(21,639) $(21,050) $(16,494) ======= ======= ======= ======= ======== ======== ======== ======== Components of expense Service costs........... $ 711 $ 2,618 $ 2,111 $ 2,012 $ 959 $ 2,782 $ 3,538 $ 3,384 Interest costs.......... 749 1,584 1,237 930 524 1,028 924 637 Expected return on plan assets................. (866) (1,802) (1,331) (1,016) -- -- -- -- Amortization of prior service cost........... 110 158 77 77 -- -- -- -- Recognized net actuarial loss/(gain)............ (8) -- 8 (103) (91) (314) 93 (203) Curtailments............ -- 266 -- -- -- -- -- -- ------- ------- ------- ------- -------- -------- -------- -------- Net periodic pension cost................... $ 696 $ 2,824 $ 2,102 $ 1,900 $ 1,392 $ 3,496 $ 4,555 $ 3,818 ======= ======= ======= ======= ======== ======== ======== ======== Weighted-average assumptions Discount rate........... 7.75% 8.00% 7.75% 7.00% 7.75% 8.00% 7.75% 7.00% Expected return on plan assets................. 10.00% 10.00% 10.00% 10.00% -- -- -- -- Rate of compensation increase............... 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00% 5.00%
F-19 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Measurement of the accumulated post-retirement benefit obligation was based on a 10.00% annual rate of increase in the cost of covered health care benefits. The rate was assumed to decrease ratably to 5.25% through 2004 and remain level at that rate thereafter. An increase and decrease of one- percentage-point in the assumed health care trend rates would have the following effects on service and interest cost in the five-month period ended December 31, 2000 and the accumulated post-retirement benefit obligation at December 31, 2000.
1% Increase 1% Decrease ----------- ----------- Effect on total of service and interest cost compo- nents of net periodic post-retirement health care benefit cost....................................... $ 377 $ (284) Effect on the health care component of the accumulated post-retirement benefit obligation..... 4,201 (3,181)
Defined Contribution Plans Various subsidiaries of the Company sponsor voluntary savings plans for eligible salaried and hourly employees. These plans allow participants to make contributions pursuant to section 401(k) of the Internal Revenue Code. Certain of these plans have Company matching contribution provisions. Charges to operations were $911 in the five month period ended December 31, 2000 and $1,731, $1,227, and $953 in fiscal years 2000, 1999 and 1998, respectively. Profit Sharing Plans DRA sponsors profit sharing plans covering substantially all of its employees. Distributions are determined based upon formulas established by management and are made annually. Profit sharing expense for the five month period ended December 31, 2000 and years ended July 31, 2000, 1999 and 1998 was $728, $2,514, $1,804 and $918, respectively. 8. STOCKHOLDERS' EQUITY See Note 18 for a discussion of the Company's acquisition by Court Square Capital Limited ("Court Square"), the subsequent merger of a subsidiary of Court Square into the Company and the Company's recapitalization, all effective March 14, 2001. All shares of Class A Common Stock and Class B Common Stock are identical and entitle the holders thereof to the same rights and privileges, provided that except as otherwise required by law, the holders of Class B Common Stock shall have no voting rights. Each share of Class A Common Stock is convertible into one share of Class B Common Stock and each share of Class B Common Stock is convertible into one share of Class A Common Stock. Stock Purchase Plan On October 21, 1994, the Company approved a private placement memorandum whereby the Company is authorized to offer for sale to certain members of management of DRA up to 1,596,000 shares of Class A Common Stock. Shares issued pursuant to this plan generally vest over three to five years. As of December 31, 2000, 1,450,400 shares were issued of which 1,383,200 shares were vested. As of December 31, 2000, 310,800 of these shares had been issued at a price approximating book value. Unearned compensation was amortized over the relevant vesting periods. The stockholder notes receivable of $336, $328 and $322 at December 31, 2000 and July 31, 2000 and 1999, respectively, are associated with the sale of Class A Common Stock and were payable in 2000 through 2002 together with interest at 9.25% per annum. F-20 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Initial Public Offering On December 22, 1997, the Company issued 4,000,000 shares of Class A Common Stock in an initial public offering at $12.00 per share. Also, on January 16, 1998, the Company issued an additional 600,000 shares of Class A Common Stock at $12.00 per share as a result of the underwriters' exercise of their over- allotment option. Net proceeds to the Company from such offerings, after deduction of associated expense, were approximately $51,336. Warrants DRI issued warrants to purchase 1,680,000 shares of DRI Class A Common Stock at a price of $.0012 per share. The warrants were exercisable, in whole or in part, at any time through June 30, 2004. Redeemable Exchangeable Preferred Stock of DRA In connection with the GM Acquisition, DRA issued 15,000 shares of Class A Preferred Stock (par value $.01 shares and liquidation preference $1,000 per share) to GM (DRA Preferred Stock). The DRA Preferred Stock was exchangeable, at the option of DRA, in whole or in part, for 8% subordinated debentures to be issued by DRA at $1,000 per share plus accrued and unpaid dividends. As a part of the December 22, 1997 initial offering and recapitalization, the DRA Preferred Stock was exchanged for the 8% Subordinated Debenture. As a result, a deemed dividend of $1,639 on the preferred stock conversion was incurred in fiscal year 1998. Dividends The Company paid no dividends on its common stock. Payment of dividends was at the discretion of the Company's Board of Directors and depended, among other factors, upon the Company's earnings, financial condition and capital requirements and the terms of the Company's financing agreements. The ability of the Company to make dividend payments was also restricted by the terms of certain of its debt instruments. Stock Options The Company had two fixed stock option plans which reserve shares of common stock for issuance to executives, key employees, and directors. In December 1997, the Company adopted the Stock-Based Incentive Compensation Plan whereby employees of the Company are eligible to be granted incentive stock options or non-qualified stock options. A total of 1,224,000 shares were initially reserved for grants of stock options, stock appreciation rights, and restricted stock awards under the plan. In December 2000, the stockholders of the Company approved an increase of 1,224,000 shares, resulting in a total of 2,448,000 shares authorized as of December 31, 2000. In December 1997, the Company adopted the Non-Qualified Stock Option Plan for Non-Employee Directors whereby non-employee directors are eligible to be granted non-qualified stock options. A total of 100,000 shares were initially reserved for grant under the plan. In December 2000, the stockholders of the Company approved an increase of 100,000 shares, resulting in a total of 200,000 shares authorized as of December 31, 2000. On December 16, 1997 and December 16, 1999, each non-employee director of the Company was granted options to purchase 2,000 shares. The exercise price of stock options granted could not be less than the fair market value of a share of common stock on the date of the grant. Options became exercisable in periods ranging from one to five years F-21 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) and vested ratably over a period of five years from the date of the grant. Information regarding these option plans is as follows:
Weighted Average Exercise Shares Price ------- ---------------- Initial grant of options (weighted average fair value of $5.56)................................ 258,700 $12.00 Cancelled....................................... (7,600) 12.00 ------- Outstanding as of July 31, 1998................. 251,100 12.00 Granted (weighted average fair value of $5.45).. 224,100 11.75 Cancelled....................................... (39,460) 11.92 ------- Outstanding as of July 31, 1999................. 435,740 11.88 Granted (weighted average fair value of $3.48).. 281,065 8.69 Cancelled....................................... (87,670) 11.44 ------- Outstanding as of July 31, 2000................. 629,135 10.53 Granted (weighted average fair value of $2.70).. 316,025 6.77 Cancelled....................................... (2,500) 7.63 ------- Outstanding as of December 31, 2000............. 942,660 $ 9.28 =======
At December 31, 2000, approximately 227,466 options were exercisable and approximately 1,605,340 additional shares were available for grant under the Company's plans. No options were exercised during the five months ended December 31, 2000 and fiscal years 2000, 1999, or 1998. Disclosure of pro forma information regarding net income and earnings per share is required by FASB Statement No. 123 as if the Company has accounted for its stock options under the fair value method as defined by that Statement. Disclosure of this information for the five-month period ended December 31, 2000 has not been provided because these plans were cancelled in March 2001 and the Company does not believe such disclosure would provide additional meaningful information to stockholders. The fair value for options granted by the Company was estimated as of the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions:
Year Ended July 31 ---------------- 2000 1999 1998 ---- ---- ---- Risk-free interest rate.................................. 6.00% 5.00% 5.00% Dividend yield........................................... 0.00% 0.00% 0.00% Volatility factor of the expected market price of the Company's common stock.................................. 0.22 0.30 0.30 Expected life of the options (years)..................... 7 8 8
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including expected stock price volatility. Because the Company's stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimates, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its stock options. For purpose of pro forma disclosures, the estimated fair value of the options are amortized to expense over the related vesting period. Because compensation expense is recognized over the vesting period, the initial F-22 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) impact on pro forma net income may not be representative of compensation expense in future years, when the effect of amortization of multiple awards would be reflected in the consolidated statements of operations. The Company's pro forma information giving effect to the estimated compensation expense related to stock options is as follows:
Year Ended July 31 ----------------------- 2000 1999 1998 ------- ------- ------- Pro forma net income (loss)........................ $12,184 $28,109 $(4,128) Pro forma earnings (loss) per share: Basic............................................ 0.50 1.18 (.21) Diluted.......................................... 0.47 1.08 (.21)
9. INCOME TAXES The following is a summary of the components of the provision for income taxes (benefit):
Five Months Ended Year Ended July 31 December 31, ------------------------ 2000 2000 1999 1998 ------------ ------- ------- ------- Current: Federal.............................. $ 62 $ 669 $ 257 $(2,916) State and local...................... 597 1,323 1,478 2,276 Foreign.............................. 3,289 7,157 5,214 2,834 ------ ------- ------- ------- 3,948 9,149 6,949 2,194 Deferred: Federal.............................. 4,180 1,280 7,146 (1,019) State and local...................... 54 3,350 1,703 (1,227) Foreign.............................. (2,088) (2,319) 656 -- ------ ------- ------- ------- 2,146 2,311 9,505 (2,246) ------ ------- ------- ------- $6,094 $11,460 $16,454 $ (52) ====== ======= ======= =======
Income (loss) before income taxes (benefit), minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures, preferred dividend requirement of subsidiary and deemed dividend on preferred stock conversion was taxed in the following jurisdictions:
Five Months Ended Year Ended July 31 December 31, -------------------------- 2000 2000 1999 1998 ------------ ------- ------- -------- Domestic............................ $11,659 $ 8,031 $25,101 $(10,789) Foreign............................. 7,888 23,174 19,844 10,655 Eliminations........................ (509) (233) (1,644) -- ------- ------- ------- -------- $19,038 $30,972 $43,301 $ (134) ======= ======= ======= ========
F-23 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) A reconciliation of income taxes at the United States federal statutory rate to the effective income tax rate follows:
Five Months Year Ended July Ended 31 December 31, ------------------ 2000 2000 1999 1998 ------------ ----- ---- ----- Federal statutory income tax rate......... 35.0% 35.0% 35.0% 35.0% State and local income taxes--net of federal tax benefit...................... 2.2 7.9 4.8 (21.7) Foreign operations........................ (6.8) (10.6) (2.3) 43.0 Goodwill.................................. 2.2 2.4 .7 (13.3) Other items............................... (0.6) 2.3 (.2) (4.2) ---- ----- ---- ----- Effective income tax rate................. 32.0% 37.0% 38.0% 38.8% ==== ===== ==== =====
State and local income taxes include provisions for Indiana and Michigan which do not provide proportional benefit in loss years. The following is a summary of the significant components of the Company's deferred tax assets and liabilities:
July 31 December 31, ---------------- 2000 2000 1999 ------------ ------- ------- Deferred tax assets: Non-recurring charges... $ 5,358 $11,079 $ 2,244 Employee benefits....... 10,514 10,096 9,648 Inventories............. 4,326 4,609 4,576 Warranty................ 2,418 2,625 3,350 Non-compete agreements.. 824 824 789 Alternative minimum tax credits................ 3,937 3,825 5,309 Net operating loss carryforwards.......... 15,025 12,414 7,925 Other................... 8,239 6,656 1,615 ------- ------- ------- Total deferred tax assets................... 50,641 52,128 35,456 Valuation allowance..... (7,779) (7,779) (2,507) ------- ------- ------- Deferred tax assets net of valuation allowance...... 42,862 44,349 32,949 Deferred tax liabilities: Depreciation............ (21,280) (20,674) (17,633) Other................... (15,836) (15,557) (4,887) ------- ------- ------- Total deferred tax liabilities.............. (37,116) (36,231) (22,520) ------- ------- ------- Net deferred tax asset.... $ 5,746 $ 8,118 $10,429 ======= ======= =======
At December 31, 2000, the Company had unused Federal net operating loss carryforwards of approximately $20,159 that expire between the years of 2018 and 2020. The Company also had unused alternative minimum tax credit carryforwards of approximately $3,937 that may be carried forward indefinitely. Income tax payments (refunds), including state taxes, for the five month period ended December 31, 2000 and years ended July 31, 2000, 1999 and 1998 were $743, $10,726, $617 and ($483), respectively. No provision has been made for United States federal and state or foreign taxes that may result from future remittances of undistributed earnings of foreign subsidiaries ($32,680 at December 31, 2000) because it F-24 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) is expected that such earnings will be reinvested in these foreign operations indefinitely. It is not practical to estimate the amount of taxes that might be payable on the eventual remittances of such earnings. 10. ACCUMULATED OTHER COMPREHENSIVE LOSS The Company's other comprehensive loss consists of unrealized net gains and losses on the translation of the assets and liabilities of its foreign operations, currency instruments and interest rate swaps. The before tax net loss, related income tax benefit and accumulated balance are as follows:
Foreign Unrealized Unrealized Accumulated Currency Losses on Losses on Other Translation Currency Interest Rate Comprehensive Adjustment Instruments Swaps Loss ----------- ----------- ------------- ------------- Balance at August 1, 1997..................... $ (1,752) $ -- $ -- $ (1,752) Before tax loss........... (3,794) -- -- (3,794) Income tax effect......... (1,472) -- -- (1,472) --------- -------- -------- --------- Other comprehensive loss.. (2,322) -- -- (2,322) --------- -------- -------- --------- Balance at July 31, 1998.. (4,074) -- -- (4,074) Before tax loss........... (3,939) -- -- (3,939) Income tax effect......... (1,497) -- -- (1,497) --------- -------- -------- --------- Other comprehensive loss.. (2,442) -- -- (2,442) --------- -------- -------- --------- Balance at July 31, 1999.. (6,516) -- -- (6,516) Before tax loss........... (6,859) -- -- (6,859) Income tax effect......... (2,538) -- -- (2,538) --------- -------- -------- --------- Other comprehensive loss.. (4,321) -- -- (4,321) --------- -------- -------- --------- Balance at July 31, 2000.. (10,837) -- -- (10,837) Cumulative effect of accounting change for derivative instruments... -- 241 -- 241 Before tax loss........... (2,569) (4,561) (1,505) (8,635) Income tax effect......... (822) (691) (482) (1,995) --------- -------- -------- --------- Other comprehensive loss.. (1,747) (3,870) (1,023) (6,640) --------- -------- -------- --------- Balance at December 31, 2000..................... $ (12,584) $ (3,629) $ (1,023) $ (17,236) ========= ======== ======== =========
11. TRANSACTIONS WITH GM The Company and GM have entered into several transactions and agreements related to their respective businesses. In addition to the transactions disclosed elsewhere in the accompanying consolidated financial statements and related notes, the Company entered into the following transactions with GM:
Five Months Ended Year Ended July 31 December 31, -------------------------- 2000 2000 1999(a) 1998(a) ----------------- -------- -------- -------- Sales....................... $124,596 $332,665 $359,162 $307,048 Material purchases and costs for services............... 2,002 4,500 34,273 52,273
- --------------------- (a) Includes transactions with Delphi Automotive Systems Corporation which was divested by GM in fiscal 1999. F-25 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) In addition, the Company had the following balances with GM:
July 31 December 31, --------------- 2000 2000 1999 ------------ ------- ------- Trade accounts receivable.................... $36,406 $32,722 $43,490 Other receivables............................ 5,704 4,768 4,990
12. LEASE COMMITMENTS The Company occupies space and uses certain equipment under lease arrangements. Rent expense was $4,064, $9,091, $7,793 and $8,207 for the five month period ended December 31, 2000 and years ended July 31, 2000, 1999 and 1998, respectively. Rental commitments at December 31, 2000 for long-term non- cancelable operating leases were as follows: Year ending 2001................................................... $ 8,106 Year ending 2002................................................... 5,117 Year ending 2003................................................... 4,522 Year ending 2004................................................... 4,147 Year ending 2005................................................... 3,475 Thereafter......................................................... 12,653 ------- $38,020 =======
13. COMMITMENTS AND CONTINGENCIES The Company is party to various legal actions and administrative proceedings and subject to various claims arising in the ordinary course of business, including those relating to commercial transactions, product liability, safety, health, taxes, environmental and other matters. The Company believes that the ultimate liability, if any, in excess of amounts already provided for in the financial statements or covered by insurance on the disposition of these matters will not have a material adverse effect on the financial position, results of operations or cash flows of the Company. 14. BUSINESS SEGMENTS AND GEOGRAPHIC AREA INFORMATION The Company is a global vehicular parts designer, manufacturer, remanufacturer, marketer and distributor, and a provider of core exchange services. Products include starter motors, alternators, engines, transmissions, traction control systems, torque converters and fuel systems which are principally sold or distributed to OEMs for both original equipment manufacture and aftermarket operations, as well as to warehouse distributors and retail automotive parts chains. It manages its business and operates in a single reportable business segment. Because of the similar economic characteristics of the operations, including the nature of products, production processes, customers and methods of distribution, those operations have been aggregated following the provisions of SFAS No. 131 for segment reporting purposes. The Company is a multi-national corporation with operations in many countries, including the United States, Canada, Mexico, Brazil, Hungary, Poland, Germany, Korea, the United Kingdom, Ireland, Belgium, Tunisia and the Netherlands. As a result, the Company's financial results could be significantly affected by factors such as changes in foreign currency exchange rates or weak economic conditions in the foreign markets in which the Company distributes its products. The Company's operating results are exposed to changes in exchange rates between the U.S. dollar and the South Korean Won, the Mexican Peso and various European currencies. Exposure to variability in foreign currency exchange rates is managed primarily through the use of F-26 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) natural hedges, whereby funding obligations and assets are both denominated in the local currency. From time to time, the Company enters into exchange agreements to manage its exposure arising from fluctuating exchange rates related to specific transactions. Sales are attributed to geographic locations based on the location of product production.
Five Months Ended Year Ended July 31 December 31, ---------------------------- 2000 2000 1999 1998 ------------ ---------- -------- -------- Net sales to external customers: United States............... $381,077 $ 937,451 $845,945 $733,551 Europe...................... 27,303 62,427 46,325 23,547 Canada...................... 14,350 43,811 47,270 44,660 Asia Pacific................ 11,263 33,695 3,386 -- Other....................... 9,073 13,554 10,780 13,555 -------- ---------- -------- -------- Total net sales........... $443,066 $1,090,938 $953,706 $815,313 ======== ========== ======== ========
July 31 December 31, ----------------- 2000 2000 1999 ------------ -------- -------- Long-lived assets: United States............................ $296,974 $300,785 $280,785 Europe................................... 27,148 27,015 23,960 Canada................................... 13,759 12,342 11,361 Asia Pacific............................. 28,766 29,843 25,310 Other.................................... 24,500 21,475 12,389 -------- -------- -------- Total long-lived assets................ $391,147 $391,460 $353,805 ======== ======== ========
Customers that accounted for a significant portion of consolidated net sales were as follows:
Five Months Ended Year Ended July 31 December 31, -------------------------- 2000 2000 1999 1998 ------------ -------- -------- -------- General Motors Corporation: North American OE Operations... $93,696 $257,684 $241,288 $209,695 Other.......................... 30,900 74,981 117,874 97,353 International Truck and Engine Corporation..................... 53,433 141,443 127,842 NA
Sales to International Truck and Engine Corporation accounted for less than 10% of consolidated net sales in fiscal 1998. F-27 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Following is a summary of the composition by product category of the Company's sales to external customers. Third-party sales for core exchange services are included in the "Other" category.
Five Months Ended Year Ended July 31 December 31, ---------------------------- 2000 2000 1999 1998 ----------------- ---------- -------- -------- Electrical systems............... $337,637 $ 859,045 $793,727 $697,448 Powertrain/drivetrain............ 77,313 194,303 149,279 110,370 Other............................ 28,116 37,590 10,700 7,495 -------- ---------- -------- -------- Total............................ $443,066 $1,090,938 $953,706 $815,313 ======== ========== ======== ========
15. OTHER INFORMATION Supplemental Cash Flow Information
Five Months Ended Year Ended July 31 December 31, ------------------------- 2000 2000 1999 1998 ----------------- ------- ------- ------- Cash paid for interest........... $22,636 $46,835 $41,502 $33,397 Cash paid for income taxes, net of refunds received............. 743 10,726 617 (483) Detail of acquisitions: Fair value of assets acquired.. $ -- $45,219 $63,786 $35,135 Liabilities assumed............ -- (15,783) (33,398) (6,168) Goodwill recorded.............. -- 38,569 23,383 29,778 Minority interest.............. -- -- (5,450) -- Common stock issued............ -- -- -- (23,023) ------- ------- ------- ------- Net cash paid for acquisitions.................. -- 68,005 48,321 35,722 Cash acquired.................. -- 1,669 4,571 189 ------- ------- ------- ------- Total.......................... $ -- $69,674 $52,892 $35,911 ======= ======= ======= =======
Research and Development Costs The Company spent approximately $7,200, $16,300, $13,500 and $13,300 in the five month period ended December 31, 2000 and years ended July 31, 2000, 1999 and 1998, respectively, on research and development activities. All expenditures were Company funded. F-28 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 16. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR SUBSIDIARIES The Company conducts a significant portion of its business through subsidiaries. The Senior Notes and the Senior Subordinated Notes referred to in Note 6, Long-term Debt, are fully and unconditionally guaranteed, jointly and severally, by certain direct and indirect wholly-owned subsidiaries (the Subsidiary Guarantors). Certain of the Company's subsidiaries do not guarantee the Senior Notes and the Senior Subordinated Notes (the Non-Guarantor Subsidiaries). The claims of creditors of Non-Guarantor Subsidiaries have priority over the rights of the Company to receive dividends or distributions from such subsidiaries. Presented below is condensed consolidating financial information for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at December 31, 2000 and July 31, 2000 and 1999 and for the five month period ended December 31, 2000 and the years ended July 31, 2000, 1999 and 1998. The equity method has been used by the Company with respect to investments in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in Non-Guarantor Subsidiaries. Separate financial statements for Subsidiary Guarantors are not presented. The following table sets forth the Guarantor and direct Non-Guarantor Subsidiaries: Guarantor Subsidiaries Non-Guarantor Subsidiaries Delco Remy America, Inc. Delco Remy Hungary RT (formerly Autovill RT Ltd.) Nabco, Inc. Power Investments Canada Ltd. The A&B Group, Inc. Remy UK Limited A&B Enterprises, Inc. Delco Remy International (Europe) GmbH Dalex, Inc. Remy India Holdings, Inc. A&B Cores, Inc. Remy Korea Holdings, Inc. R&L Tool Company, Inc. World Wide Automotive Distributors, Inc. MCA, Inc. of Mississippi Kraftube, Inc. Power Investments, Inc. Tractech (Ireland) Ltd. Franklin Power Products, Central Precision Limited Inc. International Fuel Systems, Electro Diesel Rebuild BVBA Inc. Power Investments Marine, Electro-Rebuild Tunisia S.A.R.L. Inc. Marine Corporation of Delco Remy Mexico, S. de R.L. de C.V. America Powrbilt Products, Inc. Publitech, Inc. World Wide Automotive, Inc. Delco Remy Brazil, Ltda. Ballantrae Corporation Western Reman Ltd. Tractech, Inc. Engine Rebuilders Ltd. Williams Technologies, Inc. Reman Transport Ltd. Western Reman, Inc. Delco Remy Remanufacturing Engine Master, L.P. Delco Remy Germany GmbH M&M Knopf Auto Parts, Inc. Remy Componentes S. de R.L. de C.V. Reman Holdings, Inc. Delco Remy Belgium BVBA Remy International, Inc. Magnum Power Products, LLC Elmot-DR Sp. z o.o.
F-29 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Balance Sheet December 31, 2000 ------------------------------------------------------------------ Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Assets: Current assets: Cash and cash equivalents........... $ -- $ (256) $ 24,636 $ -- $ 24,380 Trade accounts receivable............ -- 141,028 32,438 -- 173,466 Other receivables...... -- 9,886 6,319 -- 16,205 Inventories............ -- 243,410 52,465 (2,051)(c) 293,824 Deferred income taxes.. 14,256 -- 2,283 -- 16,539 Other current assets... 2,667 2,694 3,548 -- 8,909 -------- -------- -------- --------- -------- Total current assets.... 16,923 396,762 121,689 (2,051) 533,323 Property and equipment.. 40 217,644 87,899 -- 305,583 Less accumulated depreciation........... 40 90,536 15,167 -- 105,743 -------- -------- -------- --------- -------- Property and equipment, net.................... -- 127,108 72,732 -- 199,840 Deferred financing costs.................. 6,806 1,888 -- -- 8,694 Goodwill, net........... -- 146,163 23,075 -- 169,238 Investment in affiliates............. 515,616 -- -- (508,600)(a) 7,016 Other assets............ 770 3,087 2,502 -- 6,359 -------- -------- -------- --------- -------- Total assets............ $540,115 $675,008 $219,998 $(510,651) $924,470 ======== ======== ======== ========= ======== Liabilities and stockholders' equity: Current liabilities: Accounts payable....... $ 965 $109,727 $ 45,383 $ -- $156,075 Intercompany accounts.. 90,427 (81,466) (8,360) (601)(c) -- Accrued interest payable............... 6,719 919 1,495 -- 9,133 Accrued non-recurring charges............... -- 6,798 894 -- 7,692 Other liabilities and accrued expenses...... 5,256 20,623 7,911 -- 33,790 Current debt........... -- 1,526 6,581 -- 8,107 -------- -------- -------- --------- -------- Total current liabilities............ 103,367 58,127 53,904 (601) 214,797 Deferred income taxes... 12,209 -- (2,054) -- 10,155 Long-term debt, less current portion........ 285,000 219,266 15,018 -- 519,284 Post-retirement benefits other than pensions.... -- 22,794 -- -- 22,794 Accrued pension benefits............... -- 3,751 673 -- 4,424 Other non-current liabilities............ 2,208 971 705 -- 3,884 Minority interest in subsidiaries........... -- 11,351 16,663 -- 28,014 Stockholders' equity: Common stock: Class A Shares......... 182 -- -- -- 182 Class B Shares......... 63 -- -- -- 63 Paid-in capital........ 104,176 -- -- -- 104,176 Subsidiary investment.. -- 266,087 94,172 (360,259)(a) -- Retained earnings...... 34,269 92,661 57,130 (149,791)(b) 34,269 Accumulated other comprehensive loss.... (1,023) -- (16,213) -- (17,236) Stock purchase plan.... (336) -- -- -- (336) -------- -------- -------- --------- -------- Total stockholders' equity................. 137,331 358,748 135,089 (510,050) 121,118 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity... $540,115 $675,008 $219,998 $(510,651) $924,470 ======== ======== ======== ========= ========
- --------------------- (a) Elimination of investments in subsidiaries. (b) Elimination of investments in subsidiaries' earnings. (c) Elimination of intercompany profit in inventory. F-30 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Operations For the Five Months Ended December 31, 2000 ------------------------------------------------------------------ Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Net sales............... $ -- $456,628 $171,281 $(184,843)(a) $443,066 Cost of goods sold...... -- 392,758 147,600 (184,843)(a) 355,515 -------- -------- -------- --------- -------- Gross profit............ -- 63,870 23,681 -- 87,551 Selling, general and administrative expenses............... 5,275 23,472 15,399 -- 44,146 Amortization of goodwill and intangibles........ 26 2,228 371 -- 2,625 -------- -------- -------- --------- -------- Operating (loss) income................. (5,301) 38,170 7,911 -- 40,780 Interest expense........ (13,753) (7,661) (376) -- (21,790) Non-operating income (expense).............. (1,124) 602 570 -- 48 -------- -------- -------- --------- -------- (Loss) income before income tax (benefit), minority interest in income of subsidiaries, loss from unconsolidated joint ventures and equity in earnings of subsidiaries........... (20,178) 31,111 8,105 -- 19,038 Income taxes (benefit).. (7,331) 12,276 1,149 -- 6,094 Minority interest in income of subsidiaries........... -- (1,589) (1,189) -- (2,778) Loss from unconsolidated joint ventures......... -- -- (467) -- (467) Equity in earnings of subsidiaries........... 22,546 -- -- (22,546)(b) -- -------- -------- -------- --------- -------- Net income (loss)....... $ 9,699 $ 17,246 $ 5,300 $ (22,546) $ 9,699 ======== ======== ======== ========= ========
- --------------------- (a)Elimination of intercompany sales and cost of sales. (b)Elimination of equity in net income (loss) from consolidated subsidiaries. F-31 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows For the Five Months Ended December 31, 2000 ----------------------------------------------------------------- Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Operating Activities: Net income (loss)....... $ 9,699 $17,246 $ 5,300 $(22,546)(a) $ 9,699 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............ -- 7,255 3,723 -- 10,978 Amortization............ 26 2,228 371 -- 2,625 Minority interest in income of subsidiaries........... -- 1,589 1,189 -- 2,778 Loss from unconsolidated joint ventures......... -- -- 467 -- 467 Equity (loss) in earnings of subsidiaries........... (22,546) -- -- 22,546 (a) -- Deferred income taxes- current................ 1,114 -- 492 -- 1,606 Post-retirement benefits other than pensions.... -- 1,155 -- -- 1,155 Accrued pension benefits............... -- 3,089 49 -- 3,138 Non-cash interest expense................ 455 285 -- -- 740 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable..... -- (758) (3,145) -- (3,903) Inventories............. -- (22,513) (3,158) -- (25,671) Accounts payable........ (291) 4,032 10,390 -- 14,131 Intercompany accounts... 16,998 (25,808) 8,810 -- -- Other current assets and liabilities............ (3,508) (2,467) (3,325) -- (9,300) Cash payments for non- recurring charges...... -- (14,103) (2,736) -- (16,839) Other non-current assets and liabilities, net... (1,947) (1,530) (3,523) -- (7,000) ------- ------- ------- -------- ------- Net cash provided by (used in) operating activities............. -- (30,300) 14,904 -- (15,396) Investing Activities: Purchases of property and equipment.......... -- (4,752) (7,072) -- (11,824) ------- ------- ------- -------- ------- Net cash used in investing activities... -- (4,752) (7,072) -- (11,824) Financing Activities: Net borrowing under revolving line of credit and other....... -- 34,130 1,175 -- 35,305 Distributions to minority interests..... -- -- (322) -- (322) ------- ------- ------- -------- ------- Net cash provided by financing activities... -- 34,130 853 -- 34,983 Effect of exchange rate changes on cash........ -- -- (1,205) -- (1,205) ------- ------- ------- -------- ------- Net increase (decrease) in cash and cash equivalents............ -- (922) 7,480 -- 6,558 Cash and cash equivalents at beginning of year...... -- 666 17,156 -- 17,822 ------- ------- ------- -------- ------- Cash and cash equivalents at end of year................... $ -- $ (256) $24,636 $ -- $24,380 ======= ======= ======= ======== =======
- --------------------- (a) Elimination of equity in earnings of subsidiary. F-32 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Balance Sheet July 31, 2000 ------------------------------------------------------------------ Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Assets: Current assets: Cash and cash equivalents........... $ -- $ 666 $ 17,156 $ -- $ 17,822 Trade accounts receivable............ -- 140,270 29,293 -- 169,563 Other receivables...... -- 7,982 7,251 -- 15,233 Inventories............ -- 220,944 49,258 (2,049)(c) 268,153 Deferred income taxes.. 15,370 -- 2,775 -- 18,145 Other current assets... 1,613 2,643 4,608 -- 8,864 -------- -------- -------- --------- -------- Total current assets.... 16,983 372,505 110,341 (2,049) 497,780 Property and equipment.. 40 212,528 85,006 -- 297,574 Less accumulated depreciation........... 40 81,865 13,758 -- 95,663 -------- -------- -------- --------- -------- Property and equipment, net.................... -- 130,663 71,248 -- 201,911 Deferred financing costs.................. 7,261 2,171 -- -- 9,432 Goodwill, net........... (185) 148,045 23,172 -- 171,032 Investment in affiliates............. 488,843 -- -- (483,510)(a) 5,333 Other assets............ 671 612 2,469 -- 3,752 -------- -------- -------- --------- -------- Total assets............ $513,573 $653,996 $207,230 $(485,559) $889,240 ======== ======== ======== ========= ======== Liabilities and stockholders' equity: Current liabilities: Accounts payable....... $ 1,256 $105,695 $ 34,993 $ -- $141,944 Intercompany accounts.. 73,912 (56,141) (17,170) (601)(c) -- Accrued interest payable............... 9,001 132 1,725 -- 10,858 Accrued non-recurring charges............... -- 21,148 3,630 -- 24,778 Other liabilities and accrued expenses...... 3,924 23,163 12,998 -- 40,085 Current debt........... -- 1,868 5,586 -- 7,454 -------- -------- -------- --------- -------- Total current liabilities............ 88,093 95,865 41,762 (601) 225,119 Deferred income taxes... 9,574 -- 453 -- 10,027 Long-term debt, less current portion........ 285,000 184,283 14,987 -- 484,270 Post-retirement benefits other than pensions.... -- 21,639 -- -- 21,639 Accrued pension benefits............... -- 662 624 -- 1,286 Other non-current liabilities............ 2,243 985 660 (2) 3,886 Minority interest in subsidiaries........... -- 9,060 16,127 -- 25,187 Stockholders' equity: Common stock: Class A Shares......... 182 -- -- -- 182 Class B Shares......... 63 -- -- -- 63 Paid-in capital........ 104,176 -- -- -- 104,176 Subsidiary investment.. -- 266,087 91,624 (357,711)(a) -- Retained earnings...... 24,570 75,415 51,830 (127,245)(b) 24,570 Accumulated other comprehensive loss.... -- -- (10,837) -- (10,837) Stock purchase plan.... (328) -- -- -- (328) -------- -------- -------- --------- -------- Total stockholders' equity................. 128,663 341,502 132,617 (484,956) 117,826 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity... $513,573 $653,996 $207,230 $(485,559) $889,240 ======== ======== ======== ========= ========
- --------------------- (a) Elimination of investments in subsidiaries. (b) Elimination of investments in subsidiaries' earnings. (c) Elimination of intercompany profit in inventory. F-33 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Operations For the Year Ended July 31, 2000 ------------------------------------------------------------------- Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Net sales............... $ -- $1,098,395 $383,885 $(391,342)(a) $1,090,938 Cost of goods sold...... -- 928,770 324,744 (391,342)(a) 862,172 ------- ---------- -------- --------- ---------- Gross profit............ -- 169,625 59,141 -- 228,766 Selling, general and administrative expenses............... 13,922 67,152 26,977 -- 108,051 Amortization of goodwill and intangibles........ 108 5,064 871 -- 6,043 Non-recurring charge.... -- 30,133 5,089 -- 35,222 ------- ---------- -------- --------- ---------- Operating (loss) income................. (14,030) 67,276 26,204 -- 79,450 Interest expense........ (30,259) (16,646) (1,861) -- (48,766) Non-operating income.... -- -- 288 -- 288 ------- ---------- -------- --------- ---------- (Loss) income before income tax (benefit), minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures and equity in earnings of subsidiaries........... (44,289) 50,630 24,631 -- 30,972 Income taxes (benefit).. (13,966) 20,553 4,873 -- 11,460 Minority interest in income of subsidiaries........... -- (3,244) (3,498) -- (6,742) Loss from unconsolidated joint ventures......... -- -- (352) -- (352) Equity in earnings of subsidiaries........... 42,741 -- -- (42,741)(b) -- ------- ---------- -------- --------- ---------- Net income (loss)....... $12,418 $ 26,833 $ 15,908 $ (42,741) $ 12,418 ======= ========== ======== ========= ==========
- --------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income (loss) from consolidated subsidiaries. F-34 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows For the Five Months Ended July 31, 2000 ----------------------------------------------------------------- Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Operating Activities: Net income (loss)....... $12,418 $26,833 $15,908 $(42,741)(a) $ 12,418 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............ -- 19,044 7,082 -- 26,126 Amortization............ 108 5,064 871 -- 6,043 Minority interest in income of subsidiaries........... -- 3,244 3,498 -- 6,742 (Income) loss from unconsolidated joint ventures............... -- -- 352 -- 352 Equity (loss) in earnings of subsidiaries........... (42,741) -- -- 42,741(a) -- Deferred income taxes- current................ (373) -- (2,775) -- (3,148) Post-retirement benefits other than pensions.... -- 589 -- -- 589 Accrued pension benefits............... -- (2,057) 624 -- (1,433) Non-cash interest expense................ 1,092 671 -- -- 1,763 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable..... -- (2,046) 466 -- (1,580) Inventories............. -- (15,245) (2,967) -- (18,212) Accounts payable........ 620 11,180 4,035 -- 15,835 Intercompany accounts... 75,521 (76,633) 1,112 -- -- Other current assets and liabilities............ 3,904 (14,184) (5,111) -- (15,391) Non-recurring charge.... -- 30,133 5,089 -- 35,222 Cash payments for non- recurring charges...... -- (8,230) (670) -- (8,900) Other non-current assets and liabilities, net... 18,619 (8,150) 2,823 -- 13,292 ------- ------- ------- -------- -------- Net cash provided by (used in) operating activities............. 69,168 (29,787) 30,337 -- 69,718 Investing Activities: Acquisitions, net of cash acquired.......... (69,168) -- 1,163 -- (68,005) Purchases of property and equipment.......... -- (17,365) (21,006) -- (38,371) ------- ------- ------- -------- -------- Net cash used in investing activities... (69,168) (17,365) (19,843) -- (106,376) Financing Activities: Net borrowing under revolving line of credit and other....... -- 48,060 (7,054) -- 41,006 Distributions to minority interests..... -- -- (1,200) -- (1,200) ------- ------- ------- -------- -------- Net cash provided (used in) by financing activities............. -- 48,060 (8,254) -- 39,806 ------- ------- ------- -------- -------- Effect of exchange rate changes on cash........ -- -- (635) -- (635) ------- ------- ------- -------- -------- Net increase in cash and cash equivalents....... -- 908 1,605 -- 2,513 Cash and cash equivalents at beginning of year...... -- (242) 15,551 -- 15,309 ------- ------- ------- -------- -------- Cash and cash equivalents at end of year................... $ -- $ 666 $17,156 $ -- $ 17,822 ======= ======= ======= ======== ========
- --------------------- (a) Elimination of equity in earnings of subsidiary. F-35 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Balance Sheet July 31, 1999 ------------------------------------------------------------------ Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Assets: Current assets: Cash and cash equivalents........... $ -- $ (242) $ 15,551 $ -- $ 15,309 Trade accounts receivable............ -- 122,957 25,031 -- 147,988 Other receivables...... -- 6,657 8,839 -- 15,496 Inventories............ -- 193,264 40,543 (1,642)(c) 232,165 Deferred income taxes.. -- 14,997 -- -- 14,997 Other current assets... -- 2,125 778 -- 2,903 -------- -------- -------- --------- -------- Total current assets.... -- 339,758 90,742 (1,642) 428,858 Property and equipment.. 40 202,462 56,225 -- 258,727 Less accumulated depreciation........... 40 55,664 7,828 -- 63,532 -------- -------- -------- --------- -------- Property and equipment, net.................... -- 146,798 48,397 -- 195,195 Deferred financing costs.................. 8,352 2,840 -- -- 11,192 Goodwill, net........... -- 116,710 20,719 -- 137,429 Investment in affiliates............. 381,250 14 5 (376,513)(a) 4,756 Other assets............ 2,411 858 1,964 -- 5,233 -------- -------- -------- --------- -------- Total assets............ $392,013 $606,978 $161,827 $(378,155) $782,663 ======== ======== ======== ========= ======== Liabilities and stockholders' equity: Current liabilities: Accounts payable....... $ 636 $ 90,185 $ 28,518 $ -- $119,339 Intercompany accounts.. (19,626) 44,513 (24,286) (601)(c) -- Accrued interest payable............... 9,001 2,592 10 -- 11,603 Accrued non-recurring charges............... -- 5,866 -- -- 5,866 Other liabilities and accrued expenses...... (1,250) 27,622 10,733 -- 37,105 Current debt........... -- 1,227 11,369 -- 12,596 -------- -------- -------- --------- -------- Total current liabilities............ (11,239) 172,005 26,344 (601) 186,509 Deferred income taxes... -- 4,560 8 -- 4,568 Long-term debt, less current portion........ 285,000 136,867 13,064 -- 434,931 Post-retirement benefits other than pensions.... -- 21,050 -- -- 21,050 Accrued pension benefits............... -- 2,719 -- -- 2,719 Other non-current liabilities............ 2,216 1,329 -- -- 3,545 Minority interest in subsidiaries........... -- 10,663 9,158 -- 19,821 Stockholders' equity: Common stock: Class A Shares........ 182 -- -- -- 182 Class B Shares........ 63 -- -- -- 63 Paid-in capital........ 104,176 -- -- -- 104,176 Subsidiary investment.. -- 209,203 83,847 (293,050)(a) -- Retained earnings...... 12,152 48,582 35,922 (84,504)(b) 12,152 Accumulated other comprehensive loss.... -- -- (6,516) -- (6,516) Stock purchase plan.... (537) -- -- -- (537) -------- -------- -------- --------- -------- Total stockholders' equity................. 116,036 257,785 113,253 (377,554) 109,520 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity... $392,013 $606,978 $161,827 $(378,155) $782,663 ======== ======== ======== ========= ========
- --------------------- (a) Elimination of investments in subsidiaries. (b) Elimination of investments in subsidiaries' earnings. (c) Elimination of intercompany profit in inventory. F-36 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Operations For the Year Ended July 31, 1999 ------------------------------------------------------------------ Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Net sales............... $ -- $953,652 $266,447 $(266,393)(a) $953,706 Cost of goods sold...... -- 811,669 223,982 (264,749)(a) 770,902 ------- -------- -------- --------- -------- Gross profit............ -- 141,983 42,465 (1,644)(c) 182,804 Selling, general and administrative expenses............... 11,241 58,242 19,312 -- 88,795 Amortization of goodwill and intangibles........ 5 4,680 518 -- 5,203 ------- -------- -------- --------- -------- Operating (loss) income................. (11,246) 79,061 22,635 (1,644) 88,806 Interest expense........ (27,693) (16,390) (1,422) -- (45,505) ------- -------- -------- --------- -------- (Loss) income before income tax (benefit), minority interest in income of subsidiaries, income from unconsolidated joint ventures and equity in earnings of subsidiaries........... (38,939) 62,671 21,213 (1,644) 43,301 Income taxes (benefit).. (4,528) 15,584 5,997 (599)(c) 16,454 Minority interest in income of subsidiaries........... -- (2,898) (1,023) -- (3,921) Income from unconsolidated joint ventures............... -- -- 5,420 -- 5,420 Equity in earnings of subsidiaries........... 62,757 -- -- (62,757)(b) -- ------- -------- -------- --------- -------- Net income (loss)....... $28,346 $ 44,189 $ 19,613 $ (63,802) $ 28,346 ======= ======== ======== ========= ========
- --------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income (loss) from consolidated subsidiaries. (c) Elimination of intercompany profit in inventory. F-37 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows For the Year Ended July 31, 1999 ----------------------------------------------------------------- Delco Remy International 38Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Operating Activities: Net income (loss)....... $28,346 $44,189 $19,613 $(63,802)(a) $28,346 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............ 20 15,010 3,328 -- 18,358 Amortization............ 5 4,680 518 -- 5,203 Minority interest in income of subsidiaries........... -- 2,898 1,023 -- 3,921 Income from unconsolidated joint ventures............... -- -- (5,420) -- (5,420) Equity (loss) in earnings of subsidiaries........... (62,757) -- -- 62,757(a) -- Deferred income taxes- current................ 6,428 228 -- -- 6,656 Post-retirement benefits other than pensions.... -- 4,555 -- -- 4,555 Accrued pension benefits............... -- (1,909) -- -- (1,909) Non-cash interest expense................ -- 1,648 -- -- 1,648 Changes in operating assets and liabilities, net of acquisition: Accounts receivable..... -- (2,634) 7,255 -- 4,621 Inventories............. -- (13,500) (5,849) 1,644(b) (17,705) Accounts payable........ 506 6,479 6,649 -- 13,634 Intercompany accounts... 48,638 (38,324) (9,715) (599)(b) -- Other current assets and liabilities............ (4,001) (1,662) (982) -- (6,645) Cash payments for non- recurring charges...... -- (14,941) -- -- (14,941) Other non-current assets and liabilities, net... 27,877 (19,975) (5,138) -- 2,764 ------- ------- ------- -------- ------- Net cash provided by (used in) operating activities............. 45,062 (13,258) 11,282 -- 43,086 Investing Activities: Acquisitions, net of cash acquired.......... (45,042) -- (3,279) -- (48,321) Purchase of property and equipment.............. (20) (19,267) (5,779) -- (25,066) ------- ------- ------- -------- ------- Net cash used in investing activities... (45,062) (19,267) (9,058) -- (73,387) Financing Activities: Net borrowing under revolving line of credit and other....... -- 32,158 5,890 -- 38,048 ------- ------- ------- -------- ------- Net cash provided by financing activities... -- 32,158 5,890 -- 38,048 Effect of exchange rate changes on cash........ -- -- (551) -- (551) ------- ------- ------- -------- ------- Net increase (decrease) in cash and cash equivalents............ -- (367) 7,563 -- 7,196 Cash and cash equivalents at beginning of year...... -- 125 7,988 -- 8,113 ------- ------- ------- -------- ------- Cash and cash equivalents at end of year................... $ -- $ (242) $15,551 $ -- $15,309 ======= ======= ======= ======== =======
- --------------------- (a) Elimination of equity in earnings of subsidiary. (b) Elimination of intercompany profit in inventory. F-38 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Operations July 31, 1998 ------------------------------------------------------------------- Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Net sales............... $ -- $ 833,952 $ 138,016 $ (156,655)(a) $ 815,313 Cost of goods sold...... -- 708,334 116,119 (156,655)(a) 667,798 -------- --------- --------- ---------- --------- Gross profit............ -- 125,618 21,897 -- 147,515 Selling, general and administrative expenses............... 175 67,362 9,400 -- 76,937 Amortization of goodwill and intangibles........ 191 3,088 199 -- 3,478 Non-recurring charge.... -- 26,515 -- -- 26,515 -------- --------- --------- ---------- --------- Operating (loss) income................. (366) 28,653 12,298 -- 40,585 Interest expense........ (24,911) (15,179) (201) -- (40,291) Non-operating expense... -- -- (428) -- (428) -------- --------- --------- ---------- --------- (Loss) income before income tax (benefit), minority interest in income of subsidiaries, equity in earnings of subsidiaries, income from unconsolidated joint ventures, preferred dividend requirement of subsidiary and deemed dividend on preferred stock.................. (25,277) 13,474 11,669 -- (134) Income taxes (benefit).. (9,415) 6,440 2,923 -- (52) Minority interest in income of subsidiaries........... -- (2,027) (362) -- (2,389) Equity in earnings of subsidiaries........... 11,842 -- -- (11,842)(b) -- Income from unconsolidated joint ventures............... -- -- 2,568 -- 2,568 Preferred dividend requirement of subsidiary............. -- -- -- (645)(c) (645) Deemed dividend on preferred stock conversion............. -- -- -- (1,639) (1,639) -------- --------- --------- ---------- --------- (Loss) income from continuing operations.. (4,020) 5,007 10,952 (14,126) (2,187) Extraordinary item: Write-off of debt issuance costs (net of applicable income tax benefit)............... -- (1,833) -- -- (1,833) -------- --------- --------- ---------- --------- Net (loss) income....... $ (4,020) $ 3,174 $ 10,952 $ (14,126) $ (4,020) ======== ========= ========= ========== =========
- --------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income (loss) from consolidated subsidiaries. (c) Recording of preferred dividend requirement of subsidiary. F-39 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows For the Year Ended July 31, 1998 ----------------------------------------------------------------- Delco Remy International Non- Inc. (Parent Subsidiary Guarantor Company Only) Guarantors Subsidiaries Eliminations Consolidated ------------- ---------- ------------ ------------ ------------ Operating Activities: Net income (loss)....... $ (4,020) $ 3,174 $10,952 $(14,126)(a) $ (4,020) Extraordinary item...... -- 2,095 -- -- 2,095 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............ 7 12,634 950 -- 13,591 Amortization............ 191 3,088 199 -- 3,478 Minority interest in income of subsidiaries........... -- 2,027 362 -- 2,389 Income from unconsolidated joint ventures............... -- -- (2,568) -- (2,568) Equity in earnings of subsidiaries........... (11,842) -- -- 11,842(a) -- Deferred income taxes- current................ (10,325) 12,012 26 -- 1,713 Post-retirement benefits other than pensions.... -- 3,818 -- -- 3,818 Accrued pension benefits............... -- 86 -- -- 86 Non-cash interest expense................ -- 2,387 -- -- 2,387 Deemed dividend requirements of subsidiary............. -- -- -- 1,639 1,639 Preferred dividend requirement of subsidiary............. -- -- -- 645 645 Changes in operating assets and liabilities, net of acquisition: Accounts receivable..... -- (4,136) (4,296) -- (8,432) Inventories............. -- (15,428) (1,972) -- (17,400) Accounts payable........ (65) (12,621) 5,113 -- (7,573) Intercompany accounts... (98,447) 113,029 (14,582) -- -- Other current assets and liabilities............ (6,283) 3,951 (2,556) -- (4,888) Non-recurring charge.... -- 26,515 -- -- 26,515 Cash payments for non- recurring charges...... -- (19,204) -- -- (19,204) Other non-current assets and liabilities, net... (9,914) (6,912) 11,249 -- (5,577) -------- -------- ------- -------- -------- Net cash (used in) provided by operating activities............. (140,698) 126,515 2,877 -- (11,306) Investing Activities: Acquisitions, net of cash acquired.......... (34,358) -- (1,364) -- (35,722) Purchase of property and equipment.............. -- (22,545) (1,645) -- (24,190) Investment of joint ventures............... (9,355) -- -- -- (9,355) -------- -------- ------- -------- -------- Net cash used in investing activities... (43,713) (22,545) (3,009) -- (69,267) Financing Activities: Proceeds from initial public offering........ 51,336 -- -- -- 51,336 Proceeds from issuances of long-term debt...... 141,375 -- -- -- 141,375 Payments on long-term debt................... (8,300) (137,486) -- -- (145,786) Net borrowing under revolving line of credit and other....... -- 32,137 61 -- 32,198 -------- -------- ------- -------- -------- Net cash provided by (used in) financing activities............. 184,411 (105,349) 61 -- 79,123 Effect of exchange rate changes on cash........ -- -- (487) -- (487) -------- -------- ------- -------- -------- Net decrease in cash and cash equivalents....... -- (1,379) (558) -- (1,937) Cash and cash equivalents at beginning of year...... -- 1,504 8,546 -- 10,050 -------- -------- ------- -------- -------- Cash and cash equivalents at end of year................... $ -- $ 125 $ 7,988 $ -- $ 8,113 ======== ======== ======= ======== ========
- --------------------- (a) Elimination of equity in earnings of subsidiary. F-40 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 17. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Two Months Three Months Five Months Ended Ended Ended 9/30/00 12/31/00 12/31/00 ---------- ------------ ----------- Transition Period Ended: Net sales.............. $183,210 $259,856 $443,066 Gross profit........... 32,749 54,802 87,551 Net income............. 1,325 8,374 9,699 Basic earnings per common share.......... .05 .35 .40 Diluted earnings per common share.......... .05 .32 .37 10/31/99 1/31/00 4/30/00 7/31/00 Total Year ---------- ------------ ----------- -------- ---------- Quarter Ended: Net sales.............. $277,189 $260,037 $274,861 $278,851 $1,090,938 Gross profit........... 56,471 52,826 60,602 58,867 228,766 Net income (loss)...... 7,974 6,907 10,199 (12,662) 12,418 Basic earnings (loss) per common share...... .33 .29 .42 (.52) .51 Diluted earnings (loss) per common share...... .31 .27 .39 (.52) .48 10/31/98 1/31/99 4/30/99 7/31/99 Total Year ---------- ------------ ----------- -------- ---------- Quarter Ended: Net sales.............. $232,785 $222,324 $248,826 $249,771 $ 953,706 Gross profit........... 39,576 43,824 49,443 49,961 182,804 Net income ............ 5,388 5,856 8,174 8,928 28,346 Basic earnings per common share.......... .23 .25 .34 .37 1.19 Diluted earnings per common share.......... .21 .23 .32 .34 1.09
18. SUBSEQUENT EVENTS On January 11, 2001, Citicorp Venture Capital Ltd. ("CVC"), through its affiliates Court Square Capital Limited ("Court Square") and DRI Acquisition LLC ("DRI Acquisition"), a Delaware limited liability company (together the "CVC Group") commenced an initial tender offer to purchase the Company's Class A common shares not then owned directly or indirectly by CVC and subsequently merge DRI Acquisition with and into the Company (the "Merger"). As of December 31, 2000, CVC and its affiliates owned approximately 53% of the Company's combined outstanding Class A and Class B common stock. The initial tender offer price was $8.00 cash per share. On February 7, 2001, the Company, Court Square and DRI Acquisition signed a Merger Agreement that provided for the definitive terms of the Merger and an increase in the purchase price to $9.50 cash per share. On March 14, 2001, the Company entered into a Securities Transfer, Recapitalization and Holders Agreement (the "Securities Holders Agreement") among the Company, the CVC Group and certain of the Company's management and directors. As a result of the Securities Holders Agreement, the CVC Group owned greater than 90% of the Company's common stock. On March 14, 2001 and after completion of the transactions contemplated by the Securities Holders Agreement, the Merger was consummated and the Company became the surviving corporation in the Merger. Upon the consummation of the Merger, each outstanding share of the Company's Class A common stock (other than shares of Class A common stock held by the CVC Group or held in the treasury of the Company and F-41 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued) shares of Class A common stock as to which dissenters' rights are perfected) has been converted into the right to receive $9.50 cash per share. As a result of the Merger, the Company became a subsidiary of Court Square. Effective March 15, 2001, the Company's common stock, which had up to this date traded on the New York Stock Exchange under the ticker symbol "RMY," was delisted. Pursuant to the above transactions, the stock purchase plan, warrants and stock option plans described in Note 8 were canceled. As of March 15, 2001, under the Amended and Restated Certificate of Incorporation and as a result of the Securities Holders Agreement, the authorized capital stock of the Company consisted of (i) 1,000 shares of Class A Common Stock (par value $.001), of which 1,000 were issued and outstanding, (ii) 6,000,000 shares of Class B Common Stock (par value $.001), of which 350,187.63 shares were issued and outstanding, (iii) 6,000,000 shares of Class C Common Stock (par value $.001), of which 2,019,387.42 shares were issued and outstanding and (iv) 3,500,000 shares of 12% Series A Cumulative compounding Preferred Stock (par value $.01), of which 2,092,549.91 shares were issued and outstanding. The Class A Common Stock and Class B Common Stock are voting stock. The Series A Preferred Stock has a stated value of $100 per share and will be entitled to semi-annual dividends commencing September 15, 2001, when, as and if declared, which dividends are cumulative, whether or not earned or declared, and accrue at a rate of 12%, compounding annually. The Company may not pay any dividend upon, or redeem or otherwise acquire shares of capital stock junior to the preferred stock (including the Company's common stock), except for dividends payable in junior stock, unless all cumulative dividends on the preferred stock have been paid in full. Upon liquidation, dissolution or winding up of the Company, holders of preferred stock are entitled to receive out of the Company's legally available assets, before any amount shall be paid to holders of junior stock, an amount equal to $100 per share of preferred stock, plus all accrued and unpaid dividends to the date of final distribution. If such available assets are insufficient to pay the holders of the outstanding shares of preferred stock in full, such assets, or the proceeds from the sale of the assets, will be distributed ratably among the holders of the preferred stock. The preferred stock is not mandatorily redeemable by the Company prior to April 16, 2021. The Company anticipates that the dividends on the preferred stock will accrue but not be paid. The ability to pay cash dividends, and to redeem the preferred stock, is subject to restrictions contained in the Company's credit facility and the indentures for our outstanding notes. These transactions did not constitute a "change of control" as referenced in the description of the Senior Subordinated Notes and the Senior Notes (see Note 6). F-42 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (in thousands)
Three-Month Period Ended March 31 ------------------ 2001 2000 -------- -------- Net sales................................................. $261,663 $276,115 Cost of goods sold........................................ 213,376 214,614 -------- -------- Gross profit.............................................. 48,287 61,501 Selling, general and administrative expenses.............. 28,140 27,552 Amortization of goodwill and intangibles.................. 1,289 1,445 -------- -------- Operating income.......................................... 18,858 32,504 Interest expense.......................................... (13,294) (11,103) Other non-operating expense............................... (5,087) (387) -------- -------- Income before income taxes, minority interest in income of subsidiaries and loss from unconsolidated joint ventures................................................. 477 21,014 Income taxes.............................................. 152 7,868 Minority interest in income of subsidiaries............... (1,822) (1,717) Loss from unconsolidated joint ventures................... (391) (28) -------- -------- Net income (loss)....................................... $ (1,888) $ 11,401 ======== ========
See Accompanying Notes F-43 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 31, 2001 December 31, (Unaudited) 2000 ----------- ------------ ASSETS Current assets: Cash and cash equivalents............................ $ 14,398 $ 24,380 Trade accounts receivable, net....................... 188,909 173,466 Other receivables.................................... 16,887 16,205 Inventories.......................................... 300,857 293,824 Deferred income taxes................................ 16,383 16,539 Other current assets................................. 11,157 8,909 -------- -------- Total current assets............................... 548,591 533,323 Property and equipment................................. 306,302 305,583 Less accumulated depreciation.......................... 111,857 105,743 -------- -------- Property and equipment, net............................ 194,445 199,840 Deferred financing costs............................... 8,251 8,694 Goodwill (net of accumulated amortization)............. 168,503 169,238 Investments in joint ventures.......................... 8,962 7,016 Other assets........................................... 7,121 6,359 -------- -------- Total assets....................................... $935,873 $924,470 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable..................................... $155,979 $156,075 Accrued interest payable............................. 7,880 9,133 Accrued non-recurring charges........................ 7,977 7,692 Other liabilities and accrued expenses............... 43,148 33,790 Current debt......................................... 7,583 8,107 -------- -------- Total current liabilities.......................... 222,567 214,797 Deferred income taxes.................................. 9,981 10,155 Long-term debt, less current portion................... 528,646 519,284 Post-retirement benefits other than pensions........... 23,723 22,794 Accrued pension benefits............................... 4,860 4,424 Other noncurrent liabilities........................... 4,897 3,884 Commitments and contingencies.......................... Minority interest in subsidiaries...................... 28,497 28,014 Stockholders' equity: Preferred stock--Series A............................ 21 -- Common stock: Class A shares...................................... -- 182 Class B shares...................................... 1 63 Class C shares...................................... 2 -- Paid-in capital...................................... 231,752 104,176 Retained earnings (deficit).......................... (94,962) 34,269 Accumulated other comprehensive loss................. (24,112) (17,236) Stock purchase plan.................................. -- (336) -------- -------- Total stockholders' equity......................... 112,702 121,118 -------- -------- Total liabilities and stockholders' equity......... $935,873 $924,470 ======== ========
See Accompanying Notes F-44 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands)
Three-Month Period Ended March 31 ---------------- 2001 2000 ------- ------- Operating activities: Net income (loss).......................................... $(1,888) $11,401 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation............................................. 7,003 7,128 Amortization............................................. 1,289 1,445 Changes in operating assets and liabilities, net of acquisitions: Accounts receivable..................................... (15,443) 13,064 Inventories............................................. (3,269) (16,618) Accounts payable........................................ (96) 7,211 Other current assets and liabilities.................... 3,555 (4,706) Cash payments for non-recurring charges................. (755) (567) Other non-current assets and liabilities, net........... (1,885) 846 ------- ------- Net cash provided by (used in) operating activities.... (11,489) 19,204 Investing activities: Acquisitions, net of cash acquired......................... (2,479) (61,238) Purchases of property and equipment........................ (3,458) (7,163) ------- ------- Net cash used in investing activities.................. (5,937) (68,401) Financing activities: Net borrowings under revolving line of credit and other.... 8,838 55,661 Distributions to minority interests........................ (762) -- ------- ------- Net cash provided by financing activities.............. 8,076 55,661 Effect of exchange rate changes on cash...................... (632) -- ------- ------- Net increase (decrease) in cash and cash equivalents......... (9,982) 6,464 Cash and cash equivalents at beginning of period............. 24,380 11,362 ------- ------- Cash and cash equivalents at end of period................... $14,398 $17,826 ======= =======
See Notes to Condensed Consolidated Financial Statements F-45 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2001 (Unaudited) (dollars in thousands, except per share data) 1. BASIS OF PRESENTATION Effective in the fourth quarter of calendar year 2000, the Company changed its fiscal year from July 31 to December 31. Any references to "fiscal year" are to years ending July 31. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and notes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Certain prior year amounts have been reclassified to conform to the current year's presentation. Operating results for the three-month period ended March 31, 2001 are not necessarily indicative of the results that may be expected for the full year. The balance sheet at December 31, 2000 has been derived from the audited financial statements at that date but does not include all of the information and notes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and notes thereto for the five-month transition period ended December 31, 2000 and the three fiscal years ended July 31, 2000. 2. GOING PRIVATE TRANSACTION On February 7, 2001, the Company agreed to a going private transaction with its largest stockholder, Court Square Limited ("Court Square"), pursuant to which Court Square made a cash tender offer for all of the Company's common stock not owned by it. Following completion of the tender offer on February 23, 2001, DRI Acquisition LLC, an affiliate of Court Square, merged with the Company and all remaining common stock not owned by Court Square was eliminated and converted into the right to receive the merger consideration of $9.50 per share. Following completion of the merger on March 14, 2001, the New York Stock Exchange delisted the Company's common stock and the Company terminated the registration of its common stock under the Exchange Act. For financial accounting purposes the transaction is treated as a leveraged recapitalization whereby the assets are not revalued and the excess purchase price of the redeemed shares over the par value and paid in capital of the shares ($127,343) has been charged to the Company's retained earnings. Stockholders' equity at March 31, 2001 reflects the Company's equity subsequent the above transactions and the paid in capital includes $209,234 attributable to the preferred stock--Series A with liquidation value of $100.00 per share. 3. ACQUISITION On February 12, 2001, the Company acquired the assets of XL Component Distribution Limited ("XL") for approximately $2,400. XL, headquartered in Droitwich, Worcestershire, England, is involved in the remanufacturing, packaging and distribution of steering racks, brake calipers, ignition distributors, ignition leads, transmission components and rotating electrics. Goodwill of approximately $1,300 recorded in connection with the acquisition is being amortized over 20 years. Pro forma consolidated financial information has not been presented because the effect on consolidated results would not be material. F-46 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 4. ADDITIONAL BALANCE SHEET INFORMATION
March December 31, 31, 2001 2000 -------- ------------ Inventory: Raw material......................................... $162,523 $154,550 Work-in-process...................................... 52,150 51,668 Finished goods....................................... 86,184 87,606 -------- -------- Total.............................................. $300,857 $293,824 ======== ========
5. ACCUMULATED OTHER COMPREHENSIVE LOSS The Company's other comprehensive loss consists of unrealized net gains and losses on the translation of the assets and liabilities of its foreign operations, currency instruments and interest rate swaps. The before tax loss, related income tax benefit and accumulated balance are as follows:
Foreign Unrealized Unrealized Accumulated Currency Losses on Losses on Other Translation Currency Interest Rate Comprehensive Adjustment Hedges Swaps Loss ----------- ---------- ------------- ------------- Balance at December 31, 2000...................... $(12,584) $(3,629) $(1,023) $(17,236) Before tax................. (8,187) (499) (1,643) (10,329) Income tax effect.......... (2,620) (119) (714) (3,453) -------- ------- ------- -------- Other comprehensive loss... (5,567) (380) (929) (6,876) -------- ------- ------- -------- Balance at March 31, 2001.. $(18,151) $(4,009) $(1,952) $(24,112) ======== ======= ======= ========
6. NON-RECURRING CHARGES In May 2000, the Company completed plans for the realignment of certain manufacturing facilities in the United States, Canada and the United Kingdom. A one-time charge of $35,222 was recorded in June 2000 for the estimated cost of the plan. The reserve included $27,098 for the estimated cost of various voluntary and involuntary employee separation programs associated with the resulting workforce reductions. A total of $5,011 was paid in fiscal year 2000, $15,961 was paid in the five months ended December 31, 2000 and $3,100, $2,842 and $184 are estimated to be paid in the calendar years 2001, 2002 and 2003, respectively. The reserve also includes $8,124, net of salvage value, for the write-down of certain production assets which will no longer be used as a result of the realignment. Additionally, reserves of $1,050 and $1,221 were established in connection with the acquisition of Elmot in March 2000 and XL in February 2001, respectively. The following table summarizes the reserve for non-recurring charges:
Termination Exit/Impairment Benefits Costs Total ----------- --------------- ------ Reserve at December 31, 2000.............. $7,362 $330 $7,692 Payments and charges in the three-month period ended March 31, 2001.............. (927) (9) (936) Reserve established in acquisition of business................................. 846 375 1,221 ------ ---- ------ Reserve at March 31, 2001................. $7,281 $696 $7,977 ====== ==== ======
F-47 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) 7. SUBSEQUENT EVENT On April 26, 2001, the Company issued $165,000 of 11.00% senior subordinated debt due May 1, 2009 (the "Notes"). Net proceeds (after discounts, commissions and expenses) of approximately $156,000 were used to retire the GM Subordinated Debenture of $18,951 including accrued interest and repay approximately $137,000 outstanding under the Company's Senior Credit Facility. Interest on the Notes will accrue at 11.00% per annum and will be payable semi-annually in arrears on May 1 and November 1, commencing on November 1, 2001. The Notes are redeemable at the option of the Company, in whole or in part, at any time on or after May 1, 2005, at the redemption prices set forth in the note agreement plus accrued and unpaid interest, if any, to the date of redemption. The Notes are unsecured senior subordinated obligations of the Company. As such, they are subordinated in right of payment to all existing and future senior indebtedness of the Company and are senior in right of payment to any future subordinated obligations of the Company. The Notes are guaranteed by each subsidiary guarantor and are subject to registration with the SEC. The following table sets forth the consolidated capitalization of the Company as of March 31, 2001, on an actual basis and adjusted to give effect to the issuance of the Notes and application of the proceeds.
March 31, 2001 --------------------- Pro Actual Forma -------- -------- Debt: Senior Credit Facility.................................. $193,438 $ 56,354 8% Subordinated Debenture............................... 18,916 -- 8 5/8% Senior Notes Due 2007............................ 145,000 145,000 Other Senior Debt and Capitalized Leases................ 38,875 38,875 10 5/8% Senior Subordinated Notes Due 2006.............. 140,000 140,000 11% Senior Subordinated Notes Due 2009.................. -- 162,852 -------- -------- Total Debt............................................ 536,229 543,081 Stockholders' Equity...................................... 112,702 113,372 -------- -------- Total Capitalization...................................... $648,931 $656,453 ======== ========
The Company will record an extraordinary gain of approximately $670 after tax on the early retirement of the GM subordinated Debenture in the second quarter. 8. FINANCIAL INFORMATION FOR SUBSIDIARY GUARANTORS AND NON-GUARANTOR SUBSIDIARIES The Company conducts a significant portion of its business through subsidiaries. The Senior Notes and the Senior Subordinated Notes are fully and unconditionally guaranteed, jointly and severally, by certain direct and indirect subsidiaries (the Subsidiary Guarantors). Certain of the Company's subsidiaries do not guarantee the Senior Notes or the Senior Subordinated Notes (the Non-Guarantor Subsidiaries). The claims of creditors of Non-Guarantor Subsidiaries have priority over the rights of the Company to receive dividends or distributions from such subsidiaries. F-48 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued) Presented below is condensed consolidating financial information for the Company, the Subsidiary Guarantors and the Non-Guarantor Subsidiaries at March 31, 2001 and December 31, 2000 and for the three- month periods ended March 31, 2001 and 2000. The equity method has been used by the Company with respect to investments in subsidiaries. The equity method has been used by Subsidiary Guarantors with respect to investments in Non-Guarantor Subsidiaries. Separate financial statements for Subsidiary Guarantors are not presented based on management's determination that they do not provide additional information that is material to investors. The following table sets forth the Guarantor and direct Non-Guarantor Subsidiaries: Guarantor Subsidiaries Non-Guarantor Subsidiaries ---------------------- -------------------------- Delco Remy America, Inc. Delco Remy Hungary RT (formerly Autovill RT Ltd.) Nabco, Inc. Power Investments Canada Ltd. The A&B Group, Inc. Delco Remy UK Limited A&B Enterprises, Inc. Delco Remy International (Europe) GmbH Dalex, Inc. Remy India Holdings, Inc. A&B Cores, Inc. Remy Korea Holdings, Inc. R&L Tool Company, Inc. World Wide Automotive Distributors, Inc. MCA, Inc. of Mississippi Kraftube, Inc. Power Investments, Inc. Tractech (Ireland) Ltd. Franklin Power Products, Inc. Central Precision Limited International Fuel Systems, Inc. Electro Diesel Rebuild BVBA Power Investments Marine, Inc. Electro-Rebuild Tunisia S.A.R.L. (Tunisia) Marine Corporation of America Delco Remy Mexico, S. de R.L. de C.V. Powrbilt Products, Inc. Publitech, Inc. World Wide Automotive, Inc. Delco Remy Brazil, Ltda. Ballantrae Corporation Western Reman Ltd. Tractech, Inc. Engine Rebuilders Ltd. Williams Technologies, Inc. Reman Transport Ltd. Western Reman, Inc. Delco Remy Remanufacturing Engine Master, L.P. Delco Remy Germany GmbH M&M Knopf Auto Parts, Inc. Remy Componentes S. de R. L. de C. V. Reman Holdings, Inc. Delco Remy Belgium BVBA Remy International, Inc. Magnum Power Products, LLC Elmot-DR Sp. z o.o. XL Component Distribution Ltd.
F-49 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2001 (Unaudited) ----------------------------------------------------------------------- Delco Remy International Inc. Non- (Parent Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated ------------------ ---------- ------------ ------------ ------------ Net sales............... $ -- $265,618 $106,046 $(110,001)(a) $261,663 Cost of goods sold...... -- 232,820 90,557 (110,001)(a) 213,376 ------- -------- -------- --------- -------- Gross profit............ -- 32,798 15,489 -- 48,287 Selling, general and administrative expenses............... 4,482 16,035 7,623 -- 28,140 Amortization of goodwill and intangibles........ -- 1,138 151 -- 1,289 ------- -------- -------- --------- -------- Operating income (loss)................. (4,482) 15,625 7,715 -- 18,858 Interest expense........ (8,709) (4,378) (207) -- (13,294) Other non-operating expenses............... -- (6,335) 1,248 -- (5,087) ------- -------- -------- --------- -------- Income (loss) before income taxes, minority interest in income of subsidiaries, loss from unconsolidated joint ventures and equity in earnings of subsidiaries........... (13,191) 4,912 8,756 -- 477 Income taxes (benefit).. (5,380) 4,528 1,004 -- 152 Minority interest in income of subsidiaries........... -- (853) (969) -- (1,822) Loss from unconsolidated joint ventures......... -- (309) (82) -- (391) Equity in earnings of subsidiaries 5,923 -- -- (5,923)(b) -- ------- -------- -------- --------- -------- Net income (loss)....... $(1,888) $ (778) $ 6,701 $ (5,923) $ (1,888) ======= ======== ======== ========= ========
- --------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income of consolidated subsidiaries. F-50 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Operations For the Three Months Ended March 31, 2000 (Unaudited) ----------------------------------------------------------------------- Delco Remy International Inc. Non- (Parent Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated ------------------ ---------- ------------ ------------ ------------ Net sales............... $ -- $280,206 $97,627 $(101,718)(a) $276,115 Cost of goods sold...... -- 235,750 80,582 (101,718)(a) 214,614 -------- -------- ------- --------- -------- Gross profit............ -- 44,456 17,045 -- 61,501 Selling, general and administrative expenses............... 3,067 16,425 8,060 -- 27,552 Amortization of goodwill and intangibles........ 16 1,278 151 -- 1,445 -------- -------- ------- --------- -------- Operating income (loss)................. (3,083) 26,753 8,834 -- 32,504 Interest expense........ (7,237) (3,634) (232) -- (11,103) Other non-operating expense................ -- -- (387) -- (387) -------- -------- ------- --------- -------- Income (loss) before income taxes, minority interest in income of subsidiaries, loss from unconsolidated joint ventures and equity in earnings of subsidiaries........... (10,320) 23,119 8,215 -- 21,014 Income taxes (benefit).. (2,575) 8,951 1,492 -- 7,868 Minority interest in income of subsidiaries........... -- (689) (1,028) -- (1,717) Loss from unconsolidated joint ventures......... -- -- (28) -- (28) Equity in earnings of subsidiaries........... 19,146 -- -- (19,146)(b) -- -------- -------- ------- --------- -------- Net income (loss)....... $ 11,401 $ 13,479 $ 5,667 $ (19,146) $ 11,401 ======== ======== ======= ========= ========
- --------------------- (a) Elimination of intercompany sales and cost of sales. (b) Elimination of equity in net income of consolidated subsidiaries. F-51 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Balance Sheet March 31, 2001 (Unaudited) ----------------------------------------------------------------------- Delco Remy International Inc. Non- (Parent Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated ------------------ ---------- ------------ ------------ ------------ Assets Current assets: Cash and cash equivalents........... $ -- $ 6,158 $ 8,240 $ -- $ 14,398 Trade accounts receivable, net....... -- 158,394 30,515 -- 188,909 Other receivables...... -- 9,491 7,396 -- 16,887 Inventories............ -- 251,595 51,967 (2,705)(c) 300,857 Deferred income taxes................. 13,774 41 2,568 -- 16,383 Other current assets... 3,691 3,322 4,144 -- 11,157 -------- -------- -------- --------- -------- Total current assets.............. 17,465 429,001 104,830 (2,705) 548,591 Property and equipment.. 40 219,413 86,849 -- 306,302 Less accumulated depreciation........... 21 95,473 16,363 -- 111,857 -------- -------- -------- --------- -------- Property and equipment, net.................... 19 123,940 70,486 -- 194,445 Deferred financing costs.................. 6,533 1,718 -- -- 8,251 Goodwill, net........... -- 146,060 22,443 -- 168,503 Investments in affiliates............. 523,536 -- -- (514,574)(a) 8,962 Other assets............ 826 2,364 3,931 -- 7,121 -------- -------- -------- --------- -------- Total assets......... $548,379 $703,083 $201,690 $(517,279) $935,873 ======== ======== ======== ========= ======== Liabilities and stockholders' equity Current liabilities: Accounts payable....... $ 4,814 $115,619 $ 35,546 $ -- $155,979 Intercompany accounts.............. 97,208 (75,684) (20,923) (601)(c) -- Accrued interest payable............... 6,119 1,498 263 -- 7,880 Accrued non-recurring charges............... -- 7,470 507 -- 7,977 Other liabilities and accrued expenses...... 7,115 23,073 12,960 -- 43,148 Current debt........... -- 1,564 6,019 -- 7,583 -------- -------- -------- --------- -------- Total current liabilities......... 115,256 73,540 34,372 (601) 222,567 Deferred income taxes... 11,012 -- (1,031) -- 9,981 Long-term debt, less current portion........ 285,000 230,127 13,519 -- 528,646 Post-retirement benefits other than pensions.... -- 23,723 -- -- 23,723 Accrued pension benefits............... -- 4,124 736 -- 4,860 Other non-current liabilities............ 2,249 1,478 1,170 -- 4,897 Minority interest in subsidiaries........... -- 12,208 16,289 -- 28,497 Stockholders' equity: Preferred stock-- Series A.............. 21 -- -- -- 21 Common stock: Class A shares....... -- -- -- -- -- Class B shares....... 1 -- -- -- 1 Class C shares....... 2 -- -- -- 2 Paid-in capital........ 231,752 -- -- -- 231,752 Subsidiary investment............ -- 266,000 94,964 (360,964)(a) -- Retained earnings (deficit)............. (94,962) 91,883 63,831 (155,714)(b) (94,962) Accumulated other comprehensive loss.... (1,952) -- (22,160) -- (24,112) -------- -------- -------- --------- -------- Total stockholders' equity.............. 134,862 357,883 136,635 (516,678) 112,702 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity.............. $548,379 $703,083 $201,690 $(517,279) $935,873 ======== ======== ======== ========= ========
- --------------------- (a) Elimination of investments in subsidiaries. (b) Elimination of investments in subsidiaries' earnings. (c) Elimination of intercompany profit in inventory. F-52 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Balance Sheet December 31, 2000 ----------------------------------------------------------------------- Delco Remy International Inc. Non- (Parent Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated ------------------ ---------- ------------ ------------ ------------ Assets Current assets: Cash and cash equivalents........... $ -- $ (256) $ 24,636 $ -- $ 24,380 Trade accounts receivable, net....... -- 141,028 32,438 -- 173,466 Other receivables...... -- 9,886 6,319 -- 16,205 Inventories............ -- 243,410 52,465 (2,051)(c) 293,824 Deferred income taxes................. 14,256 -- 2,283 -- 16,539 Other current assets... 2,667 2,694 3,548 -- 8,909 -------- -------- -------- --------- -------- Total current assets.............. 16,923 396,762 121,689 (2,051) 533,323 Property and equipment.. 40 217,644 87,899 -- 305,583 Less accumulated depreciation........... 40 90,536 15,167 -- 105,743 -------- -------- -------- --------- -------- Property and equipment, net.................... -- 127,108 72,732 -- 199,840 Deferred financing costs.................. 6,806 1,888 -- -- 8,694 Goodwill, net........... -- 146,163 23,075 -- 169,238 Investments in affiliates............. 515,616 -- -- (508,600)(a) 7,016 Other assets............ 770 3,087 2,502 -- 6,359 -------- -------- -------- --------- -------- Total assets......... $540,115 $675,008 $219,998 $(510,651) $924,470 ======== ======== ======== ========= ======== Liabilities and stockholders' equity Current liabilities: Accounts payable....... $ 965 $109,727 $ 45,383 $ -- $156,075 Intercompany accounts.............. 90,427 (81,466) (8,360) (601)(c) -- Accrued interest payable............... 6,719 919 1,495 -- 9,133 Accrued non-recurring charges............... -- 6,798 894 -- 7,692 Other liabilities and accrued expenses...... 5,256 20,623 7,911 -- 33,790 Current debt........... -- 1,526 6,581 -- 8,107 -------- -------- -------- --------- -------- Total current liabilities......... 103,367 58,127 53,904 (601) 214,797 Deferred income taxes... 12,209 -- (2,054) -- 10,155 Long-term debt, less current portion........ 285,000 219,266 15,018 -- 519,284 Post-retirement benefits other than pensions.... -- 22,794 -- -- 22,794 Accrued pension benefits............... -- 3,751 673 -- 4,424 Other non-current liabilities............ 2,208 971 705 -- 3,884 Minority interest in subsidiaries........... -- 11,351 16,663 -- 28,014 Stockholders' equity: Common stock: Class A shares....... 182 -- -- -- 182 Class B shares....... 63 -- -- -- 63 Paid-in capital........ 104,176 -- -- -- 104,176 Subsidiary investment............ -- 266,087 94,172 (360,259)(a) -- Retained earnings...... 34,269 92,661 57,130 (149,791)(b) 34,269 Accumulated other comprehensive loss.... (1,023) -- (16,213) -- (17,236) Stock purchase plan.... (336) -- -- -- (336) -------- -------- -------- --------- -------- Total stockholders' equity.............. 137,331 358,748 135,089 (510,050) 121,118 -------- -------- -------- --------- -------- Total liabilities and stockholders' equity.............. $540,115 $675,008 $219,998 $(510,651) $924,470 ======== ======== ======== ========= ========
- --------------------- (a) Elimination of investments in subsidiaries. (b) Elimination of investments in subsidiaries' earnings. (c) Elimination of intercompany profit in inventory. F-53 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2001 (Unaudited) ---------------------------------------------------------------------- Delco Remy International Inc. Non- (Parent Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated ------------------ ---------- ------------ ------------ ------------ Operating activities: Net income (loss)..... $ (1,888) $ (778) $ 6,701 $ (5,923)(a) $(1,888) Adjustments to reconcile net income (loss) to net cash used in operating activities: Depreciation.......... -- 4,972 2,031 -- 7,003 Amortization.......... -- 1,138 151 -- 1,289 Equity in earnings of subsidiary........... (5,923) -- -- 5,923(a) -- Changes in operating assets and liabilities, net of acquisitions: Accounts receivable.. -- (13,520) (1,923) -- (15,443) Inventories.......... -- (3,262) (7) -- (3,269) Accounts payable..... 3,849 4,154 (8,099) -- (96) Other current assets and liabilities..... 716 2,997 (158) -- 3,555 Intercompany accounts............ 4,752 711 (5,463) -- -- Cash payments for non-recurring charges............. -- (471) (284) -- (755) Other non-current assets and liabilities, net.... (1,506) 1,722 (2,101) -- (1,885) -------- ------- ------- -------- ------- Net cash used in operating activities......... -- (2,337) (9,152) -- (11,489) Investing activities: Acquisitions, net of cash acquired........ -- -- (2,479) -- (2,479) Purchases of property and equipment........ -- (2,149) (1,309) -- (3,458) -------- ------- ------- -------- ------- Net cash used in investing activities......... -- (2,149) (3,788) -- (5,937) Financing activities: Net borrowings (repayments) under revolving line of credit and other..... -- 10,900 (2,062) -- 8,838 Distributions to minority interests... -- -- (762) -- (762) -------- ------- ------- -------- ------- Net cash provided by (used in) financing activities......... -- 10,900 (2,824) -- 8,076 Effect of exchange rate changes on cash....... -- -- (632) -- (632) -------- ------- ------- -------- ------- Net increase (decrease) in cash and cash equivalents........... -- 6,414 (16,396) -- (9,982) Cash and cash equivalents at beginning of period... -- (256) 24,636 -- 24,380 -------- ------- ------- -------- ------- Cash and cash equivalents at end of period................ $ -- $ 6,158 $ 8,240 $ -- $14,398 ======== ======= ======= ======== =======
- --------------------- (a) Elimination of equity in earnings of subsidiaries. F-54 DELCO REMY INTERNATIONAL, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Condensed Consolidating Statement of Cash Flows For the Three Months Ended March 31, 2000 (Unaudited) -------------------------------------------------------------------- Delco Remy International Inc. Non- (Parent Company Subsidiary Guarantor Only) Guarantors Subsidiaries Eliminations Consolidated ------------------ ---------- ------------ ------------ ------------ Operating activities: Net income (loss)..... $ 11,401 $ 13,479 $ 5,667 $(19,146) $ 11,401 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation.......... -- 5,199 1,929 -- 7,128 Amortization.......... 16 1,274 155 -- 1,445 Equity in earnings of subsidiaries (19,146) -- -- 19,146(a) -- Changes in operating assets and liabilities, net of acquisitions: Accounts receivable.. -- 5,199 7,865 -- 13,064 Inventories.......... -- (13,040) (3,578) -- (16,618) Accounts payable..... (47) 4,717 2,541 -- 7,211 Intercompany accounts............ 61,517 (72,961) 11,444 -- -- Other current assets and liabilities..... 7,135 69 (11,910) -- (4,706) Cash payments for non-recurring charges............. -- (567) -- -- (567) Other non-current assets and liabilities, net.... (144) 3,568 (2,578) -- 846 -------- -------- -------- -------- -------- Net cash provided by (used in) operating activities......... 60,732 (53,063) 11,535 -- 19,204 Investing activities: Acquisitions, net of cash acquired........ (60,732) -- (506) -- (61,238) Purchases of property and equipment........ -- (3,484) (3,679) -- (7,163) -------- -------- -------- -------- -------- Net cash used in investing activities......... (60,732) (3,484) (4,185) -- (68,401) Financing activities: Net borrowings (repayments) under revolving line of credit and other..... -- 56,989 (1,328) -- 55,661 -------- -------- -------- -------- -------- Net cash provided by (used in) financing activities......... -- 56,989 (1,328) -- 55,661 Effect of exchange rate changes on cash....... -- -- -- -- -- -------- -------- -------- -------- -------- Net increase in cash and cash equivalents.. -- 442 6,022 -- 6,464 Cash and cash equivalents at beginning of period... -- (111) 11,473 -- 11,362 -------- -------- -------- -------- -------- Cash and cash equivalents at end of period................ $ -- $ 331 $ 17,495 $ -- $ 17,826 ======== ======== ======== ======== ========
- --------------------- (a) Elimination of equity in earnings of subsidiaries. F-55 [LOGO OF DELCO REMY] Until , 2001, all dealers that effect transactions in these securities, whether or not participating in this exchange offer may be required to deliver a prospectus. This is in addition to the dealers' obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions. PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS. As permitted by the Delaware General Corporation Law ("DGCL"), the Company's Restated Certificate of Incorporation provides that directors of the Company shall not be personally liable to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts of omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the DGCL, relating to prohibited dividends or distributions or the repurchase or redemption of stock, or (iv) for any transaction from which the director derives an improper personal benefit. In addition, the Company's Bylaws provide for indemnification of the Company's officers and directors to the fullest extent permitted under Delaware law. Section 145 of the DGCL provides that a corporation may indemnify any persons, including officers and directors, who were or are, or are threatened to be made, parties to any threatened, pending or completed legal action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of such corporation or is or was serving at the request of such corporation as an officer, director, employee or agent of another corporation, partnership, joint venture, trust or other enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests and, for criminal proceedings, had no reasonable cause to believe that his conduct was unlawful. A Delaware corporation may indemnify officers and directors in an action by or in the right of the corporation under the same conditions, except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses that such officer or director actually and reasonably incurred. Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the Company pursuant to the foregoing provisions, the Company has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable. The directors and officers of the Company are insured against certain liabilities under the registrant's directors' and officers' liability insurance. ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES. (a) Exhibits The following exhibits are filed herewith unless otherwise indicated: (1) 2.1 Agreement and Plan of Merger dated as of February 7, 2001 by and among Court Square Capital Limited, DRI Acquisition LLC and the Company (2) 2.2 Amendment No. 1 to Agreement and Plan of Merger (2) 3.1 Restated Certificate of Incorporation (2) 3.2 By-laws of the Company
II-1 (3) 4.1 Indenture, dated as of August 1, 1996, among the Company, certain of the Company's subsidiaries signatories thereto and National City Bank of Indiana, as trustee (7) 4.2 Indenture governing 8 5/8% Senior Notes Due 2007 among the Company, the Subsidiary Guarantors and United States Trust Company of New York, as trustee, dated December 22, 1997 4.3 Indenture governing 11% Senior Subordinated Notes Due 2009 among the Company, the Subsidiary Guarantors and First Union National Bank, as trustee, dated April 26, 2001 4.4 Form of 11% Senior Subordinated Note Due 2009 (included in Exhibit 4.3) 4.5 Registration Rights Agreement, dated April 19, 2001, by and among the Company, the Subsidiaries Guarantors Named Therein, Credit Suisse First Boston Corporation and Deutsche Banc Alex. Brown, Inc. * 5.1 Opinion of Dechert (6) 10.1 Light Duty Starter Motor Supply Agreement, dated July 31, 1994, by and between Delco Remy America, Inc. ("DRA") and General Motors Corporation ("GM") (6) 10.2 Heavy Duty Component Supply Agreement, dated July 31, 1994, by and between DRA and GM (6) 10.3 Distribution and Supply Agreement, dated July 31, 1994, by and between DRA and GM (3) 10.4 Trademark License, dated July 31, 1994, by and among DRA, DRI International, Inc. and GM (3) 10.5 Tradename License Agreement, dated July 31, 1994, by and among DRA, DR International, Inc. and GM (3) 10.6 Partnership Agreement of Delco Remy Mexico S. de R.L. de C.V., dated April 17, 1997 (4) 10.7 Joint Venture Agreement, dated , by and between Remy Korea Holdings, Inc. and S.C. Kim (2) 10.8 Securities Transfer, Recapitalization and Holders Agreement dated March 14, 2001 by and among the Company, DRI Acquisition Corporation, Court Square Capital Limited, World Equity Partners, L.P., DRI Group LLC and the Continuing Investors Named therein (2) 10.9 Registration Rights Agreement, dated March 14, 2001, by and among the Company, Court Square Capital Limited, World Equity Partners, L.P., DRI Group LLC and the Continuing Investors named therein (5) 10.10 Employment Agreement, dated July 31, 1994, by and between Delco Remy International, Inc. and Thomas J. Snyder (6) 10.11 Form of Fourth Amended and Restated Financing Agreement, dated as of December 16, 1997, among the Company, certain of the Company's subsidiaries signatories thereto and Bank One, Indianapolis, National Association, The CIT Group/Business Credit, Inc. (3) 10.14 Contingent Purchase Price Note of DRA, in favor of GM, dated July, 31, 1994 (4) 10.15 Lease by and between ANDRA L.L.C. and DRA, dated February 9, 1995 (4) 10.16 Lease by and between Eagle I L.L.C. and DRA, dated August 11, 1995 (9) 10.20 Starter Motor Pricing Agreement, dated March 17, 1999, by and between DRA and GM (2) 10.21 Preferred Stockholders Agreement, dated March 14, 2001, by and among Court Square Capital Limited, World Equity Partners, L.P., DRI Group LLC and the Continuing Investors named therein (2) 10.22 Stock Purchase Warrant, dated March 14, 2001, issued by the Company to World Equity Partners, L.P. (11) 10.23 Letter Agreement by and between the Company and Thomas J. Snyder, dated as of February 6, 2001
II-2 (12) 10.24 Form of Letter Agreement by and between the Company and each of J. Timothy Gargaro, Joseph P. Felicelli, Richard L. Stanley, Susan E. Goldy, Roderick English and Patrick Mobouck, each dated as of February 6, 2001 (13) 10.25 Amendment Number Two to the Delco Remy International, Inc. Supplemental Executive Retirement Plan, dated as of February 6, 2001 (14) 10.26 Form of Amendment Number Two to the Collateral Assignment Split- Dollar Insurance Agreement by and between the Company and each of Thomas J. Snyder, J. Timothy Gargaro, Joseph P. Felicelli, Richard L. Stanley, Susan E. Goldy, Roderick English 12 Statement of Computation of Ratio of Earnings to Fixed Charges 21 Subsidiaries of the Registrant 23.1 Consent of Ernst & Young LLP 23.2 Consent of Dechert (included in Exhibit 5.1) 24 Powers of Attorney (included on signature pages) 25 Statement of Eligibility and Qualification of First Union National Bank on Form T-1 99.1 Form of Letter of Transmittal 99.2 Form of Notice of Guaranteed Delivery 99.3 Letter to Holders of 11% Senior Subordinated Notes Due 2009 Concerning Offer For All Outstanding 11% Senior Subordinated Notes Due 2009 in Exchange for 11% Senior Subordinated Notes Due 2009 of Delco Remy International, Inc. Which Have Been Registered Under the Securities Act of 1933, as amended 99.4 Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees Concerning Offer For All Outstanding 11% Senior Subordinated Notes Due 2009 in Exchange for 11% Senior Subordinated Notes Due 2009 of Delco Remy International, Inc. Which Have Been Registered Under the Securities Act of 1933, as amended 99.5 Letter to Clients Concerning Offer For All Outstanding 11% Senior Subordinated Notes Due 2009 in Exchange for 11% Senior Subordinated Notes Due 2009 of Delco Remy International, Inc. Which Have Been Registered Under the Securities Act of 1933, as amended 99.6 Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9 * To be filed by subsequent amendment. (1) Incorporated by reference to Exhibit (a)(8) to Amendment No. 1 to the Solicitation/Recommendation Statement on Schedule 14D-9 filed by the Company on February 9, 2001 (the "Solicitation/Recommendation Statement") (2) Incorporated by reference to the Exhibit of the same number to the Company's Form 10-K for the year ended December 31, 2000 (3) Incorporated by reference to the Exhibit of the same number to the Registration Statement on Form S-1 previously filed by the Company on October 10, 1997, registering the issuance of the Company's Class A Common Stock, par value $.01 per share (the "Equity Registration Statement") (4) Incorporated by reference to the Exhibit of the same number to Amendment No. 1 to the Equity Registration Statement which was filed by the Company on October 22, 1997
II-3 (5) Incorporated by reference to the Exhibit of the same number to Amendment No. 2 to the Equity Registration Statement which was filed by the Company on November 21, 1997 (6) Incorporated by reference to the Exhibit of the same number to Amendment No. 3 to the Equity Registration Statement which was filed by the Company on November 26, 1997 (7) Incorporated by reference to the Exhibit of the same number to Amendment No. 4 to the Equity Registration Statement which was filed by the Company on December 8, 1997 (8) Incorporated by reference to Exhibit 4.1 to the Company's Form 10-Q for the quarter ended January 31, 1998 (9) Incorporated by reference to Exhibit 10.20 to the Company's Form 10-K for the year ended July 13, 1999 (10) Incorporated by reference to Exhibit (a)(1)(I) to Amendment No. 3 to Transition Statement filed by on Schedule 13E-3 on February 9, 2001 (11) Incorporated by reference to Exhibit (e)(4) to the Solicitation/Recommendation Statement (12) Incorporated by reference to Exhibit (e)(5) to the Solicitation/Recommendation Statement (13) Incorporated by reference to Exhibit (e)(6) to the Solicitation/Recommendation Statement (14) Incorporated by reference to Exhibit (e)(7) to the Solicitation/Recommendation Statement
(b) Financial Statement Schedules: Schedules not listed above are omitted because of the absence of the conditions under which they are required or because the information required by such omitted schedules is set forth in the financial statements or the notes thereto. ITEM 22. UNDERTAKINGS. (a) The undersigned registrants hereby undertake: (1) to file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement: (i) to include any prospectus required by Section 10(a)(3) of the Securities Act of 1933; (ii) to reflect in the prospectus any facts or events arising after the effective date of the registration statement (or the most recent post-effective amendment thereof) which, individually or in the aggregate, represent a fundamental change in the information set forth in the registration statement. Notwithstanding the foregoing, any increase or decrease in volume of securities offered (if the total dollar value of securities offered would not exceed that which was registered) and any deviation from the low or high end of the estimated maximum offering range may be reflected in the form of prospectus filed with Securities and Exchange Commission pursuant to Rule 424(b) if, in the aggregate, the changes in volume and price represent no more than a 20% change in the maximum aggregate offering price set forth in the "Calculation of Registration Fee" table in the effective registration statement; and (iii) to include any material information with respect to the plan of distribution not previously disclosed in the registration statement or any material change to such information in the registration statement; (2) that, for the purpose of determining any liability under the Securities Act of 1933, each such post-effective amendment shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof; and II-4 (3) to remove from registration by means of a post-effective amendment any of the securities being registered which remain unsold at the termination of the offering. (b) Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the registrants pursuant to the foregoing provisions, or otherwise, the registrants have been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrants in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrants will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. (c) The undersigned registrants hereby undertake to respond to requests for information that is incorporated by reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of such request, and to send the incorporated documents by first class mail or other equally prompt means. This includes information contained in documents filed subsequent to the effective date of the registration statement through the date of responding to the request. (d) The undersigned registrants hereby undertake to supply by means of a post-effective amendment all information concerning a transaction, and the company being acquired involved therein, that was not the subject of and included in the registration statement when it became effective. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Delco Remy International, Inc. Thomas J. Snyder By: _________________________________ Thomas J. Snyder President and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubsitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Thomas J. Snyder President, Chief Executive Officer and _____________________________________________ Director (principal executive officer) Thomas J. Snyder J. Timothy Gargaro Senior Vice President and Chief Financial _____________________________________________ Officer (principal financial officer) J. Timothy Gargaro Richard L. Reinhart Vice President and Corporate Controller _____________________________________________ (principal accounting officer) Richard L. Reinhart E. H. Billig Director _____________________________________________ E.H. Billig Richard M. Cashin, Jr. Director _____________________________________________ Richard M. Cashin, Jr. Michael A. Delaney Director _____________________________________________ Michael A. Delaney James R.Gerrity Director _____________________________________________ James R. Gerrity Robert J. Schultz Director _____________________________________________ Robert J. Schultz Joseph M. Silvestri Director _____________________________________________ Joseph M. Silvestri Harold K. Sperlich Chairman and Director _____________________________________________ Harold K. Sperlich
II-6 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Delco Remy America, Inc. Thomas J. Snyder By: _________________________________ Thomas J. Snyder Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Thomas J. Snyder Chief Executive Officer and Director _____________________________________________ (principal executive officer) Thomas J. Snyder John Cowden Vice President of Finance _____________________________________________ (principal financial and accounting John Cowden officer) Richard L. Stanley Director _____________________________________________ Richard L. Stanley David E. Stoll Director _____________________________________________ David E. Stoll
II-7 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Remy International, Inc. Thomas J. Snyder By: _________________________________ Thomas J. Snyder President and Chief Operating Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Harold K. Sperlich Chairman and Director _____________________________________________ (principal executive officer) Harold K. Sperlich David E. Stoll Secretary and Treasurer _____________________________________________ (principal financial and accounting David E. Stoll officer) E.H. Billig Director _____________________________________________ E.H. Billig Richard M. Cashin, Jr. Director _____________________________________________ Richard M. Cashin, Jr. Michael A. Delaney Director _____________________________________________ Michael A. Delaney James R. Gerrity Director _____________________________________________ James R. Gerrity Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-8 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Reman Holdings, Inc. Thomas J. Snyder By: _________________________________ Thomas J. Snyder President and Chief Operating Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Harold K. Sperlich Chairman and Director _____________________________________________ (principal executive officer) Harold K. Sperlich David E. Stoll Secretary and Treasurer _____________________________________________ (principal financial and accounting David E. Stoll officer) E.H. Billig Director _____________________________________________ E.H. Billig Richard M. Cashin, Jr. Director _____________________________________________ Richard M. Cashin, Jr. Michael A. Delaney Director _____________________________________________ Michael A. Delaney James R. Gerrity Director _____________________________________________ James R. Gerrity Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-9 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. NABCO, Inc. Joseph P. Felicelli By: _________________________________ Joseph P. Felicelli Vice President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Joseph P. Felicelli Vice President _____________________________________________ (principal executive officer) Joseph P. Felicelli David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-10 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. The A&B Group, Inc. Robert Covington By: _________________________________ Robert Covington Vice President--Operations POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Robert Covington Vice President--Operations _____________________________________________ (principal executive officer) Robert Covington Timothy G. Hill Chief Financial Officer _____________________________________________ (principal financial and accounting Timothy G. Hill officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder David E. Stoll Director _____________________________________________ David E. Stoll
II-11 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. A&B Enterprises, Inc. Robert Covington By: _________________________________ Robert Covington Vice President--Operations POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Robert Covington Vice President--Operations _____________________________________________ (principal executive officer) Robert Covington David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-12 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Dalex, Inc. Robert Covington By: _________________________________ Robert Covington Vice President--Operations POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Robert Covington Vice President--Operations _____________________________________________ (principal executive officer) Robert Covington David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-13 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. A&B Cores, Inc. Robert Covington By: _________________________________ Robert Covington Vice President--Operations POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signature Title --------- ----- Robert Covington Vice President--Operations _____________________________________________ (principal executive officer) Robert Covington David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-14 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. R&L Tool Company, Inc. Robert Covington By: _________________________________ Robert Covington Vice President--Operations POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Robert Covington Vice President--Operations _____________________________________________ (principal executive officer) Robert Covington David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting officer) David E. Stoll Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-15 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. MCA, Inc. of Mississippi Robert Covington By: _________________________________ Robert Covington Vice President--Operations POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Robert Covington Vice President--Operations _____________________________________________ (principal executive officer) Robert Covington David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting officer) David E. Stoll Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-16 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Power Investments, Inc. J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President and Director _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-17 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Franklin Power Products, Inc. J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President and Director _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-18 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. International Fuel Systems, Inc. J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President and Director _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-19 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Marine Corporation of America J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President and Director _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-20 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Powrbilt Products, Inc. J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis _____________________________________________ President and Director J. Michael Jarvis (principal executive officer) David E. Stoll _____________________________________________ Secretary, Treasurer and Director David E. Stoll (principal financial and accounting officer) Thomas J. Snyder _____________________________________________ Director Thomas J. Snyder
II-21 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. World Wide Automotive, Inc. Richard Keister By: _________________________________ Richard Keister President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Richard Keister _____________________________________________ President and Director Richard Keister (principal executive officer) David E. Stoll _____________________________________________ Secretary, Treasurer and Director David E. Stoll (principal financial and accounting officer) Thomas J. Snyder _____________________________________________ Director Thomas J. Snyder
II-22 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Ballantrae Corporation Thomas J. Snyder By: _________________________________ Thomas J. Snyder President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Thomas J. Snyder President and Director _____________________________________________ (principal executive officer) Thomas J. Snyder John David Phillips Secretary and Treasurer _____________________________________________ (principal financial and accounting officer) John David Phillips David E. Stoll Director _____________________________________________ David E. Stoll
II-23 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Tractech, Inc. Ralph McGee By: _________________________________ Ralph McGee President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- James R. Gerrity Chairman and Director _____________________________________________ (principal executive officer) James R. Gerrity John David Phillips Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting officer) John David Phillips Ralph McGee Director _____________________________________________ Ralph McGee
II-24 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Williams Technologies, Inc. Thomas J. Snyder By: _________________________________ Thomas J. Snyder Vice President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Thomas J. Snyder Vice President and Director _____________________________________________ (principal executive officer) Thomas J. Snyder David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting officer) David E. Stoll Joseph P. Felicelli Director _____________________________________________ Joseph P. Felicelli
II-25 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Engine Master, L.P. By: HSG I, Inc., Its General Partner J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubsitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Vice President--Finance, Secretary and _____________________________________________ Director (principal financial and David E. Stoll accounting officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-26 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. M.&M. Knopf Auto Parts, Inc. Heywood Knopf By: _________________________________ Heywood Knopf Chairman and Chief Executive Officer POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Heywood Knopf _____________________________________________ Chairman, Chief Executive Officer and Heywood Knopf Director (principal executive officer) David E. Stoll _____________________________________________ Vice President, Secretary, Treasurer and David E. Stoll Director (principal financial and accounting officer) Joseph P. Felicelli _____________________________________________ Director Joseph P. Felicelli Marshall Knopf _____________________________________________ Director Marshall Knopf Thomas J. Snyder _____________________________________________ Director Thomas J. Snyder
II-27 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. Power Investments Marine, Inc. J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President and Director _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Secretary, Treasurer and Director _____________________________________________ (principal financial and accounting David E. Stoll officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-28 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. DR Sales, Inc. Richard L. Stanley By: _________________________________ Richard L. Stanley President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- Richard L. Stanley President _____________________________________________ (principal executive officer) Richard L. Stanley David E. Stoll Vice President--Finance, Secretary and _____________________________________________ Director (principal financial and David E. Stoll accounting officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-29 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. HSG II, Inc. J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Vice President--Finance, Secretary and _____________________________________________ Director (principal financial and David E. Stoll accounting officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-30 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Anderson, State of Indiana, on the 20th day of July, 2001. HSG I, Inc. J. Michael Jarvis By: _________________________________ J. Michael Jarvis President POWER OF ATTORNEY Each person whose signature appears below hereby constitutes and appoints Thomas J. Snyder and Susan E. Goldy, either of whom may act without the joinder of the other, as such person's true and lawful attorney-in-fact and agent with full power of substitution and resubstitution, for such person and in such person's name, place and stead, in any and all capacities to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with all exhibits thereto and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as such person might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or their substitute or substitutes may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Act of 1933, as amended, this Registration Statement has been signed below by the following persons in the capacities indicated on July 20, 2001.
Signatures Title ---------- ----- J. Michael Jarvis President _____________________________________________ (principal executive officer) J. Michael Jarvis David E. Stoll Vice President--Finance, Secretary and _____________________________________________ Director (principal financial and David E. Stoll accounting officer) Thomas J. Snyder Director _____________________________________________ Thomas J. Snyder
II-31 EX-4.3 2 dex43.txt INDENTURE EXECUTION COPY ================================================================================ DELCO REMY INTERNATIONAL, INC. 11% Senior Subordinated Notes Due 2009 __________________________________________________ INDENTURE Dated as of April 26, 2001 __________________________________________________ FIRST UNION NATIONAL BANK Trustee ================================================================================ TABLE OF CONTENTS
Page ---- ARTICLE 1 Definitions and Incorporation by Reference SECTION 1.01. Definitions.......................................................................... 1 SECTION 1.02. Other Definitions.................................................................... 28 SECTION 1.03. Incorporation by Reference of Trust Indenture Act............................................................. 28 SECTION 1.04. Rules of Construction................................................................ 29 ARTICLE 2 The Securities SECTION 2.01. Form and Dating...................................................................... 30 SECTION 2.02. Execution and Authentication......................................................... 30 SECTION 2.03. Registrar and Paying Agent........................................................... 31 SECTION 2.04. Paying Agent To Hold Money in Trust.................................................. 31 SECTION 2.05. Securityholder Lists................................................................. 32 SECTION 2.06. Transfer and Exchange................................................................ 32 SECTION 2.07. Replacement Securities............................................................... 32 SECTION 2.08. Outstanding Securities............................................................... 33 SECTION 2.09. Temporary Securities................................................................. 33 SECTION 2.10. Cancellation......................................................................... 33 SECTION 2.11. Defaulted Interest................................................................... 34 SECTION 2.12. CUSIP Numbers........................................................................ 34 SECTION 2.13. Issuance of Additional Securities.................................................... 34 ARTICLE 3 Redemption SECTION 3.01. Notices to Trustee................................................................... 35 SECTION 3.02. Selection of Securities To Be Redeemed............................................... 35 SECTION 3.03. Notice of Redemption................................................................. 36 SECTION 3.04. Effect of Notice of Redemption....................................................... 37 SECTION 3.05. Deposit of Redemption Price.......................................................... 37 SECTION 3.06. Securities Redeemed in Part.......................................................... 37
ARTICLE 4 Covenants SECTION 4.01. Payment of Securities................................................................ 37 SECTION 4.02. SEC Reports.......................................................................... 38 SECTION 4.03. Limitation on Indebtedness........................................................... 38 SECTION 4.04. Limitation on Restricted Payments.................................................... 42 SECTION 4.05. Limitation on Restrictions on Distributions from Restricted Subsidiaries............. 47 SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock................................... 49 SECTION 4.07. Limitation on Affiliate Transactions................................................. 53 SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of Restricted Subsidiaries....... 55 SECTION 4.09. Change of Control.................................................................... 55 SECTION 4.10. Limitation on Liens.................................................................. 57 SECTION 4.11. Compliance Certificate............................................................... 58 SECTION 4.12. Further Instruments and Acts......................................................... 58 SECTION 4.13. Future Guarantors.................................................................... 58 ARTICLE 5 Successor Company SECTION 5.01. When Company May Merge or Transfer Assets............................................ 58 SECTION 5.02. When a Subsidiary Guarantor May Merge or Transfer Assets............................. 59 ARTICLE 6 Defaults and Remedies SECTION 6.01. Events of Default.................................................................... 60 SECTION 6.02. Acceleration......................................................................... 63 SECTION 6.03. Other Remedies....................................................................... 64 SECTION 6.04. Waiver of Past Defaults.............................................................. 64 SECTION 6.05. Control by Majority.................................................................. 64 SECTION 6.06. Limitation on Suits.................................................................. 64 SECTION 6.07. Rights of Holders to Receive Payment................................................. 65 SECTION 6.08. Collection Suit by Trustee........................................................... 65 SECTION 6.09. Trustee May File Proofs of Claim..................................................... 65 SECTION 6.10. Priorities........................................................................... 66 SECTION 6.11. Undertaking for Costs................................................................ 66 SECTION 6.12. Waiver of Stay or Extension Laws..................................................... 67
ARTICLE 7 Trustee SECTION 7.01. Duties of Trustee.................................................................. 67 SECTION 7.02. Rights of Trustee.................................................................. 69 SECTION 7.03. Individual Rights of Trustee....................................................... 69 SECTION 7.04. Trustee's Disclaimer............................................................... 69 SECTION 7.05. Notice of Defaults................................................................. 70 SECTION 7.06. Reports by Trustee to Holders...................................................... 70 SECTION 7.07. Compensation and Indemnity......................................................... 70 SECTION 7.08. Replacement of Trustee............................................................. 71 SECTION 7.09. Successor Trustee by Merger........................................................ 72 SECTION 7.10. Eligibility; Disqualification...................................................... 73 SECTION 7.11. Preferential Collection of Claims Against Company.................................. 73 ARTICLE 8 Discharge of Indenture; Defeasance SECTION 8.01. Discharge of Liability on Securities; Defeasance................................... 73 SECTION 8.02. Conditions to Defeasance........................................................... 75 SECTION 8.03. Application of Trust Money......................................................... 76 SECTION 8.04. Repayment to Company............................................................... 76 SECTION 8.05. Indemnity for Government Obligations............................................... 77 SECTION 8.06. Reinstatement...................................................................... 77 ARTICLE 9 Amendments SECTION 9.01. Without Consent of Holders......................................................... 77 SECTION 9.03. Compliance with Trust Indenture Act................................................ 80 SECTION 9.04. Revocation and Effect of Consents and Waivers...................................... 80 SECTION 9.05. Notation on or Exchange of Securities.............................................. 80 SECTION 9.06. Trustee To Sign Amendments......................................................... 80 SECTION 9.07. Payment for Consent................................................................ 81 ARTICLE 10 Subordination SECTION 10.01. Agreement To Subordinate.......................................................... 81 SECTION 10.02. Liquidation, Dissolution, Bankruptcy.............................................. 81 SECTION 10.03. Default on Senior Indebtedness.................................................... 82 SECTION 10.04. Acceleration of Payment of Securities............................................. 83
SECTION 10.05. When Distribution Must Be Paid Over.................................................... 83 SECTION 10.06. Subrogation............................................................................ 83 SECTION 10.07. Relative Rights........................................................................ 84 SECTION 10.08. Subordination May Not Be Impaired by Company........................................... 84 SECTION 10.09. Rights of Trustee and Paying Agent..................................................... 84 SECTION 10.10. Distribution or Notice to Representative............................................... 85 SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit Right To Accelerate............... 85 SECTION 10.12. Trust Moneys Not Subordinated.......................................................... 85 SECTION 10.13. Trustee Entitled To Rely............................................................... 85 SECTION 10.14. Trustee To Effectuate Subordination.................................................... 86 SECTION 10.15. Trustee Not Fiduciary for Holders of Senior Indebtedness............................... 86 SECTION 10.16. Reliance by Holders of Senior Indebtedness on Subordination Provisions................. 86 ARTICLE 11 Subsidiary Guaranties SECTION 11.01. Guaranties............................................................................. 87 SECTION 11.02. Limitation on Liability................................................................ 89 SECTION 11.03. Successors and Assigns................................................................. 90 SECTION 11.04. No Waiver.............................................................................. 90 SECTION 11.05. Modification........................................................................... 90 SECTION 11.06. Release of Subsidiary Guarantor........................................................ 90 SECTION 11.07. Execution of Supplemental Indenture for Future Subsidiary Guarantors................... 91 ARTICLE 12 Subordination of Subsidiary Guaranties SECTION 12.01. Agreement To Subordinate............................................................... 91 SECTION 12.02. Liquidation, Dissolution, Bankruptcy................................................... 92 SECTION 12.03. Default on Senior Indebtedness of Subsidiary Guarantor................................. 92 SECTION 12.04. Demand for Payment..................................................................... 93 SECTION 12.05. When Distribution Must Be Paid Over.................................................... 93 SECTION 12.06. Subrogation............................................................................ 93 SECTION 12.07. Relative Rights........................................................................ 93 SECTION 12.08. Subordination May Not Be Impaired by Company........................................... 94 SECTION 12.09. Rights of Trustee and Paying Agent..................................................... 94 SECTION 12.10. Distribution or Notice to Representative............................................... 95 SECTION 12.11. Article 12 Not To Prevent Defaults Under a Subsidiary Guaranty or Limit Right To Demand Payment....................................................................... 95
SECTION 12.12. Trustee Entitled To Rely................................................................... 95 SECTION 12.13. Trustee To Effectuate Subordination........................................................ 96 SECTION 12.14. Trustee Not Fiduciary for Holders of Senior Indebtedness of Subsidiary Guarantor........... 96 SECTION 12.15. Reliance by Holders of Senior Indebtedness on Subordination Provisions..................... 96 ARTICLE 13 Miscellaneous SECTION 13.01. Trust Indenture Act Controls............................................................... 96 SECTION 13.02. Notices.................................................................................... 97 SECTION 13.03. Communication by Holders with Other Holders................................................ 97 SECTION 13.04. Certificate and Opinion as to Conditions Precedent......................................... 98 SECTION 13.05. Statements Required in Certificate or Opinion.............................................. 98 SECTION 13.06. When Securities Disregarded................................................................ 99 SECTION 13.07. Rules by Trustee, Paying Agent and Registrar............................................... 99 SECTION 13.08. Legal Holidays............................................................................. 99 SECTION 13.09. Governing Law.............................................................................. 99 SECTION 13.10. No Recourse Against Others................................................................. 99 SECTION 13.11. Successors................................................................................. 99 SECTION 13.12. Multiple Originals......................................................................... 100 SECTION 13.13. Table of Contents; Headings................................................................ 100
Contents, p. 8 Page ---- Appendix A Provisions Relating to Initial Securities, Exchange Securities and Private Exchange Securities Exhibit 1 to Form of Initial Security Appendix A Exhibit A Form of Exchange Security or Private Exchange Security Exhibit B Form of Supplemental Indenture CROSS-REFERENCE TABLE TIA Indenture Section Section ------- ------- 310(a) (1) ........................... 7.10 (a) (2) ........................... 7.10 (a) (3) ........................... N.A. (a) (4) ........................... N.A. (b) ........................... .08; 7.10 (c) ........................... N.A. 311(a) ........................... 7.11 (b) ........................... 7.11 (c) ........................... N.A. 312(a) ........................... 2.05 (b) ........................... 3.03 (c) ........................... 3.03 313(a) ........................... 7.06 (b)(1) ........................... N.A. (b)(2) ........................... 7.06 (c) ........................... 3.02 (d) ........................... 7.06 314(a) ........................... .02; 4.11; 3.02 (b) ........................... N.A. (c) (1) ........................... 3.04 (c) (2) ........................... 3.04 (c) (3) ........................... N.A. (d) ........................... N.A. (e) ........................... 3.05 (f) ........................... 4.11 315(a) ........................... 7.01 (b) ........................... .05; 13.02 (c) ........................... 7.01 (d) ........................... 7.01 (e) ........................... 6.11 316(a) (last sentence) ........................... 13.06 TIA Indenture Section Section ------- ------- (a)(1)(A) ................................... 6.05 (a)(1)(B) ................................... 6.04 (a)(2) .................................. N.A. (b) .................................. 6.07 317(a)(1) .................................. 6.08 (a)(2) .................................. 6.09 (b) .................................. 2.04 318(a) .................................. 3.01 N.A. Means Not Applicable. Note: This Cross-Reference Table shall not, for any purposes, be deemed to be part of this Indenture. EXECUTION COPY INDENTURE dated as of April 26, 2001, among DELCO REMY INTERNATIONAL, INC., a Delaware corporation (the "Company"), ------- certain of the Company's subsidiaries signatory hereto (each, a "Subsidiary Guarantor" and, collectively, the "Subsidiary --------------------- ---------- Guarantors") and FIRST UNION NATIONAL BANK, a national banking ---------- association (the "Trustee"). ------- Each party agrees as follows for the benefit of the other parties and for the equal and ratable benefit of the Holders of the Company's Initial Securities, Exchange Securities and Private Exchange Securities (collectively, the "Securities"): ---------- ARTICLE 1 Definitions and Incorporation by Reference ------------------------------------------ SECTION 1.01. Definitions. ------------ "Additional Assets" means (i) any property or assets (other than ----------------- Indebtedness and Capital Stock) in a Related Business; (ii) the Capital Stock of a Person that becomes a Restricted Subsidiary as a result of the acquisition of such Capital Stock by the Company or another Restricted Subsidiary; or (iii) Capital Stock constituting a minority interest in any Person that at such time is a Restricted Subsidiary; provided, however, that any such Restricted -------- ------- Subsidiary described in clauses (ii) or (iii) above is primarily engaged in a Related Business. "Additional Securities" means, subject to the Company's compliance --------------------- with Section 4.03, 11% Senior Subordinated Notes Due 2009 issued from time to time after the Issue Date under the terms of this Indenture (other than pursuant to Section 2.06, 2.07, 2.09, 3.06 or 9.05 of this Indenture and other than Exchange Securities or Private Exchange Securities issued pursuant to an exchange offer for other Securities outstanding under this Indenture). "Affiliate" of any specified Person means any other Person, directly --------- or indirectly, controlling or controlled by or under direct or indirect common control with such specified Person. For the purposes of this definition, "control" when used with respect to any Person means the power to direct the management and policies of such Person, directly or indirectly, whether through the 2 ownership of voting securities, by contract or otherwise; and the terms "controlling" and "controlled" have meanings correlative to the foregoing. For purposes of Sections 4.04, 4.06 and 4.07 only, "Affiliate" shall also mean any beneficial owner of Capital Stock representing 10% or more of the total voting power of the Voting Stock (on a fully diluted basis) of the Company or of rights or warrants to purchase such Capital Stock (whether or not currently exercisable) and any Person who would be an Affiliate of any such beneficial owner pursuant to the first sentence hereof. "Asset Disposition" means any sale, lease, transfer or other ----------------- disposition (or series of related sales, leases, transfers or dispositions) by the Company or any Restricted Subsidiary, including any disposition by means of a merger, consolidation or similar transaction (each referred to for the purposes of this definition as a "disposition"), of (i) any shares of Capital Stock of a Restricted Subsidiary (other than directors' qualifying shares and, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders), (ii) all or substantially all the assets of any division, business segment or comparable line of business of the Company or any Restricted Subsidiary or (iii) any other assets of the Company or any Restricted Subsidiary outside of the ordinary course of business of the Company or such Restricted Subsidiary (other than, in the case of (i), (ii) and (iii) above, (y) a disposition by a Restricted Subsidiary to the Company or by the Company or a Restricted Subsidiary to a Wholly Owned Subsidiary and (z) for purposes of Section 4.06 only, (A) a disposition that constitutes a Permitted Investment or Restricted Payment permitted by Section 4.04) and (B) a disposition of accounts receivable (and related assets) in connection with a Permitted Receivables Financing). "Asset Purchase Agreement" means the Asset Purchase Agreement dated ------------------------ July 13, 1994, by and among the Company, DRA and General Motors Corporation. "Attributable Debt" in respect of a Sale/Leaseback Transaction means, ----------------- as at the time of determination, the present value (discounted at the interest rate borne by the Securities, compounded annually) of the total obligations of the lessee for rental payments during the remaining term of the lease included in such Sale/Leaseback Transaction (including any period for which such lease has been extended). "Average Life" means, as of the date of determination, with respect to ------------ any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum of the products of the numbers of years from the date of determination to the dates of each successive scheduled principal payment of such Indebtedness or redemption or similar payment with respect to such Preferred Stock multi- 3 plied by the amount of such payment by (ii) the sum of all such payments. "Bank Indebtedness" means any and all amounts payable under or in ----------------- respect of the Senior Credit Facility including principal, premium (if any), interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceedings), fees, charges, expenses, reimbursement obligations, Guarantees and all other amounts payable thereunder or in respect thereof. "Board of Directors" means the Board of Directors of the Company or ------------------ any committee thereof duly authorized to act on behalf of such Board. "Business Day" means each day which is not a Legal Holiday. ------------ "Capital Lease Obligations" means an obligation that is required to be ------------------------- classified and accounted for as a capital lease for financial reporting purposes in accordance with GAAP, and the amount of Indebtedness represented by such obligation shall be the capitalized amount of such obligation determined in accordance with GAAP; and the Stated Maturity thereof shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty. "Capital Stock" of any Person means any and all shares, interests, ------------- rights to purchase, warrants, options, participations or other equivalents of or interests in (however designated) equity of such Person, including any Preferred Stock, but excluding any debt securities convertible into such equity. "Change of Control" means the occurrence of any of the following ----------------- events: (1) prior to the first public offering of common stock of the Company after the Issue Date, the Permitted Holders cease to be the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange Act), directly or indirectly, of a majority in the aggregate of the total voting power of the Voting Stock of the Company, whether as a result of issuance of securities of the Company, any merger, consolidation, liquidation or dissolution of the Company, any direct or indirect transfer of securities by the Permitted Holders or otherwise (for purposes of this clause (1) and clause (2) below, the Permitted Holders shall be deemed to beneficially own any Voting Stock of any Person (the "specified entity") held by any other Person (the "parent entity") so long as the Permitted Holders beneficially own (as so defined), directly or indirectly, in the aggregate a majority of the voting power of the Voting Stock of the parent entity); 4 (2) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than one or more Permitted Holders, is or becomes the beneficial owner (as defined in clause (1) above, except that for purposes of this clause (2) such person shall be deemed to have "beneficial ownership" of all shares that any such person has the right to acquire, whether such right is exercisable immediately or only after the passage of time), directly or indirectly, of more than 35% of the total voting power of the Voting Stock of the Company; provided, however, that the Permitted Holders beneficially own (as -------- ------- defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the total voting power of the Voting Stock of the Company than such other person and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the Board of Directors (for the purposes of this clause (2), such other person shall be deemed to beneficially own any Voting Stock of a specified entity held by a parent entity, if such other person is the beneficial owner (as defined in this clause (2)), directly or indirectly, of more than 35% of the voting power of the Voting Stock of such parent entity and the Permitted Holders beneficially own (as defined in clause (1) above), directly or indirectly, in the aggregate a lesser percentage of the voting power of the Voting Stock of such parent entity and do not have the right or ability by voting power, contract or otherwise to elect or designate for election a majority of the board of directors of such parent entity); (3) individuals who on the Issue Date constituted the Board of Directors (together with any new directors whose election by such Board of Directors or whose nomination for election by the stockholders of the Company was approved by a vote of a majority of the directors of the Company then still in office who were either directors on the Issue Date or whose election or nomination for election was previously so approved) cease for any reason to constitute a majority of the Board of Directors then in office; (4) the merger or consolidation of the Company with or into another Person or the merger of another Person with or into the Company, or the sale of all or substantially all the assets of the Company (determined on a consolidated basis) to another Person (other than any merger or consolidation with or into, or any sale to, a Person that is controlled by the Permitted Holders), other than a transaction following which (A) in the case of a merger or consolidation transaction, holders of securities that represented 100% of the Voting Stock of the Company immediately prior to such transaction (or other securities into which such securities are converted as part of such merger or consolidation transaction) own directly or indirectly at least a majority of the voting power of the Voting Stock of the surviving Person in such merger or 5 consolidation transaction immediately after such transaction and (B) in the case of a sale of assets transaction, the transferee Person becomes the obligor in respect of the Securities and a Subsidiary of the transferor of such assets; or (5) the adoption of a plan relating to the liquidation or dissolution of the Company. "Code" means the Internal Revenue Code of 1986, as amended. ---- "Company" means the party named as such in this Indenture until a ------- successor replaces it and, thereafter, means the successor and, for purposes of any provision contained herein and required by the TIA, each other obligor on the indenture securities. "Consolidated Coverage Ratio" as of any date of determination means --------------------------- the ratio of (i) the aggregate amount of EBITDA for the period of the most recent four consecutive fiscal quarters ending at least 45 days (or, if less, the number of days after the end of such fiscal quarter as the consolidated financial statements of the Company shall be provided to the Securityholders pursuant to the Indenture) prior to the date of such determination to (ii) Consolidated Interest Expense for such four fiscal quarters; provided, however, -------- ------- that: (1) if the Company or any Restricted Subsidiary has Incurred any Indebtedness since the beginning of such period that remains outstanding on such date of determination or if the transaction giving rise to the need to calculate the Consolidated Coverage Ratio is an Incurrence of Indebtedness, or both, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving effect on a pro forma basis to such Indebtedness as if such Indebtedness had been Incurred on the first day of such period and the discharge of any other Indebtedness repaid, repurchased, defeased or otherwise discharged with the proceeds of such new Indebtedness as if such discharge had occurred on the first day of such period (except that, in the case of Indebtedness used to finance working capital needs incurred under a revolving credit or similar arrangement, the amount thereof shall be deemed to be the average daily balance of such Indebtedness during such four-fiscal-quarter period); (2) if since the beginning of such period the Company or any Restricted Subsidiary shall have made any Asset Disposition, the EBITDA for such period shall be reduced by an amount equal to the EBITDA (if positive) directly attributable to the assets which are the subject of such Asset Disposition for such period, or increased by an amount equal to the EBITDA (if negative), directly attributable thereto for such period and Consolidated Interest Expense for such period shall be reduced by an amount equal to the Consolidated Interest Expense directly 6 attributable to any Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased, defeased, assumed by a third person (to the extent the Company and its Restricted Subsidiaries are no longer liable for such Indebtedness) or otherwise discharged with respect to the Company and its continuing Restricted Subsidiaries in connection with such Asset Disposition for such period (or, if the Capital Stock of any Restricted Subsidiary is sold, the Consolidated Interest Expense for such period directly attributable to the Indebtedness of such Restricted Subsidiary to the extent the Company and its continuing Restricted Subsidiaries are no longer liable for such Indebtedness after such sale); (3) if the Company or any Restricted Subsidiary has repaid, repurchased, defeased or otherwise discharged any Indebtedness since the beginning of such period or if any Indebtedness is to be repaid, repurchased, defeased or otherwise discharged (in each case other than Indebtedness Incurred under any revolving credit facility unless such Indebtedness has been permanently repaid and has not been replaced) on the date of the transaction giving rise to the need to calculate the Consolidated Coverage Ratio, EBITDA and Consolidated Interest Expense for such period shall be calculated on a pro forma basis as if such discharge had occurred on the first day of such period and as if the Company or such Restricted Subsidiary has not earned the interest income actually earned during such period in respect of cash or Temporary Cash Investments used to repay, repurchase, defease or otherwise discharge such Indebtedness; (4) if since the beginning of such period the Company or any Restricted Subsidiary (by merger or otherwise) shall have made an Investment in any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary) or an acquisition of assets, which acquisition constitutes all or substantially all of an operating unit of a business, including any such Investment or acquisition occurring in connection with a transaction requiring a calculation to be made hereunder, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto (including the Incurrence of any Indebtedness) as if such Investment or acquisition occurred on the first day of such period; and (5) if since the beginning of such period any Person (that subsequently became a Restricted Subsidiary or was merged with or into the Company or any Restricted Subsidiary since the beginning of such period) shall have made any Asset Disposition, any Investment or acquisition of assets that would have required an adjustment pursuant to clause (3) or (4) above if made by the Company or a Restricted Subsidiary during such period, EBITDA and Consolidated Interest Expense for such period shall be calculated after giving pro forma effect thereto as if such 7 Asset Disposition, Investment or acquisition occurred on the first day of such period. For purposes of this definition, whenever pro forma effect is to be given to an acquisition of assets, the amount of income or earnings relating thereto and the amount of Consolidated Interest Expense associated with any Indebtedness Incurred in connection therewith, the pro forma calculations shall be determined in good faith by a responsible financial or accounting Officer of the Company. If any Indebtedness bears a floating rate of interest and is being given pro forma effect, the interest of such Indebtedness shall be calculated as if the rate in effect on the date of determination had been the applicable rate for the entire period (taking in to account any Interest Rate Agreement applicable to such Indebtedness if such Interest Rate Agreement has a remaining term in excess of 12 months). "Consolidated Interest Expense" means, for any period, the total ----------------------------- interest expense of the Company and its consolidated Restricted Subsidiaries, plus, (a) to the extent not included in such total interest expense, and to the extent incurred by the Company or its Restricted Subsidiaries, (i) interest expense attributable to Capital Lease Obligations, (ii) amortization of debt discount, (iii) capitalized interest, (iv) non-cash interest expenses, (v) commissions, discounts and other fees and charges owed with respect to letters of credit and bankers' acceptance financing, (vi) net costs associated with Hedging Obligations (including amortization of fees), (vii) Preferred Stock dividends in respect of all Preferred Stock held by Persons other than the Company or a Wholly Owned Subsidiary, (viii) interest incurred in connection with Investments in discontinued operations, (ix) interest actually paid on any Indebtedness of any other Person that is Guaranteed by the Company or any Restricted Subsidiary and (x) the cash contributions to any employee stock ownership plan or similar trust to the extent such contributions are used by such plan or trust to pay interest or fees to any Person (other than the Company or any Wholly Owned Subsidiary) in connection with Indebtedness Incurred by such plan or trust, minus, (b) to the extent included in such total interest expense, amortization of deferred financing costs, fees and expenses. 8 "Consolidated Net Income" means, for any period, the net income of the ----------------------- Company and its consolidated Subsidiaries; provided, however, that there shall -------- ------- not be included in such Consolidated Net Income: (i) any net income (or loss) of any Person if such Person is not a Restricted Subsidiary, except that subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Person for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash actually distributed by such Person during such period to the Company or a Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to a Restricted Subsidiary, to the limitations contained in clause (iii) below); (ii) for purposes of subclause (a)(3)(A) of Section 4.04 only, any net income (or loss) of any Person acquired by the Company or a Subsidiary in a pooling of interests transaction for any period prior to the date of such acquisition; (iii) any net income of any Restricted Subsidiary if such Restricted Subsidiary is subject to restrictions, directly or indirectly, on the payment of dividends or the making of distributions by such Restricted Subsidiary, directly or indirectly, to the Company, except that (A) subject to the exclusion contained in clause (iv) below, the Company's equity in the net income of any such Restricted Subsidiary for such period shall be included in such Consolidated Net Income up to the aggregate amount of cash that could have been distributed by such Restricted Subsidiary consistent with such restriction during such period to the Company or another Restricted Subsidiary as a dividend or other distribution (subject, in the case of a dividend or other distribution paid to another Restricted Subsidiary, to the limitation contained in this clause) and (B) the Company's equity in a net loss of any such Restricted Subsidiary for such period shall be included in determining such Consolidated Net Income; (iv) any gain (or loss) realized upon the sale or other disposition of any assets of the Company or its consolidated Subsidiaries (including pursuant to any sale-and-leaseback arrangement) which is not sold or otherwise disposed of in the ordinary course of business and any gain (but not loss) realized upon the sale or other disposition of any Capital Stock of any Person; (v) extraordinary gains or losses; 9 (vi) the cumulative effect of a change in accounting principles; and (vii) any noncash compensation expense realized for grants of performance shares, stock options or other stock awards to officers, directors and employees of the Company or any Restricted Subsidiary. Notwithstanding the foregoing, for the purpose of Section 4.04 only, there shall be excluded from Consolidated Net Income any repurchases, repayments or redemptions of Investments, proceeds realized on the sale of Investments or return of capital to the Company or a Restricted Subsidiary to the extent such repurchases, repayments, redemptions, proceeds or returns increase the amount of Restricted Payments permitted under such covenant pursuant to clause (a)(3)(D) thereof. "Court Square" means Court Square Capital Limited, a Delaware ------------ corporation. "Currency Agreement" means with respect to any Person, any foreign ------------------ exchange contract, currency swap agreement or other similar agreement as to which such Person is a party or a beneficiary. "CVC" means (i) any Subsidiary of Citigroup Inc., a Delaware --- corporation, including Citicorp Venture Capital Ltd., a New York corporation, and Court Square; or (ii) any investment vehicle that (A) is sponsored or managed (whether through ownership of securities having a majority of the voting power or through the management of investments) by any Subsidiary included in clause (i) hereof and (B) contains, as a part of its name, "Citigroup," "CVC" or any variant thereof; or (iii) World Equity Partners, L.P., a Delaware limited partnership. "CVC Investor" means (i) CVC; (ii) any officer, employee, director or ------------ general partner of CVC or the general partner of any investment vehicle included in the definition of CVC; and (iii) any trust, partnership or other entity established solely for the benefit of the Persons included in (i) or (ii) hereof. "Default" means any event which is, or after notice or passage of time ------- or both would be, an Event of Default. "Designated Senior Indebtedness" means (i) the Bank Indebtedness and ------------------------------ (ii) any other Senior Indebtedness of the Company which, at the date of determination, has an aggregate principal amount outstanding of, or under which, at the date of determination, the holders thereof are committed to lend up to, at least $10 million and is specifically designated by the Company in the instrument evidencing or governing such Senior Indebtedness as 10 "Designated Senior Indebtedness" for purposes of this Indenture. "Disqualified Stock" means, with respect to any Person, any Capital ------------------ Stock which by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable) or upon the happening of any event (i) matures or is mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii) is convertible or exchangeable, at the option of the holder thereof, for Indebtedness or Disqualified Stock or (iii) is redeemable at the option of the holder thereof, in whole or in part, in each case on or prior to the first anniversary of the Stated Maturity of the Securities. "Domestic Restricted Subsidiary" means any Restricted Subsidiary of ------------------------------ the Company other than a Foreign Restricted Subsidiary. "DRA" means Delco Remy America, Inc., a Delaware corporation and a --- Wholly Owned Subsidiary. "EBITDA" for any period means the sum of Consolidated Net Income, plus ------ Consolidated Interest Expense plus the following, without duplication, to the extent deducted in calculating such Consolidated Net Income: (a) income tax expense, (b) depreciation expense, (c) amortization expense and (d) all other non-cash items reducing Consolidated Net Income (other than items that will require cash payments and for which an accrual or reserve is, or is required by GAAP to be, made, other than accruals for post-retirement benefits other than pensions), less all non-cash items increasing Consolidated Net Income, in each case for such period. Notwithstanding the foregoing, the provision for taxes based on the income or profits of, and the depreciation and amortization of, a Subsidiary of the Company shall be added to Consolidated Net Income to compute EBITDA only to the extent (and in the same proportion) that the net income of such Subsidiary was included in calculating Consolidated Net Income. "Excess Proceeds" has the meaning set forth in Section 4.06(a). --------------- "Exchange Act" means the Securities Exchange Act of 1934, as amended. ------------ "Financing Disposition" means any sale of any accounts receivable, or --------------------- interest therein, by the Company or any Subsidiary to any Receivables Subsidiary, or by the Receivables Subsidiary, pursuant to a Permitted Receivables Financing. "Foreign Restricted Subsidiary" means any Restricted Subsidiary of the ----------------------------- Company which is not organized under the laws of the United States of America or any State thereof or the District of Columbia. 11 "GAAP" means generally accepted accounting principles in the United ---- States of America as in effect as of the Issue Date, including those set forth in (i) the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants, (ii) statements and pronouncements of the Financial Accounting Standards Board and (iii) such other statements by such other entity as approved by a significant segment of the accounting profession. "GM Note" means the Contingent Purchase Price Note issued by DRA ------- pursuant to the Asset Purchase Agreement. "Guarantee" means any obligation, contingent or otherwise, of any --------- Person directly or indirectly guaranteeing any Indebtedness or other obligation of any other Person and any obligation, direct or indirect, contingent or otherwise, of such Person (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or other obligation of such Person (whether arising by virtue of partnership arrangements, or by agreements to keep-well, to purchase assets, goods, securities or services, to take-or-pay or to maintain financial statement conditions or otherwise) or (ii) entered into for the purpose of assuring in any other manner the obligee of such Indebtedness or other obligation of the payment thereof or to protect such obligee against loss in respect thereof (in whole or in part); provided, however, that the term -------- ------- "Guarantee" shall not include endorsements for collection or deposit in the ordinary course of business. The term "Guarantee" used as a verb has a corresponding meaning. The term "Guarantor" shall mean any Person Guaranteeing any obligation. "Hedging Obligations" of any Person means the obligations of such ------------------- Person pursuant to any Interest Rate Agreement or Currency Agreement. "Holder" or "Securityholder" means the Person in whose name a Security ------ -------------- is registered on the Registrar's books. "Incur" means issue, assume, Guarantee, incur or otherwise become ----- liable for; provided, however, that any Indebtedness or Capital Stock of a -------- ------- Person existing at the time such Person becomes a Subsidiary (whether by merger, consolidation, acquisition or otherwise) shall be deemed to be Incurred by such Subsidiary at the time it becomes a Subsidiary; and provided further, however, ---------------- ------- that in the case of a discount security, neither the accrual of interest nor the accretion of original issue discount shall be considered an Incurrence of Indebtedness, but the entire face amount of such security shall be deemed Incurred upon the issuance of such security. The term "Incurrence" when used as a noun shall have a correlative meaning. 12 "Indebtedness" means, with respect to any Person on any date of ------------ determination (without duplication): (i) the principal of and premium (if any) in respect of (A) indebtedness of such Person for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which such Person is responsible or liable; (ii) all Capital Lease Obligations of such Person and all Attributable Debt in respect of Sale/Leaseback Transactions entered into by such Person; (iii) all obligations of such Person issued or assumed as the deferred purchase price of property or services, all conditional sale obligations of such Person and all obligations of such Person under any title retention agreement (but excluding trade accounts payable arising in the ordinary course of business), which purchase price or obligation is due more than six months after the date of placing such property in service or taking delivery and title thereto or the completion of such services (provided that, in the case of obligations of an acquired Person assumed in -------- connection with an acquisition of such Person, such obligations would constitute Indebtedness of such Person); (iv) all obligations of such Person for the reimbursement of any obligor on any letter of credit, banker's acceptance or similar credit transaction (other than obligations with respect to letters of credit securing obligations (other than obligations described in clauses (i) through (iii) above) entered into in the ordinary course of business of such Person to the extent such letters of credit are not drawn upon or, if and to the extent drawn upon, such drawing is reimbursed no later than the tenth Business Day following receipt by such Person of a demand for reimbursement following payment on the letter of credit); (v) the amount of all obligations of such Person with respect to the redemption, repayment or other repurchase of any Disqualified Stock or, with respect to any Subsidiary of such Person, any Preferred Stock (but excluding, in each case, any accrued dividends); (vi) all obligations of the type referred to in clauses (i) through (v) of other Persons and all dividends of other Persons for the payment of which, in either case, such Person is responsible or liable, directly or indirectly, as obligor, guarantor or otherwise, including by means of any Guarantee; (vii) all obligations of the type referred to in clauses (i) through (vi) of other Persons secured by 13 any Lien on any property or asset of such Person (whether or not such obligation is assumed by such Person), the amount of such obligation being deemed to be the lesser of the value of such property or assets or the amount of the obligation so secured; and (viii) to the extent not otherwise included in this definition, Hedging Obligations of such Person. The amount of Indebtedness of any Person at any date shall be the outstanding balance at such date of all unconditional obligations as described above and the maximum liability, upon the occurrence of the contingency giving rise to the obligation, of any contingent obligations as described above at such date; provided, however, that (A) the amount outstanding at any time of any - -------- ------- Indebtedness issued with original issue discount shall be deemed to be the face amount of such Indebtedness less the remaining unamortized portion of the original issue discount of such Indebtedness at such time as determined in conformity with GAAP and (B) the outstanding principal amount of the GM Note shall be deemed to be zero until the last day of the fiscal year or other period with respect to which the amount due thereunder shall be determined. "Indenture" means this Indenture as amended or supplemented from time --------- to time. "Interest Rate Agreement" means any interest rate swap agreement, ----------------------- interest rate cap agreement or other financial agreement or arrangement designed to protect the Company or any Restricted Subsidiary against fluctuations in interest rates. "Investment" in any Person means any direct or indirect advance, loan ---------- (other than advances to customers in the ordinary course of business that are recorded as accounts receivable on the balance sheet of such Person) or other extensions of credit (including by way of Guarantee or similar arrangement) or capital contribution to (by means of any transfer of cash or other property to others or any payment for property or services for the account or use of others), or any purchase or acquisition of Capital Stock, Indebtedness or other similar instruments issued by such Person. For purposes of the definition of "Unrestricted Subsidiary", the definition of "Restricted Payment" and Section 4.04, (i) "Investment" shall include the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of any Subsidiary of the Company at the time that such Subsidiary is designated an Unrestricted Subsidiary; provided, however, that upon a redesignation of such -------- ------- Subsidiary as a Restricted Subsidiary, the Company shall be deemed to continue to have a permanent "Investment" in an Unrestricted Subsidiary equal to an amount (if positive) equal to (x) the Company's "Investment" in such Subsidiary at the time of such redesignation less (y) the portion 14 (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of such Subsidiary at the time of such redesignation; and (ii) any property transferred to or from an Unrestricted Subsidiary shall be valued at its fair market value at the time of such transfer, in each case as determined in good faith by the Board of Directors. "Issue Date" means April 26, 2001. ---------- "Joint Venture" means, in respect of any Person, any corporation, ------------- association, partnership or other business entity of which not less than 20% and not more than 80% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Lien" means any mortgage, pledge, security interest, encumbrance, ---- lien or charge of any kind (including any conditional sale or other title retention agreement or lease in the nature thereof). "Management Investors" means each of the officers, employees and -------------------- directors of the Company who own Voting Stock of the Company, in each case so long as such person shall remain an officer, employee or director of the Company. "Net Available Cash" from an Asset Disposition means cash payments ------------------ received therefrom (including any cash payments received by way of deferred payment of principal pursuant to a note or installment receivable or otherwise, but only as and when received, but excluding any other consideration received in the form of assumption by the acquiring Person of Indebtedness or other obligations relating to such properties or assets or received in any other noncash form) in each case net of (i) all legal, title and recording tax expenses, commissions and other fees and expenses incurred, and all Federal, state, provincial, foreign and local taxes required to be paid or accrued as a liability under GAAP, as a consequence of such Asset Disposition, (ii) all payments made on any Indebtedness which is secured by any assets subject to such Asset Disposition, in accordance with the terms of any Lien upon or other security agreement of any kind with respect to such assets, or which must by its terms, or in order to obtain a necessary consent to such Asset Disposition, or by applicable law be, repaid out of the proceeds from such Asset Disposition, (iii) all distributions and other payments required to be made to minority interest holders in Subsidiaries or Joint Ventures as a result of such Asset Disposition and (iv) the deduction of appropriate amounts provided by the seller as a reserve, in accordance with 15 GAAP, against any liabilities associated with the property or other assets disposed in such Asset Disposition and retained by the Company or any Restricted Subsidiary after such Asset Disposition. "Net Cash Proceeds", with respect to any issuance or sale of Capital ----------------- Stock, means the cash proceeds of such issuance or sale net of attorneys' fees, accountants' fees, underwriters' or placement agents' fees, discounts or commissions and brokerage, consultant and other fees actually incurred in connection with such issuance or sale and net of taxes paid or payable as a result thereof. "Non-Wholly Owned Subsidiary" means a Restricted Subsidiary all the --------------------------- Capital Stock (other than, to the extent required by local ownership laws in foreign countries, shares owned by foreign shareholders) of which is owned by (i) the Company or one or more Wholly Owned Subsidiaries and (ii) any of the directors, officers, employees or former owners of such Restricted Subsidiary. "Officer" means the Chairman of the Board, the Chief Executive ------- Officer, the Chief Financial Officer, the President, any Vice President, the Treasurer or the Secretary of the Company. "Officers' Certificate" means a certificate signed by two Officers. --------------------- "Opinion of Counsel" means a written opinion from legal counsel who is ------------------ acceptable to the Trustee. The counsel may be an employee of or counsel to the Company or the Trustee. "Permitted Holders" means the CVC Investors, the Management Investors ----------------- and, in the case of any individual who is a Permitted Holder, any Permitted Transferee (as defined in the Stockholders Agreement except a Permitted Transferee by virtue of Section 3.5(b)(iv) of the Stockholders Agreement) of such individual; provided, however, that in no event shall any Persons (other -------- ------- than CVC), collectively, be deemed "Permitted Holders" with respect to more than 30% of the total voting power of all classes of Voting Stock of the Company. "Permitted Investment" means an Investment by the Company or any -------------------- Restricted Subsidiary in (i) the Company; (ii) a Restricted Subsidiary or a Person that will, upon the making of such Investment, become a Restricted Subsidiary; provided, however, that the primary business of such Restricted -------- ------- Subsidiary is a Related Business; (iii) another Person if as a result of such Investment such other Person is merged or consolidated with or into, or transfers or conveys all or substantially all its assets to, the Company or a Domestic Restricted Subsidiary; provided, however, that such Person's primary -------- ------- business is a Related Business; (iv) Temporary Cash Investments; (v) receivables owing to the Company or any Restricted Subsidiary if created or 16 acquired in the ordinary course of business and payable or dischargeable in accordance with customary trade terms; provided, however, that such trade terms -------- ------- may include such consessionary trade terms as the Company or any such Restricted Subsidiary deems reasonable under the circumstances; (vi) payroll, travel and similar advances to cover matters that are expected at the time of such advances ultimately to be treated as expenses for accounting purposes and that are made in the ordinary course of business; (vii) loans or advances to employees made in the ordinary course of business consistent with past practices of the Company or such Restricted Subsidiary and not exceeding $2 million in the aggregate outstanding at any time; (viii) stock, obligations or securities received in settlement of debts created in the ordinary course of business and owing to the Company or any Restricted Subsidiary or in satisfaction of judgments; and (ix) any Person to the extent such Investment represents the non-cash portion of the consideration received for an Asset Disposition as permitted pursuant to Section 4.06. "Permitted Receivables Financing" means any financing pursuant to ------------------------------- which the Company or any Restricted Subsidiary may sell, convey or otherwise transfer to a Receivables Subsidiary or any other Person (in the case of a transfer by a Receivables Subsidiary), or grant a security interest in, any accounts receivable (and related assets) of the Company or any Restricted Subsidiary; provided, however, that (i) the covenants, events of default and -------- ------- other provisions applicable to such financing shall be customary for such transactions and shall be on market terms (as determined in good faith by the Board of Directors) at the time such financing is entered into, (ii) the interest rate applicable to such financing shall be a market interest rate (as determined in good faith by the Board of Directors) at the time such financing is entered into and (iii) such financing shall be non-recourse to the Company and its Subsidiaries (other than the Receivables Subsidiary) except to a limited extent customary for such transactions. "Person" means any individual, corporation, partnership, joint ------ venture, association, joint-stock company, trust, unincorporated organization, government or any agency or political subdivision thereof or any other entity. "Preferred Stock", as applied to the Capital Stock of any corporation, --------------- means Capital Stock of any class or classes (however designated) which is preferred as to the payment of dividends, or as to the distribution of assets upon any voluntary or involuntary liquidation or dissolution of such corporation, over shares of Capital Stock of any other class of such corporation. "principal" of a Security means the principal of the Security plus the --------- premium, if any, payable on the 17 Security which is due or overdue or is to become due at the relevant time. "Public Equity Offering" means an underwritten primary public offering ---------------------- of common stock of the Company (or, for purposes of Section 4.08(D), any Restricted Subsidiary referred to therein) pursuant to an effective registration statement under the Securities Act. "Public Market" means any time after (i) a Public Equity Offering has ------------- been consummated with respect to a Restricted Subsidiary and (ii) at least 10% of the total issued and outstanding common stock of such Restricted Subsidiary has been distributed by means of an effective registration statement under the Securities Act or sales pursuant to Rule 144 under the Securities Act. "Purchase Money Indebtedness" mean Indebtedness (i) consisting of the --------------------------- deferred purchase price of property, conditional sale obligations, obligations under any title retention agreement, other purchase money obligations and obligations in respect of industrial revenue bonds or similar Indebtedness, in each case where the maturity of such Indebtedness does not exceed the anticipated useful life of the asset being financed, and (ii) incurred to finance the acquisition by the Company or a Restricted Subsidiary of such asset, including additions and improvements; provided, however, that any Lien arising -------- ------- in connection with any such Indebtedness shall be limited to the specified asset being financed or, in the case of real property or fixtures, including additions and improvements, the real property on which such asset is attached; and provided further, however, that such Indebtedness is Incurred within 90 days - ---------------- ------- after such acquisition of such asset by the Company or Restricted Subsidiary. "Receivables Subsidiary" means a bankruptcy-remote, special-purpose ---------------------- Wholly Owned Subsidiary formed in connection with a Permitted Receivables Financing. "Refinance" means, in respect of any Indebtedness, to refinance, --------- extend, renew, refund, repay, prepay, redeem, defease or retire, or to issue other Indebtedness in exchange or replacement for, such Indebtedness. "Refinanced" and "Refinancing" shall have correlative meanings. "Refinancing Indebtedness" means Indebtedness that Refinances any ------------------------ Indebtedness of the Company or any Restricted Subsidiary existing on the Issue Date or Incurred in compliance with this Indenture, including Indebtedness that refinances Refinancing Indebtedness; provided, however, that (i) such -------- ------- Refinancing Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the Indebtedness being Refinanced, (ii) such Refinancing Indebtedness has an Average Life at the time such Refinancing Indebtedness is Incurred that is equal to or greater than the Average Life 18 of the Indebtedness being Refinanced and (iii) such Refinancing Indebtedness has an aggregate principal amount (or if Incurred with original issue discount, an aggregate issue price) that is equal to or less than the aggregate principal amount (or if Incurred with original issue discount, the aggregate accreted value) then outstanding or committed (plus fees and expenses, including any premium and defeasance costs) under the Indebtedness being Refinanced; provided -------- further, however, that Refinancing Indebtedness shall not include (x) - ------- ------- Indebtedness of a Subsidiary that Refinances Indebtedness of the Company or (y) Indebtedness of the Company or a Restricted Subsidiary that Refinances Indebtedness of an Unrestricted Subsidiary. For purposes of this definition, the Average Life and the aggregate principal amount of the GM Note at the time of any Refinancing thereof shall be determined by a responsible financial or accounting Officer of the Company based on a good faith estimate of the amount of the contingent payment that will become due and payable under such note and the timing of the scheduled installments thereof in accordance with the terms of such note. "Related Business" means any business related, ancillary or ---------------- complementary (as determined in good faith by the Board of Directors) to the businesses of the Company and the Restricted Subsidiaries on the Issue Date. "Representative" means any trustee, agent or representative (if any) -------------- for an issue of Senior Indebtedness of the Company. "Restricted Payment" means, with respect to any Person, (i) the ------------------ declaration or payment of any dividends or any other distributions on or in respect of its Capital Stock (including any payment in connection with any merger or consolidation involving such Person) or similar payment to the holders of its Capital Stock, except dividends or distributions payable solely in its Capital Stock (other than Disqualified Stock)) and except dividends or distributions payable solely to the Company or a Restricted Subsidiary (and, if such Restricted Subsidiary is not wholly owned, to its other shareholders on a pro rata basis or on a basis that results in the receipt by the Company or a Restricted Subsidiary of dividends or distributions of greater value than it would receive on a pro rata basis), (ii) the purchase, redemption or other acquisition or retirement for value of any Capital Stock of the Company held by any Person or of any Capital Stock of a Restricted Subsidiary held by any Affiliate of the Company (other than a Restricted Subsidiary), including the exercise of any option to exchange any Capital Stock (other than into Capital Stock of the Company that is not Disqualified Stock), (iii) the purchase, repurchase, redemption, defeasance or other acquisition or retirement for value, prior to scheduled maturity, scheduled repayment or scheduled sinking fund payment of any Subordinated Obligations (other than the purchase, repurchase, or other 19 acquisition of Subordinated Obligations purchased in anticipation of satisfying a sinking fund obligation, principal installment or final maturity, in each case due within one year of the date of acquisition) or (iv) the making of any Investment in any Person (other than a Permitted Investment). "Restricted Subsidiary" means any Subsidiary of the Company that is --------------------- not an Unrestricted Subsidiary. "Sale/Leaseback Transaction" means an arrangement relating to property -------------------------- now owned or hereafter acquired whereby the Company or a Restricted Subsidiary transfers such property to a Person and the Company or a Restricted Subsidiary leases it from such Person. "SEC" means the Securities and Exchange Commission. --- "Secured Indebtedness" means any Indebtedness of the Company secured -------------------- by a Lien. "Secured Indebtedness" of any Subsidiary Guarantor has a correlative -------------------- meaning. "Senior Credit Facility" means the revolving credit facility made ---------------------- available pursuant to the Fourth Amended and Restated Financing Agreement, as amended as of April 19, 2001, among certain subsidiaries of the Company, as borrowers, the Company and certain subsidiaries of the Company, as guarantors, the lenders from time to time party thereto and Bank One, Indiana, National Association, as agent, as the same may be amended, waived, modified, Refinanced or replaced from time to time (except to the extent that any such amendment, waiver, modification, replacement or Refinancing would be prohibited by the terms of the Indenture). "Senior Indebtedness" of the Company means (i) Indebtedness of the ------------------- Company, whether outstanding on the Issue Date or thereafter Incurred, including the Guarantees by the Company of all Bank Indebtedness, and (ii) accrued and unpaid interest (including interest accruing on or after the filing of any petition in bankruptcy or for reorganization relating to the Company whether or not a claim for post-filing interest is allowed in such proceeding) in respect of (A) indebtedness of the Company for money borrowed and (B) indebtedness evidenced by notes, debentures, bonds or other similar instruments for the payment of which the Company is responsible or liable unless, in the instrument creating or evidencing the same or pursuant to which the same is outstanding, it is provided that such obligations are subordinate or pari passu in right of payment to the Securities; provided, however, that Senior Indebtedness shall not -------- ------- include (1) any obligation of the Company to any Subsidiary, (2) any liability for Federal, state, local or other taxes owed or owing by the Company, (3) any accounts payable or other liability to trade creditors arising in the ordinary course of business 20 (including guarantees thereof or instruments evidencing such liabilities), (4) any Indebtedness of the Company (and any accrued and unpaid interest in respect thereof) which is subordinate or junior in any respect (other than as a result of the Indebtedness being unsecured) to any other Indebtedness or other obligation of the Company including any Senior Subordinated Indebtedness and any Subordinated Obligations, (5) any obligations with respect to any Capital Stock or (6) that portion of any Indebtedness which at the time of Incurrence is Incurred in violation of this Indenture. "Senior Indebtedness" of any Subsidiary ------------------- Guarantor has a correlative meaning. "Senior Subordinated Indebtedness" of the Company means the -------------------------------- Securities, the 10-5/8% Senior Subordinated Notes and any other Indebtedness of the Company that specifically provides that such Indebtedness is to rank pari passu with the Securities in right of payment and is not subordinated by its terms in right of payment to any Indebtedness or other obligation of the Company which is not Senior Indebtedness. "Senior Subordinated Indebtedness" of any -------------------------------- Subsidiary Guarantor has a correlative meaning; provided, however, that "Senior -------- ------- Subordinated Indebtedness" of DRA shall specifically include (i) the Subsidiary Guaranty of DRA and (ii) the GM Note (and any Senior Subordinated Indebtedness Incurred to Refinance such note). "Significant Subsidiary" means any Restricted Subsidiary that would be ---------------------- a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under Regulation S-X promulgated by the SEC. "Stated Maturity" means, with respect to any security, the date --------------- specified in such security as the fixed date on which the final payment of principal of such security is due and payable, including pursuant to any mandatory redemption provision (but excluding any provision providing for the repurchase of such security at the option of the holder thereof upon the happening of any contingency unless such contingency has occurred). "Stockholders Agreement" means the Securities Transfer, ---------------------- Recapitalization and Holders Agreement among the stockholders of the Company as in effect on the Issue Date. "Subordinated Obligation" of the Company means any Indebtedness of the ----------------------- Company (whether outstanding on the Issue Date or thereafter Incurred) which is subordinate or junior in right of payment to the Securities pursuant to a written agreement to that effect. "Subordinated Obligation" of any Subsidiary ----------------------- Guarantor has a correlative meaning. "Subsidiary" means, in respect of any Person, any corporation, ---------- association, partnership or other business entity of which more than 50% of the total voting power of shares of Capital Stock or other interests (including partnership interests) entitled (without regard to the 21 occurrence of any contingency) to vote in the election of directors, managers or trustees thereof is at the time owned or controlled, directly or indirectly, by (i) such Person, (ii) such Person and one or more Subsidiaries of such Person or (iii) one or more Subsidiaries of such Person. "Subsidiary Guarantor" means each Subsidiary designated as such on the -------------------- signature pages hereto and any other Subsidiary that has issued a Subsidiary Guaranty. "Subsidiary Guaranty" means any Guarantee of the Securities which may ------------------- from time to time be executed and delivered pursuant to this Indenture. Each such Subsidiary Guaranty shall be in the form prescribed in this Indenture. "Temporary Cash Investments" means any of the following: (i) any -------------------------- investment in direct obligations of the United States of America or any agency thereof or obligations guaranteed by the United States of America or any agency thereof, (ii) investments in time deposit accounts, certificates of deposit and money market deposits maturing within 180 days of the date of acquisition thereof issued by a bank or trust company which is organized under the laws of the United States of America, any state thereof or any foreign country recognized by the United States, and which bank or trust company has capital, surplus and undivided profits aggregating in excess of $50,000,000 (or the foreign currency equivalent thereof) and has outstanding debt which is rated "A" (or such similar equivalent rating) or higher by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act) or any money-market fund sponsored by a registered broker dealer or mutual fund distributor, (iii) repurchase obligations with a term of not more than 30 days for underlying securities of the types described in clause (i) above entered into with a bank meeting the qualifications described in clause (ii) above, (iv) investments in commercial paper, maturing not more than 90 days after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States of America, any State thereof or the District of Columbia or any foreign country recognized by the United States of America with a rating at the time as of which any investment therein is made of "P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or higher) according to Standard and Poor's Ratings Group, and (v) investments in securities with maturities of six months or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States of America, or by any political subdivision or taxing authority thereof, and rated at least "A" by Standard & Poor's Ratings Group or "A" by Moody's Investors Service, Inc. 22 "TIA" means the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) --- ------ 77aaa-77bbbb) as in effect on the date of this Indenture. "Total Assets" means at any time the total consolidated assets ------------ (determined in accordance with GAAP) of the Company and the Restricted Subsidiaries, as of the most recent date for which the Company prepares a consolidated balance sheet in the ordinary course of business. "Trustee" means the party named as such in this Indenture until a ------- successor replaces it and, thereafter, means the successor. "Trust Officer" means the Chairman of the Board, the President or any ------------- other officer or assistant officer of the Trustee assigned by the Trustee to administer its corporate trust matters. "Uniform Commercial Code" means the New York Uniform Commercial Code ----------------------- as in effect from time to time. "Unrestricted Subsidiary" means (i) any Subsidiary of the Company that ----------------------- at the time of determination shall be designated an Unrestricted Subsidiary by the Board of Directors in the manner provided below; (ii) any Subsidiary of an Unrestricted Subsidiary; and (iii) Autovill Holdings, Inc., Remy Mexico Holdings, Inc., Remy South America Holdings, Inc., Remy Korea Holdings, Inc., Kraftube, Inc. and Electro Diesel Rebuild bvba (in each case as to which the Company represents and warrants that such Subsidiary is an Unrestricted Subsidiary under the indentures for the 8% Senior Notes and the 10% Senior Subordinated Notes). The Board of Directors may designate any Subsidiary of the Company (including any newly acquired or newly formed Subsidiary of the Company) to be an Unrestricted Subsidiary unless such Subsidiary or any of its Subsidiaries owns any Capital Stock or Indebtedness of, or holds any Lien on any property of, the Company or any other Subsidiary of the Company that is not a Subsidiary of the Subsidiary to be so designated; provided, however, that either -------- ------- (A) the Subsidiary to be so designated has total assets of $1,000 or less or (B) if such Subsidiary has assets greater than $1,000, such designation would be permitted under Section 4.04. The Board of Directors may designate any Unrestricted Subsidiary to be a Restricted Subsidiary; provided, however, that -------- ------- immediately after giving effect to such designation (x) the Company could Incur $1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall have occurred and be continuing. Any such designation by the Board of Directors shall be evidenced to the Trustee by promptly filing with the Trustee a copy of the resolution of the Board of Directors giving effect to such designation and an Officers' Certificate certifying that such designation complied with the foregoing provisions. 23 "U.S. Government Obligations" means direct obligations (or --------------------------- certificates representing an ownership interest in such obligations) of the United States of America (including any agency or instrumentality thereof) for the payment of which the full faith and credit of the United States of America is pledged and which are not callable at the issuer's option. "Voting Stock" of a Person means all classes of Capital Stock or other ------------ interests (including partnership interests) of such Person then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of directors, managers or trustees thereof. "Wholly Owned Subsidiary" means a Restricted Subsidiary all the ----------------------- Capital Stock of which (other than directors' qualifying shares is owned by the Company and/or one or more Wholly Owned Subsidiaries. "8-5/8% Senior Notes" means the Company's 8-5/8% Senior Notes due 2007 ------------------- issued under an indenture dated as of December 22, 1997. "10-5/8% Senior Subordinated Notes" means the Company's 10-5/8% Senior --------------------------------- Subordinated Notes due 2006 issued under an indenture dated as of August 1, 1996. SECTION 1.02. Other Definitions. ------------------
Defined in Term Section ---- ----------- "Affiliate Transaction"................. 4.07 "Bankruptcy Law"........................ 6.01 "Blockage Notice"....................... 10.03 "Change of Control Offer"............... 4.09(b) "covenant defeasance option"............ 8.01(b) "Custodian"............................. 6.01 "Event of Default"...................... 6.01 "legal defeasance option"............... 8.01(b) "Legal Holiday.......................... 13.08 "Obligations"........................... 11.01 "Offer"................................. 4.06 "Offer Amount".............. 4.06 "Offer Period".......................... 4.06 "pay the Securities"........ 10.03 "pay its Subsidiary Guaranty" 12.03 "Paying Agent".......................... 2.03 "Payment Blockage Period"............... 10.03 "Purchase Date"......................... 4.06 "Registrar"................. 2.03 "Successor Company"..................... 5.01
SECTION 1.03. Incorporation by Reference of Trust Indenture Act. -------------------------------------------------- This Indenture is subject to the mandatory provisions of the TIA which are incorporated by reference in and made a part of this Indenture. The following TIA terms have the following meanings: "Commission" means the SEC. ---------- 24 "indenture securities" means the Securities. -------------------- "indenture security holder" means a Securityholder. ------------------------- "indenture to be qualified" means this Indenture. ------------------------- "indenture trustee" or "institutional trustee" means the Trustee. ----------------- --------------------- "obligor" on the indenture securities means the Company and any other ------- obligor on the indenture securities. All other TIA terms used in this Indenture that are defined by the TIA, defined by TIA reference to another statute or defined by SEC rule have the meanings assigned to them by such definitions. SECTION 1.04. Rules of Construction. Unless the context otherwise ---------------------- requires: (1) a term has the meaning assigned to it; (2) an accounting term not otherwise defined has the meaning assigned to it in accordance with GAAP; (3) "or" is not exclusive; (4) "including" means including without limitation; (5) words in the singular include the plural and words in the plural include the singular; (6) unsecured Indebtedness shall not be deemed to be subordinate or junior to Secured Indebtedness merely by virtue of its nature as unsecured Indebtedness; (7) the principal amount of any noninterest bearing or other discount security at any date shall be the principal amount thereof that would be shown on a balance sheet of the issuer dated such date prepared in accordance with GAAP; (8) the principal amount of any Preferred Stock shall be (i) the maximum liquidation value of such Preferred Stock or (ii) the maximum mandatory redemption or mandatory repurchase price with respect to such Preferred Stock, whichever is greater; and (9) all references to the date the Securities were originally issued shall refer to the Issue Date. 25 ARTICLE 2 The Securities -------------- SECTION 2.01. Form and Dating. Provisions relating to the Initial ---------------- Securities, the Exchange Securities and the Private Exchange Securities are set forth in Appendix A, which is hereby incorporated in and expressly made part of this Indenture. The Initial Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit 1 to Appendix A which is hereby incorporated in and expressly made a part of this Indenture. The Exchange Securities, the Private Exchange Securities and the Trustee's certificate of authentication shall be substantially in the form of Exhibit A, which is hereby incorporated in and expressly made a part of this Indenture. The Securities may have notations, legends or endorsements required by law, stock exchange rule, agreements to which the Company is subject, if any, or usage (provided that any such notation, legend or endorsement is in a form acceptable to the Company). Each Security shall be dated the date of its authentication. The terms of the Securities set forth in Exhibit 1 to Appendix A and Exhibit A are part of the terms of this Indenture. SECTION 2.02. Execution and Authentication. Two Officers shall sign ----------------------------- the Securities for the Company by manual or facsimile signature. The Company's seal shall be impressed, affixed, imprinted or reproduced on the Securities and may be in facsimile form. If an Officer whose signature is on a Security no longer holds that office at the time the Trustee authenticates the Security, the Security shall be valid nevertheless. A Security shall not be valid until an authorized signatory of the Trustee manually signs the certificate of authentication on the Security. The signature shall be conclusive evidence that the Security has been authenticated under this Indenture. The Trustee may appoint an authenticating agent reasonably acceptable to the Company to authenticate the Securities. Unless limited by the terms of such appointment, an authenticating agent may authenticate Securities whenever the Trustee may do so. Each reference in this Indenture to authentication by the Trustee includes authentication by such agent. An authenticating agent has the same rights as any Registrar (as defined below), Paying Agent (as defined below) or agent for service of notices and demands. SECTION 2.03. Registrar and Paying Agent. The Company shall maintain --------------------------- an office or agency where Securities may be presented for registration of transfer or for 26 exchange (the "Registrar") and an office or agency where Securities may be --------- presented for payment (the "Paying Agent"). The Registrar shall keep a register ------------ of the Securities and of their transfer and exchange. The Company may have one or more co-registrars and one or more additional paying agents. The term "Paying ------ Agent" includes any additional paying agent. - ----- The Company shall enter into an appropriate agency agreement with any Registrar, Paying Agent or co-registrar not a party to this Indenture, which shall incorporate the terms of the TIA. The agreement shall implement the provisions of this Indenture that relate to such agent. The Company shall notify the Trustee of the name and address of any such agent. If the Company fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and shall be entitled to appropriate compensation therefor pursuant to Section 7.07. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar, co-registrar or transfer agent. The Company initially appoints the Trustee as Registrar and Paying Agent in connection with the Securities. SECTION 2.04. Paying Agent To Hold Money in Trust. Prior to each due ------------------------------------ date of the principal and interest on any Security, the Company shall deposit with the Paying Agent a sum sufficient to pay such principal and interest when so becoming due. The Company shall require each Paying Agent (other than the Trustee) to agree in writing that the Paying Agent shall hold in trust for the benefit of Securityholders or the Trustee all money held by the Paying Agent for the payment of principal of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment. If the Company or a Subsidiary acts as Paying Agent, it shall segregate the money held by it as Paying Agent and hold it as a separate trust fund. The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by the Paying Agent. Upon complying with this Section, the Paying Agent shall have no further liability for the money delivered to the Trustee. SECTION 2.05. Securityholder Lists. The Trustee shall preserve in as --------------------- current a form as is reasonably practicable the most recent list available to it of the names and addresses of Securityholders. If the Trustee is not the Registrar, the Company shall furnish to the Trustee, in writing at least five Business Days before each interest payment date and at such other times as the Trustee may request in writing, a list in such form and as of such date as the Trustee may reasonably require of the names and addresses of Securityholders. SECTION 2.06. Transfer and Exchange. The Securities shall be issued ---------------------- in registered form and shall be 27 transferable only upon the surrender of a Security for registration of transfer and in compliance with Appendix A. When a Security is presented to the Registrar or a co-registrar with a request to register a transfer, the Registrar shall register the transfer as requested if the requirements of this Indenture and Section 8-401(1) of the Uniform Commercial Code are met. When Securities are presented to the Registrar or a co-registrar with a request to exchange them for an equal principal amount of Securities of other denominations, the Registrar shall make the exchange as requested if the same requirements are met. SECTION 2.07. Replacement Securities. If a mutilated Security is ----------------------- surrendered to the Registrar or if the Holder of a Security claims that the Security has been lost, destroyed or wrongfully taken, the Company shall issue and the Trustee shall authenticate a replacement Security if the requirements of Section 8-405 of the Uniform Commercial Code are met and the Holder satisfies any other reasonable requirements of the Trustee. If required by the Trustee or the Company, such Holder shall furnish an indemnity bond sufficient in the judgment of the Company and the Trustee to protect the Company, the Trustee, the Paying Agent, the Registrar and any co-registrar from any loss which any of them may suffer if a Security is replaced. The Company and the Trustee may charge the Holder for their expenses in replacing a Security. Every replacement Security is an additional obligation of the Company. SECTION 2.08. Outstanding Securities. Securities outstanding at any ----------------------- time are all Securities authenticated by the Trustee except for those canceled by it, those delivered to it for cancellation and those described in this Section as not outstanding. A Security does not cease to be outstanding because the Company or an Affiliate of the Company holds the Security. If a Security is replaced pursuant to Section 2.07, it ceases to be outstanding unless the Trustee and the Company receive proof satisfactory to them that the replaced Security is held by a bona fide purchaser, in which event the replacement Security shall cease to be outstanding, subject to the provisions of Section 8-405 of the Uniform Commercial Code. If the Paying Agent segregates and holds in trust, in accordance with this Indenture, on a redemption date or maturity date money sufficient to pay all principal and interest payable on that date with respect to the Securities (or portions thereof) to be redeemed or maturing, as the case may be, and the Paying Agent is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture, then on and after that date such Securities (or portions thereof) cease to be outstanding and interest on them ceases to accrue. 28 SECTION 2.09. Temporary Securities. Until definitive Securities are --------------------- ready for delivery, the Company may prepare and the Trustee shall authenticate temporary Securities. Temporary Securities shall be substantially in the form of definitive Securities but may have variations that the Company considers appropriate for temporary Securities. Without unreasonable delay, the Company shall prepare and the Trustee shall authenticate definitive Securities and deliver them in exchange for temporary Securities. SECTION 2.10. Cancellation. The Company at any time may deliver ------------- Securities to the Trustee for cancellation. The Registrar and the Paying Agent shall forward to the Trustee any Securities surrendered to them for registration of transfer, exchange or payment. The Trustee and no one else shall cancel and destroy (subject to the record retention requirements of the Exchange Act) all Securities surrendered for registration of transfer, exchange, payment or cancellation and deliver a certificate of such destruction to the Company. The Company may not issue new Securities to replace Securities it has redeemed, paid or delivered to the Trustee for cancellation. SECTION 2.11. Defaulted Interest. If the Company defaults in a ------------------- payment of interest on the Securities, the Company shall pay defaulted interest (plus interest on such defaulted interest to the extent lawful) in any lawful manner. The Company may pay the defaulted interest to the persons who are Securityholders on a subsequent special record date. The Company shall fix or cause to be fixed any such special record date and payment date to the reasonable satisfaction of the Trustee and shall promptly mail to each Securityholder a notice that states the special record date, the payment date and the amount of defaulted interest to be paid. SECTION 2.12. CUSIP Numbers. The Company in issuing the Securities -------------- may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall use "CUSIP" numbers in notices of redemption as a convenience to Holders; provided, however, that any such notice may state that no representation is made - -------- ------- as to the correctness of such numbers either as printed on the Securities or as contained in any notice of a redemption and that reliance may be placed only on the other identification numbers printed on the Securities, and any such redemption shall not be affected by any defect in or omission of such numbers. SECTION 2.13. Issuance of Additional Securities. The Company shall ---------------------------------- be entitled, subject to its compliance with Section 4.03, to issue Additional Securities under this Indenture which shall have identical terms as the Initial Securities issued on the Issue Date, other than with respect to the date of issuance and issue price. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange 29 Securities issued in exchange therefor shall be treated as a single class for all purposes under this Indenture. With respect to any Additional Securities, the Company shall set forth in a resolution of the Board of Directors and an Officers' Certificate, a copy of each which shall be delivered to the Trustee, the following information: (1) the aggregate principal amount of such Additional Securities to be authenticated and delivered pursuant to this Indenture; (2) the issue price, the issue date and the CUSIP number of such Additional Securities; provided, however, that no Additional Securities may -------- ------- be issued at a price that would cause such Additional Securities to have "original issue discount" within the meaning of Section 1273 of the Code; and (3) whether such Additional Securities shall be Transfer Restricted Securities and issued in the form of Initial Securities as set forth in the Appendix to this Indenture or shall be issued in the form of Exchange Securities as set forth in Exhibit A. ARTICLE 3 Redemption ---------- SECTION 3.01. Notices to Trustee. If the Company elects to redeem ------------------- Securities pursuant to paragraph 5 of the Securities, it shall notify the Trustee in writing of the redemption date, the principal amount of Securities to be redeemed and the paragraph of the Securities pursuant to which the redemption will occur. The Company shall give each notice to the Trustee provided for in this Section at least 45 days before the redemption date unless the Trustee consents to a shorter period. Such notice shall be accompanied by an Officers' Certificate and an Opinion of Counsel from the Company to the effect that such redemption will comply with the conditions herein. SECTION 3.02. Selection of Securities To Be Redeemed. If fewer than --------------------------------------- all the Securities are to be redeemed, the Trustee shall select the Securities to be redeemed pro rata or by lot or by a method that complies with applicable legal and securities exchange requirements, if any, and that the Trustee considers fair and appropriate and in accordance with methods generally used at the time of selection by fiduciaries in similar circumstances. The Trustee shall make the selection from outstanding Securities not previously called for redemption. The Trustee may select for redemption portions of the principal of Secur- 30 ities that have denominations larger than $1,000. Securities and portions of them the Trustee selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions of this Indenture that apply to Securities called for redemption also apply to portions of Securities called for redemption. The Trustee shall notify the Company promptly of the Securities or portions of Securities to be redeemed. SECTION 3.03. Notice of Redemption. At least 30 days but not more --------------------- than 60 days before a date for redemption of Securities, the Company shall mail a notice of redemption by first-class mail to each Holder of Securities to be redeemed. The notice shall identify the Securities to be redeemed and shall state: (1) the redemption date; (2) the redemption price; (3) the name and address of the Paying Agent; (4) that Securities called for redemption must be surrendered to the Paying Agent to collect the redemption price; (5) if fewer than all the outstanding Securities are to be redeemed, the identification and principal amounts of the particular Securities to be redeemed; (6) that, unless the Company defaults in making such redemption payment or the Paying Agent is prohibited from making such payment pursuant to the terms of this Indenture, interest on Securities (or portion thereof) called for redemption ceases to accrue on and after the redemption date; and (7) that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities. At the Company's request, the Trustee shall give the notice of redemption in the Company's name and at the Company's expense. In such event, the Company shall provide the Trustee with the information required by this Section at least 45 days before the redemption date. SECTION 3.04. Effect of Notice of Redemption. Once notice of ------------------------------- redemption is mailed, Securities called for redemption become due and payable on the redemption date and at the redemption price stated in the notice. Upon surrender to the Paying Agent, such Securities shall be paid at the redemption price stated in the notice, plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the related interest payment date). Failure 31 to give notice or any defect in the notice to any Holder shall not affect the validity of the notice to any other Holder. SECTION 3.05. Deposit of Redemption Price. Prior to the redemption ---------------------------- date, the Company shall deposit with the Paying Agent (or, if the Company or a Subsidiary is the Paying Agent, shall segregate and hold in trust) money sufficient to pay the redemption price of and accrued interest on all Securities to be redeemed on that date other than Securities or portions of Securities called for redemption which have been delivered by the Company to the Trustee for cancellation. SECTION 3.06. Securities Redeemed in Part. Upon surrender of a ---------------------------- Security that is redeemed in part, the Company shall execute and the Trustee shall authenticate for the Holder (at the Company's expense) a new Security equal in principal amount to the unredeemed portion of the Security surrendered. ARTICLE 4 Covenants --------- SECTION 4.01. Payment of Securities. The Company shall promptly pay ---------------------- the principal of and interest on the Securities on the dates and in the manner provided in the Securities and in this Indenture. Principal and interest shall be considered paid on the date due if on such date the Trustee or the Paying Agent holds in accordance with this Indenture money sufficient to pay all principal and interest then due and the Trustee or the Paying Agent, as the case may be, is not prohibited from paying such money to the Securityholders on that date pursuant to the terms of this Indenture. The Company shall pay interest on overdue principal at the rate specified therefor in the Securities, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. SECTION 4.02. SEC Reports. Notwithstanding that the Company may not ------------ be subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company shall file with the SEC and provide the Trustee and Securityholders with annual reports and information, documents and other reports as are specified in those Sections and applicable to a U.S. corporation subject to those Sections, the information, documents and other reports to be so filed and provided at the times specified for the filing of the information, documents and reports under those Sections; provided, however, that the Company shall not be required to file any report, document or other information with the SEC if the SEC does not permit the filing. In addition, the Company shall furnish to the Securityholders 32 and to prospective investors, upon the requests of such Securityholders, any information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act so long as any Securities are not freely transferable under the Securities Act. The Company also shall comply with the other provisions of TIA (S) 314(a). SECTION 4.03. Limitation on Indebtedness. --------------------------- (a) The Company shall not, and shall not permit any Restricted Subsidiary to, Incur, directly or indirectly, any Indebtedness unless, on the date of such Incurrence, the Consolidated Coverage Ratio exceeds 2.00 to 1. (b) Notwithstanding the foregoing paragraph (a), the Company and its Restricted Subsidiaries may Incur any or all of the following Indebtedness: (1) Indebtedness Incurred pursuant to the Senior Credit Facility or any Permitted Receivables Financing; provided, however, that, after giving -------- ------- effect to any such Incurrence, the aggregate principal amount of such Indebtedness then outstanding does not exceed the greater of (i) $300 million (less any permanent reductions in the amount of available borrowings thereunder) and (ii) the sum of (x) 75% of the book value of the inventory of the Company and its Restricted Subsidiaries and (y) 85% of the book value of the accounts receivable of the Company and its Restricted Subsidiaries, in each case determined in accordance with GAAP; (2) Indebtedness of the Company owed to and held by any Wholly Owned Subsidiary or Indebtedness of a Restricted Subsidiary owed to and held by the Company or a Wholly Owned Subsidiary; provided, however, that any -------- ------- subsequent issuance or transfer of any Capital Stock which results in any such Wholly Owned Subsidiary ceasing to be a Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company or a Wholly Owned Subsidiary) shall be deemed, in each case, to constitute the Incurrence of such Indebtedness of the issuer thereof; (3) Indebtedness of the Company or a Restricted Subsidiary owed to and held by any Non-Wholly Owned Subsidiary; provided, however, that (i) -------- ------- any such Indebtedness shall be unsecured Subordinated Obligations of the Company or such Restricted Subsidiary, as applicable and (ii) any subsequent issuance or transfer of any Capital Stock of such Non-Wholly Owned Subsidiary or any subsequent transfer of such Indebtedness (other than to the Company, a Wholly Owned Subsidiary or another Non-Wholly Owned Subsidiary) shall be deemed to constitute the Incurrence of such Indebtedness by the issuer thereof; 33 (4) Indebtedness of the Company represented by the Securities (other than any Additional Securities); (5) Indebtedness outstanding on the Issue Date (other than Indebtedness described in clause (1), (2) or (3) of this Section 4.03(b); (6) Refinancing Indebtedness in respect of Indebtedness Incurred pursuant to Section 4.03(a) or pursuant to clause (4), (5), (9) or (12) of this Section 4.03(b) or this clause (6); (7) Indebtedness in respect of performance bonds, bankers' acceptances, letters of credit and surety or appeal bonds entered into by the Company and the Restricted Subsidiaries in the ordinary course of their business; (8) Hedging Obligations consisting of Interest Rate Agreements and Currency Agreements entered into in the ordinary course of business and not for the purpose of speculation; provided, however, that such Interest Rate -------- ------- Agreements and Currency Agreements do not increase the Indebtedness of the Company outstanding at any time other than as a result of fluctuations in foreign currency exchange rates or interest rates or by reason of fees, indemnities and compensation payable thereunder; (9) Purchase Money Indebtedness and Capital Lease Obligations Incurred to finance the acquisition by the Company or a Restricted Subsidiary of any assets in the ordinary course of business and which, together with all Refinancing Indebtedness Incurred in respect of Indebtedness previously Incurred pursuant to this clause (9), do not exceed $50 million in the aggregate at any time outstanding; (10) Indebtedness represented by the Subsidiary Guaranties and Guarantees of Indebtedness Incurred pursuant to clauses (1), (4), (5) and (6) above; (11) Indebtedness arising from the honoring by a bank or other financial institution of a check, draft or similar instrument inadvertently (except in the case of daylight overdrafts) drawn against insufficient funds in the ordinary course of business, provided that such Indebtedness -------- is extinguished within five Business Days of Incurrence; (12) Indebtedness of the Company and its Restricted Subsidiaries, to the extent the proceeds thereof are immediately used after the Incurrence thereof to purchase Securities tendered in an offer to purchase made as a result of a Change of Control; 34 (13) Indebtedness of the Company and its Restricted Subsidiaries arising from agreements providing for indemnification, adjustment of purchase price or similar obligations, in any case Incurred in connection with the disposition of any assets of the Company or any Restricted Subsidiary (other than Guarantees of Indebtedness Incurred by any Person acquiring all or any portion of such assets for the purpose of financing such acquisition), in a principal amount not to exceed the gross proceeds actually received by the Company or any Restricted Subsidiary in connection with such disposition; and (14) Indebtedness in an aggregate principal amount which, together with all other Indebtedness of the Company outstanding on the date of such Incurrence (other than Indebtedness permitted by clauses (1) through (13) of this Section 4.03(b) or Section 4.03(a)) does not exceed $100 million. (c) Notwithstanding the foregoing, the Company shall not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness pursuant to Section 4.03(b) if the proceeds thereof are used, directly or indirectly, to Refinance (i) any Subordinated Obligations unless such Indebtedness shall be subordinated to the Securities and the Subsidiary Guaranties, as applicable, to at least the same extent as such Subordinated Obligations or (ii) any Senior Subordinated Indebtedness unless such Indebtedness shall be Senior Subordinated Indebtedness or shall be subordinated to the Securities and the Subsidiary Guaranties, as applicable; provided, however, that clause (ii) above shall not -------- ------- prohibit the Refinancing of all or any part of the GM Note with Refinancing Indebtedness if, at the time of such Incurrence, no Default shall have occurred and be continuing (or would result therefrom). (d) For purposes of determining compliance with this Section 4.03, (i) in the event that an item of Indebtedness meets the criteria of more than one of the types of Indebtedness described in this Section, the Company, in its sole discretion, will classify such item of Indebtedness at the time of Incurrence and only be required to include the amount and type of such Indebtedness in one of the above clauses (provided that any Indebtedness classified as Incurred pursuant to clause (b)(14) above may later be reclassified as having been Incurred pursuant to Section 4.03(a) to the extent that such reclassified Indebtedness could be Incurred pursuant to Section 4.03(a) at the time of such reclassification) and (ii) an item of Indebtedness may be divided and classified in more than one of the types of Indebtedness described herein. (e) Notwithstanding Section 4.03(a) or 4.03(b), the Company shall not, and shall not permit any Subsidiary Guarantor to, Incur (i) any Indebtedness if such Indebtedness is subordinate or junior in ranking in any 35 respect to any Senior Indebtedness of the Company or any Subsidiary Guarantor, as applicable, unless such Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in right of payment to Senior Subordinated Indebtedness or (ii) any Secured Indebtedness that is not Senior Indebtedness of the Company or any Subsidiary Guarantor, as applicable, unless contemporaneously therewith effective provision is made to secure the Securities or Subsidiary Guaranty, as applicable equally and ratably with such Secured Indebtedness for so long as such Secured Indebtedness is secured by a Lien. SECTION 4.04. Limitation on Restricted Payments. (a) The Company ---------------------------------- shall not, and shall not permit any Restricted Subsidiary, directly or indirectly, to make a Restricted Payment if at the time the Company or such Restricted Subsidiary makes such Restricted Payment: (1) a Default shall have occurred and be continuing (or would result therefrom); (2) the Company is not able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); or (3) the aggregate amount of such Restricted Payment together with all other Restricted Payments (the amount of any payments made in property other than in cash to be valued at the fair market value of such property, as determined in good faith by the Board of Directors) declared or made since the Issue Date would exceed the sum (without duplication) of: (A) 50% of the Consolidated Net Income accrued during the period (treated as one accounting period) from the beginning of the fiscal quarter immediately following the fiscal quarter during which the Initial Securities are originally issued to the end of the most recent fiscal quarter ending at least 45 days (or, if less, the number of days after the end of such fiscal quarter as the consolidated financial statements of the Company shall be provided to the Securityholders pursuant to the Indenture) prior to the date of such Restricted Payment (or, in case such Consolidated Net Income accrued during such period (treated as one accounting period) shall be a deficit, minus 100% of such deficit); (B) the aggregate Net Cash Proceeds received by the Company from the issuance or sale of its Capital Stock (other than Disqualified Stock) subsequent to the Issue Date (other than an issuance or sale to a Subsidiary of the Company and other than an issuance or sale to an employee stock ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees to the extent that the 36 purchase by such plan or trust is financed by Indebtedness of such plan or trust to the Company or any Subsidiary or for which the Company or any Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); (C) the amount by which Indebtedness of the Company or its Restricted Subsidiaries is reduced on the Company's balance sheet upon the conversion or exchange (other than by a Subsidiary of the Company) subsequent to the Issue Date, of any Indebtedness of the Company or its Restricted Subsidiaries convertible or exchangeable for Capital Stock (other than Disqualified Stock) of the Company (less the amount of any cash, or the fair value of any other property, distributed by the Company or any Restricted Subsidiary upon such conversion or exchange); and (D) an amount equal to the sum of (i) the net reduction in Investments (other than Permitted Investments) made by the Company or any Restricted Subsidiary in any Person resulting from repurchases, repayments or redemptions of such Investments by such Person, proceeds realized on the sale of such Investments and proceeds representing the return of capital (excluding dividends and distributions), in each case received by the Company or any Restricted Subsidiary, and (ii) to the extent such Person is an Unrestricted Subsidiary, the portion (proportionate to the Company's equity interest in such Subsidiary) of the fair market value of the net assets of an Unrestricted Subsidiary at the time such Unrestricted Subsidiary is designated a Restricted Subsidiary; provided, however, that the foregoing sum shall not -------- ------- exceed, in the case of any Person or Unrestricted Subsidiary, the amount of Investments (other than Permitted Investments) previously made (and treated as a Restricted Payment) by the Company or any Restricted Subsidiary in such Person or Unrestricted Subsidiary. (b) The provisions of Section 4.04(a) shall not prohibit: (1) any purchase or redemption of Capital Stock or Subordinated Obligations of the Company or any Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Capital Stock of the Company (other than Disqualified Stock and other than Capital Stock issued or sold to a Subsidiary of the Company or an employee stock 37 ownership plan or to a trust established by the Company or any of its Subsidiaries for the benefit of their employees to the extent that the purchase by such plan or trust is financed by Indebtedness of such plan or trust to the Company or any Subsidiary or for which the Company or any Subsidiary is liable, directly or indirectly, as a guarantor or otherwise (including by the making of cash contributions to such plan or trust which are used to pay interest or principal on such Indebtedness)); provided, -------- however, that (A) such purchase or redemption shall be excluded in the ------- calculation of the amount of Restricted Payments and (B) the Net Cash Proceeds from such sale shall be excluded from the calculation of amounts under Section 4.04(a)(3)(B); (2) any purchase or redemption of (A) Subordinated Obligations of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of the Company which is permitted to be Incurred pursuant to paragraphs (b) and (c) of Section 4.03 or (B) Subordinated Obligations of a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Indebtedness of such Restricted Subsidiary or the Company which is permitted to be Incurred pursuant to paragraphs (b) and (c) of Section 4.03; provided, however, that such purchase or redemption shall be excluded -------- ------- in the calculation of the amount of Restricted Payments; (3) any purchase or redemption of (A) Disqualified Stock of the Company made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of the Company or (B) Disqualified Stock of a Restricted Subsidiary made by exchange for, or out of the proceeds of the substantially concurrent sale of, Disqualified Stock of such Restricted Subsidiary or the Company; provided, however, that (i) at -------- ------- the time of such exchange, no Default shall have occurred and be continuing or would result therefrom and (ii) such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments; (4) any purchase or redemption of Subordinated Obligations from Net Available Cash to the extent permitted by Section 4.06; provided, however, -------- ------- that such purchase or redemption will be excluded in the calculation of the amount of Restricted Payments; (5) upon the occurrence of a Change of Control and within 60 days after the completion of the offer to repurchase the Securities pursuant to Section 4.09 (including the purchase of all Securities tendered), any purchase or redemption of Subordinated Obligations required pursuant to the terms thereof as a result of 38 such Change of Control at a purchase or redemption price not to exceed the outstanding principal amount thereof, plus accrued and unpaid interest thereon, if any; provided, however, that (A) at the time of such purchase -------- ------- or redemption, no Default shall have occurred and be continuing (or would result therefrom), (B) the Company would be able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a) after giving pro forma effect to such Restricted Payment, (C) such purchase or redemption is not made, directly or indirectly, from the proceeds of (or made in anticipation of) any Issuance of Indebtedness by the Company or any Subsidiary and (D) such purchase or redemption will be included in the calculation of the amount of Restricted Payments; (6) dividends paid within 60 days after the date of declaration thereof if at such date of declaration such dividend would have complied with Section 4.04(a); provided, however, that at the time of payment of -------- ------- such dividend, no other Default shall have occurred and be continuing (or would result therefrom); provided further, however, that such dividend ---------------- ------- shall be included in the calculation of the amount of Restricted Payments; (7) the repurchase of shares of, or options to purchase shares of, common stock of the Company or any of its Subsidiaries from employees, former employees, directors or former directors of the Company or any of its Subsidiaries (or permitted transferees of such employees, former employees, directors or former directors), pursuant to the terms of the agreements (including employment agreements) or plans (or amendments thereto) approved by the Board of Directors under which such individuals purchase or sell or are granted the option to purchase or sell, shares of such common stock; provided, however, that the aggregate amount of such -------- ------- repurchases shall not exceed the sum of (i) $10 million and (ii) the aggregate amount of cash received by the Company after the Issue Date from the sale of such shares to, or the exercise of options to purchase such shares by, employees or directors of the Company or any of its Subsidiaries; provided further, however, that such repurchases shall be ---------------- ------- included in the calculation of the amount of Restricted Payments; (8) any Investment in any Person engaged in a Related Business in an aggregate amount which, when added together with the amount of all the Investments made pursuant to this clause (8) which at such time have not been repaid through repayments of loans or advances or other transfers of assets, does not exceed the greater of $35 million or 3.5% of Total Assets (with the fair market value of each Investment being measured at the time made and without giving effect to subsequent changes in value); provided, -------- however, that ------- 39 such Investments shall be excluded in the calculation of the amount of Restricted Payments; or (9) the distribution, as a dividend or otherwise, of shares of Capital Stock or assets of an Unrestricted Subsidiary provided that the fair market value (as determined in good faith by the Board of Directors of the Company) of such shares of Capital Stock or assets shall not exceed the amount of the Investments that were made (and not subsequently reduced pursuant to clause 3(D) of Section 4.04(a)) by the Company in such Unrestricted Subsidiary (and its Subsidiaries after giving effect to such distribution) and were treated as Restricted Payments or were included in the calculation of the amount of the Restricted Payments previously made; provided, however, that (A) such distributions shall be excluded in the -------- ------- calculation of the amount of Restricted Payments, and (B) any net reduction in Investments in such Unrestricted Subsidiary resulting from such distribution shall be excluded from the calculation of amounts under clause 3(D) of Section 4.04(a). SECTION 4.05. Limitation on Restrictions on Distributions from ------------------------------------------------ Restricted Subsidiaries. The Company shall not, and shall not permit any - ------------------------ Restricted Subsidiary to, create or otherwise cause or permit to exist or become effective any consensual encumbrance or consensual restriction on the ability of any Restricted Subsidiary to (i) pay dividends or make any other distributions on its Capital Stock to the Company or a Restricted Subsidiary or pay any Indebtedness owed to the Company, (ii) make any loans or advances to the Company or (iii) transfer any of its property or assets to the Company, except: (1) any encumbrance or restriction pursuant to an agreement in effect at or entered into on the Issue Date; (2) any encumbrance or restriction with respect to a Restricted Subsidiary pursuant to an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary which was entered into on or prior to the date on which such Restricted Subsidiary was acquired by the Company (other than as consideration in, or to provide all or any portion of the funds or credit support utilized to consummate, the transaction or series of related transactions pursuant to which such Restricted Subsidiary became a Restricted Subsidiary or was acquired by the Company) and outstanding on such date; (3) any encumbrance or restriction pursuant to an agreement effecting a Refinancing of Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2) of this Section 4.05 (or effecting a Refinancing of such Refinancing Indebtedness pursuant 40 to this clause (3)) or contained in any amendment to an agreement referred to in clause (1) or (2) of this Section 4.05 or this clause (3); provided, -------- however, that the encumbrances and restrictions with respect to such ------- Restricted Subsidiary contained in any such refinancing agreement or amendment are no more restrictive in any material respect than the encumbrances and restrictions with respect to such Restricted Subsidiary contained in such agreements; (4) any encumbrance or restriction consisting of customary nonassignment provisions in leases governing leasehold interests to the extent such provisions restrict the transfer of the lease or the property leased thereunder; (5) in the case of clause (iii) of this Section 4.05, any restriction contained in security agreements or mortgages securing Indebtedness of a Restricted Subsidiary to the extent such restrictions restrict the transfer of the property subject to such security agreements or mortgages; (6) any restriction with respect to a Restricted Subsidiary imposed pursuant to an agreement entered into for the sale or disposition of all or substantially all the Capital Stock or assets of such Restricted Subsidiary pending the closing of such sale or disposition; (7) any encumbrance or restriction with respect to any Receivables Subsidiary pursuant to an agreement related to Indebtedness of the Receivables Subsidiary which is permitted under Section 4.03 or pursuant to any agreement relating to a Financing Disposition to or by the Receivables Subsidiary; (8) any encumbrance or restriction with respect to the disposition or distribution of assets or property and contained in joint venture agreements and other similar agreements entered into in the ordinary course of business; and (9) any restriction contained in any agreement or instrument governing Capital Stock (other than Disqualified Stock) of any Restricted Subsidiary that is in effect on the date such Restricted Subsidiary is acquired by the Company or a Restricted Subsidiary. SECTION 4.06. Limitation on Sales of Assets and Subsidiary Stock. --------------------------------------------------- (a) The Company shall not, and shall not permit any Restricted Subsidiary to, consummate any Asset Disposition unless (i) the Company or such Restricted Subsidiary receives consideration at the time of such Asset Disposition at least equal to the fair market value (including as to the value of all noncash consideration), as determined in good faith by the Board of Directors, of the 41 shares and assets subject to such Asset Disposition, and (ii) at least 75% (or 100% in the case of lease payments) of the consideration thereof received by the Company or such Restricted Subsidiary is in the form of cash or cash equivalents. In the event and to the extent that the aggregate Net Available Cash received by the Company or any Restricted Subsidiary from one or more Asset Dispositions occurring on or after the Issue Date exceeds $10 million, then the Company or such Restricted Subsidiary shall: (A) within 360 days after the date such Net Available Cash so received exceeds $10 million and to the extent the Company or such Restricted Subsidiary elects (or is required by the terms of any Senior Indebtedness) to (1) apply an amount equal to such excess Net Available Cash to prepay, repay or purchase Senior Indebtedness of the Company or such Restricted Subsidiary, in each case owing to a Person other than the Company or any Affiliate of the Company or (2) invest (or enter into a binding commitment to invest, provided that such commitment shall be subject only to customary -------- conditions (other than financing) and such investment shall be consummated within 360 days after the end of such 360-day period) an equal amount, or the amount not so applied pursuant to clause (1), in Additional Assets (including by means of an Investment in Additional Assets by a Restricted Subsidiary with Net Available Cash received by the Company or another Restricted Subsidiary) and (B) apply such excess Net Available Cash (to the extent not applied pursuant to clause (A)), to make an Offer (as defined below) to the holders of the Securities (and to holders of other Senior Subordinated Indebtedness of the Company designated by the Company) to purchase Securities (and such other Senior Subordinated Indebtedness) pursuant to and subject to the conditions of Section 4.06(b); provided, however that in connection with any prepayment, repayment or -------- ------- purchase of Senior Indebtedness pursuant to clause (A) above, the Company or such Restricted Subsidiary shall retire such Senior Indebtedness and shall cause the related loan commitment (if any) to be permanently reduced in an amount equal to the principal amount so prepaid, repaid or purchased. The amount of such excess Net Available Cash required to be applied pursuant to clause (B) above and not theretofore so applied shall constitute "Excess Proceeds". Pending application of Net Available Cash pursuant to this covenant, such Net Available Cash shall be invested in Temporary Cash Investments. For the purposes of this Section 4.06(a)(ii), the following are deemed to be cash: (x) the assumption of Senior Indebtedness of the Company or any Restricted Subsidiary and the release of the Company or such Restricted Subsidiary from all liability on such Indebtedness in connection with such Asset Disposition and (y) securities received by the Company or any Restricted Subsidiary from the transferee that are promptly converted by the Company or such Restricted Subsidiary into cash. 42 (b) In the event of an Asset Disposition that requires the purchase of Securities (and other Senior Subordinated Indebtedness) pursuant to clause (B) of Section 4.06(a), the Company shall be required to purchase an aggregate principal amount of Securities (and such other Senior Indebtedness Subordinated Indebtedness) equal to the Excess Proceeds (rounded down to the nearest multiple of $1,000), which have been tendered pursuant to an offer, commenced within 30 days following the expiration of the applicable period referred to clause (A) of Section 4.06(a) (or, if the Company so elects, at any time within such period), by the Company for the Securities (and such other Senior Indebtedness Subordinated Indebtedness) (the "Offer") at a purchase price of 100% of their ----- principal amount (or, if other than the Securities, 100% of their principal amount or, in the event such other Senior Subordinated Indebtedness was issued with significant original issue discount, 100% of the accreted value thereof), without premium, plus accrued but unpaid interest to the date of purchase (or, in respect of such other Senior Subordinated Indebtedness, such lesser price, if any, as may be provided for by the terms of such Senior Subordinated Indebtedness) in accordance with the procedures (including prorationing in the event of oversubscription) set forth in Section 4.06(c). If the aggregate purchase price of Securities (and any other Senior Subordinated Indebtedness) tendered pursuant to the Offer is less than the Net Available Cash allotted to the purchase of the Securities (and such other Senior Subordinated Indebtedness), such remaining Net Available Cash may be used by the Company for any corporate purpose (to the extent not otherwise prohibited by the Indenture). The Company shall not be required to make an Offer to purchase Securities (and other Senior Subordinated Indebtedness) pursuant to this Section 4.06 if the Net Available Cash available therefor (after application of the proceeds as provided in clause (A) of Section 4.06(a)) is less than $10 million (which lesser amount shall be carried forward for purposes of determining whether such an Offer is required with respect to the Net Available Cash from any subsequent Asset Disposition). (c) (1) Promptly, and in any event within 30 days after the Company becomes obligated to make an Offer, the Company shall be obligated to deliver to the Trustee and send, by first-class mail to each Holder, a written notice stating that the Holder may elect to have his Securities purchased by the Company either in whole or in part (subject to prorationing as described in Section 4.06(c)(3) in the event the Offer is oversubscribed) in integral multiples of $1,000 of principal amount, at the applicable purchase price. The notice shall specify a purchase date not less than 30 days nor more than 60 days after the date of such notice (the "Purchase Date") and shall contain such ------------- information concerning the business of the Company which the Company in good faith believes will enable such Holders to make an informed decision (which at a minimum will include (i) the most recently filed Annual Report on Form 10-K (including audited consolidated financial statements) of the 43 Company, the most recent subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form 8-K of the Company filed subsequent to such Quarterly Report, other than Current Reports describing Asset Dispositions otherwise described in the offering materials, or corresponding successor reports (or, until such time as the Company shall become subject to the reporting requirements of Section 13 or 15(d) of the Exchange Act, corresponding reports prepared pursuant to Section 4.02), (ii) a description of material developments in the Company's business subsequent to the date of the latest of such reports, and (iii) if material, appropriate pro forma financial information) and all instructions and materials necessary to tender Securities pursuant to the Offer, together with the information contained in clause (2). (2) Not later than the date upon which written notice of an Offer is delivered to the Trustee as provided above, the Company shall deliver to the Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer ----- Amount"), including information as to any other Senior Subordinated Indebtedness - ------ included in the Offer, (ii) the allocation of the Net Available Cash from the Asset Dispositions pursuant to which such Offer is being made and (iii) the compliance of such allocation with the provisions of Section 4.06(a) and (b). On such date, the Company shall also irrevocably deposit with the Trustee or with a paying agent (or, if the Company is acting as its own paying agent, segregate and hold in trust) in Temporary Cash Investments, maturing on the last day prior to the Purchase Date or on the Purchase Date if funds are immediately available by open of business, an amount equal to the Offer Amount to be held for payment in accordance with the provisions of this Section. If the Offer includes other Senior Subordinated Indebtedness, the deposit described in the preceding sentence may be made with any other paying agent pursuant to arrangements satisfactory to the Trustee. Upon the expiration of the period for which the Offer remains open (the "Offer Period"), the Company shall deliver to ------------ the Trustee for cancellation the Securities or portions thereof which have been properly tendered to and are to be accepted by the Company. The Trustee shall, on the Purchase Date, mail or deliver payment to each tendering Holder in the amount of the purchase price. In the event that the aggregate purchase price of the Securities delivered by the Company to the Trustee is less than the Offer Amount, the Trustee shall deliver the excess to the Company immediately after the expiration of the Offer Period for application in accordance with this Section. (3) Holders electing to have a Security purchased shall be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the Purchase Date. Holders shall be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the Purchase Date, a 44 telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. If the aggregate purchase price of Securities (and any other Senior Subordinated Indebtedness) tendered pursuant to the Offer exceeds the Net Available Cash allotted to their purchase, the Company shall select the Securities and other Senior Subordinated Indebtedness to be purchased on a pro rata basis but in round denominations, which in the case of the Securities will be denominations of $1,000 principal amount or multiples thereof. Holders whose Securities are purchased only in part shall be issued new Securities equal in principal amount to the unpurchased portion of the Securities surrendered. (4) At the time the Company delivers Securities to the Trustee which are to be accepted for purchase, the Company shall also deliver an Officers' Certificate stating that such Securities are to be accepted by the Company pursuant to and in accordance with the terms of this Section 4.06. A Security shall be deemed to have been accepted for purchase at the time the Trustee, directly or through an agent, mails or delivers payment therefor to the surrendering Holder. (d) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with the provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue thereof. SECTION 4.07. Limitation on Affiliate Transactions. (a) The Company ------------------------------------- shall not, and shall not permit any Restricted Subsidiary to, enter into or permit to exist any transaction (including the purchase, sale, lease or exchange of any property, employee compensation arrangements or the rendering of any service) with any Affiliate of the Company (an "Affiliate Transaction") unless --------------------- (i) the terms thereof are no less favorable to the Company or such Restricted Subsidiary than those that could be obtained at the time of such transaction in arm's-length dealings with a Person who is not such an Affiliate, (ii) if such Affiliate Transaction involves an amount in excess of $5 million, the terms thereof (1) are set forth in writing, (2) comply with clause (i) and (3) have been approved by a majority of disinterested members of the Board of Directors and (iii) if such Affiliate Transaction involves an amount in excess of $10 million, the terms thereof (A) comply with clause (ii) and (B) have been determined by a nationally recognized investment banking firm to be fair, from a 45 financial standpoint, to the Company and or such Restricted Subsidiary, as the case may be; provided, however, that no such opinion shall be required with -------- ------- respect to any Financing Disposition. (b) The provisions of Section 4.07(a) shall not prohibit (i) any Restricted Payment permitted to be paid pursuant to Section 4.04, (ii) any issuance of securities, or other payments, awards or grants in cash, securities or otherwise pursuant to, or the funding of, employment arrangements, stock options and stock ownership plans in the ordinary course of business and approved by the Board of Directors, (iii) the grant of stock options or similar rights to employees and directors of the Company in the ordinary course of business pursuant to plans approved by the Board of Directors, (iv) loans or advances to employees in the ordinary course of business of the Company or its Restricted Subsidiaries, (v) fees, compensation or employee benefit arrangements paid to and indemnity provided for the benefit of directors, officers or employees of the Company or any Subsidiary in the ordinary course of business, (vi) management fees or compensation paid to any CVC Investor; provided, -------- however, that the amount of such fees and compensation payable to all CVC - ------- Investors in any twelve-month period shall not exceed $1.5 million in the aggregate, (vii) the issuance or sale of any Capital Stock (other than Disqualified Stock) of the Company or (viii) any Affiliate Transaction between the Company and a Restricted Subsidiary or between Restricted Subsidiaries in the ordinary course of business (so long as the other stockholders of any participating Restricted Subsidiaries which are not Wholly Owned Restricted Subsidiaries and are not themselves Affiliates of the Company). SECTION 4.08. Limitation on the Sale or Issuance of Capital Stock of ------------------------------------------------------ Restricted Subsidiaries. The Company shall not (i) sell, pledge, hypothecate or - ------------------------ otherwise dispose of any shares of Capital Stock of a Restricted Subsidiary (other than pledges of Capital Stock securing Indebtedness under clause (1) of Section 4.03(b)), or (ii) permit any Restricted Subsidiary, directly or indirectly, to issue or sell or otherwise dispose of any shares of its Capital Stock other than (A) to the Company or a Wholly Owned Subsidiary, (B) directors' qualifying shares, (C) if, immediately after giving effect to such issuance, sale or other disposition, such Restricted Subsidiary would no longer constitute a Restricted Subsidiary or (D) with respect to the common stock of any Restricted Subsidiary, in a Public Equity Offering as a result of or after which a Public Market exists; provided, however, that, in the case of clauses (C) and -------- ------- (D), such issuance, sale or disposition or Public Equity Offering complies with Section 4.06. Upon any issuance or sale of Capital Stock pursuant to clause (C) above and delivery of a supplemental indenture to the Trustee in accordance with the terms of the Indenture, any such Restricted Subsidiary that is a Subsidiary Guarantor shall 46 be released from all its obligations under its Subsidiary Guarantee. SECTION 4.09. Change of Control. (a) Upon the occurrence of a ------------------ Change of Control, each Holder shall have the right to require that the Company repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof on the date of repurchase plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of holders of record on the relevant record date to receive interest on the relevant interest payment date), in accordance with the terms contemplated in Section 4.09(b). In the event that at the time of such Change of Control the terms of the Senior Indebtedness of the Company restrict or prohibit the repurchase of Securities pursuant to this Section, then prior to the mailing of the notice to Holders provided for in Section 4.09(b) below but in any event within 30 days following any Change of Control, the Company shall (i) repay in full all such Senior Indebtedness or offer to repay in full all such Senior Indebtedness and repay such Senior Indebtedness of each lender who has accepted such offer or (ii) obtain the requisite consent under the agreements governing such Senior Indebtedness to permit the repurchase of the Securities as provided for in Section 4.09(b). The Company must first comply with the covenant described in the preceding sentence before it will be required to purchase Securities in the event of a Change of Control. (b) Within 30 days following any Change of Control (but subject to compliance with Section 4.09(e)), the Company shall mail a notice to each Holder with a copy to the Trustee (the "Change of Control Offer") stating: ----------------------- (1) that a Change of Control has occurred and that such Holder has the right to require the Company to repurchase such Holder's Securities at a purchase price in cash equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of repurchase (subject to the right of Holders of record on the relevant record date to receive interest on the relevant interest payment date); (2) that any Securities (or portions thereof) repurchased pursuant to the Change of Control Offer shall cease to accrue interest on the date of repurchase; (3) that any Securities (or portions thereof) not properly tendered shall continue to accrue interest; (4) the circumstances and relevant facts regarding such Change of Control (including relevant financial information); 47 (5) the purchase date (which shall be no earlier than 30 days nor later than 60 days from the date such notice is mailed); and (6) the instructions determined by the Company, consistent with this Section, that a Holder must follow in order to have its Securities purchased. (c) Holders electing to have a Security purchased will be required to surrender the Security, with an appropriate form duly completed, to the Company at the address specified in the notice at least three Business Days prior to the purchase date. Holders will be entitled to withdraw their election if the Trustee or the Company receives not later than one Business Day prior to the purchase date, a telegram, telex, facsimile transmission or letter setting forth the name of the Holder, the principal amount of the Security which was delivered for purchase by the Holder and a statement that such Holder is withdrawing his election to have such Security purchased. (d) On the purchase date, all Securities purchased by the Company under this Section shall be delivered by the Company to the Trustee for cancellation, and the Company shall pay the purchase price plus accrued and unpaid interest, if any, to the Holders entitled thereto. (e) Notwithstanding the foregoing provisions of this Section, the Company shall not be required to make a Change of Control Offer upon a Change of Control if a third party makes the Change of Control Offer in the manner, at the times and otherwise in compliance with the requirements set forth in this Indenture applicable to a Change of Control Offer made by the Company and purchases all Securities validly tendered and not withdrawn under such Change of Control Offer. (f) The Company shall comply, to the extent applicable, with the requirements of Section 14(e) of the Exchange Act and any other securities laws or regulations in connection with the repurchase of Securities pursuant to this Section. To the extent that the provisions of any securities laws or regulations conflict with provisions of this Section, the Company shall comply with the applicable securities laws and regulations and shall not be deemed to have breached its obligations under this Section by virtue of its compliance with such securities laws or regulations. SECTION 4.10. Limitation on Liens. The Company shall not, and shall -------------------- not permit any Restricted Subsidiary to, directly or indirectly, Incur or permit to exist any Lien of any nature whatsoever on any property of the Company or any Restricted Subsidiary (including Capital Stock of a Restricted Subsidiary), whether owned at the Issue Date or thereafter acquired, which secures Indebtedness that ranks pari passu with or subordinated to the Securities or the Subsidiary Guaranty, as applicable, unless (i) if such Lien 48 secures Indebtedness that ranks pari passu with the Securities or the Subsidiary Guaranty, as applicable, the Securities are secured on an equal and ratable basis with the obligations so secured until such time as such obligation is no longer secured by a Lien or (ii) if such Lien secures Indebtedness that is subordinated to the Securities or the Subsidiary Guaranty, as applicable, such Lien shall be subordinated to a Lien granted to the Securityholders in the same collateral as that securing such Lien to the same extent as such subordinated Indebtedness is subordinated to the Securities or the Subsidiary Guaranty, as applicable. SECTION 4.11. Compliance Certificate. The Company shall deliver to ----------------------- the Trustee within 120 days after the end of each fiscal year of the Company an Officers' Certificate stating that in the course of the performance by the signers of their duties as Officers of the Company they would normally have knowledge of any Default and whether or not the signers know of any Default that occurred during such period. If they do, the certificate shall describe the Default, its status and what action the Company is taking or proposes to take with respect thereto. The Company also shall comply with TIA (S) 314(a)(4). SECTION 4.12. Further Instruments and Acts. Upon request of the ----------------------------- Trustee, the Company will execute and deliver such further instruments and do such further acts as may be reasonably necessary or proper to carry out more effectively the purpose of this Indenture. SECTION 4.13. Future Guarantors. After the date of this Indenture, ------------------ the Company shall cause each Domestic Restricted Subsidiary (other than each such Subsidiary that is a party hereto) to execute and deliver to the Trustee a supplemental indenture in the form of Exhibit B hereto pursuant to which such Restricted Subsidiary shall Guarantee payment of the Securities as provided in Section 11.07. ARTICLE 5 Successor Company ----------------- SECTION 5.01. When Company May Merge or Transfer Assets. The Company ------------------------------------------ shall not consolidate with or merge with or into, or convey, transfer or lease, in one transaction or a series of transactions, all or substantially all its assets to, any Person, unless: (i) the resulting, surviving or transferee Person (the "Successor --------- Company") shall be a Person organized and existing under the laws of the ------- United States of America, any State thereof or the District of Columbia and the Successor Company (if not the Company) shall expressly assume, by an indenture supplemental hereto, executed and delivered to the Trustee, in form 49 satisfactory to the Trustee, all the obligations of the Company under the Securities and this Indenture; (ii) immediately after giving effect to such transaction (and treating any Indebtedness which becomes an obligation of the Successor Company or any Subsidiary as a result of such transaction as having been Incurred by the Successor Company or such Subsidiary at the time of such transaction), no Default shall have occurred and be continuing; (iii) except in the case of a merger the sole purpose of which is to change the Company's jurisdiction of incorporation, immediately after giving effect to such transaction, the Successor Company would be able to Incur an additional $1.00 of Indebtedness pursuant to Section 4.03(a); and (iv) the Company shall have delivered to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture (if any) comply with this Indenture. Notwithstanding the foregoing clauses (ii) and (iii), any Restricted Subsidiary may consolidate with, merge into or transfer all or part of its properties and assets to the Company. The Successor Company shall be the successor to the Company and shall succeed to, and be substituted for, and may exercise every right and power of, the Company under this Indenture, but the predecessor Company in the case of a conveyance, transfer or lease shall not be released from the obligation to pay the principal of and interest on the Securities. SECTION 5.02. When a Subsidiary Guarantor May Merge or Transfer ------------------------------------------------- Assets. The Company shall not permit any Subsidiary Guarantor to consolidate - ------- with or merge with or into, or convey, transfer or lease, in one transaction or series of transactions, all or substantially all of its assets to any Person unless: (i) the resulting, surviving or transferee Person (if not such Subsidiary) shall be a Person organized and existing under the laws of the jurisdiction under which such Subsidiary was organized or under the laws of the United States of America, or any State hereof or the District of Columbia, and such Person shall expressly assume, by supplemental indenture, in a form acceptable to the Trustee, all the obligations of such Subsidiary, if any, under its Subsidiary Guaranty; (ii) immediately after giving effect to such transaction or transactions on a pro forma basis (and treating any Indebtedness which becomes an obligation 50 of the resulting, surviving or transferee Person as a result of such transaction as having been Incurred by such Person at the time of such transaction), no Default shall have occurred and be continuing; and (iii) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that such consolidation, merger or transfer and such supplemental indenture, if any, complies with this Indenture; provided, however, that the foregoing clauses (i) and (iii) shall not apply to - -------- ------- any transaction which constitutes an Asset Disposition if the Company has complied with the applicable provisions of Section 4.06 with respect to such Asset Disposition. ARTICLE 6 Defaults and Remedies --------------------- SECTION 6.01. Events of Default. An "Event of Default" occurs if: ------------------ ---------------- (1) the Company defaults in any payment of interest on any Security when the same becomes due and payable, whether or not such payment shall be prohibited by Article 10, and such default continues for a period of 30 days; (2) the Company defaults in the payment of the principal of any Security when the same becomes due and payable at its Stated Maturity, upon optional redemption, upon required repurchase, upon declaration or otherwise, whether or not such payment shall be prohibited by Article 10; (3) the Company fails to comply with Section 5.01; (4) the Company fails to comply with Section 4.02, 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 or 4.13 (other than a failure to purchase Securities when required under Section 4.06 or 4.09) and such failure continues for 30 days after the notice specified below; (5) the Company or any Subsidiary Guarantor fails to comply with any of its agreements in the Securities or this Indenture (other than those referred to in clause (1), (2), (3) or (4) above) and such failure continues for 30 days after the notice specified below; (6) Indebtedness of the Company or any Significant Subsidiary is not paid within any applicable grace period after final maturity or is accelerated by the holders thereof because of a default and the total amount of such Indebtedness unpaid or accelerated 51 exceeds $10 million or its foreign currency equivalent at the time and such non-payment or acceleration continues for 10 days after the notice specified below; (7) the Company or any Significant Subsidiary pursuant to or within the meaning of any Bankruptcy Law: (A) commences a voluntary case; (B) consents to the entry of an order for relief against it in an involuntary case; (C) consents to the appointment of a Custodian of it or for any substantial part of its property; or (D) makes a general assignment for the benefit of its creditors; or takes any comparable action under any foreign laws relating to insolvency; (8) a court of competent jurisdiction enters an order or decree under any Bankruptcy Law that: (A) is for relief against the Company or any Significant Subsidiary in an involuntary case; (B) appoints a Custodian of the Company or any Significant Subsidiary or for any substantial part of its property; (C) orders the winding up or liquidation of the Company or any Significant Subsidiary; or (D) any similar relief is granted under any foreign laws; and in each such case the order or decree remains unstayed and in effect for 60 days; (9) any judgment or decree for the payment of money in excess of $10 million or its foreign currency equivalent at the time is entered against the Company or any Significant Subsidiary, remains outstanding for a period of 60 days following the entry of such judgment or decree and is not discharged, waived or the execution thereof stayed within 10 days after the notice specified below; or (10) a Subsidiary Guaranty ceases or otherwise fails to be in full force and effect (other than in accordance with the terms of such Subsidiary Guaranty) or a Subsidiary Guarantor denies or disaffirms its obligations under its Subsidiary Guaranty and such 52 Default continues for a period of 10 days after the notice specified below. The foregoing will constitute Events of Default whatever the reason for any such Event of Default and whether it is voluntary or involuntary or is effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body. The term "Bankruptcy Law" means Title 11, United States Code, or any -------------- ------------------ similar Federal or state law for the relief of debtors. The term "Custodian" --------- means any receiver, trustee, assignee, liquidator, custodian or similar official under any Bankruptcy Law. A Default under clause (4), (5), (6) or (9) is not an Event of Default until the Trustee or the Holders of at least 25% in principal amount of the Securities notify the Company of the Default and the Company does not cure such Default within the time specified after receipt of such notice. Such notice must specify the Default, demand that it be remedied and state that such notice is a "Notice of Default" (and, if given by the Holders, a copy of such notice shall also be given to the Trustee). The Company shall deliver to the Trustee, within 30 days after the occurrence thereof, written notice in the form of an Officers' Certificate of any Event of Default under clause (3), (7) or (10) and any event which with the giving of notice or the lapse of time would become an Event of Default under clause (4), (5), (6), (8) or (9), its status and what action the Company is taking or proposes to take with respect thereto. SECTION 6.02. Acceleration. If an Event of Default (other than an ------------- Event of Default specified in Section 6.01(7) or (8) with respect to the Company) occurs and is continuing, the Trustee by notice to the Company, or the Holders of at least 25% in principal amount of the Securities by notice to the Company and the Trustee, may declare the principal of and accrued interest on all the Securities to be due and payable. Upon such a declaration, such principal and interest shall be due and payable immediately. If an Event of Default specified in Section 6.01(7) or (8) with respect to the Company occurs, the principal of and interest on all the Securities shall ipso facto become and ---- ----- be immediately due and payable without any declaration or other act on the part of the Trustee or any Securityholders. The Holders of a majority in principal amount of the Securities by notice to the Trustee may rescind an acceleration and its consequences if the rescission would not conflict with any judgment or decree and if all existing Events of Default have been cured or waived except nonpayment of principal or interest that has become due solely because of acceleration. No such 53 rescission shall affect any subsequent Default or impair any right consequent thereto. SECTION 6.03. Other Remedies. If an Event of Default occurs and is --------------- continuing, the Trustee may pursue any available remedy to collect the payment of principal of or interest on the Securities or to enforce the performance of any provision of the Securities or this Indenture. The Trustee may maintain a proceeding even if it does not possess any of the Securities or does not produce any of them in the proceeding. A delay or omission by the Trustee or any Securityholder in exercising any right or remedy accruing upon an Event of Default shall not impair the right or remedy or constitute a waiver of or acquiescence in the Event of Default. No remedy is exclusive of any other remedy. All available remedies are cumulative. SECTION 6.04. Waiver of Past Defaults. The Holders of a majority in ------------------------ principal amount of the Securities by notice to the Trustee may waive an existing Default and its consequences except (i) a Default in the payment of the principal of or interest on a Security or (ii) a Default in respect of a provision that under Section 9.02 cannot be amended without the consent of each Securityholder affected. When a Default is waived, it is deemed cured, but no such waiver shall extend to any subsequent or other Default or impair any consequent right. SECTION 6.05. Control by Majority. The Holders of a majority in -------------------- principal amount of the Securities may direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or of exercising any trust or power conferred on the Trustee. However, the Trustee may refuse to follow any direction that conflicts with law or this Indenture or, subject to Section 7.01, that the Trustee determines is unduly prejudicial to the rights of other Securityholders or would involve the Trustee in personal liability; provided, however, that the Trustee may take any other action deemed -------- ------- proper by the Trustee that is not inconsistent with such direction. Prior to taking any action hereunder, the Trustee shall be entitled to indemnification satisfactory to it in its sole discretion against all losses and expenses caused by taking or not taking such action. SECTION 6.06. Limitation on Suits. A Securityholder may not pursue -------------------- any remedy with respect to this Indenture or the Securities unless: (1) the Holder gives to the Trustee written notice stating that an Event of Default is continuing; (2) the Holders of at least 25% in principal amount of the Securities make a written request to the Trustee to pursue the remedy; 54 (3) such Holder or Holders offer to the Trustee reasonable security or indemnity against any loss, liability or expense; (4) the Trustee does not comply with the request within 60 days after receipt of the request and the offer of security or indemnity; and (5) the Holders of a majority in principal amount of the Securities do not give the Trustee a direction inconsistent with the request during such 60-day period. A Securityholder may not use this Indenture to prejudice the rights of another Securityholder or to obtain a preference or priority over another Securityholder. SECTION 6.07. Rights of Holders to Receive Payment. Notwithstanding ------------------------------------- any other provision of this Indenture, the right of any Holder to receive payment of principal of and interest on the Securities held by such Holder, on or after the respective due dates expressed in the Securities, or to bring suit for the enforcement of any such payment on or after such respective dates, shall not be impaired or affected without the consent of such Holder. SECTION 6.08. Collection Suit by Trustee. If an Event of Default --------------------------- specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may recover judgment in its own name and as trustee of an express trust against the Company for the whole amount then due and owing (together with interest on any unpaid interest to the extent lawful) and the amounts provided for in Section 7.07. SECTION 6.09. Trustee May File Proofs of Claim. The Trustee may file --------------------------------- such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Securityholders allowed in any judicial proceedings relative to the Company, its creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders in any election of a trustee in bankruptcy or other Person performing similar functions, and any Custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 7.07. 55 SECTION 6.10. Priorities. If the Trustee collects any money or ----------- property pursuant to this Article 6, it shall pay out the money or property in the following order: FIRST: to the Trustee for amounts due under Section 7.07; SECOND: to holders of Senior Indebtedness of the Company to the extent required by Article 10; THIRD: to Securityholders for amounts due and unpaid on the Securities for principal and interest, ratably, without preference or priority of any kind, according to the amounts due and payable on the Securities for principal and interest, respectively; and FOURTH: to the Company. The Trustee may fix a record date and payment date for any payment to Securityholders pursuant to this Section. At least 15 days before such record date, the Company shall mail to each Securityholder and the Trustee a notice that states the record date, the payment date and amount to be paid. SECTION 6.11. Undertaking for Costs. In any suit for the enforcement ---------------------- of any right or remedy under this Indenture or in any suit against the Trustee for any action taken or omitted by it as Trustee, a court in its discretion may require the filing by any party litigant in the suit of an undertaking to pay the costs of the suit, and the court in its discretion may assess reasonable costs, including reasonable attorneys' fees, against any party litigant in the suit, having due regard to the merits and good faith of the claims or defenses made by the party litigant. This Section does not apply to a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a suit by Holders of more than 10% in principal amount of the Securities. SECTION 6.12. Waiver of Stay or Extension Laws. The Company (to the --------------------------------- extent it may lawfully do so) shall not at any time insist upon, or plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay or extension law wherever enacted, now or at any time hereafter in force, which may affect the covenants or the performance of this Indenture; and the Company (to the extent that it may lawfully do so) hereby expressly waives all benefit or advantage of any such law, and shall not hinder, delay or impede the execution of any power herein granted to the Trustee, but shall suffer and permit the execution of every such power as though no such law had been enacted. 56 ARTICLE 7 Trustee ------- SECTION 7.01. Duties of Trustee. (a) If an Event of Default has ------------------ occurred and is continuing, the Trustee shall exercise the rights and powers vested in it by this Indenture and use the same degree of care and skill in their exercise as a prudent Person would exercise or use under the circumstances in the conduct of such Person's own affairs. (b) Except during the continuance of an Event of Default: (1) the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture and no implied covenants or obligations shall be read into this Indenture against the Trustee; and (2) in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture. However, the Trustee shall examine the certificates and opinions to determine whether or not they conform to the requirements of this Indenture (but need not confirm or investigate the accuracy of mathematical calculations or other facts stated therein). (c) The Trustee may not be relieved from liability for its own negligent action, its own negligent failure to act or its own wilful misconduct, except that: (1) this paragraph does not limit the effect of paragraph (b) of this Section; (2) the Trustee shall not be liable for any error of judgment or exercise of its discretion made in good faith by a Trust Officer unless it is proved that the Trustee was negligent in ascertaining the pertinent facts; and (3) the Trustee shall not be liable with respect to any action it takes or omits to take in good faith in accordance with a direction received by it pursuant to Section 6.05. (d) Every provision of this Indenture that in any way relates to the Trustee is subject to paragraphs (a), (b) and (c) of this Section. (e) The Trustee shall not be liable for interest on any money received by it except as the Trustee may agree in writing with the Company. 57 (f) Money held in trust by the Trustee need not be segregated from other funds except to the extent required by law. (g) No provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur financial liability in the performance of any of its duties hereunder or in the exercise of any of its rights or powers, if it shall have reasonable grounds to believe that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it. (h) Every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section and to the provisions of the TIA. SECTION 7.02. Rights of Trustee. (a) The Trustee may conclusively ------------------ rely on any document believed by it to be genuine and to have been signed or presented by the proper person. The Trustee need not investigate any fact or matter stated in the document. (b) Before the Trustee acts or refrains from acting, it may require an Officers' Certificate or an Opinion of Counsel. The Trustee shall not be liable for any action it takes or omits to take in good faith in reliance on the Officers' Certificate or Opinion of Counsel. (c) The Trustee may act through agents and shall not be responsible for the misconduct or negligence of any agent appointed with due care. (d) The Trustee shall not be liable for any action it takes or omits to take in good faith which it believes to be authorized or within its rights or powers; provided, however, that the Trustee's conduct does not constitute wilful --------- ------- misconduct or negligence. (e) The Trustee may consult with counsel, and the advice or opinion of counsel with respect to legal matters relating to this Indenture and the Securities shall be full and complete authorization and protection from liability in respect to any action taken, omitted or suffered by it hereunder in good faith and in accordance with the advice or opinion of such counsel. SECTION 7.03. Individual Rights of Trustee. The Trustee in its ----------------------------- individual or any other capacity may become the owner or pledgee of Securities and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar or co-paying agent may do the same with like rights. However, the Trustee must comply with Sections 7.10 and 7.11. 58 SECTION 7.04. Trustee's Disclaimer. The Trustee shall not be --------------------- responsible for and makes no representation as to the validity or adequacy of this Indenture or the Securities, it shall not be accountable for the Company's use of the proceeds from the Securities, and it shall not be responsible for any statement of the Company in the Indenture or in any document issued in connection with the sale of the Securities or in the Securities other than the Trustee's certificate of authentication. SECTION 7.05. Notice of Defaults. If a Default occurs and is ------------------- continuing and if it is known to the Trustee, the Trustee shall mail to each Securityholder notice of the Default within 90 days after it occurs or, if later, within 30 days after the Trustee has actual knowledge thereof. Except in the case of a Default in payment of principal of or interest on any Security (including payments pursuant to the mandatory redemption provisions of such Security, if any), the Trustee may withhold the notice if and so long as the Trustee in good faith determines that withholding the notice is in the interests of Securityholders. SECTION 7.06. Reports by Trustee to Holders. As promptly as ------------------------------ practicable after each May 15 beginning with the May 15 following the date of this Indenture, and in any event prior to July 15 in each year, the Trustee shall mail to each Securityholder a brief report dated as of such date that complies with TIA (S) 313(a). The Trustee also shall comply with TIA (S) 313(b). A copy of each report at the time of its mailing to Securityholders shall be filed with the SEC and each stock exchange (if any) on which the Securities are listed. The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof. SECTION 7.07. Compensation and Indemnity. The Company shall pay to --------------------------- the Trustee promptly upon request from time to time reasonable compensation for its services. The Trustee's compensation shall not be limited by any law on compensation of a trustee of an express trust. The Company shall reimburse the Trustee promptly upon request for all reasonable out-of-pocket expenses incurred or made by it, including costs of collection, in addition to the compensation for its services. Such expenses shall include the reasonable compensation and expenses, disbursements and advances of the Trustee's agents, counsel, accountants and experts. The Company shall indemnify the Trustee and any of its officers, directors and employees (the "Indemnified Persons") against any and ------------------- all losses, claims, actions, suits, damages, expenses (including attorneys' fees and expenses) and liabilities (including liabilities under state or federal securities laws) incurred by such Indemnified Persons in connection with the acceptance and administration of this trust and the performance of the Trustee's duties hereunder, including the costs and expenses of defending 59 itself against any claim or liability in connection with the exercise or performance of any of its powers or duties hereunder or in connection with enforcing this Section 7.07, except to the extent that any such loss, liability or expense is attributable to its negligence or bad faith. The Trustee shall notify the Company promptly of any claim for which any Indemnified Person may seek indemnity. Failure by the Trustee to so notify the Company shall not relieve the Company of its obligations hereunder. The Company shall defend the claim and the Indemnified Person may have separate counsel and the Company shall pay the fees and expenses of such counsel. The Company need not reimburse any expense or indemnify against any loss, liability or expense incurred by the Indemnified Person through the Indemnified Person's own wilful misconduct, negligence or bad faith. The Company need not pay for any settlement made by the Indemnified Person without the Company's consent, such consent not to be unreasonably withheld. To secure the Company's payment obligations in this Section, the Trustee shall have a lien prior to the Securities on all money or property held or collected by the Trustee other than money or property held in trust to pay principal of and interest on particular Securities. The Company's payment obligations pursuant to this Section shall survive the discharge of this Indenture. When the Trustee incurs expenses after the occurrence of a Default specified in Section 6.01(7) or (8) with respect to the Company, the expenses are intended to constitute expenses of administration under the Bankruptcy Law. SECTION 7.08. Replacement of Trustee. The Trustee may resign at any ----------------------- time by so notifying the Company. The Holders of a majority in principal amount of the Securities may remove the Trustee by so notifying the Trustee and may appoint a successor Trustee. The Company shall remove the Trustee if: (1) the Trustee fails to comply with Section 7.10; (2) the Trustee is adjudged bankrupt or insolvent; (3) a receiver or other public officer takes charge of the Trustee or its property; or (4) the Trustee otherwise becomes incapable of acting. If the Trustee resigns, is removed by the Company or by the Holders of a majority in principal amount of the Securities and such Holders do not reasonably promptly appoint a successor Trustee, or if a vacancy exists in the office of Trustee for any reason (the Trustee in such event being referred to herein as the retiring Trustee), the Company shall promptly appoint a successor Trustee. 60 A successor Trustee shall deliver a written acceptance of its appointment to the retiring Trustee and to the Company. Thereupon the resignation or removal of the retiring Trustee shall become effective, and the successor Trustee shall have all the rights, powers and duties of the Trustee under this Indenture. The successor Trustee shall mail a notice of its succession to Securityholders. The retiring Trustee shall promptly transfer all property held by it as Trustee to the successor Trustee, subject to the lien provided for in Section 7.07. If a successor Trustee does not take office within 60 days after the retiring Trustee resigns or is removed, the retiring Trustee or the Holders of 10% in principal amount of the Securities may petition any court of competent jurisdiction for the appointment of a successor Trustee. If the Trustee fails to comply with Section 7.10, any Securityholder may petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee. Notwithstanding the replacement of the Trustee pursuant to this Section, the Company's obligations under Section 7.07 shall continue for the benefit of the retiring Trustee. SECTION 7.09. Successor Trustee by Merger. If the Trustee ---------------------------- consolidates with, merges or converts into, or transfers all or substantially all its corporate trust business or assets to, another corporation or banking association, the resulting, surviving or transferee corporation without any further act shall be the successor Trustee. In case at the time such successor or successors by merger, conversion or consolidation to the Trustee shall succeed to the trusts created by this Indenture any of the Securities shall have been authenticated but not delivered, any such successor to the Trustee may adopt the certificate of authentication of any predecessor trustee, and deliver such Securities so authenticated; and in case at that time any of the Securities shall not have been authenticated, any successor to the Trustee may authenticate such Securities either in the name of any predecessor hereunder or in the name of the successor to the Trustee; and in all such cases such certificates shall have the full force which it is anywhere in the Securities or in this Indenture provided that the certificate of the Trustee shall have. SECTION 7.10. Eligibility; Disqualification. The Trustee shall at ------------------------------ all times satisfy the requirements of TIA (S) 310(a). The Trustee shall have a combined capital and surplus of at least $50,000,000 as set forth in its most recent published annual report of condition. The Trustee shall comply with TIA (S) 310(b); provided, however, that there shall be excluded from the operation -------- ------- of TIA (S) 310(b)(1) any indenture or indentures under which other securities or certificates of interest or 61 participation in other securities of the Company are outstanding if the requirements for such exclusion set forth in TIA (S) 310(b)(1) are met. SECTION 7.11. Preferential Collection of Claims Against Company. The -------------------------------------------------- Trustee shall comply with TIA (S) 311(a), excluding any creditor relationship listed in TIA (S) 311(b). A Trustee who has resigned or been removed shall be subject to TIA (S) 311(a) to the extent indicated. ARTICLE 8 Discharge of Indenture; Defeasance ---------------------------------- SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a) ------------------------------------------------- When (i) the Company delivers to the Trustee all outstanding Securities (other than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all outstanding Securities have become due and payable, whether at maturity or as a result of the mailing of a notice of redemption pursuant to Article 3 hereof and the Company irrevocably deposits with the Trustee funds sufficient to pay at maturity or upon redemption all outstanding Securities, including interest thereon to maturity or such redemption date (other than Securities replaced pursuant to Section 2.07), and if in either case the Company pays all other sums payable hereunder by the Company, then this Indenture shall, subject to Sections 8.01(c), cease to be of further effect. The Trustee shall acknowledge satisfaction and discharge of this Indenture on demand of the Company accompanied by an Officers' Certificate and an Opinion of Counsel and at the cost and expense of the Company. (b) Subject to Sections 8.01(c) and 8.02, the Company at any time may terminate (i) all its obligations under the Securities and this Indenture ("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03, - ------------------------- 4.04, 4.05, 4.06, 4.07, 4.08, 4.09, 4.10 and 4.13 and the operation of Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) ("covenant -------- defeasance option") or contained in Section 5.01(iii). The Company may exercise - ----------------- its legal defeasance option notwithstanding its prior exercise of its covenant defeasance option. If the Company exercises its legal defeasance option, payment of the Securities may not be accelerated because of an Event of Default. If the Company exercises its covenant defeasance option, payment of the Securities may not be accelerated because of an Event of Default specified in Sections 6.01(4), 6.01(6), 6.01(7), 6.01(8) and 6.01(9) (but, in the case of Sections 6.01(7) and (8), with respect only to Significant Subsidiaries) or because of the failure of the Company to comply with Section 5.01(iii). If the Company exercises its legal defeasance option or its 62 covenant defeasance option, each Subsidiary Guarantor, if any, shall be released from all its obligations under its Subsidiary Guaranty. Upon satisfaction of the conditions set forth herein and upon request of the Company, the Trustee shall acknowledge in writing the discharge of those obligations that the Company terminates. (c) Notwithstanding clauses (a) and (b) above, the Company's obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 2.08, 7.07, 7.08 and this Article 8 shall survive until the Securities have been paid in full. Thereafter, the Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive. SECTION 8.02. Conditions to Defeasance. The Company may exercise its ------------------------- legal defeasance option or its covenant defeasance option only if: (1) the Company irrevocably deposits in trust with the Trustee money or U.S. Government Obligations for the payment of principal of and interest on the Securities to maturity or redemption, as the case may be; (2) the Company delivers to the Trustee a certificate from a nationally recognized firm of independent accountants expressing their opinion that the payments of principal and interest when due and without reinvestment on the deposited U.S. Government Obligations plus any deposited money without investment will provide cash at such times and in such amounts as will be sufficient to pay principal and interest when due on all the Securities to maturity or redemption, as the case may be; (3) 123 days pass after the deposit is made and during the 123-day period no Default specified in Sections 6.01(7) or (8) with respect to the Company occurs which is continuing at the end of the period; (4) the deposit does not constitute a default under any other agreement binding on the Company and is not prohibited by Article 10; (5) the Company delivers to the Trustee an Opinion of Counsel to the effect that the trust resulting from the deposit does not constitute, or is qualified as, a regulated investment company under the Investment Company Act of 1940; (6) in the case of the legal defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel stating that (i) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (ii) since the date of this Indenture there has been a change in the 63 applicable Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance had not occurred; (7) in the case of the covenant defeasance option, the Company shall have delivered to the Trustee an Opinion of Counsel to the effect that the Securityholders will not recognize income, gain or loss for Federal income tax purposes as a result of such covenant defeasance and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred; and (8) the Company delivers to the Trustee an Officers' Certificate and an Opinion of Counsel, each stating that all conditions precedent to the defeasance and discharge of the Securities as contemplated by this Article 8 have been complied with. Before or after a deposit, the Company may make arrangements satisfactory to the Trustee for the redemption of Securities at a future date in accordance with Article 3. SECTION 8.03. Application of Trust Money. The Trustee shall hold in --------------------------- trust money or U.S. Government Obligations deposited with it pursuant to this Article 8. It shall apply the deposited money and the money from U.S. Government Obligations through the Paying Agent and in accordance with this Indenture to the payment of principal of and interest on the Securities. Money and securities so held in trust are not subject to Article 10. SECTION 8.04. Repayment to Company. The Trustee and the Paying Agent --------------------- shall promptly turn over to the Company upon request any excess money or securities held by them at any time. Subject to any applicable abandoned property law, the Trustee and the Paying Agent shall pay to the Company upon request any money held by them for the payment of principal or interest that remains unclaimed for two years, and, thereafter, Securityholders entitled to the money must look to the Company for payment as general creditors. SECTION 8.05. Indemnity for Government Obligations. The Company ------------------------------------- shall pay and shall indemnify the Trustee against any tax, fee or other charge imposed on or assessed against deposited U.S. Government Obligations or the principal and interest received on such U.S. Government Obligations. 64 SECTION 8.06. Reinstatement. If the Trustee or Paying Agent is -------------- unable to apply any money or U.S. Government Obligations in accordance with this Article 8 by reason of any legal proceeding or by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, the Company's obligations under this Indenture and the Securities shall be revived and reinstated as though no deposit had occurred pursuant to this Article 8 until such time as the Trustee or Paying Agent is permitted to apply all such money or U.S. Government Obligations in accordance with this Article 8; provided, however, that, if the --------- ------- Company has made any payment of interest on or principal of any Securities because of the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money or U.S. Government Obligations held by the Trustee or Paying Agent. ARTICLE 9 Amendments ---------- SECTION 9.01. Without Consent of Holders. The Company, the -------------------------- Subsidiary Guarantors and the Trustee may amend this Indenture or the Securities without notice to or consent of any Securityholder: (1) to cure any ambiguity, omission, defect or inconsistency; (2) to comply with Article 5; (3) to provide for uncertificated Securities in addition to or in place of certificated Securities; provided, however, that the -------- ------- uncertificated Securities are issued in registered form for purposes of Section 163(f) of the Code or in a manner such that the uncertificated Securities are described in Section 163(f)(2)(B) of the Code; (4) to make any change in Article 10 or Article 12 that would limit or terminate the benefits available to any holder of Senior Indebtedness of the Company or any Subsidiary Guarantor (or Representatives therefor) under Article 10 or Article 12, respectively; (5) to add further Guarantees with respect to the Securities or to release Subsidiary Guarantors when permitted by the terms hereof, or to secure the Securities; (6) to add to the covenants of the Company for the benefit of the Holders or to surrender any right or power herein conferred upon the Company; 65 (7) to comply with any requirements of the SEC in connection with qualifying, or maintaining the qualification of, this Indenture under the TIA; or (8) to make any change that does not adversely affect the rights of any Securityholder. An amendment under this Section may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness of the Company or any Subsidiary Guarantor then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.02. With Consent of Holders. The Company, the Subsidiary ------------------------ Guarantors and the Trustee may amend this Indenture or the Securities without notice to any Securityholder but with the written consent of the Holders of at least a majority in principal amount of the Securities. However, without the consent of each Securityholder affected thereby, an amendment may not: (1) reduce the amount of Securities whose Holders must consent to an amendment; (2) reduce the rate of or extend the time for payment of interest on any Security; (3) reduce the principal of or extend the Stated Maturity of any Security; (4) reduce the amount payable upon the redemption of any Security or change the time at which any Security may be redeemed in accordance with Article 3; (5) make any Security payable in money other than that stated in the Security; (6) make any change in Article 10 or Article 12 that adversely affects the rights of any Securityholder under Article 10 or Article 12; (7) impair the right of any Holder to institute suit for enforcement of any payment on or with respect to such Holder's Securities or any Subsidiary Guaranty; (8) make any change in Section 6.04 or 6.07 or the second sentence of this Section; or 66 (9) make any change in any Subsidiary Guaranty that would adversely affect the Securityholders. It shall not be necessary for the consent of the Holders under this Section to approve the particular form of any proposed amendment, but it shall be sufficient if such consent approves the substance thereof. An amendment under this Section may not make any change that adversely affects the rights under Article 10 or Article 12 of any holder of Senior Indebtedness of the Company or any Subsidiary Guarantor then outstanding unless the holders of such Senior Indebtedness (or any group or representative thereof authorized to give a consent) consent to such change. After an amendment under this Section becomes effective, the Company shall mail to Securityholders a notice briefly describing such amendment. The failure to give such notice to all Securityholders, or any defect therein, shall not impair or affect the validity of an amendment under this Section. SECTION 9.03. Compliance with Trust Indenture Act. Every amendment ------------------------------------ to this Indenture or the Securities shall comply with the TIA as then in effect. SECTION 9.04. Revocation and Effect of Consents and Waivers. A ---------------------------------------------- consent to an amendment or a waiver by a Holder of a Security shall bind the Holder and every subsequent Holder of that Security or portion of the Security that evidences the same debt as the consenting Holder's Security, even if notation of the consent or waiver is not made on the Security. However, any such Holder or subsequent Holder may revoke the consent or waiver as to such Holder's Security or portion of the Security if the Trustee receives the notice of revocation before the date the amendment or waiver becomes effective. After an amendment or waiver becomes effective, it shall bind every Securityholder. An amendment or waiver becomes effective upon the execution of such amendment or waiver by the Trustee. The Company may, but shall not be obligated to, fix a record date for the purpose of determining the Securityholders entitled to give their consent or take any other action described above or required or permitted to be taken pursuant to this Indenture. If a record date is fixed, then notwithstanding the immediately preceding paragraph, those Persons who were Securityholders at such record date (or their duly designated proxies), and only those Persons, shall be entitled to give such consent or to revoke any consent previously given or to take any such action, whether or not such Persons continue to be Holders after such record date. No such consent shall be valid or effective for more than 120 days after such record date. 67 SECTION 9.05. Notation on or Exchange of Securities. If an amendment -------------------------------------- changes the terms of a Security, the Trustee may require the Holder of the Security to deliver it to the Trustee. The Trustee may place an appropriate notation on the Security regarding the changed terms and return it to the Holder. Alternatively, if the Company or the Trustee so determines, the Company in exchange for the Security shall issue and the Trustee shall authenticate a new Security that reflects the changed terms. Failure to make the appropriate notation or to issue a new Security shall not affect the validity of such amendment. SECTION 9.06. Trustee To Sign Amendments. The Trustee shall sign any --------------------------- amendment authorized pursuant to this Article 9 if the amendment does not adversely affect the rights, duties, liabilities or immunities of the Trustee. If it does, the Trustee may but need not sign it. In signing such amendment the Trustee shall be entitled to receive indemnity reasonably satisfactory to it and to receive, and (subject to Section 7.01) shall be fully protected in relying upon, an Officers' Certificate and an Opinion of Counsel stating that such amendment is authorized or permitted by this Indenture. SECTION 9.07. Payment for Consent. Neither the Company nor any -------------------- Affiliate of the Company shall, directly or indirectly, pay or cause to be paid any consideration, whether by way of interest, fee or otherwise, to any Holder for or as an inducement to any consent, waiver or amendment of any of the terms or provisions of this Indenture or the Securities unless such consideration is offered to be paid to all Holders that so consent, waive or agree to amend in the time frame set forth in solicitation documents relating to such consent, waiver or agreement. ARTICLE 10 Subordination ------------- SECTION 10.01. Agreement To Subordinate. The Company agrees, and ------------------------- each Securityholder by accepting a Security agrees, that the Indebtedness evidenced by the Securities is subordinated in right of payment, to the extent and in the manner provided in this Article 10, to the prior payment of all Senior Indebtedness of the Company and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Securities shall in all respects rank pari passu with all other Senior Subordinated ---- ----- Indebtedness of the Company and only Indebtedness of the Company which is Senior Indebtedness shall rank senior to the Securities in accordance with the provisions set forth herein. All provisions of this Article 10 shall be subject to Section 10.12. 68 SECTION 10.02. Liquidation, Dissolution, Bankruptcy. Upon any ------------------------------------- payment or distribution of the assets of the Company to creditors upon a total or partial liquidation or a total or partial dissolution of the Company or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to the Company or its property: (1) holders of Senior Indebtedness of the Company shall be entitled to receive payment in full in cash of such Senior Indebtedness before Securityholders shall be entitled to receive any payment of principal of or interest on the Securities; and (2) until such Senior Indebtedness is paid in full in cash, any payment or distribution to which Securityholders would be entitled but for this Article 10 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive shares of stock and any debt securities that are subordinated to such Senior Indebtedness to at least the same extent as the Securities. SECTION 10.03. Default on Senior Indebtedness. The Company may not ------------------------------- pay the principal of or interest on the Securities or make any deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise retire any Securities (collectively, "pay the Securities") if (i) any Senior Indebtedness ------------------ of the Company is not paid in full in cash when due or (ii) any other default on Senior Indebtedness of the Company occurs and the maturity of such Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Senior Indebtedness has been paid in full in cash; provided, however, that the Company may pay the Securities without regard to the - -------- ------- foregoing if the Company and the Trustee receive written notice approving such payment from the Representative of all Senior Indebtedness with respect to which such default has occurred and is continuing. During the continuance of any default (other than a default described in clause (i) or (ii) of the preceding sentence) with respect to any Designated Senior Indebtedness pursuant to which the maturity thereof may be accelerated immediately without further notice (except such notice as may be required to effect such acceleration) or the expiration of any applicable grace periods, the Company may not pay the Securities for a period (a "Payment Blockage Period") commencing upon the ----------------------- receipt by the Company and the Trustee of written notice (a "Blockage Notice") --------------- of such default from the Representative of such Designated Senior Indebtedness specifying an election to effect a Payment Blockage Period and ending 179 days thereafter (or earlier if such Payment Blockage Period is terminated (i) by written notice to the Trustee and the Company from the Person or Persons who gave such Blockage Notice, (ii) because the default giving rise to such Blockage Notice is cured, waived or otherwise no 69 longer continuing or (iii) because such Designated Senior Indebtedness has been discharged or repaid in full in cash). Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of such Designated Senior Indebtedness or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, the Company may resume payments on the Securities after such Payment Blockage Period. Not more than one Blockage Notice may be given in any consecutive 360-day period, irrespective of the number of defaults with respect to Designated Senior Indebtedness during such period. SECTION 10.04. Acceleration of Payment of Securities. If payment of -------------------------------------- the Securities is accelerated because of an Event of Default, the Company or the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of the acceleration. SECTION 10.05. When Distribution Must Be Paid Over. If a ------------------------------------ distribution is made to Securityholders that because of this Article 10 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of Senior Indebtedness of the Company and pay it over to them as their interests may appear. SECTION 10.06. Subrogation. After all Senior Indebtedness of the ------------ Company is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to such Senior Indebtedness. A distribution made under this Article 10 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the Company and Securityholders, a payment by the Company on such Senior Indebtedness. SECTION 10.07. Relative Rights. This Article 10 defines the relative ---------------- rights of Securityholders and holders of Senior Indebtedness of the Company. Nothing in this Indenture shall: (1) impair, as between the Company and Securityholders, the obligation of the Company, which is absolute and unconditional, to pay principal of and interest on the Securities in accordance with their terms; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a Default, subject to the rights of holders of Senior Indebtedness of the Company to receive distributions otherwise payable to Securityholders. 70 SECTION 10.08. Subordination May Not Be Impaired by Company. No --------------------------------------------- right of any holder of Senior Indebtedness of the Company to enforce the subordination of the Indebtedness evidenced by the Securities shall be impaired by any act or failure to act by the Company or by its failure to comply with this Indenture. SECTION 10.09. Rights of Trustee and Paying Agent. Notwithstanding ----------------------------------- Section 10.03, the Trustee or Paying Agent may continue to make payments on the Securities and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives notice satisfactory to it that payments may not be made under this Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness may give the notice; provided, -------- however, that, if an issue of Senior Indebtedness of the Company has a - ------- Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness of the Company with the same rights it would have if it were not Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 10 with respect to any Senior Indebtedness of the Company which may at any time be held by it, to the same extent as any other holder of such Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 10 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 10.10. Distribution or Notice to Representative. Whenever a ----------------------------------------- distribution is to be made or a notice given to holders of Senior Indebtedness of the Company, the distribution may be made and the notice given to their Representative (if any). SECTION 10.11. Article 10 Not To Prevent Events of Default or Limit ---------------------------------------------------- Right To Accelerate. The failure to make a payment pursuant to the Securities - -------------------- by reason of any provision in this Article 10 shall not be construed as preventing the occurrence of a Default. Nothing in this Article 10 shall have any effect on the right of the Securityholders or the Trustee to accelerate the maturity of the Securities. SECTION 10.12. Trust Moneys Not Subordinated. Notwithstanding ------------------------------ anything contained herein to the contrary, payments from money or the proceeds of U.S. Government Obligations held in trust under Article 8 by the Trustee for the payment of principal of and interest on the Securities shall not be subordinated to the prior payment of any Senior Indebtedness or subject to the restrictions set forth in this Article 10, and none of the Securityholders shall be 71 obligated to pay over any such amount to the Company or any holder of Senior Indebtedness of the Company or any other creditor of the Company. SECTION 10.13. Trustee Entitled To Rely. Upon any payment or ------------------------- distribution pursuant to this Article 10, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 10.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of the Company for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other Indebtedness of the Company, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 10. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of the Company to participate in any payment or distribution pursuant to this Article 10, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of such Senior Indebtedness held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 10, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 10. SECTION 10.14. Trustee To Effectuate Subordination. Each ------------------------------------ Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of the Company as provided in this Article 10 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 10.15. Trustee Not Fiduciary for Holders of Senior ------------------------------------------- Indebtedness. The Trustee shall not be deemed to owe any fiduciary duty to the - ------------- holders of Senior Indebtedness and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of Senior Indebtedness of the Company shall be entitled by virtue of this Article 10 or otherwise. SECTION 10.16. Reliance by Holders of Senior Indebtedness on --------------------------------------------- Subordination Provisions. Each - ------------------------- 72 Securityholder by accepting a Security acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of the Company, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of such Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 11 Subsidiary Guaranties --------------------- SECTION 11.01. Guaranties. Each Subsidiary Guarantor hereby ----------- unconditionally and irrevocably guarantees, jointly and severally, to each Holder and to the Trustee and its successors and assigns (a) the full and punctual payment of principal of and interest on the Securities when due, whether at maturity, by acceleration, by redemption or otherwise, and all other monetary obligations of the Company under this Indenture and the Securities and (b) the full and punctual performance within applicable grace periods of all other obligations of the Company under this Indenture and the Securities (all the foregoing being hereinafter collectively called the "Obligations"). Each ----------- Subsidiary Guarantor further agrees that the Obligations may be extended or renewed, in whole or in part, without notice or further assent from such Subsidiary Guarantor and that such Subsidiary Guarantor will remain bound under this Article 11 notwithstanding any extension or renewal of any Obligation. Each Subsidiary Guarantor waives presentation to, demand of, payment from and protest to the Company of any of the Obligations and also waives notice of protest for nonpayment. Each Subsidiary Guarantor waives notice of any default under the Securities or the Obligations. The obligations of each Subsidiary Guarantor hereunder shall not be affected by (a) the failure of any Holder or the Trustee to assert any claim or demand or to enforce any right or remedy against the Company or any other Person under this Indenture, the Securities or any other agreement or otherwise; (b) any extension or renewal of any thereof; (c) any rescission, waiver, amendment or modification of any of the terms or provisions of this Indenture, the Securities or any other agreement; (d) the release of any security held by any Holder or the Trustee for the Obligations or any of them; (e) the failure of any Holder or the Trustee to exercise any right or remedy against any other guarantor of the Obligations; or (f) any change in the ownership of such Subsidiary Guarantor. Each Subsidiary Guarantor further agrees that its Subsidiary Guaranty herein constitutes a guarantee of 73 payment, performance and compliance when due (and not a guarantee of collection) and waives any right to require that any resort be had by any Holder or the Trustee to any security held for payment of the Obligations. Each Subsidiary Guaranty is, to the extent and in the manner set forth in Article 12, subordinated and subject in right of payment to the prior payment in full of the principal of and premium, if any, and interest on all Senior Indebtedness of the Subsidiary Guarantor giving such Subsidiary Guaranty and each Subsidiary Guaranty is made subject to such provisions of this Indenture. Except as expressly set forth in Sections 8.01(b), 11.02 and 11.06, the obligations of each Subsidiary Guarantor hereunder shall not be subject to any reduction, limitation, impairment or termination for any reason, including any claim of waiver, release, surrender, alteration or compromise, and shall not be subject to any defense of setoff, counterclaim, recoupment or termination whatsoever or by reason of the invalidity, illegality or unenforceability of the Obligations or otherwise. Without limiting the generality of the foregoing, the obligations of each Subsidiary Guarantor herein shall not be discharged or impaired or otherwise affected by the failure of any Holder or the Trustee to assert any claim or demand or to enforce any remedy under this Indenture, the Securities or any other agreement, by any waiver or modification of any thereof, by any default, failure or delay, willful or otherwise, in the performance of the obligations, or by any other act or thing or omission or delay to do any other act or thing which may or might in any manner or to any extent vary the risk of such Subsidiary Guarantor or would otherwise operate as a discharge of such Subsidiary Guarantor as a matter of law or equity. Each Subsidiary Guarantor further agrees that its Guarantee herein shall continue to be effective or be reinstated, as the case may be, if at any time payment, or any part thereof, of principal of or interest on any Obligation is rescinded or must otherwise be restored by any Holder or the Trustee upon the bankruptcy or reorganization of the Company or otherwise. In furtherance of the foregoing and not in limitation of any other right which any Holder or the Trustee has at law or in equity against any Subsidiary Guarantor by virtue hereof, upon the failure of the Company to pay the principal of or interest on any Obligation when and as the same shall become due, whether at maturity, by acceleration, by redemption or otherwise, or to perform or comply with any other Obligation, each Subsidiary Guarantor hereby promises to and will, upon receipt of written demand by the Trustee, forthwith pay, or cause to be paid, in cash, to the Holders or the Trustee an amount equal to the sum of (i) the unpaid amount of such Obligations, (ii) accrued and unpaid interest on such Obligations (but only to the extent 74 not prohibited by law) and (iii) all other monetary Obligations of the Company to the Holders and the Trustee. Each Subsidiary Guarantor agrees that it shall not be entitled to any right of subrogation in respect of any Obligations guaranteed hereby until payment in full of all Obligations and all obligations to which the Obligations are subordinated as provided in Article 12. Each Subsidiary Guarantor further agrees that, as between it, on the one hand, and the Holders and the Trustee, on the other hand, (x) the maturity of the Obligations Guaranteed hereby may be accelerated as provided in Article 6 for the purposes of such Subsidiary Guarantor's Subsidiary Guaranty herein, notwithstanding any stay, injunction or other prohibition preventing such acceleration in respect of the Obligations guaranteed hereby, and (y) in the event of any declaration of acceleration of such obligations as provided in Article 6, such Obligations (whether or not due and payable) shall forthwith become due and payable by such Subsidiary Guarantor for the purposes of this Section. Each Subsidiary Guarantor also agrees to pay any and all costs and expenses (including reasonable attorneys' fees) incurred by the Trustee or any Holder in enforcing any rights under this Section. SECTION 11.02. Limitation on Liability. Any term or provision of ------------------------ this Indenture to the contrary notwithstanding, the maximum, aggregate amount of the obligations guaranteed hereunder by any Subsidiary Guarantor shall not exceed the maximum amount that can be hereby guaranteed without rendering this Indenture, as it relates to such Subsidiary Guarantor, voidable under applicable law relating to fraudulent conveyance or fraudulent transfer or similar laws affecting the rights of creditors generally. SECTION 11.03. Successors and Assigns. This Article 11 shall be ----------------------- binding upon each Subsidiary Guarantor and its successors and assigns and shall enure to the benefit of the successors and assigns of the Trustee and the Holders and, in the event of any transfer or assignment of rights by any Holder or the Trustee, the rights and privileges conferred upon that party in this Indenture and in the Securities shall automatically extend to and be vested in such transferee or assignee, all subject to the terms and conditions of this Indenture. SECTION 11.04. No Waiver. Neither a failure nor a delay on the part ---------- of either the Trustee or the Holders in exercising any right, power or privilege under this Article 11 shall operate as a waiver thereof, nor shall a single or partial exercise thereof preclude any other or further exercise of any right, power or privilege. The rights, remedies and benefits of the Trustee and the Holders herein expressly specified are cumulative and not exclusive of any other rights, remedies or benefits which either may have 75 under this Article 11 at law, in equity, by statute or otherwise. SECTION 11.05. Modification. No modification, amendment or waiver of ------------- any provision of this Article 11, nor the consent to any departure by any Subsidiary Guarantor therefrom, shall in any event be effective unless the same shall be in writing and signed by the Trustee, and then such waiver or consent shall be effective only in the specific instance and for the purpose for which given. No notice to or demand on any Subsidiary Guarantor in any case shall entitle such Subsidiary Guarantor to any other or further notice or demand in the same, similar or other circumstances. SECTION 11.06. Release of Subsidiary Guarantor. This Subsidiary -------------------------------- Guaranty as to any Subsidiary Guarantor shall terminate and be of no further force or effect (i) upon the sale or other disposition (including by way of consolidation or merger) of such Subsidiary Guarantor or (ii) upon the sale or disposition of all or substantially all of the assets of such Subsidiary Guarantor, in each case other than to the Company or a Restricted Subsidiary; provided, however, that such sale or transfer shall be deemed to constitute an - -------- ------- Asset Disposition and the Company shall comply with all applicable provisions of Section 4.06 with respect to such Asset Disposition. SECTION 11.07. Execution of Supplemental Indenture for Future ---------------------------------------------- Subsidiary Guarantors. Each Subsidiary which is required to become a Subsidiary - ---------------------- Guarantor pursuant to Section 4.13 shall promptly execute and deliver to the Trustee a supplemental indenture in the form of Exhibit B hereto pursuant to which such Subsidiary shall become a Subsidiary Guarantor under this Article 11 and shall guarantee the Obligations. Concurrently with the execution and delivery of such supplemental indenture, the Company shall deliver to the Trustee an Opinion of Counsel to the effect that such supplemental indenture has been duly authorized, executed and delivered by such Subsidiary and that, subject to the application of bankruptcy, insolvency, moratorium, fraudulent conveyance or transfer and other similar laws relating to creditors' rights generally and to the principles of equity, whether considered in a proceeding at law or in equity, the Subsidiary Guaranty of such Subsidiary Guarantor is a legal, valid and binding obligation of such Subsidiary Guarantor, enforceable against such Subsidiary Guarantor in accordance with its terms. 76 ARTICLE 12 Subordination of Subsidiary Guaranties -------------------------------------- SECTION 12.01. Agreement To Subordinate. Each Subsidiary Guarantor ------------------------- agrees, and each Securityholder by accepting a Security agrees, that the Obligations of such Subsidiary Guarantor are subordinated in right of payment, to the extent and in the manner provided in this Article 12, to the prior payment of all Senior Indebtedness of such Subsidiary Guarantor and that the subordination is for the benefit of and enforceable by the holders of such Senior Indebtedness. The Obligations of a Subsidiary Guarantor shall in all respects rank pari passu with all other Senior Subordinated Indebtedness of such ---- ----- Subsidiary Guarantor and only Senior Indebtedness of such Subsidiary Guarantor (including such Subsidiary Guarantor's Guarantee of Senior Indebtedness of the Company) shall rank senior to the Obligations of such Subsidiary Guarantor in accordance with the provisions set forth herein. SECTION 12.02. Liquidation, Dissolution, Bankruptcy. Upon any ------------------------------------- payment or distribution of the assets of any Subsidiary Guarantor to creditors upon a total or partial liquidation or a total or partial dissolution of such Subsidiary Guarantor or in a bankruptcy, reorganization, insolvency, receivership or similar proceeding relating to such Subsidiary Guarantor or its property: (1) holders of Senior Indebtedness of such Subsidiary Guarantor shall be entitled to receive payment in full of such Senior Indebtedness in cash or cash equivalents before Securityholders shall be entitled to receive any payment pursuant to any Obligations of such Subsidiary Guarantor; and (2) until the Senior Indebtedness of any Subsidiary Guarantor is paid in full in cash or cash equivalents, any distribution to which Securityholders would be entitled but for this Article 12 shall be made to holders of such Senior Indebtedness as their interests may appear, except that Securityholders may receive shares of stock and any debt securities of such Subsidiary Guarantor that are subordinated to Senior Indebtedness, and to any debt securities received by holders of Senior Indebtedness, of such Subsidiary Guarantor to at least the same extent as the Obligations of such Subsidiary Guarantor are subordinated to Senior Indebtedness of such Subsidiary Guarantor. SECTION 12.03. Default on Senior Indebtedness of Subsidiary -------------------------------------------- Guarantor. No Subsidiary Guarantor may make any payment pursuant to any of its - ---------- Obligations or repurchase, redeem or otherwise retire or defease any Securities or other Obligations (collectively, "pay its Subsidiary ------------------ 77 Guaranty") if (i) any Designated Senior Indebtedness of the Company is not paid - -------- in full in cash when due or (ii) any other default on Designated Senior Indebtedness of the Company occurs and the maturity of such Designated Senior Indebtedness is accelerated in accordance with its terms unless, in either case, (x) the default has been cured or waived and any such acceleration has been rescinded or (y) such Designated Senior Indebtedness has been paid in full in cash; provided, however, that any Subsidiary Guarantor may pay its Subsidiary -------- ------- Guaranty without regard to the foregoing if such Subsidiary Guarantor and the Trustee receive written notice approving such payment from the Representatives of the Designated Senior Indebtedness. No Subsidiary Guarantor may pay its Subsidiary Guaranty during the continuance of any Payment Blockage Period after receipt by the Company and the Trustee of a Payment Notice under Section 10.03. Notwithstanding the provisions described in the immediately preceding sentence (but subject to the provisions contained in the first sentence of this Section), unless the holders of Designated Senior Indebtedness giving such Payment Notice or the Representative of such holders shall have accelerated the maturity of such Designated Senior Indebtedness, any Subsidiary Guarantor may resume payments pursuant to its Subsidiary Guaranty after such Payment Blockage Period. SECTION 12.04. Demand for Payment. If a demand for payment is made ------------------- on a Subsidiary Guarantor pursuant to Article 11, the Trustee shall promptly notify the holders of the Designated Senior Indebtedness (or their Representatives) of such demand. SECTION 12.05. When Distribution Must Be Paid Over. If a ------------------------------------ distribution is made to Securityholders that because of this Article 12 should not have been made to them, the Securityholders who receive the distribution shall hold it in trust for holders of the relevant Senior Indebtedness and pay it over to them or their Representatives as their interests may appear. SECTION 12.06. Subrogation. After all Senior Indebtedness of a ------------ Subsidiary Guarantor is paid in full and until the Securities are paid in full, Securityholders shall be subrogated to the rights of holders of such Senior Indebtedness to receive distributions applicable to Senior Indebtedness. A distribution made under this Article 12 to holders of such Senior Indebtedness which otherwise would have been made to Securityholders is not, as between the relevant Subsidiary Guarantor and Securityholders, a payment by such Subsidiary Guarantor on such Senior Indebtedness. SECTION 12.07. Relative Rights. This Article 12 defines the relative ---------------- rights of Securityholders and holders of Senior Indebtedness of a Subsidiary Guarantor. Nothing in this Indenture shall: 78 (1) impair, as between a Subsidiary Guarantor and Securityholders, the obligation of such Subsidiary Guarantor, which is absolute and unconditional, to pay the Obligations to the extent set forth in Article 11 or the relevant Subsidiary Guaranty; or (2) prevent the Trustee or any Securityholder from exercising its available remedies upon a default by such Subsidiary Guarantor under the Obligations, subject to the rights of holders of Senior Indebtedness of such Subsidiary Guarantor to receive distributions otherwise payable to Securityholders. SECTION 12.08. Subordination May Not Be Impaired by Company. No --------------------------------------------- right of any holder of Senior Indebtedness of any Subsidiary Guarantor to enforce the subordination of the Obligations of such Subsidiary Guarantor shall be impaired by any act or failure to act by such Subsidiary Guarantor or by its failure to comply with this Indenture. SECTION 12.09. Rights of Trustee and Paying Agent. Notwithstanding ----------------------------------- Section 12.03, the Trustee or Paying Agent may continue to make payments on any Subsidiary Guaranty and shall not be charged with knowledge of the existence of facts that would prohibit the making of any such payments unless, not less than two Business Days prior to the date of such payment, a Trust Officer of the Trustee receives written notice satisfactory to it that payments may not be made under this Article 12. The Company, the relevant Subsidiary Guarantor, the Registrar or co-registrar, the Paying Agent, a Representative or a holder of Senior Indebtedness of any Subsidiary Guarantor may give the notice; provided, -------- however, that, if an issue of Senior Indebtedness of any Subsidiary Guarantor - ------- has a Representative, only the Representative may give the notice. The Trustee in its individual or any other capacity may hold Senior Indebtedness with the same rights it would have if it were not the Trustee. The Registrar and co-registrar and the Paying Agent may do the same with like rights. The Trustee shall be entitled to all the rights set forth in this Article 12 with respect to any Senior Indebtedness of any Subsidiary Guarantor which may at any time be held by it, to the same extent as any other holder of Senior Indebtedness; and nothing in Article 7 shall deprive the Trustee of any of its rights as such holder. Nothing in this Article 12 shall apply to claims of, or payments to, the Trustee under or pursuant to Section 7.07. SECTION 12.10. Distribution or Notice to Representative. Whenever a ----------------------------------------- distribution is to be made or a notice given to holders of Senior Indebtedness of any Subsidiary Guarantor, the distribution may be made and the notice given to their Representative (if any). SECTION 12.11. Article 12 Not To Prevent Defaults Under a Subsidiary ----------------------------------------------------- Guaranty or Limit Right To Demand - --------------------------------- 79 Payment. The failure to make a payment pursuant to a Subsidiary Guaranty by - ------- reason of any provision in this Article 12 shall not be construed as preventing the occurrence of a default under such Subsidiary Guaranty. Nothing in this Article 12 shall have any effect on the right of the Securityholders or the Trustee to make a demand for payment on any Subsidiary Guarantor pursuant to Article 11 or the relevant Subsidiary Guaranty. SECTION 12.12. Trustee Entitled To Rely. Upon any payment or ------------------------- distribution pursuant to this Article 12, the Trustee and the Securityholders shall be entitled to rely (i) upon any order or decree of a court of competent jurisdiction in which any proceedings of the nature referred to in Section 12.02 are pending, (ii) upon a certificate of the liquidating trustee or agent or other Person making such payment or distribution to the Trustee or to the Securityholders or (iii) upon the Representatives for the holders of Senior Indebtedness of any Subsidiary Guarantor for the purpose of ascertaining the Persons entitled to participate in such payment or distribution, the holders of such Senior Indebtedness and other indebtedness of such Subsidiary Guarantor, the amount thereof or payable thereon, the amount or amounts paid or distributed thereon and all other facts pertinent thereto or to this Article 12. In the event that the Trustee determines, in good faith, that evidence is required with respect to the right of any Person as a holder of Senior Indebtedness of any Subsidiary Guarantor to participate in any payment or distribution pursuant to this Article 12, the Trustee may request such Person to furnish evidence to the reasonable satisfaction of the Trustee as to the amount of Senior Indebtedness of such Subsidiary Guarantor held by such Person, the extent to which such Person is entitled to participate in such payment or distribution and other facts pertinent to the rights of such Person under this Article 12, and, if such evidence is not furnished, the Trustee may defer any payment to such Person pending judicial determination as to the right of such Person to receive such payment. The provisions of Sections 7.01 and 7.02 shall be applicable to all actions or omissions of actions by the Trustee pursuant to this Article 12. SECTION 12.13. Trustee To Effectuate Subordination. Each ------------------------------------ Securityholder by accepting a Security authorizes and directs the Trustee on his behalf to take such action as may be necessary or appropriate to acknowledge or effectuate the subordination between the Securityholders and the holders of Senior Indebtedness of any Subsidiary Guarantor as provided in this Article 12 and appoints the Trustee as attorney-in-fact for any and all such purposes. SECTION 12.14. Trustee Not Fiduciary for Holders of Senior -------------------------------------------- Indebtedness of Subsidiary Guarantor. The Trustee shall not be deemed to owe - ------------------------------------- any fiduciary duty to the holders of Senior Indebtedness of any Subsidiary Guarantor 80 and shall not be liable to any such holders if it shall mistakenly pay over or distribute to Securityholders or the Company or any other Person, money or assets to which any holders of such Senior Indebtedness shall be entitled by virtue of this Article 12 or otherwise. SECTION 12.15. Reliance by Holders of Senior Indebtedness on --------------------------------------------- Subordination Provisions. Each Securityholder by accepting a Security - ------------------------- acknowledges and agrees that the foregoing subordination provisions are, and are intended to be, an inducement and a consideration to each holder of any Senior Indebtedness of any Subsidiary Guarantor, whether such Senior Indebtedness was created or acquired before or after the issuance of the Securities, to acquire and continue to hold, or to continue to hold, such Senior Indebtedness and such holder of Senior Indebtedness shall be deemed conclusively to have relied on such subordination provisions in acquiring and continuing to hold, or in continuing to hold, such Senior Indebtedness. ARTICLE 13 Miscellaneous ------------- SECTION 13.01. Trust Indenture Act Controls. If any provision of ----------------------------- this Indenture limits, qualifies or conflicts with another provision which is required to be included in this Indenture by the TIA, the required provision shall control. SECTION 13.02. Notices. Any notice or communication shall be in -------- writing and delivered in person, or sent by registered or certified mail, by air courier guaranteeing overnight delivery or by fax (promptly confirmed by telephone) and addressed as follows: if to the Company or any Subsidiary Guarantor: Delco Remy International, Inc. 2902 Enterprise Drive Anderson, IN 46013 Attention: Chief Financial Officer Phone: (317) 778-6499 Fax: (317) 778-6424 if to the Trustee: First Union National Bank 5847 San Felipe, Suite 1050 Houston, Texas 77057 Attention: Mr. Kevin Dobrova Phone: (713) 278-4320 Fax: (713) 278-4329 81 The Company or the Trustee by notice to the other may designate additional or different addresses for subsequent notices or communications. Any notice or communication mailed to a Securityholder shall be mailed to the Securityholder at the Securityholder's address as it appears on the registration books of the Registrar and shall be sufficiently given if so mailed within the time prescribed. Failure to mail a notice or communication to a Securityholder or any defect in it shall not affect its sufficiency with respect to other Securityholders. If a notice or communication is given in the manner provided above, it is duly given, whether or not the addressee receives it. SECTION 13.03. Communication by Holders with Other Holders. -------------------------------------------- Securityholders may communicate pursuant to TIA (S) 312(b) with other Securityholders with respect to their rights under this Indenture or the Securities. The Company, the Trustee, the Registrar and anyone else shall have the protection of TIA (S) 312(c). SECTION 13.04. Certificate and Opinion as to Conditions Precedent. --------------------------------------------------- Upon any request or application by the Company to the Trustee to take or refrain from taking any action under this Indenture, the Company shall furnish to the Trustee: (1) an Officers' Certificate in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of the signers, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with; and (2) an Opinion of Counsel in form and substance reasonably satisfactory to the Trustee stating that, in the opinion of such counsel, all conditions precedent, if any, provided for in this Indenture relating to the proposed action have been complied with. SECTION 13.05. Statements Required in Certificate or Opinion. Each ---------------------------------------------- certificate or opinion with respect to compliance with a covenant or condition provided for in this Indenture shall include: (1) a statement that the individual making such certificate or opinion has read such covenant or condition; (2) a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based; 82 (3) a statement that, in the opinion of such individual, he has made such examination or investigation as is necessary to enable him to express an informed opinion as to whether or not such covenant or condition has been complied with; and (4) a statement as to whether or not, in the opinion of such individual, such covenant or condition has been complied with. SECTION 13.06. When Securities Disregarded. In determining whether ---------------------------- the Holders of the required principal amount of Securities have concurred in any direction, waiver or consent, Securities owned by the Company or by any Person directly or indirectly controlling or controlled by or under direct or indirect common control with the Company shall be disregarded and deemed not to be outstanding, except that, for the purpose of determining whether the Trustee shall be protected in relying on any such direction, waiver or consent, only Securities which the Trustee knows are so owned shall be so disregarded. Also, subject to the foregoing, only Securities outstanding at the time shall be considered in any such determination. SECTION 13.07. Rules by Trustee, Paying Agent and Registrar. The --------------------------------------------- Trustee may make reasonable rules for action by or a meeting of Securityholders. The Registrar and the Paying Agent may make reasonable rules for their functions. SECTION 13.08. Legal Holidays. A "Legal Holiday" is a Saturday, a --------------- ------------- Sunday or a day on which banking institutions are not required to be open in the State of New York. If a payment date is a Legal Holiday, payment shall be made on the next succeeding day that is not a Legal Holiday, and no interest shall accrue for the intervening period. If a regular record date is a Legal Holiday, the record date shall not be affected. SECTION 13.09. Governing Law. This Indenture and the Securities -------------- shall be governed by, and construed in accordance with, the laws of the State of New York but without giving effect to applicable principles of conflicts of law to the extent that the application of the laws of another jurisdiction would be required thereby. SECTION 13.10. No Recourse Against Others. A director, officer, --------------------------- employee or stockholder, as such, of the Company shall not have any liability for any obligations of the Company under the Securities or this Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder shall waive and release all such liability. The waiver and release shall be part of the consideration for the issue of the Securities. SECTION 13.11. Successors. All agreements of the Company in this ----------- Indenture and the Securities shall bind its 83 successors. All agreements of the Trustee in this Indenture shall bind its successors. SECTION 13.12. Multiple Originals. The parties may sign any number ------------------- of copies of this Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. One signed copy is enough to prove this Indenture. SECTION 13.13. Table of Contents; Headings. The table of contents, ---------------------------- cross-reference sheet and headings of the Articles and Sections of this Indenture have been inserted for convenience of reference only, are not intended to be considered a part hereof and shall not modify or restrict any of the terms or provisions hereof. IN WITNESS WHEREOF, the parties have caused this Indenture to be duly executed as of the date first written above. DELCO REMY INTERNATIONAL, INC., by THOMAS J. SNYDER ---------------------------------------------- Name: Thomas J. Snyder Title: President SUBSIDIARY GUARANTORS: DELCO REMY AMERICA, INC., by THOMAS J. SNYDER ---------------------------------------------- Name: Thomas J. Snyder Title: Chief Executive Officer REMY INTERNATIONAL, INC., by THOMAS J. SNYDER ---------------------------------------------- Name: Thomas J. Snyder Title: President REMAN HOLDINGS, INC., by THOMAS J. SNYDER ---------------------------------------------- Name: Thomas J. Snyder Title: President NABCO, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary THE A&B GROUP, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary A&B ENTERPRISES, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary DALEX, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary A&B CORES, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary R&L TOOL COMPANY, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary MCA, INC. OF MISSISSIPPI, by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary POWER INVESTMENTS, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary FRANKLIN POWER PRODUCTS, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary INTERNATIONAL FUEL SYSTEMS, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary MARINE CORPORATION OF AMERICA, by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary POWRBILT PRODUCTS, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary WORLD WIDE AUTOMOTIVE, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary BALLANTRAE CORPORATION, by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary TRACTECH, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Vice President WILLIAMS TECHNOLOGIES, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary ENGINE MASTER, L.P., by HSG I, Inc., its General Partner by DAVID E. STOLL --------------------------------------------- Name: David E. Stoll Title: Vice President M & M KNOPF AUTO PARTS, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Vice President POWER INVESTMENTS MARINE, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary DR SALES, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Secretary HSG I, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Vice President HSG II, INC., by DAVID E. STOLL ---------------------------------------------- Name: David E. Stoll Title: Vice President FIRST UNION NATIONAL BANK, by KEVIN M. DOBRAVA ---------------------------------------------- Name: Kevin M. Dobrava Title: Vice President APPENDIX A PROVISIONS RELATING TO INITIAL SECURITIES, ------------------------------------------ EXCHANGE SECURITIES ------------------- AND PRIVATE EXCHANGE SECURITIES ------------------------------- 1. Definitions ----------- 1.1 Definitions ----------- For the purposes of this Appendix A the following terms shall have the meanings indicated below: "Applicable Procedures" means, with respect to any transfer or --------------------- transaction involving a Temporary Regulation S Global Security or beneficial interest therein, the rules and procedures of the Depository, Euroclear, Clearstream and Cedel for such a Temporary Regulations S Global Security, in each case to the extent applicable to such transaction and as in effect from time to time. "Cedel" means Cedel Bank, S.A., or any successor securities clearing ----- agency. "Clearstream" means Clearstream Banking, societe anonyme, or any ----------- successor securities clearing agency. "Definitive Security" means a certificated Initial Security or ------------------- Exchange Security or Private Exchange Security bearing, if required, the restricted securities legend set forth in Section 2.3(e). "Depository" means The Depository Trust Company, its nominees and ---------- their respective successors. "Distribution Compliance Period", with respect to any Securities, ------------------------------ means the period of 40 consecutive days beginning on and including the later of (i) the day on which such Securities are first offered to persons other than distributors (as defined in Regulation S under the Securities Act) in reliance on Regulation S and (ii) the Issue Date with respect to such Securities. "Euroclear" means the Euroclear Clearance System or any successor --------- securities clearing agency. "Exchange Securities" means (1) the 11% Senior Subordinated Notes Due ------------------- 2009 to be issued pursuant to this Indenture in connection with a Registered Exchange Offer pursuant to the Registration Agreement and (2) Additional Securities, if any, issued pursuant to a registration statement filed with the SEC under the Securities Act. "Initial Purchasers" means (1) with respect to the Initial Securities ------------------ issued on the Issue Date, Credit Suisse 2 First Boston Corporation and Deutsche Banc Alex. Brown Inc. and (2) with respect to each issuance of Additional Securities, the Persons purchasing such Additional Securities under the related Purchase Agreement. "Initial Securities" means (1) $165,000,000 aggregate principal amount ------------------ of 11% Senior Subordinated Notes Due 2009 issued under this Indenture on the Issue Date and (2) Additional Securities, if any, issued in a transaction exempt from the registration requirements of the Securities Act. "Private Exchange" means the offer by the Company, pursuant to a ---------------- Registration Agreement, to the Initial Purchasers to issue and deliver to each Initial Purchaser, in exchange for the Initial Securities held by the Initial Purchaser as part of its initial distribution, a like aggregate principal amount of Private Exchange Securities. "Private Exchange Securities" means any 11% Senior Subordinated Notes --------------------------- Due 2009 issued in connection with a Private Exchange. "Purchase Agreement" means (1) with respect to the Initial Securities ------------------ issued on the Issue Date, the Purchase Agreement dated April 19, 2001, among the Company, the Subsidiary Guarantors and the Initial Purchasers and (2) with respect to each issuance of Additional Securities, the purchase agreement or underwriting agreement among the Company and the Persons purchasing such Additional Securities. "QIB" means a "qualified institutional buyer" as defined in Rule 144A. --- "Registered Exchange Offer" means the offer by the Company, pursuant ------------------------- to a Registration Agreement, to certain Holders of Initial Securities, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of Exchange Securities registered under the Securities Act. "Registration Agreement" means (1) with respect to the Initial ---------------------- Securities issued on the Issue Date, the Registration Rights Agreement dated April 19, 2001, among the Company, the Subsidiary Guarantors and the Initial Purchasers and (2) with respect to each issuance of Additional Securities issued in a transaction exempt from the registration requirements of the Securities Act, the registration rights agreement, if any, among the Company and 3 the Persons purchasing such Additional Securities under the related Purchase Agreement. "Rule 144A Securities" means all Initial Securities offered and sold -------------------- to QIBs in reliance on Rule 144A. "Securities" means the Initial Securities, the Exchange Securities and ---------- the Private Exchange Securities, treated as a single class. "Securities Act" means the Securities Act of 1933, as amended. -------------- "Securities Custodian" means the custodian with respect to a Global -------------------- Security (as appointed by the Depository), or any successor person thereto and shall initially be the Trustee. "Shelf Registration Statement" means the registration statement issued ---------------------------- by the Company in connection with the offer and sale of Initial Securities or Private Exchange Securities pursuant to a Registration Agreement. "Transfer Restricted Securities" means Definitive Securities and any ------------------------------ other Securities that bear or are required to bear the legend set forth in Section 2.3(e) hereto. 1.2 Other Definitions ----------------- Defined in ---------- Term Section: ---- ------- "Agent Members".................................................. 2.1(b) "Global Security"................................................ 2.1(a) "Permanent Regulation S Global Security"......................... 2.1(a) "Regulation S"................................................... 2.1(a) "Rule 144A"...................................................... 2.1(a) "Rule 144A Global Security"...................................... 2.1(a) "Temporary Regulation S Global Security"......................... 2.1(a) 2. The Securities -------------- 2.1 (a) Form and Dating. The Initial Securities will be offered and sold ---------------- by the Company, from time to time, pursuant to one or more Purchase Agreements. The Initial Securities will be resold initially only to QIBs in reliance on Rule 144A under the Securities Act ("Rule 144A") and in reliance on Regulation S --------- under the Securities Act ("Regulation S"). Initial Securities may thereafter be ------------ transferred to, among others, QIBs and purchasers in reliance 4 on Regulation S, subject to the restrictions on transfer set forth herein. Initial Securities initially resold pursuant to Rule 144A shall be issued initially in the form of one or more permanent global Securities in definitive, fully registered form (collectively, the "Rule 144A Global Security") and ------------------------- Initial Securities initially resold pursuant to Regulation S shall be issued initially in the form of one or more temporary global securities in definitive, fully registered form (collectively, the "Temporary Regulation S Global ----------------------------- Security"), in each case without interest coupons and with the global securities - -------- legend and restricted securities legend set forth in Exhibit 1 hereto, which shall be deposited on behalf of the purchasers of the Initial Securities represented thereby with the Securities Custodian, and registered in the name of the Depository or a nominee of the Depository, duly executed by the Company and authenticated by the Trustee as provided in this Indenture. Beneficial ownership interests in the Temporary Regulation S Global Security will not be exchangeable for interests in the Rule 144A Global Security, a permanent global security (the "Permanent Regulation S Global Security"), or any other Security without a -------------------------------------- legend cntaining restrictions on transfer of such Security prior to the expiration of the Distribution Compliance Period and then only upon certification in form reasonably satisfactory to the Trustee that beneficial ownership interests in such Temporary Regulation S Global Security are owned either by non-U.S. persons or U.S. persons who purchased such interests in a transaction that did not require registration under the Securities Act. The Rule 144A Global Security, the Temporary Regulation S Global Security and the Permanent Regulation S Global Security are collectively referred to herein as "Global Securities." The aggregate principal amount of the Global Securities may ----------------- from time to time be increased or decreased by adjustments made on the records of the Trustee and the Depository or its nominee as hereinafter provided. (b) Book-Entry Provisions. This Section 2.1(b) shall apply only to a ---------------------- Global Security deposited with or on behalf of the Depository. The Company shall execute and the Trustee shall, in accordance with this Section 2.1(b), authenticate and deliver initially one or more Global Securities that (a) shall be registered in the name of the Depository for such Global Security or Global Securities or the nominee of such Depository and (b) shall be delivered by the Trustee to such Depository or pursuant to such Depository's instructions or held by the Trustee as custodian for the Depository. 5 Members of, or participants in, the Depository ("Agent Members") shall ------------- have no rights under this Indenture with respect to any Global Security held on their behalf by the Depository or by the Trustee as the custodian of the Depository or under such Global Security, and the Company, the Trustee and any agent of the Company or the Trustee shall be entitled to treat the Depository as the absolute owner of such Global Security for all purposes whatsoever. Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depository or impair, as between the Depository and its Agent Members, the operation of customary practices of such Depository governing the exercise of the rights of a holder of a beneficial interest in any Global Security. (c) Definitive Securities. Except as provided in Section 2.3 or 2.4, ---------------------- owners of beneficial interests in Global Securities shall not be entitled to receive physical delivery of Definitive Securities. 2.2 Authentication. The Trustee shall authenticate and deliver: (1) on --------------- the Issue Date, an aggregate principal amount of $165,000,000 11% Senior Subordinated Notes Due 2009, (2) any Additional Securities for an original issue in an aggregate principal amount specified in the written order of the Company pursuant to Section 2.02 of the Indenture and (3) Exchange Securities or Private Exchange Securities for issue only in a Registered Exchange Offer or a Private Exchange, respectively, pursuant to a Registration Agreement, for a like principal amount of Initial Securities, upon a written order of the Company signed by two Officers or by an Officer and either an Assistant Treasurer or an Assistant Secretary of the Company. Such order shall specify the amount of the Securities to be authenticated, the date on which the original issue of Securities is to be authenticated and whether the Securities are to be Initial Securities, Exchange Securities or Private Exchange Securities. In the case of any issuance of Additional Securities pursuant to Section 2.13 of the Indenture, such order shall certify that such issuance is in compliance with Section 4.03 of the Indenture. 2.3 Transfer and Exchange. (a) Transfer and Exchange of Definitive ---------------------- ----------------------------------- Securities. When Definitive Securities are presented to the Registrar or a co- - ----------- registrar with a request: (x) to register the transfer of such Definitive Securities; or 6 (y) to exchange such Definitive Securities for an equal principal amount of Definitive Securities of other authorized denominations, the Registrar or co-registrar shall register the transfer or make the exchange as requested if its reasonable requirements for such transaction are met; provided, however, that the Definitive Securities surrendered for transfer or - -------- ------- exchange: (i) shall be duly endorsed or accompanied by a written instrument of transfer in form reasonably satisfactory to the Company and the Registrar or co-registrar, duly executed by the Holder thereof or his attorney duly authorized in writing; and (ii) if such Definitive Securities are required to bear a restricted securities legend, they are being transferred or exchanged pursuant to an effective registration statement under the Securities Act, pursuant to Section 2.3(b) or pursuant to clause (A), (B) or (C) below, and are accompanied by the following additional information and documents, as applicable: (A) if such Definitive Securities are being delivered to the Registrar by a Holder for registration in the name of such Holder, without transfer, a certification from such Holder to that effect; or (B) if such Definitive Securities are being transferred to the Company, a certification to that effect; or (C) if such Definitive Securities are being transferred (x) pursuant to an exemption from registration in accordance with Rule 144A, Regulation S or Rule 144 under the Securities Act; or (y) in reliance upon another exemption from the requirements of the Securities Act: (i) a certification to that effect (in the form set forth on the reverse of the Security) and (ii) if the Company so requests, an opinion of counsel or other evidence reasonably satisfactory to it as to the compliance with the restrictions set forth in the legend set forth in Section 2.3(e)(i). 7 (b) Restrictions on Transfer of a Definitive Security for a Beneficial ------------------------------------------------------------------ Interest in a Global Security. A Definitive Security may not be exchanged for a - ------------------------------ beneficial interest in a Rule 144A Global Security or a Permanent Regulation S Global Security except upon satisfaction of the requirements set forth below. Upon receipt by the Trustee of a Definitive Security, duly endorsed or accompanied by appropriate instruments of transfer, in form satisfactory to the Trustee, together with: (i) certification, in the form set forth on the reverse of the Security, that such Definitive Security is either (A) being transferred to a QIB in accordance with Rule 144A or (B) is being transferred after expiration of the "distribution compliance period" of Regulation S by a Person who initially purchased such Security in reliance on Regulation S to a buyer who elects to hold its interest in such security in the form of a beneficial interest in the Permanent Regulation S Security; and (ii) written instructions directing the Trustee to make, or to direct the Securities Custodian to make, an adjustment on its books and records with respect to such Rule 144A Global Security (in the case of a transfer pursuant to clause (b)(i)(A)) or Permanent Regulation S Security (in the case of a transfer pursuant to clause (b)(i)(B)) to reflect an increase in the aggregate principal amount of the Securities represented by the Rule 144A Global Security or Permanent Regulation S Security, as applicable, such instructions to contain information regarding the Depositary account to be credited with such increase, then the Trustee shall cancel such Definitive Security and cause, or direct the Securities Custodian to cause, in accordance with the standing instructions and procedures existing between the Depositary and the Securities Custodian, the aggregate principal amount of Securities represented by the Rule 144A Global Security or Permanent Regulation S Security, as applicable, to be increased by the aggregate principal amount of the Definitive Security to be exchanged and shall credit or cause to be credited to the account of the Person specified in such instructions a beneficial interest in the Rule 144A Global Security or Permanent Regulation S Security, as 8 applicable, equal to the principal amount of the Definitive Security so canceled. If no Rule 144A Global Securities or Permanent Regulation S Securities, as applicable, are then outstanding, the Company shall issue and the Trustee shall authenticate, upon written order of the Company in the form of an Officers' Certificate, a new Rule 144A Global Security or Permanent Regulation S Security, as applicable, in the appropriate principal amount. (c) Transfer and Exchange of Global Securities. (i) The transfer and ------------------------------------------- exchange of Global Securities or beneficial interests therein shall be effected through the Depository, in accordance with this Indenture (including applicable restrictions on transfer set forth herein, if any) and the procedures of the Depository therefor. A transferor of a beneficial interest in a Global Security shall deliver to the Registrar a written order given in accordance with the Depository's procedures containing information regarding the participant account of the Depository to be credited with a beneficial interest in the Global Security. The Registrar shall, in accordance with such instructions instruct the Depository to credit to the account of the Person specified in such instructions a beneficial interest in the Global Security and to debit the account of the Person making the transfer the beneficial interest in the Global Security being transferred. (ii) If the proposed transfer is a transfer of a beneficial interest in one Global Security to a beneficial interest in another Global Security, the Registrar shall reflect on its books and records the date and an increase in the principal amount of the Global Security to which such interest is being transferred in an amount equal to the principal amount of the interest to be so transferred, and the Registrar shall reflect on its books and records the date and a corresponding decrease in the principal amount of the Global Security from which such interest is being transferred. (iii) Notwithstanding any other provisions of this Appendix A (other than the provisions set forth in Section 2.4), a Global Security may not be transferred as a whole except by the Depository to a nominee of the Depository or by a nominee of the Depository to the Depository or another nominee of the Depository or by the Depository or any such nominee to a successor Depository or a nominee of such successor Depository. (iv) In the event that a Global Security is exchanged for Definitive Securities pursuant to Section 2.4 prior to the consummation of a Registered Exchange Offer or the effectiveness of a Shelf Registration Statement with 9 respect to such Securities, such Securities may be exchanged only in accordance with such procedures as are substantially consistent with the provisions of this Section 2.3 (including the certification requirements set forth on the reverse of the Initial Securities intended to ensure that such transfers comply with Rule 144A or Regulation S, as the case may be) and such other procedures as may from time to time be adopted by the Company. (d) Restrictions on Transfer of Temporary Regulation S Global --------------------------------------------------------- Securities. During the Distribution Compliance Period, beneficial ownership - ----------- interests in Temporary Regulation S Global Securities may only be sold, pledged or transferred through Euroclear, Clearstream or Cedel in accordance with the Applicable Procedures and only (i) to the Company, (ii) so long as such Security is eligible for resale pursuant to Rule 144A, to a person whom the selling holder reasonably believes is a QIB that purchases for its own account or for the account of a QIB to whom notice is given that the resale, pledge or transfer is being made in reliance on Rule 144A, (iii) in an offshore transaction in accordance with Regulation S or (iv) pursuant to an exemption from registration under the Securities Act provided by Rule 144 (if applicable) under the Securities Act, in each case in accordance with any applicable securities laws of any state of the United States. (e) Legend. ------- (i) Except as permitted by the following paragraphs (ii), (iii) and (iv), each Security certificate evidencing the Global Securities and the Definitive Securities (and all Securities issued in exchange therefor or in substitution thereof) shall bear a legend in substantially the following form: THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. 10 THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. Each Definitive Security will also bear the following additional legend: IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS. (ii) Upon any sale or transfer of a Transfer Restricted Security (including any Transfer Restricted Security represented by a Global Security) pursuant to Rule 144 under the Securities Act, the Registrar shall permit the transferee thereof to exchange such Transfer Restricted Security for a certificated Security that does not bear the legend set forth above and rescind any restriction on the transfer of such Transfer Restricted Security, if the transferor thereof certifies in writing to the Registrar that such sale or transfer was made in reliance on Rule 144 (such certification to be in the form set forth on the reverse of the Security). (iii) After a transfer of any Initial Securities or Private Exchange Securities pursuant to and during the period of the effectiveness of a Shelf Registration Statement with respect to such Initial Securities or Private Exchange Securities, as the case may be, all 11 requirements pertaining to legends on such Initial Security or such Private Exchange Security will cease to apply, the requirements requiring any such Initial Security or such Private Exchange Security issued to certain Holders be issued in global form will cease to apply, and a certificated Initial Security or Private Exchange Security or an Initial Security or Private Exchange Security in global form, in each case without restrictive transfer legends, will be available to the transferee of the Holder of such Initial Securities or Private Exchange Securities upon exchange of such transferring Holder's certificated Initial Security or Private Exchange Security or directions to transfer such Holder's interest in the Global Security, as applicable. (iv) Upon the consummation of a Registered Exchange Offer with respect to the Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Securities that do not exchange their Initial Securities, and Exchange Securities in certificated or global form will be available to Holders that exchange such Initial Securities in such Registered Exchange Offer. (v) Upon the consummation of a Private Exchange with respect to the Initial Securities pursuant to which Holders of such Initial Securities are offered Private Exchange Securities in exchange for their Initial Securities, all requirements pertaining to such Initial Securities that Initial Securities issued to certain Holders be issued in global form will still apply with respect to Holders of such Initial Securities that do not exchange their Initial Securities, and Private Exchange Securities in global form with the global securities legend and the Restricted Securities Legend set forth in Exhibit 1 hereto will be available to Holders that exchange such Initial Securities in such Private Exchange. (f) Cancellation or Adjustment of Global Security. At such time as ---------------------------------------------- all beneficial interests in a Global Security have either been exchanged for Definitive Securities, redeemed, repurchased or canceled, such Global Security shall be returned to the Depository for cancellation or retained and canceled by the Trustee. At any time prior to such cancellation, if any beneficial interest in a Global Security 12 is exchanged for certificated Securities, redeemed, repurchased or canceled, the principal amount of Securities represented by such Global Security shall be reduced and an adjustment shall be made on the books and records of the Trustee (if it is then the Securities Custodian for such Global Security) with respect to such Global Security, by the Trustee or the Securities Custodian, to reflect such reduction. (g) Obligations with Respect to Transfers and Exchanges of ------------------------------------------------------ Securities. - ----------- (i) To permit registrations of transfers and exchanges, the Company shall execute and the Trustee shall authenticate certificated Securities and Global Securities at the Registrar's or co-registrar's request. (ii) No service charge shall be made for any registration of transfer or exchange, but the Company may require payment of a sum sufficient to cover any transfer tax, assessments, or similar governmental charge payable in connection therewith (other than any such transfer taxes, assessments or similar governmental charge payable upon exchange or transfer pursuant to Sections 3.06, 4.09 and 9.05 of the Indenture). (iii) The Registrar or co-registrar shall not be required to register the transfer of or exchange of (a) any Definitive Security selected for redemption in whole or in part pursuant to Article 3 of this Indenture, except the unredeemed portion of any Definitive Security being redeemed in part, or (b) any Security for a period beginning 15 Business Days before the mailing of a notice of an offer to repurchase or redeem Securities or 15 Business Days before an interest payment date. (iv) Prior to the due presentation for registration of transfer of any Security, the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar may deem and treat the person in whose name a Security is registered as the absolute owner of such Security for the purpose of receiving payment of principal of and interest on such Security and for all other purposes whatsoever, whether or not such Security is overdue, and none of the Company, the Trustee, the Paying Agent, the Registrar or any co-registrar shall be affected by notice to the contrary. 13 (v) All Securities issued upon any transfer or exchange pursuant to the terms of this Indenture shall evidence the same debt and shall be entitled to the same benefits under this Indenture as the Securities surrendered upon such transfer or exchange. (h) No Obligation of the Trustee. ----------------------------- (i) The Trustee shall have no responsibility or obligation to any beneficial owner of a Global Security, a member of, or a participant in the Depository or other Person with respect to the accuracy of the records of the Depository or its nominee or of any participant or member thereof, with respect to any ownership interest in the Securities or with respect to the delivery to any participant, member, beneficial owner or other Person (other than the Depository) of any notice (including any notice of redemption) or the payment of any amount, under or with respect to such Securities. All notices and communications to be given to the Holders and all payments to be made to Holders under the Securities shall be given or made only to or upon the order of the registered Holders (which shall be the Depository or its nominee in the case of a Global Security). The rights of beneficial owners in any Global Security shall be exercised only through the Depository subject to the applicable rules and procedures of the Depository. The Trustee may rely and shall be fully protected in relying upon information furnished by the Depository with respect to its members, participants and any beneficial owners. (ii) The Trustee shall have no obligation or duty to monitor, determine or inquire as to compliance with any restrictions on transfer imposed under this Indenture or under applicable law with respect to any transfer of any interest in any Security (including any transfers between or among Depository participants, members or beneficial owners in any Global Security) other than to require delivery of such certificates and other documentation or evidence as are expressly required by, and to do so if and when expressly required by, the terms of this Indenture, and to examine the same to determine substantial compliance as to form with the express requirements hereof. 2.4 Definitive Securities. ---------------------- 14 (a) A Global Security deposited with the Depository or with the Trustee as Securities Custodian for the Depository pursuant to Section 2.1 shall be transferred to the beneficial owners thereof in the form of Definitive Securities in an aggregate principal amount equal to the principal amount of such Global Security, in exchange for such Global Security, only if such transfer complies with Section 2.3 and (i) the Depository notifies the Company that it is unwilling or unable to continue as Depository for such Global Security or if at any time such Depository ceases to be a "clearing agency" registered under the Exchange Act and a successor Depository is not appointed by the Company within 90 days of such notice, or (ii) an Event of Default has occurred and is continuing or (iii) the Company, in its sole discretion, notifies the Trustee in writing that it elects to cause the issuance of Definitive Securities under this Indenture. (b) Any Global Security that is transferable to the beneficial owners thereof pursuant to this Section shall be surrendered by the Depository to the Trustee located at its principal corporate trust office in the Borough of Manhattan, The City of New York, to be so transferred, in whole or from time to time in part, without charge, and the Trustee shall authenticate and deliver, upon such transfer of each portion of such Global Security, an equal aggregate principal amount of Definitive Securities of authorized denominations. Any portion of a Global Security transferred pursuant to this Section shall be executed, authenticated and delivered only in denominations of $1,000 principal amount and any integral multiple thereof and registered in such names as the Depository shall direct. Any Definitive Security delivered in exchange for an interest in the Global Security shall, except as otherwise provided by Section 2.3(e), bear the restricted securities legend set forth in Exhibit 1 hereto. (c) Subject to the provisions of Section 2.4(b), the registered Holder of a Global Security shall be entitled to grant proxies and otherwise authorize any Person, including Agent Members and Persons that may hold interests through Agent Members, to take any action which a Holder is entitled to take under this Indenture or the Securities. (d) In the event of the occurrence of either of the events specified in Section 2.4(a), the Company shall promptly make available to the Trustee a reasonable supply of Definitive Securities in definitive, fully registered form without interest coupons. [FORM OF FACE OF INITIAL SECURITY] [Global Securities Legend] UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), NEW YORK, NEW YORK, TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC) ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN. TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE, BUT NOT IN PART, TO NOMINEES OF DTC OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN THE INDENTURE REFERRED TO ON THE REVERSE HEREOF. [Restricted Securities Legend] THIS SECURITY (OR ITS PREDECESSOR) WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THIS SECURITY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) THIS NOTE MAY BE OFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (I) TO THE COMPANY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED 2 BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT, IN EACH OF CASES (I) THROUGH (V) IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES, AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A) ABOVE. [Temporary Regulation S Global Security Legend] [BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE WILL NOT BE EXCHANGEABLE FOR INTERESTS IN THE RULE 144A GLOBAL NOTE OR THE PERMANENT REGULATION S GLOBAL NOTE OR ANY OTHER NOTE REPRESENTING AN INTEREST IN THE NOTES REPRESENTED HEREBY WHICH DO NOT CONTAIN A LEGEND CONTAINING RESTRICTIONS ON TRANSFER, UNTIL THE EXPIRATION OF THE "40-DAY DISTRIBUTION COMPLIANCE PERIOD" (WITHIN THE MEANING OF RULE 903(c)(3) OF REGULATION S UNDER THE SECURITIES ACT) AND THEN ONLY UPON CERTIFICATION IN FORM REASONABLY SATISFACTORY TO THE TRUSTEE THAT SUCH BENEFICIAL INTERESTS ARE OWNED EITHER BY NON-U.S. PERSONS OR U.S. PERSONS WHO PURCHASED SUCH INTERESTS IN A TRANSACTION THAT DID NOT REQUIRE REGISTRATION UNDER THE SECURITIES ACT. DURING SUCH 40-DAY DISTRIBUTION COMPLIANCE PERIOD, BENEFICIAL OWNERSHIP INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE MAY ONLY BE SOLD, PLEDGED OR TRANSFERRED THROUGH THE EUROCLEAR SYSTEM, CLEARSTREAM OR CEDEL S.A. AND ONLY (I) TO THE COMPANY, (II) INSIDE THE UNITED STATES TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (III) OUTSIDE THE UNITED STATES IN A TRANSACTION IN ACCORDANCE WITH RULE 904 UNDER THE SECURITIES ACT, OTHER THAN IN CANADA OR TO OR FOR THE BENEFIT OF A RESIDENT OF CANADA PURSUANT TO A PROSPECTUS QUALIFYING THE NOTES FOR SALE UNDER THE SECURITIES LAW IN ANY PROVINCE OR TERRITORY OF CANADA IN WHICH THE PURCHASER RESIDES OR AN EXEMPTION FROM THE PROSPECTUS REQUIREMENTS OF SUCH LAWS, (IV) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE) OR (V) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT. HOLDERS OF INTERESTS IN THIS TEMPORARY REGULATION S GLOBAL NOTE WILL NOTIFY ANY PURCHASER OF SUCH RESALE RESTRICTIONS, IF THEN APPLICABLE. [Definitive Securities Legend] 3 [IN CONNECTION WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE REGISTRAR AND TRANSFER AGENT SUCH CERTIFICATES AND OTHER INFORMATION AS SUCH TRANSFER AGENT MAY REASONABLY REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.] CUSIP No. 4 ISIN No. No. 11% Senior Subordinated Notes Due 2009 DELCO REMY INTERNATIONAL, INC., a Delaware corporation, promises to pay to Cede & Co., or registered assigns, the principal sum of One Hundred Sixty Four Million Nine Hundred Thirty Thousand Dollars on May 1, 2009. Interest Payment Dates: May 1 and November 1, commencing November 1, 2001. Record Dates: April 15 and October 15. Additional provisions of this Security are set forth on the other side of this Security. Dated: April 26, 2001 DELCO REMY INTERNATIONAL, INC. by ___________________________ Name: Thomas J. Snyder Title: President ___________________________ Name: David E. Stoll Title: Secretary TRUSTEE'S CERTIFICATE OF AUTHENTICATION FIRST UNION NATIONAL BANK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by _____________________________ Authorized Signatory 5 [FORM OF REVERSE SIDE OF INITIAL SECURITY] 11% Senior Subordinated Note Due 2009 1. Interest -------- Delco Remy International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the ------- principal amount of this Security at the rate per annum shown above; provided, -------- however, that if a Registration Default (as defined in the Registration - ------- Agreement) occurs, additional interest will accrue on this Security at a rate of 0.50% per annum (increasing by an additional 0.50% per annum after each consecutive 90-day period that occurs after the date on which such Registration default occurs up to a maximum additional interest rate of 2.00%) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured. The Company will pay interest semiannually on May 1 and November 1 of each year, commencing November 1, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from [April 26, 2001][date of issuance of Additional Securities]. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 15 or October 15 immediately preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including 6 principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, however, that payments on a certificated -------- ------- Security will be made by wire transfer to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, FIRST UNION NATIONAL BANK, a national banking association ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint ------- and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture --------- The Company issued the Securities under an Indenture dated as of April 26, 2001 ("Indenture"), between the Company and the Trustee. The terms of the --------- Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. (S)(S) ------ 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). Terms --- defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are unsecured senior subordinated obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will 7 be treated as a single class for all purposes under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications contained in the Indenture. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed the Obligations on a senior subordinated basis pursuant to the terms of the Indenture. 5. Optional Redemption ------------------- Except as set forth below, the Company will not be entitled to redeem the Securities at its option prior to May 1, 2005. On and after May 1, 2005, the Company will be entitled at its option to redeem all or a portion of the Securities upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on May 1 of the years set forth below: Redemption Period Price ------ ----- 8 2005............................................. 105.500% 2006............................................. 103.667% 2007............................................. 101.833% 2008 and thereafter.............................. 100.000% In addition, before May 1, 2004, the Company may at its option on one or more occasions redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 111%, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more Public Equity Offerings; provided, however, that - -------- ------- (1) at least 65% of such aggregate principal amount of Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption (other than Securities held, directly or indirectly, by the Company or its Affiliates); and (2) each such redemption occurs within 90 days after the date of the related Public Equity Offering. 6. Notice of Redemption -------------------- Notice of optional redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions -------------- 9 Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8. Subordination ------------- The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Guarantor Subsidiary, as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney-in-fact for such purpose. 9. Denominations; Transfer; Exchange --------------------------------- The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners --------------------- 10 The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 11 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the Securities then outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to make certain changes in the subordination provisions, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to release a Subsidiary Guarantor when permitted by the Indenture, or to make any other change that does not adversely affect the rights of any Securityholder, or to provide for the issuance and authorization of the Exchange Securities. 14. Defaults and Remedies --------------------- Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities (whether or not such payment is prohibited by the subordination provision of the Indenture); (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by the subordination provision of the Indenture), Securities when required; (iii) failure by the Company or any Subsidiary Guarantor to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $10,000,000 and such acceleration continues for 10 days after notice; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and the Significant 12 Subsidiaries; (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $10,000,000 or its foreign currency equivalent against the Company or a Significant Subsidiary; and (vii) a Subsidiary Guaranty ceasing or otherwise failing to be in full force and effect (other than in accordance with its terms) and such default continues for 10 days after notice. If any of certain Events of Default enumerated in the Indenture occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately subject to certain conditions. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- 13 A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or a Subsidiary Guarantor under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Holders' Compliance with Registration Agreement ----------------------------------------------- Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 14 21. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Delco Remy International, Inc. 2902 Enterprise Drive Anderson, IN 46013 Attention: General Counsel 15 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint _________________________ agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ______________________________________________________________________________ Date: ____________________ Your Signature: ___________________________________ ______________________________________________________________________________ Sign exactly as your name appears on the other side of this Security. In connection with any transfer of any of the Securities evidenced by this certificate occurring prior to the expiration of the period referred to in Rule 144(k) under the Securities Act after the later of the date of original issuance of such Securities and the last date, if any, on which such Securities were owned by the Company or any Affiliate of the Company, the undersigned confirms that such Securities are being transferred in accordance with its terms: CHECK ONE BOX BELOW (1) [_] to the Company; or (2) [_] pursuant to an effective registration statement under the Securities Act of 1933; or (3) [_] inside the United States to a "qualified institutional buyer" (as defined in Rule 144A under the Securities Act of 1933) that purchases for its own account or for the 16 account of a qualified institutional buyer to whom notice is given that such transfer is being made in reliance on Rule 144A, in each case pursuant to and in compliance with Rule 144A under the Securities Act of 1933; or (4) [_] outside the United States in an offshore transaction within the meaning of Regulation S under the Securities Act in compliance with Rule 904 under the Securities Act of 1933; or (5) [_] pursuant to the exemption from registration provided by Rule 144 under the Securities Act of 1933. If such transfer is being made pursuant to an offshore transaction in accordance with Rule 904 under the Securities Act, the undersigned further certifies that: (i) the offer of the Securities was not made to a person in the United States; (ii) either (a) at the time the buy offer was originated, the transferee was outside the United States or we and any person acting on our behalf reasonably believed that the transferee was outside the United States, or (b) the transaction was executed in, on or through the facilities of a designated off-shore securities market and neither we nor any person acting on our behalf knows that the transaction has been pre- arranged with a buyer in the United States; (iii) no directed selling efforts have been made in the United States in contravention of the requirements of Rule 903 or Rule 904 of Regulation S, as applicable; (iv) the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act; (v) we have advised the transferee of the transfer restrictions applicable to the Securities; and (vi) if the circumstances set forth in Rule 904(B) under the Securities Act are applicable, we have complied with the additional conditions therein, including (if applicable) sending a confirmation or other notice stating that the Securities may be offered and sold 17 during the distribution compliance period specified in Rule 903 of Regulation S; pursuant to registration of the Securities under the Securities Act; or pursuant to an available exemption from the registration requirements under the Securities Act. Unless one of the boxes is checked, the Trustee will refuse to register any of the Securities evidenced by this certificate in the name of any person other than the registered holder thereof; provided, however, that if box (4) or (5) is -------- ------- checked, the Trustee may require, prior to registering any such transfer of the Securities, such legal opinions, certifications and other information as the Company has reasonably requested to confirm that such transfer is being made pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the Securities Act of 1933, such as the exemption provided by Rule 144 under such Act. ________________________ Signature Signature Guarantee: ____________________________ _______________________________ Signature must be guaranteed Signature Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. ________________________________________________________________________________ 18 TO BE COMPLETED BY PURCHASER IF (3) ABOVE IS CHECKED. The undersigned represents and warrants that it is purchasing this Security for its own account or an account with respect to which it exercises sole investment discretion and that it and any such account is a "qualified institutional buyer" within the meaning of Rule 144A under the Securities Act of 1933, and is aware that the sale to it is being made in reliance on Rule 144A and acknowledges that it has received such information regarding the Company as the undersigned has requested pursuant to Rule 144A or has determined not to request such information and that it is aware that the transferor is relying upon the undersigned's foregoing representations in order to claim the exemption from registration provided by Rule 144A. Dated: ________________ ______________________________ NOTICE: To be executed by an executive officer 19 [TO BE ATTACHED TO GLOBAL SECURITIES] SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY The following increases or decreases in this Global Security have been made: Date of Amount of decrease Amount of increase Principal amount of Signature of Exchange in Principal in Principal Amount this Global authorized Amount of this of this Global Security following signatory of Global Security Security such decrease or Trustee or increase Securities Custodian
20 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, check the box: [_] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, state the amount in principal amount: $ Date: ___________________ Your Signature: _________________________________ (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: _________________________________________________________ (Signature must be guaranteed) Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EXHIBIT A [FORM OF FACE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] */**/ - - -- CUSIP No. No. $ 11% Senior Subordinated Notes Due 2009 DELCO REMY INTERNATIONAL, INC., a Delaware corporation, promises to pay to _______________________, or registered assigns, the principal sum of _______________________ Dollars on May 1, 2009. Interest Payment Dates: May 1 and November 1, commencing November 1, 2001. Record Dates: April 15 and October 15. Additional provisions of this Security are set forth on the other side of this Security. DELCO REMY INTERNATIONAL, INC. by _____________________________ President _____________________________ Secretary 2 TRUSTEE'S CERTIFICATE OF AUTHENTICATION Dated: FIRST UNION NATIONAL BANK, as Trustee, certifies that this is one of the Securities referred to in the Indenture. by _____________________________ Authorized Signatory _______________________ */ If the Security is to be issued in global form, add the Global Securities - - Legend from Exhibit 1 to Appendix A and the attachment from such Exhibit 1 captioned "TO BE ATTACHED TO GLOBAL SECURITIES - SCHEDULE OF INCREASES OR DECREASES IN GLOBAL SECURITY". 3 **/ If the Security is a Private Exchange Security issued in a Private Exchange - -- to an Initial Purchaser holding an unsold portion of its initial allotment, add the Restricted Securities Legend from Exhibit 1 to Appendix A and replace the Assignment Form included in this Exhibit A with the Assignment Form included in such Exhibit 1. 4 [FORM OF REVERSE SIDE OF EXCHANGE SECURITY OR PRIVATE EXCHANGE SECURITY] 11% Senior Subordinated Note Due 2009 1. Interest -------- Delco Remy International, Inc., a Delaware corporation (such corporation, and its successors and assigns under the Indenture hereinafter referred to, being herein called the "Company"), promises to pay interest on the ------- principal amount of this Security at the rate per annum shown above[; provided, -------- however, that if a Registration Default (as defined in the Registration - ------- Agreement) occurs, additional interest will accrue on this Security at a rate of 0.50% per annum (increasing by an additional 0.50% per annum after each consecutive 90-day period that occurs after the date on which such Registration default occurs up to a maximum additional interest rate of 2.00%) from and including the date on which any such Registration Default shall occur to but excluding the date on which all Registration Defaults have been cured.]/1/ The Company will pay interest semiannually on May 1 and November 1 of each year, commencing November 1, 2001. Interest on the Securities will accrue from the most recent date to which interest has been paid or, if no interest has been paid, from [April 26, 2001][date of issuance of Additional Securities]. Interest will be computed on the basis of a 360-day year of twelve 30-day months. The Company shall pay interest on overdue principal at the rate borne by the Securities plus 1% per annum, and it shall pay interest on overdue installments of interest at the same rate to the extent lawful. _______________________ 1. Insert if at the date of issuance of the Exchange Security or Private Exchange Security (as the case may be) any Registration Default has occurred with respect to the related Initial Securities during the interest period in which such date of issuance occurs. 5 2. Method of Payment ----------------- The Company will pay interest on the Securities (except defaulted interest) to the Persons who are registered holders of Securities at the close of business on the April 15 or October 15 immediately preceding the interest payment date even if Securities are canceled after the record date and on or before the interest payment date. Holders must surrender Securities to a Paying Agent to collect principal payments. The Company will pay principal and interest in money of the United States that at the time of payment is legal tender for payment of public and private debts. Payments in respect of the Securities represented by a Global Security (including principal, premium and interest) will be made by wire transfer of immediately available funds to the accounts specified by The Depository Trust Company. The Company will make all payments in respect of a certificated Security (including principal, premium and interest), by mailing a check to the registered address of each Holder thereof; provided, -------- however, that payments on a certificated Security will be made by wire transfer - ------- to a U.S. dollar account maintained by the payee with a bank in the United States if such Holder elects payment by wire transfer by giving written notice to the Trustee or the Paying Agent to such effect designating such account no later than 30 days immediately preceding the relevant due date for payment (or such other date as the Trustee may accept in its discretion). 3. Paying Agent and Registrar -------------------------- Initially, FIRST UNION NATIONAL BANK, a national banking association ("Trustee"), will act as Paying Agent and Registrar. The Company may appoint ------- and change any Paying Agent, Registrar or co-registrar without notice. The Company or any of its domestically incorporated Wholly Owned Subsidiaries may act as Paying Agent, Registrar or co-registrar. 4. Indenture --------- The Company issued the Securities under an Indenture dated as of April 26, 2001 ("Indenture"), between the Company and the Trustee. The terms of the --------- Securities include those stated in the Indenture and those made part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C. ------ 6 (S)(S) 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act"). --- Terms defined in the Indenture and not defined herein have the meanings ascribed thereto in the Indenture. The Securities are subject to all such terms, and Securityholders are referred to the Indenture and the Act for a statement of those terms. The Securities are unsecured senior subordinated obligations of the Company. The Company shall be entitled, subject to its compliance with Section 4.03 of the Indenture, to issue Additional Securities pursuant to Section 2.13 of the Indenture. This Security is one of the [Exchange] [Private Exchange] Securities referred to in the Indenture. The Initial Securities issued on the Issue Date, any Additional Securities and all Exchange Securities or Private Exchange Securities issued in exchange therefor will be treated as a single class for all purposes under the Indenture. The Initial Securities and the Exchange Securities are treated as a single class of securities under the Indenture. The Indenture imposes certain limitations on the Incurrence of Indebtedness by the Company and its Restricted Subsidiaries; the payment of dividends on, and redemption of, Capital Stock of the Company and its Restricted Subsidiaries and the redemption of certain Subordinated Obligations of the Company and its Restricted Subsidiaries; Investments; sales of assets and Restricted Subsidiary Capital Stock; certain transactions with Affiliates of the Company; the sale or issuance of Capital Stock of the Restricted Subsidiaries; the creation of Liens; and consolidations, mergers and transfers of all or substantially all of the Company's assets. In addition, the Indenture prohibits certain restrictions on distributions and dividends from Restricted Subsidiaries. All of these limitations and prohibitions, however, are subject to a number of important qualifications contained in the Indenture. To guarantee the due and punctual payment of the principal and interest, if any, on the Securities and all other amounts payable by the Company under the Indenture and the Securities when and as the same shall be due and payable, whether at maturity, by acceleration or otherwise, according to the terms of the Securities and the Indenture, the Subsidiary Guarantors have unconditionally guaranteed the Obligations on a senior subordinated basis pursuant to the terms of the Indenture. 7 5. Optional Redemption ------------------- Except as set forth below, the Company will not be entitled to redeem the Securities at its option prior to May 1, 2005. On and after May 1, 2005, the Company will be entitled at its option to redeem all or a portion of the Securities upon not less than 30 nor more than 60 days' prior notice, at the redemption prices (expressed in percentages of principal amount), plus accrued interest to the redemption date (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the 12-month period commencing on May 1 of the years set forth below: Period Redemption ------ Price ----- 2005.................................................... 105.500% 2006.................................................... 103.667% 2007.................................................... 101.833% 2008 and thereafter..................................... 100.000% In addition, before May 1, 2004, the Company may at its option on one or more occasions redeem Securities (which includes Additional Securities, if any) in an aggregate principal amount not to exceed 35% of the aggregate principal amount of the Securities (which includes Additional Securities, if any) originally issued at a redemption price (expressed as a percentage of principal amount) of 111%, plus accrued and unpaid interest to the redemption date, with the net cash proceeds from one or more Public Equity Offerings; provided, however, that - -------- ------- (1) at least 65% of such aggregate principal amount of Securities (which includes Additional Securities, if any) remains outstanding immediately after the occurrence of each such redemption (other than Securities held, directly or indirectly, by the Company or its Affiliates); and (2) each such redemption occurs within 90 days after the date of the related Public Equity Offering. 8 6. Notice of Redemption -------------------- Notice of optional redemption will be mailed by first-class mail at least 30 days but not more than 60 days before the redemption date to each Holder of Securities to be redeemed at his registered address. Securities in denominations larger than $1,000 may be redeemed in part but only in whole multiples of $1,000. If money sufficient to pay the redemption price of and accrued interest on all Securities (or portions thereof) to be redeemed on the redemption date is deposited with the Paying Agent on or before the redemption date and certain other conditions are satisfied, on and after such date interest ceases to accrue on such Securities (or such portions thereof) called for redemption. 7. Put Provisions -------------- Upon a Change of Control, unless the Company has elected to redeem the Securities pursuant to paragraph 5, any Holder of Securities will have the right, subject to certain conditions specified in the Indenture, to cause the Company to repurchase all or any part of the Securities of such Holder at a purchase price equal to 101% of the principal amount of the Securities to be repurchased plus accrued and unpaid interest, if any, to the date of purchase (subject to the right of Holders of record on the relevant record date to receive interest due on the relevant interest payment date that is on or prior to the date of purchase) as provided in, and subject to the terms of, the Indenture. 8. Subordination ------------- The Securities are subordinated to Senior Indebtedness of the Company, as defined in the Indenture. To the extent provided in the Indenture, Senior Indebtedness of the Company must be paid before the Securities may be paid. In addition, each Subsidiary Guaranty is subordinated to Senior Indebtedness of the relevant Guarantor Subsidiary, as defined in the Indenture. The Company and each Guarantor Subsidiary agrees, and each Securityholder by accepting a Security agrees, to the subordination provisions contained in the Indenture and authorizes the Trustee to give it effect and appoints the Trustee as attorney- in-fact for such purpose. 9. Denominations; Transfer; Exchange --------------------------------- 9 The Securities are in registered form without coupons in denominations of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange Securities in accordance with the Indenture. Upon any transfer or exchange, the Registrar and the Trustee may require a Holder, among other things, to furnish appropriate endorsements or transfer documents and to pay any taxes required by law or permitted by the Indenture. The Registrar need not register the transfer of or exchange any Securities selected for redemption (except, in the case of a Security to be redeemed in part, the portion of the Security not to be redeemed) or to transfer or exchange any Securities for a period of 15 days prior to a selection of Securities to be redeemed or 15 days before an interest payment date. 10. Persons Deemed Owners --------------------- The registered Holder of this Security may be treated as the owner of it for all purposes. 11. Unclaimed Money --------------- If money for the payment of principal or interest remains unclaimed for two years, the Trustee or Paying Agent shall pay the money back to the Company at its written request unless an abandoned property law designates another Person. After any such payment, Holders entitled to the money must look only to the Company and not to the Trustee for payment. 12. Discharge and Defeasance ------------------------ Subject to certain conditions, the Company at any time may terminate some or all of its obligations under the Securities and the Indenture if the Company deposits with the Trustee money or U.S. Government Obligations for the payment of principal and interest on the Securities to redemption or maturity, as the case may be. 10 13. Amendment, Waiver ----------------- Subject to certain exceptions set forth in the Indenture, (i) the Indenture or the Securities may be amended with the written consent of the Holders of at least a majority in principal amount of the Securities then outstanding and (ii) any default or noncompliance with any provision may be waived with the written consent of the Holders of a majority in principal amount of the Securities then outstanding. Subject to certain exceptions set forth in the Indenture, without the consent of any Securityholder, the Company, the Subsidiary Guarantors and the Trustee may amend the Indenture or the Securities to cure any ambiguity, omission, defect or inconsistency, or to comply with Article V of the Indenture, or to provide for uncertificated Securities in addition to or in place of certificated Securities, or to make certain changes in the subordination provisions, or to add guarantees with respect to the Securities or to secure the Securities, or to add additional covenants or surrender rights and powers conferred on the Company, or to comply with any request of the SEC in connection with qualifying the Indenture under the Act, or to release a Subsidiary Guarantor when permitted by the Indenture, or to make any other change that does not adversely affect the rights of any Securityholder, or to provide for the issuance and authorization of the Exchange Securities. 11 14. Defaults and Remedies --------------------- Under the Indenture, Events of Default include (i) default for 30 days in payment of interest on the Securities (whether or not such payment is prohibited by the subordination provision of the Indenture); (ii) default in payment of principal on the Securities at maturity, upon redemption pursuant to paragraph 5 of the Securities, upon acceleration or otherwise, or failure by the Company to redeem or purchase, upon declaration or otherwise (whether or not such payment is prohibited by the subordination provision of the Indenture), Securities when required; (iii) failure by the Company or any Subsidiary Guarantor to comply with other agreements in the Indenture or the Securities, in certain cases subject to notice and lapse of time; (iv) certain accelerations (including failure to pay within any grace period after final maturity) of other Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds $10,000,000 and such acceleration continues for 10 days after notice; (v) certain events of bankruptcy, insolvency or reorganization with respect to the Company and the Significant Subsidiaries; (vi) certain judgments or decrees not covered by insurance for the payment of money in excess of $10,000,000 or its foreign currency equivalent against the Company or a Significant Subsidiary; and (vii) a Subsidiary Guaranty ceasing or otherwise failing to be in full force and effect (other than in accordance with its terms) and such default continues for 10 days after notice. If any of certain Events of Default enumerated in the Indenture occurs and is continuing, the Trustee or the Holders of at least 25% in principal amount of the Securities may declare all the Securities to be due and payable immediately subject to certain conditions. Certain events of bankruptcy or insolvency are Events of Default which will result in the Securities being due and payable immediately upon the occurrence of such Events of Default. Securityholders may not enforce the Indenture or the Securities except as provided in the Indenture. The Trustee may refuse to enforce the Indenture or the Securities unless it receives reasonable indemnity or security. Subject to certain limitations, Holders of a majority in principal amount of the Securities may direct the Trustee in its exercise of any trust or power. The Trustee may withhold from Securityholders notice of any continuing Default (except a Default in payment of principal or interest) if it determines that withholding notice is in the interest of the Holders. 12 15. Trustee Dealings with the Company --------------------------------- Subject to certain limitations imposed by the Act, the Trustee under the Indenture, in its individual or any other capacity, may become the owner or pledgee of Securities and may otherwise deal with and collect obligations owed to it by the Company or its Affiliates and may otherwise deal with the Company or its Affiliates with the same rights it would have if it were not Trustee. 16. No Recourse Against Others -------------------------- A director, officer, employee or stockholder, as such, of the Company or any Subsidiary Guarantor shall not have any liability for any obligations of the Company or a Subsidiary Guarantor under the Securities or the Indenture or for any claim based on, in respect of or by reason of such obligations or their creation. By accepting a Security, each Securityholder waives and releases all such liability. The waiver and release are part of the consideration for the issue of the Securities. 17. Governing Law ------------- THIS SECURITY SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 18. Authentication -------------- This Security shall not be valid until an authorized signatory of the Trustee (or an authenticating agent) manually signs the certificate of authentication on the other side of this Security. 19. Abbreviations ------------- Customary abbreviations may be used in the name of a Securityholder or an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the entireties), JT TEN (=joint 13 tenants with rights of survivorship and not as tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors Act). 20. Holders' Compliance with Registration Agreement ----------------------------------------------- Each Holder of a Security, by acceptance hereof, acknowledges and agrees to the provisions of the Registration Agreement, including, without limitation, the obligations of the Holders with respect to a registration and the indemnification of the Company to the extent provided therein. 21. CUSIP Numbers ------------- Pursuant to a recommendation promulgated by the Committee on Uniform Security Identification Procedures the Company has caused CUSIP numbers to be printed on the Securities and has directed the Trustee to use CUSIP numbers in notices of redemption as a convenience to Securityholders. No representation is made as to the accuracy of such numbers either as printed on the Securities or as contained in any notice of redemption and reliance may be placed only on the other identification numbers placed thereon. The Company will furnish to any Securityholder upon written request and without charge to the Securityholder a copy of the Indenture which has in it the text of this Security in larger type. Requests may be made to: Delco Remy International, Inc. 2902 Enterprise Drive Anderson, IN 46013 Attention: General Counsel 14 ASSIGNMENT FORM To assign this Security, fill in the form below: I or we assign and transfer this Security to (Print or type assignee's name, address and zip code) (Insert assignee's soc. sec. or tax I.D. No.) and irrevocably appoint agent to transfer this Security on the books of the Company. The agent may substitute another to act for him. ____________________________________________________________ Date: ________________ Your Signature: _____________________ ____________________________________________________________________ Sign exactly as your name appears on the other side of this Security. 15 OPTION OF HOLDER TO ELECT PURCHASE If you want to elect to have this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, check the box: [_] If you want to elect to have only part of this Security purchased by the Company pursuant to Section 4.06 or Section 4.09 of the Indenture, state the amount in principal amount: $ Date: _______________ Your Signature: ______________________ (Sign exactly as your name appears on the other side of this Security.) Signature Guarantee: _______________________________________ (Signature must be guaranteed) Signatures must be guaranteed by an "eligible guarantor institution" meeting the requirements of the Registrar, which requirements include membership or participation in the Security Transfer Agent Medallion Program ("STAMP") or such other "signature guarantee program" as may be determined by the Registrar in addition to, or in substitution for, STAMP, all in accordance with the Securities Exchange Act of 1934, as amended. EXHIBIT B FORM OF SUPPLEMENTAL INDENTURE SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), ---------------------- dated as of , among [SUBSIDIARY GUARANTOR] (the "New Subsidiary Guarantor"), a subsidiary of Delco Remy ------------------------ International Inc. (or its successor), a Delaware corporation (the "Company"), DELCO REMY INTERNATIONAL, INC., on behalf of ------- itself and the Subsidiary Guarantors (the "Existing Subsidiary ------------------- Guarantors") under the Indenture referred to below, and FIRST ---------- UNION NATIONAL BANK, a national banking association, as trustee under the indenture referred to below (the "Trustee"). ------- W I T N E S S E T H : WHEREAS the Company has heretofore executed and delivered to the Trustee an Indenture (the "Indenture"), dated as of April 26, 2001, providing --------- for the issuance of 11% Senior Subordinated Notes due 2009 (the "Securities"); ---------- WHEREAS Section 4.13 of the Indenture provides that under certain circumstances the Company is required to cause the New Subsidiary Guarantor to execute and deliver to the Trustee a supplemental indenture pursuant to which the New Subsidiary Guarantor shall unconditionally guarantee all of the Company's obligations under the Securities pursuant to a Subsidiary Guaranty on the terms and conditions set forth herein; and WHEREAS pursuant to Section 9.01 of the Indenture, the Trustee, the Company and Existing Subsidiary Guarantors are authorized to execute and deliver this Supplemental Indenture; NOW THEREFORE, in consideration of the foregoing and for other good and valuable consideration, the receipt of which is hereby acknowledged, the New Subsidiary Guarantor, the Company, the Existing Subsidiary Guarantors and the Trustee mutually covenant and agree for the equal and ratable benefit of the holders of the Securities as follows: 1. Definitions. (a) Capitalized terms used herein without ------------ definition shall have the meanings assigned to them in the Indenture. (b) For all purposes of this Supplement, except as otherwise herein expressly provided or unless the context otherwise requires: (i) the terms and expressions used herein shall have the same meanings as corresponding terms and expressions used in the Indenture; and (ii) the words "herein," "hereof" and "hereby" and other words of similar import used in this Supplement refer to this Supplement as a whole and not to any particular section hereof. 2. Agreement to Guarantee. The New Subsidiary Guarantor hereby ----------------------- agrees, jointly and severally with all other Subsidiary Guarantors, to guarantee the Company's obligations under the Securities on the term and subject to the conditions set forth in Article 11 of the Indenture and to be bound by all other applicable provisions of the Indenture. 3. Ratification of Indenture; Supplemental Indentures Part of ---------------------------------------------------------- Indenture. Except as expressly amended hereby, the Indenture is in all respects - ---------- ratified and confirmed and all the terms, conditions and provisions thereof shall remain in full force and effect. This Supplemental Indenture shall form a part of the Indenture for all purposes, and every holder of Securities heretofore or hereafter authenticated and delivered shall be bound hereby. 4. Governing Law. THIS SUPPLEMENTAL INDENTURE SHALL BE GOVERNED BY, -------------- AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK BUT WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY. 5. Trustee Makes No Representation. The Trustee makes no -------------------------------- representation as to the validity or sufficiency of this Supplemental Indenture. 6. Counterparts. The parties may sign any number of copies of this ------------- Supplemental Indenture. Each signed copy shall be an original, but all of them together represent the same agreement. 3 7. Effect of Headings. The Section headings herein are for ------------------- convenience only and shall not effect the construction thereof. IN WITNESS WHEREOF, the parties hereto have caused this Supplemental Indenture to be duly executed as of the date first above written. [NEW SUBSIDIARY GUARANTOR], by ______________________________ Name: Title: DELCO REMY INTERNATIONAL, INC., on behalf of itself and the Existing Subsidiary Guarantors, by ______________________________ Name: Title: FIRST UNION NATIONAL BANK, as Trustee, by ______________________________ Name: Title: EX-4.5 3 dex45.txt REGISTRATION RIGHT AGREEMENT Exhibit 4.5 $165,000,000 DELCO REMY INTERNATIONAL, INC. 11% Senior Subordinated Notes Due 2009 REGISTRATION RIGHTS AGREEMENT ----------------------------- April 19, 2001 Credit Suisse First Boston Corporation Deutsche Banc Alex. Brown c/o Credit Suisse First Boston Corporation Eleven Madison Avenue New York, New York 10010-3629 Dear Sirs: Delco Remy International, Inc., a Delaware corporation (the "Issuer"), proposes to issue and sell to Credit Suisse First Boston Corporation and Deutsche Banc Alex. Brown (together, the "Initial Purchasers"), upon the terms set forth in a purchase agreement of even date herewith (the "Purchase Agreement"), $165,000,000 aggregate principal amount of its 11% Senior Subordinated Notes Due 2009 (the "Initial Securities") to be guaranteed on a senior subordinated basis (the "Guaranties") by each of the Company's domestic subsidiaries that are signatories hereto (the "Guarantors" and, collectively with the Issuer, the "Company"). The Initial Securities will be issued pursuant to an Indenture, dated as of , 2001 (the "Indenture"), among the Issuer, the Guarantors named therein and First Union National Bank , as trustee (the "Trustee"). As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company agrees with the Initial Purchasers, for the benefit of the Initial Purchasers and the holders of the Securities (as defined below) (collectively the "Holders"), as follows: 1. Registered Exchange Offer. Unless not permitted by applicable law (after the Company has complied with the ultimate paragraph of this Section 1), the Company shall prepare and, not later than 90 days (such 90th day being a "Filing Deadline") after the date on which the Initial Purchasers purchase the Initial Securities pursuant to the Purchase Agreement (the "Closing Date"), file with the Securities and Exchange Commission (the "Commission") a registration statement (the "Exchange Offer Registration Statement") on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), with respect to a proposed offer (the "Registered Exchange Offer") to the Holders of Transfer Restricted Securities (as defined in Section 6 hereof), who are not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer, to issue and deliver to such Holders, in exchange for the Initial Securities, a like aggregate principal amount of debt securities of the Company issued under the Indenture, identical in all material respects to the Initial Securities (except for the transfer restrictions relating to the Initial Securities and the provisions related to the matters described in Section 6 hereof) and registered under the Securities Act (the "Exchange Securities"). The Company shall use its best efforts to (i) cause such Exchange Offer Registration Statement to become effective under the Securities Act within 1 150 days after the Closing Date (such 150th day being an "Effectiveness Deadline") and (ii) keep the Exchange Offer Registration Statement effective for not less than 30 days (or longer, if required by applicable law) after the date notice of the Registered Exchange Offer is mailed to the Holders (such period being called the "Exchange Offer Registration Period"). If the Company commences the Registered Exchange Offer, the Company (i) will be entitled to consummate the Registered Exchange Offer 30 days after such commencement (provided that the Company has accepted all the Initial Securities theretofore validly tendered in accordance with the terms of the Registered Exchange Offer) and (ii) will be required to consummate the Registered Exchange Offer no later than 40 days after the date on which the Exchange Offer Registration Statement is declared effective (such 40th day being the "Consummation Deadline"). Following the declaration of the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such Registered Exchange Offer to enable each Holder of Transfer Restricted Securities electing to exchange the Initial Securities for Exchange Securities (assuming that such Holder is not an affiliate of the Company within the meaning of the Securities Act, acquires the Exchange Securities in the ordinary course of such Holder's business and has no arrangements with any person to participate in the distribution of the Exchange Securities and is not prohibited by any law or policy of the Commission from participating in the Registered Exchange Offer) to trade such Exchange Securities from and after their receipt without any limitations or restrictions under the Securities Act and without material restrictions under the securities laws of the several states of the United States. The Company acknowledges that, pursuant to current interpretations by the Commission's staff of Section 5 of the Securities Act, in the absence of an applicable exemption therefrom, (i) each Holder which is a broker-dealer electing to exchange Initial Securities, acquired for its own account as a result of market making activities or other trading activities, for Exchange Securities (an "Exchanging Dealer"), is required in connection with any resale of such Exchange Securities to deliver a prospectus containing the information set forth in (a) Annex A hereto on the cover, (b) Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section, and (c) Annex C hereto in the "Plan of Distribution" section of such prospectus in connection with a sale of any such Exchange Securities received by such Exchanging Dealer pursuant to the Registered Exchange Offer and (ii) an Initial Purchaser that elects to sell Securities (as defined below) acquired in exchange for Initial Securities constituting any portion of an unsold allotment, is required to deliver a prospectus containing the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in connection with such sale. The Company shall use its best efforts to keep the Exchange Offer Registration Statement effective and to amend and supplement the prospectus contained therein, in order to permit such prospectus to be lawfully delivered by all persons subject to the prospectus delivery requirements of the Securities Act for such period of time as such persons must comply with such requirements in order to resell the Exchange Securities; provided, however, that (i) in the -------- ------- case where such prospectus and any amendment or supplement thereto must be delivered by an Exchanging Dealer or an Initial Purchaser, such period shall be the lesser of 180 days and the date on which all Exchanging Dealers and the Initial Purchasers have sold all Exchange Securities held by them (unless such period is extended pursuant to Section 3(j) below) and (ii) the Company shall make such prospectus and any amendment or supplement thereto available to any broker-dealer for use in connection with any resale of any Exchange Securities for a period of not less than 180 days after the consummation of the Registered Exchange Offer. If, upon consummation of the Registered Exchange Offer, any Initial Purchaser holds Initial Securities acquired by it as part of its initial distribution, the Company, simultaneously with the delivery of the Exchange Securities pursuant to the Registered Exchange Offer, shall issue and deliver to such Initial Purchaser upon the written request of such Initial Purchaser, in exchange (the "Private Exchange") for the Initial Securities held by such Initial Purchaser, a like principal amount of debt securities of the Company 2 issued under the Indenture and identical in all material respects (including the existence of restrictions on transfer under the Securities Act and the securities laws of the several states of the United States, but excluding provisions relating to matters described in Section 6 hereof) to the Initial Securities (the "Private Exchange Securities"). The Initial Securities, the Exchange Securities and the Private Exchange Securities are herein collectively called the "Securities". In connection with the Registered Exchange Offer, the Company shall: (a) mail to each Holder a copy of the prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related documents; (b) keep the Registered Exchange Offer open for not less than 30 days (or longer, if required by applicable law) after the date notice thereof is mailed to the Holders; (c) utilize the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan, The City of New York, which may be the Trustee or an affiliate of the Trustee; (d) permit Holders to withdraw tendered Initial Securities at any time prior to the close of business, New York time, on the last business day on which the Registered Exchange Offer shall remain open; and (e) otherwise comply with all applicable laws. As soon as practicable after the close of the Registered Exchange Offer or the Private Exchange, as the case may be, the Company shall: (x) accept for exchange all the Initial Securities validly tendered and not withdrawn pursuant to the Registered Exchange Offer and the Private Exchange; (y) deliver to the Trustee for cancellation all the Initial Securities so accepted for exchange; and (z) cause the Trustee to authenticate and deliver promptly to each Holder of the Initial Securities, Exchange Securities or Private Exchange Securities, as the case may be, equal in principal amount to the Initial Securities of such Holder so accepted for exchange. The Indenture will provide that the Exchange Securities will not be subject to the transfer restrictions set forth in the Indenture and that all the Securities will vote and consent together on all matters as one class and that none of the Securities will have the right to vote or consent as a class separate from one another on any matter. Interest on each Exchange Security and Private Exchange Security issued pursuant to the Registered Exchange Offer and in the Private Exchange will accrue from the last interest payment date on which interest was paid on the Initial Securities surrendered in exchange therefor or, if no interest has been paid on the Initial Securities, from the date of original issue of the Initial Securities. Each Holder participating in the Registered Exchange Offer shall be required to represent to the Company in writing that at the time of the consummation of the Registered Exchange Offer (i) any Exchange Securities received by such Holder will be acquired in the ordinary course of business, (ii) such Holder will have no arrangements or understanding with any person to participate in the distribution of the Securities or the Exchange Securities within the meaning of the Securities Act, (iii) such Holder is not an "affiliate," as defined in Rule 405 of the Securities Act, of the Company or if it is an affiliate, such Holder will comply with the registration and prospectus delivery requirements of the Securities Act to the extent 3 applicable, (iv) if such Holder is not a broker-dealer, that it is not engaged in, and does not intend to engage in, the distribution of the Exchange Securities and (v) if such Holder is a broker-dealer, that it will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities and that it will be required to acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. Notwithstanding any other provisions hereof, the Company will ensure that (i) any Exchange Offer Registration Statement and any amendment thereto and any prospectus forming part thereof and any supplement thereto complies in all material respects with the Securities Act and the rules and regulations thereunder, (ii) any Exchange Offer Registration Statement and any amendment thereto does not, when it becomes effective, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading and (iii) any prospectus forming part of any Exchange Offer Registration Statement, and any supplement to such prospectus, does not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. If following the date hereof there has been announced a change in Commission policy with respect to exchange offers that in the reasonable opinion of counsel to the Company raises a substantial question as to whether the Registered Exchange Offer is permitted by applicable federal law, the Company will seek a no-action letter or other favorable decision from the Commission allowing the Company to consummate the Registered Exchange Offer unless the Company makes a good faith determination based on the advice of counsel that such a request would be denied in light of publicly available no-action letters, in which case the Company shall proceed to file a Shelf Registration Statement pursuant to the provisions of Section 2 hereof. In the event the Company seeks a no-action letter or other favorable decision from the Commission pursuant to the preceding sentence, the Company will pursue the issuance of such a decision to the Commission staff level. In connection with the foregoing, the Company will take all such other actions as may be requested by the Commission or otherwise required in connection with the issuance of such decision, including without limitation (i) participating in telephonic conferences with the Commission, (ii) delivering to the Commission staff an analysis prepared by counsel to the Company setting forth the legal bases, if any, upon which such counsel has concluded that the Registered Exchange Offer should be permitted and (iii) diligently pursuing a resolution (which need not be favorable) by the Commission staff. 4 2. Shelf Registration. If, (i) because of any change in law or in applicable interpretations thereof by the staff of the Commission, the Company is not permitted to effect a Registered Exchange Offer, as contemplated by Section 1 hereof, (ii) the Registered Exchange Offer is not consummated by the 180th day after the Closing Date, (iii) any Initial Purchaser so requests with respect to the Initial Securities (or the Private Exchange Securities) not eligible to be exchanged for Exchange Securities in the Registered Exchange Offer and held by it following consummation of the Registered Exchange Offer or (iv) any Holder (other than an Exchanging Dealer) is not eligible to participate in the Registered Exchange Offer or, in the case of any Holder (other than an Exchanging Dealer) that participates in the Registered Exchange Offer, such Holder does not receive freely tradeable Exchange Securities on the date of the exchange and any such Holder so requests, the Company shall take the following actions (the date on which any of the conditions described in the foregoing clauses (i) through (iv) occur, including in the case of clauses (iii) or (iv) the receipt of the required notice, being a "Trigger Date"): (a) The Company shall promptly (but in no event more than 45 days after the Trigger Date (such 45th day being a "Filing Deadline")) file with the Commission and thereafter use its best efforts to cause to be declared effective ((1) with respect to clause (i) above, no later than 150 days after the Closing Date (such 150th day being an "Effectiveness Deadline") and (2) in the case of clauses (ii), (iii) and (iv) above, on or prior to the 60th day after the Trigger Date (such 60th day being an "Effectiveness Deadline") a registration statement (the "Shelf Registration Statement" and, together with the Exchange Offer Registration Statement, a "Registration Statement") on an appropriate form under the Securities Act relating to the offer and sale of the Transfer Restricted Securities by the Holders thereof from time to time in accordance with the methods of distribution set forth in the Shelf Registration Statement and Rule 415 under the Securities Act (hereinafter, the "Shelf Registration"); provided, -------- however, that no Holder (other than an Initial Purchaser) shall be entitled ------- to have the Securities held by it covered by such Shelf Registration Statement unless such Holder agrees in writing to be bound by all the provisions of this Agreement applicable to such Holder. (b) The Company shall use its best efforts to keep the Shelf Registration Statement continuously effective in order to permit the prospectus included therein to be lawfully delivered by the Holders of the relevant Securities, for a period of two years (or for such longer period if extended pursuant to Section 3(j) below) from the date of its effectiveness (or until one year from the effective date of the Shelf Registration Statement if the Shelf Registration Statement is filed at the request of an Initial Purchaser) or such shorter period that will terminate when all the Securities covered by the Shelf Registration Statement (i) have been sold pursuant thereto or (ii) are no longer restricted securities (as defined in Rule 144 under the Securities Act, or any successor rule thereof). The Company shall be deemed not to have used its best efforts to keep the Shelf Registration Statement effective during the requisite period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities during that period, unless such action is required by applicable law. (c) Notwithstanding any other provisions of this Agreement to the contrary, the Company shall cause the Shelf Registration Statement and the related prospectus and any amendment or supplement thereto, as of the effective date of the Shelf Registration Statement, amendment or supplement, (i) to comply in all material respects with the applicable requirements of the Securities Act and the rules and regulations of the Commission and (ii) not to contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. 3. Registration Procedures. In connection with any Shelf Registration contemplated by Section 2 hereof and, to the extent applicable, any Registered Exchange Offer contemplated by Section 1 hereof, the following provisions shall apply: 5 (a) The Company shall (i) furnish to each Initial Purchaser, prior to the filing thereof with the Commission, a copy of the Registration Statement and each amendment thereof and each supplement, if any, to the prospectus included therein and, in the event that an Initial Purchaser (with respect to any portion of an unsold allotment from the original offering) is participating in the Registered Exchange Offer or the Shelf Registration Statement, the Company shall use its best efforts to reflect in each such document, when so filed with the Commission, such comments as such Initial Purchaser reasonably may propose; (ii) include the information set forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan of Distribution" section of the prospectus forming a part of the Exchange Offer Registration Statement and include the information set forth in Annex D hereto in the Letter of Transmittal delivered pursuant to the Registered Exchange Offer; (iii) if requested by an Initial Purchaser, include the information required by Items 507 or 508 of Regulation S-K under the Securities Act, as applicable, in the prospectus forming a part of the Exchange Offer Registration Statement; (iv) include within the prospectus contained in the Exchange Offer Registration Statement a section entitled "Plan of Distribution," reasonably acceptable to the Initial Purchasers, which shall contain a summary statement of the positions taken or policies made by the staff of the Commission with respect to the potential "underwriter" status of any broker-dealer that is the beneficial owner (as defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) of Exchange Securities received by such broker-dealer in the Registered Exchange Offer (a "Participating Broker-Dealer"), whether such positions or policies have been publicly disseminated by the staff of the Commission or such positions or policies, in the reasonable judgment of the Initial Purchasers based upon advice of counsel (which may be in-house counsel), represent the prevailing views of the staff of the Commission; and (v) in the case of a Shelf Registration Statement, include the names of the Holders who propose to sell Securities pursuant to the Shelf Registration Statement as selling securityholders. (b) The Company shall give written notice to the Initial Purchasers, the Holders of the Securities and any Participating Broker-Dealer from whom the Company has received prior written notice that it will be a Participating Broker-Dealer in the Registered Exchange Offer (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the prospectus until the requisite changes have been made): (i) when the Registration Statement or any amendment thereto has been filed with the Commission and when the Registration Statement or any post-effective amendment thereto has become effective; (ii) of any request by the Commission for amendments or supplements to the Registration Statement or the prospectus included therein or for additional information; (iii) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation of any proceedings for that purpose; (iv) of the receipt by the Company or its legal counsel of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and (v) of the happening of any event that requires the Company to make changes in the Registration Statement or the prospectus in order that the Registration Statement or the prospectus does not contain an untrue statement of a material fact nor omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the prospectus, in light of the circumstances under which they were made) not misleading. 6 (c) The Company shall make every reasonable effort to obtain the withdrawal at the earliest possible time of any order suspending the effectiveness of the Registration Statement. (d) The Company shall furnish to each Holder of Securities included within the coverage of the Shelf Registration, without charge, at least one copy of the Shelf Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if the Holder so requests in writing, all exhibits thereto (including those, if any, incorporated by reference). (e) The Company shall deliver to each Exchanging Dealer and each Initial Purchaser, and to any other Holder who so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any post-effective amendment thereto, including financial statements and schedules, and, if any Initial Purchaser or any such Holder requests, all exhibits thereto (including those incorporated by reference). (f) The Company shall, during the Shelf Registration Period, deliver to each Holder of Securities included within the coverage of the Shelf Registration, without charge, as many copies of the prospectus (including each preliminary prospectus) included in the Shelf Registration Statement and any amendment or supplement thereto as such person may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by each of the selling Holders of the Securities in connection with the offering and sale of the Securities covered by the prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. (g) The Company shall deliver to each Initial Purchaser, any Exchanging Dealer, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer, without charge, as many copies of the final prospectus included in the Exchange Offer Registration Statement and any amendment or supplement thereto as such persons may reasonably request. The Company consents, subject to the provisions of this Agreement, to the use of the prospectus or any amendment or supplement thereto by any Initial Purchaser, if necessary, any Participating Broker-Dealer and such other persons required to deliver a prospectus following the Registered Exchange Offer in connection with the offering and sale of the Exchange Securities covered by the prospectus, or any amendment or supplement thereto, included in such Exchange Offer Registration Statement. (h) Prior to any public offering of the Securities pursuant to any Registration Statement the Company shall register or qualify or cooperate with the Holders of the Securities included therein and their respective counsel in connection with the registration or qualification of the Securities for offer and sale under the securities or "blue sky" laws of such states of the United States as any Holder of the Securities reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities covered by such Registration Statement; provided, however, that -------- ------- the Company shall not be required to (i) qualify generally to do business in any jurisdiction where it is not then so qualified or (ii) take any action which would subject it to general service of process or to taxation in any jurisdiction where it is not then so subject. (i) The Company shall cooperate with the Holders of the Securities to facilitate the timely preparation and delivery of certificates representing the Securities to be sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as the Holders may request a reasonable period of time prior to sales of the Securities pursuant to such Registration Statement. 7 (j) Upon the occurrence of any event contemplated by paragraphs (ii) through (v) of Section 3(b) above during the period for which the Company is required to maintain an effective Registration Statement, the Company shall promptly prepare and file a post-effective amendment to the Registration Statement or a supplement to the related prospectus and any other required document so that, as thereafter delivered to Holders of the Securities or purchasers of Securities, the prospectus will not contain an untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. If the Company notifies the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer in accordance with paragraphs (ii) through (v) of Section 3(b) above to suspend the use of the prospectus until the requisite changes to the prospectus have been made, then the Initial Purchasers, the Holders of the Securities and any such Participating Broker-Dealers shall suspend use of such prospectus, and the period of effectiveness of the Shelf Registration Statement provided for in Section 2(b) above and the Exchange Offer Registration Statement provided for in Section 1 above shall each be extended by the number of days from and including the date of the giving of such notice to and including the date when the Initial Purchasers, the Holders of the Securities and any known Participating Broker-Dealer shall have received such amended or supplemented prospectus pursuant to this Section 3(j). (k) Not later than the effective date of the applicable Registration Statement, the Company will provide a CUSIP number for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, and provide the applicable trustee with printed certificates for the Initial Securities, the Exchange Securities or the Private Exchange Securities, as the case may be, in a form eligible for deposit with The Depository Trust Company. (l) The Company will comply with all rules and regulations of the Commission to the extent and so long as they are applicable to the Registered Exchange Offer or the Shelf Registration and will make generally available to its security holders (or otherwise provide in accordance with Section 11(a) of the Securities Act) an earnings statement satisfying the provisions of Section 11(a) of the Securities Act, no later than 45 days after the end of a 12-month period (or 90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the Registration Statement, which statement shall cover such 12-month period. (m) The Company shall cause the Indenture to be qualified under the Trust Indenture Act of 1939, as amended, in a timely manner and containing such changes, if any, as shall be necessary for such qualification. In the event that such qualification would require the appointment of a new trustee under the Indenture, the Company shall appoint a new trustee thereunder pursuant to the applicable provisions of the Indenture. (n) The Company may require each Holder of Securities to be sold pursuant to the Shelf Registration Statement to furnish to the Company such information regarding the Holder and the distribution of the Securities as the Company may from time to time reasonably require for inclusion in the Shelf Registration Statement, and the Company may exclude from such registration the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. (o) The Company shall enter into such customary agreements (including, if requested, an underwriting agreement in customary form) and take all such other action, if any, as any Holder of the Securities shall reasonably request in order to facilitate the disposition of the Securities pursuant to any Shelf Registration. (p) In the case of any Shelf Registration, the Company shall (i) make reasonably available for inspection by the Holders of the Securities, any underwriter participating in any 8 disposition pursuant to the Shelf Registration Statement and any attorney, accountant or other agent retained by the Holders of the Securities or any such underwriter all relevant financial and other records, pertinent corporate documents and properties of the Company and (ii) cause the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders of the Securities or any such underwriter, attorney, accountant or agent in connection with the Shelf Registration Statement, in each case, as shall be reasonably necessary to enable such persons to conduct a reasonable investigation within the meaning of Section 11 of the Securities Act; provided, however, that the foregoing inspection and information gathering -------- ------- shall be coordinated on behalf of the Initial Purchasers by you and, on behalf of the other parties, by one counsel designated by and on behalf of such other parties as described in Section 4 hereof; and provided, further, -------- ------- that as to any information that is designated in writing by the Company, in good faith, as confidential at the time of delivery, such information shall be kept confidential by the Holder or by any such underwriter, attorney, accountant or other agent. (q) In the case of any Shelf Registration, the Company, if requested by any Holder of Securities covered thereby, shall cause (i) its counsel to deliver an opinion and updates thereof relating to the Securities in customary form addressed to such Holders and the managing underwriters, if any, thereof and dated, in the case of the initial opinion, the effective date of such Shelf Registration Statement (it being agreed that the matters to be covered by such opinion shall include, such matters as are customarily included in opinions requested in underwritten public offerings of such type, such as the due incorporation and good standing of the Company and its subsidiaries; the qualification of the Company and its subsidiaries to transact business as foreign corporations; the due authorization, execution and delivery of the relevant agreement of the type referred to in Section 3(o) hereof; the due authorization, execution, authentication and issuance, and the validity and enforceability, of the applicable Securities; the absence of material legal or governmental proceedings involving the Company and its subsidiaries; the absence of governmental approvals required to be obtained in connection with the Shelf Registration Statement, the offering and sale of the applicable Securities, or any agreement of the type referred to in Section 3(o) hereof; the compliance as to form of such Shelf Registration Statement and any documents incorporated by reference therein and of the Indenture with the requirements of the Securities Act and the Trust Indenture Act, respectively; and, as of the date of the opinion and as of the effective date of the Shelf Registration Statement or most recent post-effective amendment thereto, as the case may be, the absence from such Shelf Registration Statement and the prospectus included therein, as then amended or supplemented, and from any documents incorporated by reference therein of an untrue statement of a material fact or the omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading (in the case of any such documents, in the light of the circumstances existing at the time that such documents were filed with the Commission under the Exchange Act)); (ii) its officers to execute and deliver all customary documents and certificates and updates thereof reasonably requested by any underwriters of the applicable Securities and (iii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is provided in the Shelf Registration Statement to provide to the selling Holders of the applicable Securities and any underwriter therefor a comfort letter in customary form and covering matters of the type customarily covered in comfort letters in connection with primary underwritten offerings, subject to receipt of appropriate documentation as contemplated, and only if permitted, by Statement of Auditing Standards No. 72. (r) In the case of the Registered Exchange Offer, if requested by any Initial Purchaser or any known Participating Broker-Dealer, the Company shall cause (i) its counsel to deliver to such Initial Purchaser or such Participating Broker-Dealer a signed opinion in the form set forth in Section 6(c) of the Purchase Agreement with such changes as are customary in connection with the preparation of a Registration Statement and (ii) its independent public accountants and the independent public accountants with respect to any other entity for which financial information is 9 provided in the Registration Statement to deliver to such Initial Purchaser or such Participating Broker-Dealer a comfort letter, in customary form, meeting the requirements as to the substance thereof as set forth in Section 6(a) of the Purchase Agreement, with appropriate date changes. (s) If a Registered Exchange Offer or a Private Exchange is to be consummated, upon delivery of the Initial Securities by Holders to the Company (or to such other Person as directed by the Company) in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be, the Company shall mark, or cause to be marked, on the Initial Securities so exchanged that such Initial Securities are being canceled in exchange for the Exchange Securities or the Private Exchange Securities, as the case may be; in no event shall the Initial Securities be marked as paid or otherwise satisfied. (t) The Company will use its best efforts to (a) if the Initial Securities have been rated prior to the initial sale of such Initial Securities, confirm such ratings will apply to the Securities covered by a Registration Statement, or (b) if the Initial Securities were not previously rated, cause the Securities covered by a Registration Statement to be rated with the appropriate rating agencies, if so requested by Holders of a majority in aggregate principal amount of Securities covered by such Registration Statement, or by the managing underwriters, if any. (u) In the event that any broker-dealer registered under the Exchange Act shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the distribution" (within the meaning of the Conduct Rules (the "Rules") of the National Association of Securities Dealers, Inc. ("NASD")) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or otherwise, the Company shall use its best efforts to assist such broker-dealer in complying with the requirements of such Rules, including, without limitation, by (i) if such Rules, including Rule 2720, shall so require, engaging a "qualified independent underwriter" (as defined in Rule 2720) to participate in the preparation of the Registration Statement relating to such Securities, to exercise usual standards of due diligence in respect thereto and, if any portion of the offering contemplated by such Registration Statement is an underwritten offering or is made through a placement or sales agent, to recommend the yield of such Securities, (ii) indemnifying any such qualified independent underwriter to the extent of the indemnification of underwriters provided in Section 5 hereof and (iii) providing such information to such broker-dealer as may be required in order for such broker-dealer to comply with the requirements of the Rules. (v) The Company shall use its best efforts to take all other steps necessary to effect the registration of the Securities covered by a Registration Statement contemplated hereby. 4. Registration Expenses. (a) All expenses incident to the Company's performance of and compliance with this Agreement will be borne by the Company, regardless of whether a Registration Statement is ever filed or becomes effective, including without limitation; (i) all registration and filing fees and expenses; (ii) all fees and expenses of compliance with federal securities and state "blue sky" or securities laws; (iii) all expenses of printing (including printing certificates for the Securities to be issued in the Registered Exchange Offer and the Private Exchange and printing of Prospectuses), messenger and delivery services and telephone; (iv) all fees and disbursements of counsel for the Company; 10 (v) all application and filing fees in connection with listing the Exchange Securities on a national securities exchange or automated quotation system pursuant to the requirements hereof; and (vi) all fees and disbursements of independent certified public accountants of the Company (including the expenses of any special audit and comfort letters required by or incident to such performance). The Company will bear its internal expenses (including, without limitation, all salaries and expenses of its officers and employees performing legal or accounting duties), the expenses of any annual audit and the fees and expenses of any person, including special experts, retained by the Company. (b) In connection with any Registration Statement required by this Agreement, the Company will reimburse the Initial Purchasers and the Holders of Transfer Restricted Securities who are tendering Initial Securities in the Registered Exchange Offer and/or selling or reselling Securities pursuant to the "Plan of Distribution" contained in the Exchange Offer Registration Statement or the Shelf Registration Statement, as applicable, for the reasonable fees and disbursements of not more than one counsel, who shall be Cravath, Swaine & Moore unless another firm shall be chosen by the Holders of a majority in principal amount of the Transfer Restricted Securities for whose benefit such Registration Statement is being prepared. 5. Indemnification. (a) The Company agrees to indemnify and hold harmless each Holder of the Securities, any Participating Broker-Dealer and each person, if any, who controls such Holder or such Participating Broker-Dealer within the meaning of the Securities Act or the Exchange Act (each Holder, any Participating Broker-Dealer and such controlling persons are referred to collectively as the "Indemnified Parties") from and against any losses, claims, damages or liabilities, joint or several, or any actions in respect thereof (including, but not limited to, any losses, claims, damages, liabilities or actions relating to purchases and sales of the Securities) to which each Indemnified Party may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of, or are based upon, the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, and shall reimburse, as incurred, the Indemnified Parties for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action in respect thereof; provided, however, that -------- ------- (i) the Company shall not be liable in any such case to the extent that such loss, claim, damage or liability arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission made in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein and (ii) with respect to any untrue statement or omission or alleged untrue statement or omission made in any preliminary prospectus relating to a Shelf Registration Statement, the indemnity agreement contained in this subsection (a) shall not inure to the benefit of any Holder or Participating Broker-Dealer from whom the person asserting any such losses, claims, damages or liabilities purchased the Securities concerned, to the extent that a prospectus relating to such Securities was required to be delivered by such Holder or Participating Broker-Dealer under the Securities Act in connection with such purchase and any such loss, claim, damage or liability of such Holder or Participating Broker-Dealer results from the fact that there was not sent or given to such person, at or prior to the written confirmation of the sale of such Securities to such person, a copy of the amended, supplemented or final prospectus if the Company had previously furnished copies thereof to such Holder or Participating Broker-Dealer; provided further, however, that this indemnity -------- ------- ------- agreement will be in addition to any liability which the Company may otherwise have to such Indemnified Party. The Company shall also indemnify underwriters, their officers and directors and each person who controls such underwriters within the meaning of the Securities Act or the Exchange Act to the 11 same extent as provided above with respect to the indemnification of the Holders of the Securities if requested by such Holders. (b) Each Holder of the Securities, severally and not jointly, will indemnify and hold harmless (i) the Company and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act, (ii) each of their respective directors and (iii) each of their respective officers who signs a Registration Statement from and against any losses, claims, damages or liabilities or any actions in respect thereof, to which the Company or any such controlling person, director or officer may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such losses, claims, damages, liabilities or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in a Registration Statement or prospectus or in any amendment or supplement thereto or in any preliminary prospectus relating to a Shelf Registration, or arise out of or are based upon the omission or alleged omission to state therein a material fact necessary to make the statements therein not misleading, but in each case only to the extent that the untrue statement or omission or alleged untrue statement or omission was made in reliance upon and in conformity with written information pertaining to such Holder and furnished to the Company by or on behalf of such Holder specifically for inclusion therein; and, subject to the limitation set forth immediately preceding this clause, shall reimburse, as incurred, the Company for any legal or other expenses reasonably incurred by the Company or any such controlling person in connection with investigating or defending any loss, claim, damage, liability or action in respect thereof. This indemnity agreement will be in addition to any liability which such Holder may otherwise have to the Company or any of its controlling persons. (c) Promptly after receipt by an indemnified party under this Section 5 of notice of the commencement of any action or proceeding (including a governmental investigation), such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party under this Section 5, notify the indemnifying party of the commencement thereof; but the omission so to notify the indemnifying party will not (i) relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the forfeiture by the indemnifying party of substantial rights and defenses and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than the indemnification obligation provided in paragraph (a) or (b) above. In case any such action is brought against any indemnified party, and it notifies the indemnifying party of the commencement thereof, the indemnifying party will be entitled to participate therein and, to the extent that it may wish, jointly with any other indemnifying party similarly notified, to assume the defense thereof, with counsel reasonably satisfactory to such indemnified party (who shall not, except with the consent of the indemnified party, be counsel to the indemnifying party), and after notice from the indemnifying party to such indemnified party of its election so to assume the defense thereof the indemnifying party will not be liable to such indemnified party under this Section 5 for any legal or other expenses, other than reasonable costs of investigation, subsequently incurred by such indemnified party in connection with the defense thereof. No indemnifying party shall, without the prior written consent of the indemnified party, effect any settlement of any pending or threatened action in respect of which any indemnified party is or could have been a party and indemnity could have been sought hereunder by such indemnified party unless such settlement includes an unconditional release of such indemnified party from all liability on any claims that are the subject matter of such action. No indemnifying party shall be liable for any settlement of any such action effected without its written consent (which consent shall not be unreasonably withheld), but if settled with its written consent or if there be a final judgment for the plaintiff in any such action, the indemnifying party agrees to indemnify and hold harmless any indemnified party from and against any loss or liability by reason of such settlement or judgment. (d) If the indemnification provided for in this Section 5 is unavailable or insufficient to hold harmless an indemnified party under subsections (a) or (b) above, then each indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of the losses, claims, damages or liabilities (or actions in respect thereof) referred to in subsection (a) or (b) above (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties on the one hand and the indemnified party on the other from the exchange of the Securities, pursuant to the 12 Registered Exchange Offer, or (ii) if the allocation provided by the foregoing clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the indemnifying party or parties on the one hand and the indemnified party on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities (or actions in respect thereof) as well as any other relevant equitable considerations. The relative fault of the parties shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company on the one hand or such Holder or such other indemnified party, as the case may be, on the other, and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities referred to in the first sentence of this subsection (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any action or claim which is the subject of this subsection (d). Notwithstanding any other provision of this Section 5(d), the Holders of the Securities shall not be required to contribute any amount in excess of the amount by which the net proceeds received by such Holders from the sale of the Securities pursuant to a Registration Statement exceeds the amount of damages which such Holders have otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this paragraph (d), each person, if any, who controls such indemnified party within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as such indemnified party and each person, if any, who controls the Company within the meaning of the Securities Act or the Exchange Act shall have the same rights to contribution as the Company. (e) The agreements contained in this Section 5 shall survive the sale of the Securities pursuant to a Registration Statement and shall remain in full force and effect, regardless of any termination or cancellation of this Agreement or any investigation made by or on behalf of any indemnified party. 6. Additional Interest Under Certain Circumstances. (a) Additional interest (the "Additional Interest") with respect to the Initial Securities and Private Exchange Securities shall be assessed as follows if any of the following events occur (each such event in clauses (i) through (iv) below being herein called a "Registration Default"): (i) any Registration Statement required by this Agreement is not filed with the Commission on or prior to the applicable Filing Deadline; (ii) any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the applicable Effectiveness Deadline; (iii) the Registered Exchange Offer has not been consummated on or prior to the Consummation Deadline; or (iv) any Registration Statement required by this Agreement has been declared effective by the Commission but (A) such Registration Statement thereafter ceases to be effective or (B) such Registration Statement or the related prospectus ceases to be usable (except as permitted in paragraph (b) below) in connection with resales of Transfer Restricted Securities during the periods specified herein because either (1) any event occurs as a result of which the related prospectus forming part of such Registration Statement would include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein in the light of the circumstances under which they were made not misleading, or (2) it shall be necessary to amend such Registration Statement or supplement the related prospectus, to comply with the Securities Act or the Exchange Act or the respective rules thereunder. 13 Each of the foregoing will constitute a Registration Default whatever the reason for any such event and whether it is voluntary or involuntary or is beyond the control of the Company or pursuant to operation of law or as a result of any action or inaction by the Commission. Additional Interest shall accrue on the Initial Securities and Private Exchange Securities over and above the interest set forth in the title of the Securities from and including the date on which any such Registration Default shall occur to but excluding the date on which all such Registration Defaults have been cured, at a rate of 0.50% per annum (the "Additional Interest Rate") for the first 90-day period immediately following the occurrence of such Registration Default. The Additional Interest Rate shall increase by an additional 0.50% per annum with respect to each subsequent 90-day period until all Registration Defaults have been cured, up to a maximum Additional Interest Rate of 2.0% per annum. (b) A Registration Default referred to in Section 6(a)(iv) hereof shall be deemed not to have occurred and be continuing in relation to a Shelf Registration Statement or the related prospectus if (i) such Registration Default has occurred solely as a result of (x) the filing of a post-effective amendment to such Shelf Registration Statement to incorporate annual audited financial information with respect to the Company where such post-effective amendment is not yet effective and needs to be declared effective to permit Holders to use the related prospectus or (y) other material events, with respect to the Company that would need to be described in such Shelf Registration Statement or the related prospectus and (ii) in the case of clause (y), the Company is proceeding promptly and in good faith to amend or supplement such Shelf Registration Statement and related prospectus to describe such events; provided, however, that in any case if such Registration Default occurs for a - -------- ------- continuous period in excess of 30 days, Additional Interest shall be payable in accordance with the above paragraph from the day following such 30 day period until the date on which such Registration Default is cured. (c) Any amounts of Additional Interest due pursuant to Section 6(a) will be payable in cash on the regular interest payment dates with respect to the Securities. The amount of Additional Interest will be determined by multiplying the applicable Additional Interest Rate by the principal amount of the Initial Securities and Private Exchange Securities, as the case may be, and further multiplied by a fraction, the numerator of which is the number of days such Additional Interest Rate was applicable during such period (determined on the basis of a 360-day year comprised of twelve 30-day months), and the denominator of which is 360. (d) "Transfer Restricted Securities" means each Security until (i) the date on which such Security has been exchanged by a person other than a broker- dealer for a freely transferable Exchange Security in the Registered Exchange Offer, (ii) following the exchange by a broker-dealer in the Registered Exchange Offer of an Initial Security for an Exchange Note, the date on which such Exchange Note is sold to a purchaser who receives from such broker-dealer on or prior to the date of such sale a copy of the prospectus contained in the Exchange Offer Registration Statement, (iii) the date on which such Security has been effectively registered under the Securities Act and disposed of in accordance with the Shelf Registration Statement or (iv) the date on which such Security is distributed to the public pursuant to Rule 144 under the Securities Act or is saleable pursuant to Rule 144(k) under the Securities Act. 7. Rules 144 and 144A. The Company shall use its best efforts to file the reports required to be filed by it under the Securities Act and the Exchange Act in a timely manner and, if at any time the Company is not required to file such reports, it will, upon the request of any Holder of Transfer Restricted Securities, make publicly available other information so long as necessary to permit sales of their securities pursuant to Rules 144 and 144A. The Company covenants that it will take such further action as any Holder of Transfer Restricted Securities may reasonably request, all to the extent required from time to time to enable such Holder to sell Transfer Restricted Securities without registration under the Securities Act within the limitation of the exemptions provided by Rules 144 and 144A (including the requirements of Rule 144A(d)(4)). The Company will provide a copy of this Agreement to prospective purchasers of Initial Securities identified to the Company by the Initial Purchasers upon request. Upon the request of any 14 Holder of Initial Securities, the Company shall deliver to such Holder a written statement as to whether it has complied with such requirements. Notwithstanding the foregoing, nothing in this Section 7 shall be deemed to require the Company to register any of its securities pursuant to the Exchange Act. 8. Underwritten Registrations. If any of the Transfer Restricted Securities covered by any Shelf Registration are to be sold in an underwritten offering, the investment banker or investment bankers and manager or managers that will administer the offering ("Managing Underwriters") will be selected by the Holders of a majority in aggregate principal amount of such Transfer Restricted Securities to be included in such offering. No person may participate in any underwritten registration hereunder unless such person (i) agrees to sell such person's Transfer Restricted Securities on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements and (ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting arrangements. 9. Miscellaneous. (a) Remedies. The Company acknowledges and agrees that any failure by the Company to comply with its obligations under Sections 1 and 2 hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, in the event of any such failure, the Initial Purchasers or any Holder may obtain such relief as may be required to specifically enforce the Company's obligations under Sections 1 and 2 hereof. The Company further agrees to waive the defense in any action for specific performance that a remedy at law would be adequate. (b) No Inconsistent Agreements. The Company will not on or after the date of this Agreement enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Holders in this Agreement or otherwise conflicts with the provisions hereof. The rights granted to the Holders hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of the Company's securities under any agreement in effect on the date hereof. (c) Amendments and Waivers. The provisions of this Agreement may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, except by the Company and the written consent of the Holders of a majority in principal amount of the Securities affected by such amendment, modification, supplement, waiver or consents. (d) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand delivery, first-class mail, facsimile transmission, or air courier which guarantees overnight delivery: (1) if to a Holder of the Securities, at the most current address given by such Holder to the Company. (2) if to the Initial Purchasers: Credit Suisse First Boston Corporation Eleven Madison Avenue New York, NY 10010-3629 Fax No.: (212) 325-8278 Attention: Transactions Advisory Group 15 with a copy to: Cravath, Swaine & Moore Worldwide Plaza 825 Eighth Avenue New York, NY 10019 Fax No.: (212) 474-3700 Attention: Kris F. Heinzelman, Esq. (3) if to the Company, at its address as follows: Delco Remy International, Inc. 2902 Enterprise Drive Anderson, IN 46013 Fax No.: (765) 778-6760 Attention: General Counsel with a copy to: Dechert 4000 Bell Atlantic Tower 1717 Arch Street Philadelphia, PA 19103 Fax No.: (215) 994-2222 Attention: G. Daniel O'Donnell, Esq. All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; three business days after being deposited in the mail, postage prepaid, if mailed; when receipt is acknowledged by recipient's facsimile machine operator, if sent by facsimile transmission; and on the day delivered, if sent by overnight air courier guaranteeing next day delivery. (e) Third Party Beneficiaries. The Holders shall be third party beneficiaries to the agreements made hereunder between the Company, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent they may deem such enforcement necessary or advisable to protect their rights or the rights of Holders hereunder. (f) Successors and Assigns. This Agreement shall be binding upon the successors and assigns of each of the parties. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAWS. (j) Severability. If any one or more of the provisions contained herein, or the application thereof in any circumstance, is held invalid, illegal or unenforceable, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions contained herein shall not be affected 16 or impaired thereby. (k) Securities Held by the Company. Whenever the consent or approval of Holders of a specified percentage of principal amount of Securities is required hereunder, Securities held by the Company or its affiliates (other than subsequent Holders of Securities if such subsequent Holders are deemed to be affiliates solely by reason of their holdings of such Securities) shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage. 17 If the foregoing is in accordance with your understanding of our agreement, please sign and return to the Issuer a counterpart hereof, whereupon this instrument, along with all counterparts, will become a binding agreement among the several Initial Purchasers, the Issuer and the Guarantors in accordance with its terms. Very truly yours, DELCO REMY INTERNATIONAL, INC., by THOMAS J. SNYDER ------------------------------------ Name: Thomas J. Snyder Title: President SUBSIDIARY GUARANTORS: DELCO REMY AMERICA, INC., by THOMAS J. SNYDER ------------------------------------ Name: Thomas J. Snyder Title: Chief Executive Officer REMY INTERNATIONAL, INC., by THOMAS J. SNYDER ------------------------------------ Name: Thomas J. Snyder Title: President REMAN HOLDINGS, INC., by THOMAS J. SNYDER ------------------------------------ Name: Thomas J. Snyder Title: President NABCO, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary 18 THE A&B GROUP, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary A&B ENTERPRISES, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary DALEX, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary A&B CORES, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary R&L TOOL COMPANY, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary MCA, INC. OF MISSISSIPPI, by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary POWER INVESTMENTS, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary 19 FRANKLIN POWER PRODUCTS, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary INTERNATIONAL FUEL SYSTEMS, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary MARINE CORPORATION OF AMERICA, by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary POWRBILT PRODUCTS, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary WORLD WIDE AUTOMOTIVE, INC., by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary BALLANTRAE CORPORATION, by DAVID E. STOLL ------------------------------------ Name: David E. Stoll Title: Secretary 20 TRACTECH, INC., by DAVID E. STOLL ----------------------------------- Name: David E. Stoll Title: Vice President WILLIAMS TECHNOLOGIES, INC., by DAVID E. STOLL ----------------------------------- Name: David E. Stoll Title: Secretary ENGINE MASTER, L.P., by HSGI, Inc., its General Partner, by DAVID E. STOLL ----------------------------------- Name: David E. Stoll Title: Vice President M & M KNOPF AUTO PARTS, INC., by DAVID E. STOLL ----------------------------------- Name: David E. Stoll Title: Vice President POWER INVESTMENTS MARINE, INC., by DAVID E. STOLL ----------------------------------- Name: David E. Stoll Title: Secretary 21 The foregoing Registration Rights Agreement is hereby confirmed and accepted as of the date first above written. Credit Suisse First Boston Corporation Deutsche Banc Alex. Brown By: CREDIT SUISSE FIRST BOSTON CORPORATION by DOUG CRUIKSHANK --------------------------------------- Name: Doug Cruikshank Title: Director 22 ANNEX A Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired by such broker- dealer as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date (as defined herein), it will make this Prospectus available to any broker-dealer for use in connection with any such resale. See "Plan of Distribution." 23 ANNEX B Each broker-dealer that receives Exchange Securities for its own account in exchange for Initial Securities, where such Initial Securities were acquired by such broker-dealer as a result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. See "Plan of Distribution." 24 ANNEX C PLAN OF DISTRIBUTION Each broker-dealer that receives Exchange Securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in connection with any resale of such Exchange Securities. This Prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of Exchange Securities received in exchange for Initial Securities where such Initial Securities were acquired as a result of market-making activities or other trading activities. The Company has agreed that, for a period of 180 days after the Expiration Date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any such resale. In addition, until , 200, all dealers effecting transactions in the Exchange Securities may be required to deliver a prospectus./(1)/ The Company will not receive any proceeds from any sale of Exchange Securities by broker-dealers. Exchange Securities received by broker-dealers for their own account pursuant to the Exchange Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the Exchange Securities or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer or the purchasers of any such Exchange Securities. Any broker-dealer that resells Exchange Securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of such Exchange Securities may be deemed to be an "underwriter" within the meaning of the Securities Act and any profit on any such resale of Exchange Securities and any commission or concessions received by any such persons may be deemed to be underwriting compensation under the Securities Act. The Letter of Transmittal states that, by acknowledging that it will deliver and by delivering a prospectus, a broker- dealer will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. For a period of 180 days after the Expiration Date the Company will promptly send additional copies of this Prospectus and any amendment or supplement to this Prospectus to any broker-dealer that requests such documents in the Letter of Transmittal. The Company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the Holders of the Securities) other than commissions or concessions of any brokers or dealers and will indemnify the Holders of the Securities (including any broker-dealers) against certain liabilities, including liabilities under the Securities Act. _________________ /(1)/ In addition, the legend required by Item 502(e) of Regulation S-K will appear on the back cover page of the Exchange Offer prospectus. 25 ANNEX D [_] CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name: __________________________ Address: _______________________ _______________________ _______________________ If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Securities. If the undersigned is a broker-dealer that will receive Exchange Securities for its own account in exchange for Initial Securities that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Securities; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. 26 EX-12 4 dex12.txt COMPUTATION OF RATIO OF EARNINGS Exhibit 12 Delco Remy International, Inc. Statement of Computation of Ratio of Earnings to Fixed Charges
Fiscal Year Ended July 31 --------------------------------------------------------------- 1996 1997 1998 1999 2000 --------------------------------------------------------------- Earnings: Income (1oss) from continuing operations before income taxes (benefit), minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion and extraordinary item $ 13,312 $(10,737) $ (134) $ 43,301 $ 30,972 Fixed charges 31,346 42,842 46,759 48,103 51,796 Less preferred stock dividend requirement (2,527) (2,747) (1,054) - - Less deemed dividend on preferred stock conversion - - (2,678) - - Less interest capitalized during period (393) - - - - ------------------------------------------------------------- Total earnings $ 41,738 $ 29,358 $ 42,893 $ 91,404 $ 82,768 ============================================================= Fixed Charges: Interest expense $ 27,367 $ 38,774 $ 40,291 $ 45,505 $ 48,766 Interest capitalized during period 393 - - - - Preferred stock dividend requirement 2,527 2,747 1,054 - - Deemed dividend on preferred stock conversion - - 2,678 - - Implicit interest in rent expense 1,059 1,321 2,736 2,598 3,030 ------------------------------------------------------------- Total Fixed Charges $ 31,346 $ 42,842 $ 46,759 $ 48,103 $ 51,796 ============================================================= Ratio of Earnings to Fixed Charges (a) 1.3x - - 1.9x 1.6x ============================================================= Pro Forma -------------------------------- Three Months Fiscal Year Three Months Ended March 31, Ended July 31, Ended 2001 2000 2000 March 31, 2001 ------------------------------------------------------------ Earnings: Income (1oss) from continuing operations before income taxes (benefit), minority interest in income of subsidiaries, income (loss) from unconsolidated joint ventures preferred dividend requirement of subsidiary, deemed dividend on preferred stock conversion and extraordinary item $ 477 $ 21,014 $ 28,868 $ (1,093) Fixed charges 14,044 11,853 61,678 15,614 Less preferred stock dividend requirement - - - - Less deemed dividend on preferred stock conversion - - - - Less interest capitalized during period - - - - ---------------------------------------------------------- Total earnings $ 14,521 $ 32,867 $ 90,546 $ 14,521 ========================================================== Fixed Charges: Interest expense $ 13,294 $ 11,103 $ 58,648 $ 14,864 Interest capitalized during period - - - - Preferred stock dividend requirement - - - - Deemed dividend on preferred stock conversion - - - - Implicit interest in rent expense 750 750 3,030 750 ---------------------------------------------------------- Total Fixed Charges $ 14,044 $ 11,853 $ 61,678 $ 15,614 Ratio of Earnings to Fixed Charges (a) 1.0x 2.8x 1.5x - ==========================================================
(a) The deficiency of earnings to fixed charges was $13.5 million and $3.9 million in fiscal-years 1997 and 1998, respectively. Excluding non- recurring charges, the ratio of earnings to fixed charges would have been 1.5x in 1997 and 1.5x in 1998. On a pro forma basis, the deficiency of earnings to fixed charges would have been $1.l million in the three months ended March 31, 2001. Excluding the tender offer and merger expenses, the ratio of earnings to fixed charges would have been 1.2x on a pro forma basis. EX-21 5 dex21.txt SUBSIDIARIES OF THE REGISTRANT EXHIBIT 21 Delco Remy International, Inc. Subsidiaries of the Registrant Delco Remy International, Inc. (Delaware) Delco Remy America, Inc. (Delaware) Delco Remy International (Europe) GmbH (Germany) Reman Holdings, Inc. (Delaware) Nabco, Inc. (Michigan) The A & B Group, Inc. (Mississippi) A & B Cores, Inc. (Mississippi) A & B Enterprises, Inc. (Mississippi) Dalex, Inc. (Mississippi) MCA, Inc. of Mississippi (Mississippi) R & L Tool Company, Inc. (Mississippi) Power Investments, Inc. (Indiana) Franklin Power Products, Inc. (Indiana) Magnum Power Products, LLC (Delaware) International Fuel Systems, Inc. (Indiana) Marine Corporation of America (Indiana) Power Investments Marine, Inc. (New Jersey) Powrbilt Products, Inc. (Texas) Central Precision Limited (Alberta) Reman Transport Ltd. (Alberta) World Wide Automotive Inc. (Virginia) Publitech, Inc. (Virginia) World Wide Automotive Distributors, Inc. (Virginia) Williams Technologies, Inc. (South Carolina) HSG I, Inc. (Delaware) HSG II, Inc. (Delaware) Engine Master, L.P. (Delaware) Delco Remy International, Inc. (Delaware), continued Remy International, Inc. (Delaware) DR Sales, Inc. (Delaware) Remy Holding Limited (UK) Remy Auto Parts Holdings B.V. (Netherlands) Delco Remy Germany GmbH (Germany) Continental ISAD Electric Motors Verwaltungs GmbH (Germany) Continental ISAD Electric Motors GmbH & Co. OHG (Germany) Delco Remy Hungary KFT (Hungary) Delco Remy Remanufacturing KFT (Hungary) Delco Remy UK Limited (UK) Remy Holdings do Brasil Ltda. (Brazil) Delco Remy Brazil, Ltda. (Brazil) DR Holdings II BV (Netherlands) Elmot - DR, Sp.z.o.o DRK Holdings B.V. (Netherlands) Remy Korea LTD (Korea) Delco Remy Distribution Center bvba (Belgium) Delco Remy Belgium bvba (Belgium) Electro Diesel Rebuild bvba Electro-Rebuild Tunisie S.A.R.L. (Tunisia) Remy Mexico Holdings, S. de R.L. de C.V. (Mexico) Delco Remy Remanufacturing Services, S. de R. L. de C.V. (Mexico) Delco Remy Remanufacturing de Mexico S. de R.L. de C.V. (Mexico) Delco Remy Mexico, S. de R.L. de C.V. (Mexico) Remy Mexico Services, S. de R.L. de C.V. (Mexico) Remy Componentes S. De R.L. de C.V. (Mexico) Remy India Holdings, Inc. (Delaware) Delco Remy Electricals India Limited (India) Remy Korea Holdings, Inc. (Delaware) Delco Remy International Limited (Barbados) Ballantrae Corporation Kraftube, Inc. (Michigan) Tractech, Inc. (Delaware) Tractech, Inc. Limited (Ireland) Remy Logistics L.L.C. (Delaware) IPower Technologies L.L.C. (Delaware) EX-23.1 6 dex231.txt CONSENT OF ERNST & YOUNG LLP CONSENT OF INDEPENDENT AUDITORS We consent to the reference to our firm under the caption "Experts" and to the use of our report dated February 22, 2001 (except for Notes 1, 2, 8, and 18 as to which the date is March 15, 2001), in the Registration Statement on Form S-4 and related Prospectus of Delco Remy International, Inc. for the registration of the 11% Senior Subordinated Notes due 2009. /s/ Ernst & Young LLP Indianapolis, Indiana July 17, 2001 EX-25.1 7 dex251.txt FORM T-1 Exhibit 25 Registration No. 333- FORM T-1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Statement of Eligibility Under the Trust Indenture Act of 1939 of a Corporation Designated to Act as Trustee CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY OF A TRUSTEE PURSUANT TO SECTION 305(b)(2) _____ First Union National Bank (Exact name of trustee as specified in its charter) United States of America (Jurisdiction of incorporation or organization if not a U.S. national bank) 22-1147033 (I.R.S. Employer Identification Number) One First Union 301 South College Street Charlotte, North Carolina (Address of principal executive offices) 28288 (Zip code) Kevin M. Dobrava First Union National Bank Corporate Trust Group 5847 San Felipe, Suite 1050 Houston, Texas 77057 (713) 278-4320 (Name, address and telephone number of agent for service) Delco Remy International, Inc. (Exact name of each obligor as specified in its charter) Delaware (State or other jurisdiction of incorporation or organization) 35-1909253 (I.R.S. Employer Identification No.) 2902 Enterprise Drive Anderson, IN (Address of principal executive offices) 46013 (Zip code) 11% Senior Subordinated Notes Due 2009 (Title of the indenture securities) Item 1. General information. Furnish the following information as to the trustee: a. Name and address of each examining or supervising authority to which it is subject. NAME ADDRESS Board of Governors of the Federal Washington, D.C. Reserve System Comptroller of the Currency Washington, D.C. Federal Deposit Insurance Washington, D.C. Corporation b. Whether it is authorized to exercise corporate trust powers. The Trustee is authorized to exercise corporate trust powers. Item 2. Affiliations with the obligor. If the obligor is an affiliate of the trustee, describe each such affiliation. The obligor is not an affiliate of the trustee. Item 3. Voting securities of the trustee. Furnish the following information as to each class of voting securities of the trustee: As of______ (Insert date within 31 days). COL. A COL. B TITLE OF CLASS AMOUNT OUTSTANDING Not Applicable Item 4. Trusteeships under other indentures. If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, furnish the following information: a. Title of the securities outstanding under each such other indenture. Not Applicable. b. A brief statement of the facts relied upon as a basis for the claim that no conflicting interest within the meaning of Section 310(b)(1) of the Act arises as a result of the trusteeship under any such other indenture, including a statement as to how the indenture securities will rank as compared with the securities issued under such other indenture. Not Applicable. Item 5. Interlocking directorates and similar relationships with the obligor or underwriters. If the trustee or any of the directors or executive officers of the trustee is a director, officer, partner, employee, appointee, or representative of the obligor of any underwriter for the obligor, identify each such person having any such connection and state the nature of each such connection. 2 Not Applicable Item 6. Voting securities of the trustee owned by the obligor or its officials. Furnish the following information as to the voting securities of the trustee owned beneficially by the obligor and each director, partner, and executive officer of the obligor. As of ________________ (Insert date within 31 days).
COL. D COL. C PERCENTAGE OF VOTING SECURITIES COL. A COL. B AMOUNT OWNED REPRESENTED BY AMOUNT GIVEN NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
Not Applicable Item 7. Voting securities of the trustee owned by underwriters or their officials. Furnish the following information as to the voting securities of the trustee owned beneficially by each underwriter for the obligator and each director, partner, and executive officer of each such underwriter: As of _______________ (Insert date within 31 days).
COL. D COL. C PERCENTAGE OF VOTING SECURITIES COL. A COL. B AMOUNT OWNED REPRESENTED BY AMOUNT GIVEN NAME OF OWNER TITLE OF CLASS BENEFICIALLY IN COL. C
Not Applicable Item 8. Securities of the obligor owned or held by the trustee. Furnish the following information as to securities of the obligor owned beneficially or held as collateral security for obligations in default by the trustee: As of __________________ (Insert date within 31 days).
COL. C AMOUNT OWNED COL. COL. B BENEFICIALLY OR PERCENT OF CLASS WHETHER THE SECURITIES HELD AS COLLATERAL REPRESENTED BY COL. A ARE VOTING OR SECURITY FOR AMOUNT GIVEN TITLE OF CLASS NONVOTING SECURITIES OBLIGATIONS IN DEFAULT IN COL. C
Not Applicable. 3 Item 9. Securities of underwriters owned or held by the trustee. If the trustee owns beneficially or hold as collateral security for obligations in default any securities of an underwriter for the obligor, furnish the following information as to each class of securities of such underwriter any of which are so owned or held by the trustee: As of _________________ (Insert date within 31 days).
COL. C COL. D AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS COL. A COL. B OR HELD AS COLLATERAL REPRESENTED BY TITLE OF ISSUER AMOUNT SECURITY FOR OBLIGATIONS AMOUNT GIVEN AND TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable Item 10. Ownership or holdings by the trustee of voting securities of certain affiliates or security holders of the obligor. If the trustee owns beneficially or holds as collateral security for obligations in default voting securities of a person who, to the knowledge of the trustee (1) owns 10 percent or more of the voting securities of the obligor or (2) is an affiliate, other than a subsidiary, of the obligor, furnish the following information as to the voting securities of such person: As of __________________ (Insert date within 31 days).
COL. C COL. D AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS COL. A COL. B OR HELD AS COLLATERAL REPRESENTED BY TITLE OF ISSUER AMOUNT SECURITY FOR OBLIGATIONS AMOUNT GIVEN AND TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable Item 11. Ownership or holdings by the trustee of any securities of a person owning 50 percent or more of the voting securities of the obligor. If the trustee owns beneficially or holds as collateral security for obligations in default any securities of a person who, to the knowledge of the trustee, owns 50 percent or more of the voting securities of the obligor, furnish the following information as to each class of securities of such person any of which are so owned or held by the trustee: As of __________________ (Insert date within 31 days).
COL. C COL. D AMOUNT OWNED BENEFICIALLY PERCENT OF CLASS COL. A COL. B OR HELD AS COLLATERAL REPRESENTED BY TITLE OF ISSUER AMOUNT SECURITY FOR OBLIGATIONS AMOUNT GIVEN AND TITLE OF CLASS OUTSTANDING IN DEFAULT BY TRUSTEE IN COL. C
Not Applicable Item 12. Indebtedness of the Obligor to the Trustee. Except as noted in the instructions, if the obligor is indebted to the trustee, furnish the following information: As of __________(Insert date within 31 days). 4 COL. A COL. B COL. C NATURE OF INDEBTEDNESS AMOUNT OUTSTANDING DATE DUE Not Applicable Item 13 Defaults by the Obligor. a. State whether there is or has been a default with respect to the securities under this indenture. Explain the nature of any such default. None. b. If the trustee is a trustee under another indenture under which any other securities, or certificates of interest or participation in any other securities, of the obligor are outstanding, or is trustee for more than one outstanding series of securities under the indenture, state whether there has been a default under any such indenture or series, identify the indenture or series affected, and explain the nature of any such default. Not Applicable Item 14. Affiliations with the Underwriters. If any underwriter is an affiliate of the trustee, describe each such affiliation. Not Applicable Item 15. Foreign Trustee. Identify the order or rule pursuant to which the foreign trustee is authorized to act as sole trustee under indentures qualified or to be qualified under the Act. Not Applicable Item 16. List of exhibits. List below all exhibits filed as a part of this statement of eligibility. 1. Articles of Association of First Union National Bank as now in effect.* 2. Certificate of Authority of the trustee to commence business.* 3. Copy of the authorization of the trustee to exercise corporate trust powers.* 4. Existing bylaws of the trustee. 5. Not Applicable. 6. The consent of the trustee required by Section 321(b) of the Act. 7. A copy of the latest report of condition of the trustee published pursuant to law or the requirements of its supervising or examining authority. 5 8. Not Applicable. 9. Not Applicable. ________________________ * Previously filed with the Securities and Exchange Commission as an Exhibit to Form T-1 in connection with Registration Statement Number 333-47985 incorporated herein by reference. NOTES: SIGNATURE Pursuant to the requirements of the Trust Indenture Act of 1939 the trustee, First Union National Bank, a national banking association organized and existing under the laws of the United States of America, has duly caused this statement of eligibility to be signed on its behalf by the undersigned, thereunto duly authorized, all in the city of Houston, and State of Texas, on the 29/th/ day of May, 2001. FIRST UNION NATIONAL BANK (Trustee) By: /s/ Kevin M. Dobrava -------------------------- Kevin M. Dobrava, Vice President (Name and Title) 6 EXHIBIT 6 First Union National Bank, pursuant to the requirements of Section 321(b) of the Trust Indenture Act of 1939, as amended (the "Act") in connection with the proposed issuance by Delco Remy International, Inc. of its 11% Senior Subordinated Notes due 2009 to be issued hereby consents that reports of examination by federal, state, territorial, or district authorities may be furnished by such authorities to the Securities and Exchange Commission upon request therefor, as contemplated by Section 321(b) of the Act. Dated: May 29, 2001 FIRST UNION NATIONAL BANK By: /s/ Kevin M. Dobrava --------------------------------- Kevin M. Dobrava, Vice President EXHIBIT 4 BY-LAWS OF FIRST UNION NATIONAL BANK Charter No. 1 Effective May 18, 1998 BY-LAWS OF FIRST UNION NATIONAL BANK ARTICLE I Meetings of Shareholders ------------------------ Section 1.1 Annual Meeting. The annual meeting of the shareholders for the -------------------------- election of directors and for the transaction of such other business as may properly come before the meeting shall be held on the third Tuesday of April in each year, commencing with the year 1998, except that the Board of Directors may, from time to time and upon passage of a resolution specifically setting forth its reasons, set such other date for such meeting during the month of April as the Board of Directors may deem necessary or appropriate; provided, however, that if an annual meeting would otherwise fall on a legal holiday, then such annual meeting shall be held on the second business day following such legal holiday. The holders of a majority of the outstanding shares entitled to vote which are represented at any meeting of the shareholders may choose persons to act as Chairman and as Secretary of the meeting. Section 1.2 Special Meetings. Except as otherwise specifically provided by ---------------------------- statute, special meetings of the shareholders may be called for any purpose at any time by the Board of Directors or by any three or more shareholders owning, in the aggregate, not less than ten percent of the stock of the Association. Every such special meeting, unless otherwise provided by law, shall be called by mailing, postage prepaid, not less than ten days prior to the date fixed for such meeting, to each shareholder at his address appearing on the books of the Association, a notice stating the purpose of the meeting. Section 1.3 Nominations for Directors. Nominations for election to the ------------------------------------- Board of Directors may be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the bank entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the existing management of the bank, shall be made in writing and shall be delivered or mailed to the President of the Bank and to the Comptroller of the Currency, Washington, D. C., not less than 14 days nor more than 50 days prior to any meeting of stockholders called for the election of directors, provided however, that if less than 21 days' notice of such meeting is given to shareholders, such nomination shall be mailed or delivered to the President of the Bank and to the Comptroller of the Currency not later than the close of business on the seventh day following the day on which the notice of meeting was mailed. Such notification shall contain the following information to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the bank that will be voted for each proposed nominee; (d) the name and residence address of the notifying shareholder; and (e) the number of shares of capital stock of the bank owned by the notifying shareholder. Nominations not made in accordance herewith may, in his discretion, be disregarded by the chairman of the meeting, and upon his instructions, the vote tellers may disregard all votes cast for each such nominee. Section 1.4 Judges of Election. The Board may at any time appoint from ------------------------------ among the shareholders three or more persons to serve as Judges of Election at any meeting of shareholders; to act as judges and tellers with respect to all votes by ballot at such meeting and to file with the Secretary of the meeting a Certificate under their hands, certifying the result thereof. Section 1.5 Proxies. Shareholders may vote at any meeting of the ------------------- shareholders by proxies duly authorized in writing, but no officer or employee of this Association shall act as proxy. Proxies shall be valid only for one meeting, to be specified therein, and any adjournments of such meeting. Proxies shall be dated and shall be filed with the records of the meeting. Section 1.6 Quorum. A majority of the outstanding capital stock, ------------------ represented in person or by proxy, shall constitute a quorum at any meeting of shareholders, unless otherwise provided by law; but less than a quorum may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. A majority of the votes cast shall decide every question or matter submitted to the shareholders at any meeting, unless otherwise provided by law or by the Articles of Association. ARTICLE II Directors --------- Section 2.1 Board of Directors. The Board of Directors (hereinafter ------------------------------ referred to as the "Board"), shall have power to manage and administer the business and affairs of the Association. Except as expressly limited by law, all corporate powers of the Association shall be vested in and may be exercised by said Board. Section 2.2 Number. The Board shall consist of not less than five nor more ------------------ than twenty-five directors, the exact number within such minimum and maximum limits to be fixed and determined from time to time by resolution of a majority of the full Board or by resolution of the shareholders at any meeting thereof; provided, however, that a majority of the full Board of Directors may not increase the number of directors to a number which, (1) exceeds by more than two the number of directors last elected by shareholders where such number was fifteen or less, and (2) to a number which exceeds by more than four the number of directors last elected by shareholders where such number was sixteen or more, but in no event shall the number of directors exceed twenty-five. Section 2.3 Organization Meeting. The Secretary of the meeting upon -------------------------------- receiving the certificate of the judges, of the result of any election, shall notify the directors-elect of their election and of the time at which they are required to meet at the Main Office of the Association for the purpose of organizing the new Board and electing and appointing officers of the Association for the succeeding year. Such meeting shall be held as soon thereafter as practicable. If, at the time fixed for such meeting, there shall not be a quorum present, the directors present may adjourn the meeting from time to time, until a quorum is obtained. Section 2.4 Regular Meetings. Regular meetings of the Board of Directors ---------------------------- shall be held at such place and time as may be designated by resolution of the Board of Directors. Upon adoption of such resolution, no further notice of such meeting dates or the places or times thereof shall be required. Upon the failure of the Board of Directors to adopt such a resolution, regular meetings of the Board of Directors shall be held, without notice, on the third Tuesday in February, April, June, August, October and December, commencing with the year 1997, at the main office or at such other place and time as may be designated by the Board of Directors. When any regular meeting of the Board would otherwise fall on a holiday, the meeting shall be held on the next business day unless the Board shall designate some other day. Section 2.5 Special Meetings. Special meetings of the Board of Directors ---------------------------- may be called by the President of the Association, or at the request of three (3) or more directors. Each member of the Board of Directors shall be given notice stating the time and place, by telegram, letter, or in person, of each such special meeting. Section 2.6 Quorum. A majority of the directors shall constitute a quorum ------------------ at any meeting, except when otherwise provided by law; but a less number may adjourn any meeting, from time to time, and the meeting may be held, as adjourned, without further notice. Section 2.7 Vacancies. When any vacancy occurs among the directors, the --------------------- remaining members of the Board, in accordance with the laws of the United States, may appoint a director to fill such vacancy at any regular meeting of the Board, or at a special meeting called for that purpose. Section 2.8 Advisory Boards. The Board of Directors may appoint Advisory --------------------------- Boards for each of the states in which the Association conducts operations. Each such Advisory Board shall consist of as many persons as the Board of Directors may determine. The duties of each Advisory Board shall be to consult and advise with the Board of Directors and senior officers of the Association in such state with regard to the best interests of the Association and to perform such other duties as the Board of Directors may lawfully delegate. The senior officer in such state, or such officers as directed by such senior officer, may appoint advisory boards for geographic regions within such state and may consult with the State Advisory Boards prior to such appointments. ARTICLE III Committees of the Board ----------------------- Section 3.1 The Board of Directors, by resolution adopted by a majority of ----------- the number of directors fixed by these By-Laws, may designate two or more directors to constitute an Executive Committee and other committees, each of which, to the extent authorized by law and provided in such resolution, shall have and may exercise all of the authority of the Board of Directors and the management of the Association. The designation of any committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility or liability imposed upon it or any member of the Board of Directors by law. The Board of Directors reserves to itself alone the power to act on (1) dissolution, merger or consolidation, or disposition of substantially all corporate property, (2) designation of committees or filling vacancies on the Board of Directors or on a committee of the Board (except as hereinafter provided), (3) adoption, amendment or repeal of By-laws, (4) amendment or repeal of any resolution of the Board which by its terms is not so amendable or repealable, and (5) declaration of dividends, issuance of stock, or recommendations to stockholders of any action requiring stockholder approval. The Board of Directors or the Chairman of the Board of Directors of the Association may change the membership of any committee at any time, fill vacancies therein, discharge any committee or member thereof either with or without cause at any time, and change at any time the authority and responsibility of any such committee. A majority of the members of any committee of the Board of Directors may fix such committee's rules of procedure. All action by any committee shall be reported to the Board of Directors at a meeting succeeding such action, except such actions as the Board may not require to be reported to it in the resolution creating any such committee. Any action by any committee shall be subject to revision, alteration, and approval by the Board of Directors, except to the extent otherwise provided in the resolution creating such committee; provided, however, that no rights or acts of third parties shall be affected by any such revision or alteration. ARTICLE IV Officers and Employees ---------------------- Section 4.1 Officers. The officers of the Association may be a Chairman of -------------------- the Board, a Vice Chairman of the Board, one or more Chairmen or Vice Chairmen (who shall not be required to be directors of the Association), a President, one or more Vice Presidents, a Secretary, a Cashier or Treasurer, and such other officers, including officers holding similar or equivalent titles to the above in regions, divisions or functional units of the Association, as may be appointed by the Board of Directors. The Chairman of the Board and the President shall be members of the Board of Directors. Any two or more offices may be held by one person, but no officer shall sign or execute any document in more than one capacity. Section 4.2 Election, Term of Office, and Qualification. Each officer ------------------------------------------------------- shall be chosen by the Board of Directors and shall hold office until the annual meeting of the Board of Directors held next after his election or until his successor shall have been duly chosen and qualified, or until his death, or until he shall resign, or shall have been disqualified, or shall have been removed from office. Section 4.2(a) Officers Acting as Assistant Secretary. Notwithstanding ----------------------------------------------------- Section 1 of these By-laws, any Senior Vice President, Vice President, or Assistant Vice President shall have, by virtue of his office, and by authority of the By-laws, the authority from time to time to act as an Assistant Secretary of the Bank, and to such extent, said officers are appointed to the office of Assistant Secretary. Section 4.3 Chief Executive Officer. The Board of Directors shall ----------------------------------- designate one of its members to be the President of this Association, and the officer so designated shall be an ex officio member of all committees of the Association except the Examining Committee, and its Chief Executive Officer unless some other officer is so designated by the Board of Directors. Section 4.4 Duties of Officers. The duties of all officers shall be ------------------------------ prescribed by the Board of Directors. Nevertheless, the Board of Directors may delegate to the Chief Executive Officer the authority to prescribe the duties of other officers of the corporation not inconsistent with law, the charter, and these By-laws, and to appoint other employees, prescribe their duties, and to dismiss them. Notwithstanding such delegation of authority, any officer or employee also may be dismissed at any time by the Board of Directors. Section 4.5 Other Employees. The Board of Directors may appoint from time --------------------------- to time such tellers, vault custodians, bookkeepers, and other clerks, agents, and employees as it may deem advisable for the prompt and orderly transaction of the business of the Association, define their duties, fix the salary to be paid them, and dismiss them. Subject to the authority of the Board of Directors, the Chief Executive Officer or any other officer of the Association authorized by him, may appoint and dismiss all such tellers, vault custodians, bookkeepers and other clerks, agents, and employees, prescribe their duties and the conditions of their employment, and from time to time fix their compensation. Section 4.6 Removal and Resignation. Any officer or employee of the ----------------------------------- Association may be removed either with or without cause by the Board of Directors. Any employee other than an officer elected by the Board of Directors may be dismissed in accordance with the provisions of the preceding Section 4.5. Any officer may resign at any time by giving written notice to the Board of Directors or to the Chief Executive Officer of the Association. Any such resignation shall become effective upon its being accepted by the Board of Directors, or the Chief Executive Officer. ARTICLE V Fiduciary Powers ---------------- Section 5.1 Capital Management Group. There shall be an area of this ------------------------------------ Association known as the Capital Management Group which shall be responsible for the exercise of the fiduciary powers of this Association. The Capital Management Group shall consist of four service areas: Fiduciary Services, Retail Services, Investments and Marketing. The Fiduciary Services unit shall consist of personal trust, employee benefits, corporate trust and operations. The General Office for the Fiduciary Services unit shall be located in Charlotte, N.C., with City Trust Offices located in such cities within the State of North Carolina as designated by the Board of Directors. Section 5.2 Trust Officers. There shall be a General Trust Officer of this -------------------------- Association whose duties shall be to manage, supervise and direct all the activities of the Capital Management Group. Further, there shall be one or more Senior Trust Officers designated to assist the General Trust Officer in the performance of his duties. They shall do or cause to be done all things necessary or proper in carrying out the business of the Capital Management Group in accordance with provisions of applicable law and regulation. Section 5.3 Capital Management/General Trust Committee. There shall be a ------------------------------------------------------ Capital Management/General Trust Committee composed of not less than four (4) members of the Board of Directors or officers of this Association who shall be appointed annually or from time to time by the Board of Directors of the Association. The General Trust Officer shall serve as an ex-officio member of the Committee. Each member shall serve until his successor is appointed. The Board of Directors or the Chairman of the Board may change the membership of the Capital Management/General Trust Committee at any time, fill vacancies therein, or discharge any member thereof with or without cause at any time. The Committee shall counsel and advise on all matters relating to the business or affairs of the Capital Management Group and shall adopt overall policies for the conduct of the business of the Capital Management Group including but not limited to: general administration, investment policies, new business development, and review for approval of major assignments of functional responsibilities. The Committee shall meet at least quarterly or as called for by its Chairman or any three (3) members of the Committee. A quorum shall consist of three (3) members. In carrying out its responsibilities, the Capital Management/General Trust Committee shall review the actions of all officers, employees and committees utilized by this Association in connection with the activities of the Capital Management Group and may assign the administration and performance of any fiduciary powers or duties to any of such officers or employees or to the Investment Policy Committee, Personal Trust Administration Committee, Account Review Committee, Corporate and Institutional Accounts Committee, or any other committees it shall designate. One of the methods to be used in the review process will be the thorough scrutiny of the Report of Examination by the Office of the Comptroller of the Currency and the reports of the Audit Division of First Union Corporation, as they relate to the activities of the Capital Management Group. These reviews shall be in addition to reviews of such reports by the Audit Committee of the Board of Directors. The Chairman of the Capital Management/ General Trust Committee shall be appointed by the Chairman of the Board of Directors. He shall cause to be recorded in appropriate minutes all actions taken by the Committee. The minutes shall be signed by its Secretary and approved by its Chairman. Further, the Committee shall summarize all actions taken by it and shall submit a report of its proceedings to the Board of Directors at its next regularly scheduled meeting following a meeting of the Capital Management/General Trust Committee. As required by Section 9.7 of Regulation 9 of the Comptroller of the Currency, the Board of Directors retains responsibility for the proper exercise of the fiduciary powers of this Association. The Fiduciary Services unit of the Capital Management Group will maintain a list of securities approved for investment in fiduciary accounts and will from time to time provide the Capital Management/General Trust Committee with current information relative to such list and also with respect to transactions in other securities not on such list. It is the policy of this Association that members of the Capital Management/General Trust Committee should not buy, sell or trade in securities which are on such approved list or in any other securities in which the Fiduciary Services unit has taken, or intends to take, a position in fiduciary accounts in any circumstances in which any such transaction could be viewed as a possible conflict of interest or could constitute a violation of applicable law or regulation. Accordingly, if any such securities are owned by any member of the Capital Management/General Trust Committee at the time of appointment to such Committee, the Capital Management Group shall be promptly so informed in writing. If any member of the Capital Management/General Trust Committee intends to buy, sell, or trade in any such securities while serving as a member of the Committee, he should first notify the Capital Management Group in order to make certain that any proposed transaction will not constitute a violation of this policy or of applicable law or regulation. Section 5.4 Investment Policy Committee. There shall be an Investment --------------------------------------- Policy Committee composed of not less than seven (7) officers and/or employees of this Association who shall be appointed annually or from time to time by the Board of Directors. Each member shall serve until his successor is appointed. Meetings shall be called by the Chairman or any two (2) members of the Committee. A quorum shall consist of five (5) members. The Investment Policy Committee shall exercise such fiduciary powers and perform such duties as may be assigned to it by the Capital Management/General Trust Committee. All actions taken by the Investment Policy Committee shall be recorded in appropriate minutes, signed by the Secretary thereof, approved by its Chairman and submitted to the Capital Management/General Trust Committee at its next ensuing regular meeting for its review and approval. Section 5.5 Personal Trust Administration Committee. There shall be a --------------------------------------------------- Personal Trust Administration Committee composed of not less than five (5) officers, who shall be appointed annually or from time to time by the Board of Directors. Each member shall serve until his successor is appointed. Meetings shall be called by the Chairman or any three (3) members of the Committee. A quorum shall consist of three (3) members. The Personal Trust Administration Committee shall exercise such fiduciary powers and perform such duties as may be assigned to it by the Capital Management/General Trust Committee. All action taken by the Personal Trust Administration Committee shall be recorded in appropriate minutes signed by the Secretary thereof, approved by its Chairman, and submitted to the Capital Management/General Trust Committee at its next ensuing regular meeting for its review and approval. Section 5.6 Account Review Committee. There shall be an Account Review ------------------------------------ Committee composed of not less than four (4) officers and/or employees of this Association, who shall be appointed annually or from time to time by the Board of Directors. Each member shall serve until his successor is appointed. Meetings shall be called by the Chairman or any two (2) members of the Committee. A quorum shall consist of three (3) members. The Account Review Committee shall exercise such fiduciary powers and perform such duties as may be assigned to it by the Capital Management/General Trust Committee. All actions taken by the Account Review Committee shall be recorded in appropriate minutes, signed by the Secretary thereof, approved by its Chairman and submitted to the Capital Management/ General Trust Committee at its next ensuing regular meeting for its review and approval. Section 5.7 Corporate and Institutional Accounts Committee. There shall be ---------------------------------------------------------- a Corporate and Institutional Accounts Committee composed of not less than five (5) officers and/or employees of this Association, who shall be appointed annually, or from time to time, by the Capital Management/General Trust Committee and approved by the Board of Directors. Meetings may be called by the Chairman or any two (2) members of the Committee. A quorum shall consist of three (3) members. The Corporate and Institutional Accounts Committee shall exercise such fiduciary powers and duties as may be assigned to it by the General Trust Committee. All actions taken by the Corporate and Institutional Accounts Committee shall be recorded in appropriate minutes, signed by the Secretary thereof, approved by its Chairman and made available to the General Trust Committee at its next ensuing regular meeting for its review and approval. ARTICLE VI Stock and Stock Certificates ---------------------------- Section 6.1 Transfers. Shares of stock shall be transferable on the books --------------------- of the Association, and a transfer book shall be kept in which all transfers of stock shall be recorded. Every person becoming a shareholder by such transfer shall, in proportion to his shares, succeed to all rights and liabilities of the prior holder of such shares. Section 6.2 Stock Certificates. Certificates of stock shall bear the ------------------------------ signature of the Chairman, the Vice Chairman, the President, or a Vice President (which may be engraved, printed, or impressed), and shall be signed manually or by facsimile process by the Secretary, Assistant Secretary, Cashier, Assistant Cashier, or any other officer appointed by the Board of Directors for that purpose, to be known as an Authorized Officer, and the seal of the Association shall be engraved thereon. Each certificate shall recite on its face that the stock represented thereby is transferable only upon the books of the Association properly endorsed. ARTICLE VII Corporate Seal -------------- Section 7.1 The President, the Cashier, the Secretary, or any Assistant ----------- Cashier, or Assistant Secretary, or other officer thereunto designated by the Board of Directors shall have authority to affix the corporate seal to any document requiring such seal, and to attest the same. Such seal shall be substantially in the following form. ARTICLE VIII Miscellaneous Provisions ------------------------ Section 8.1 Fiscal Year. The fiscal year of the Association shall be the ----------------------- calendar year. Section 8.2 Execution of Instruments. All agreements, indentures, ------------------------------------ mortgages, deeds, conveyances, transfers, certificates, declarations, receipts, discharges, releases, satisfactions, settlements, petitions, notices, applications, schedules, accounts, affidavits, bonds, undertakings, proxies, and other instruments or documents may be signed, executed, acknowledged, verified, delivered or accepted in behalf of the Association by the Chairman of the Board, the Vice Chairman of the Board, any Chairman or Vice Chairman, the President, any Vice President or Assistant Vice President, the Secretary or any Assistant Secretary, the Cashier or Treasurer or any Assistant Cashier or Assistant Treasurer, or any officer holding similar or equivalent titles to the above in any regions, divisions or functional units of the Association, or, if in connection with the exercise of fiduciary powers of the Association, by any of said officers or by any Trust Officer or Assistant Trust Officer (or equivalent titles); provided, however, that where required, any such instrument shall be attested by one of said officers other than the officer executing such instrument. Any such instruments may also be executed, acknowledged, verified, delivered or accepted in behalf of the Association in such other manner and by such other officers as the Board of Directors may from time to time direct. The provisions of this Section 8.2 are supplementary to any other provision of these By-laws. Section 8.3 Records. The Articles of Association, the By-laws, and the ------------------- proceedings of all meetings of the shareholders, the Board of Directors, standing committees of the Board, shall be recorded in appropriate minute books provided for the purpose. The minutes of each meeting shall be signed by the Secretary, Cashier, or other officer appointed to act as Secretary of the meeting. ARTICLE IX By-laws ------- Section 9.1 Inspection. A copy of the By-laws, with all amendments ---------------------- thereto, shall at all times be kept in a convenient place at the Head Office of the Association, and shall be open for inspection to all shareholders, during banking hours. Section 9.2 Amendments. The By-laws may be amended, altered or repealed, ---------------------- at any regular or special meeting of the Board of Directors, by a vote of a majority of the whole number of Directors. Exhibit A --------- First Union National Bank Article X Emergency By-laws In the event of an emergency declared by the President of the United States or the person performing his functions, the officers and employees of this Association will continue to conduct the affairs of the Association under such guidance from the directors or the Executive Committee as may be available except as to matters which by statute require specific approval of the Board of Directors and subject to conformance with any applicable governmental directives during the emergency. OFFICERS PRO TEMPORE AND DISASTER Section 1. The surviving members of the Board of Directors or the Executive Committee shall have the power, in the absence or disability of any officer, or upon the refusal of any officer to act, to delegate and prescribe such officer's powers and duties to any other officer, or to any director, for the time being. Section 2. In the event of a state of disaster of sufficient severity to prevent the conduct and management of the affairs and business of this Association by its directors and officers as contemplated by these By-laws, any two or more available members of the then incumbent Executive Committee shall constitute a quorum of that Committee for the full conduct and management of the affairs and business of the Association in accordance with the provisions of Article II of these By-laws; and in addition, such Committee shall be empowered to exercise all of the powers reserved to the General Trust Committee under Section 5.3 of Article V hereof. In the event of the unavail- ability, at such time, of a minimum of two members of the then incumbent Executive Committee, any three available directors shall constitute the Executive Committee for the full conduct and management of the affairs and business of the Association in accordance with the foregoing provisions of this section. This By-law shall be subject to implementation by resolutions of the Board of Directors passed from time to time for that purpose, and any provisions of these By-laws (other than this section) and any resolutions which are contrary to the provisions of this section or to the provisions of any such implementary resolutions shall be suspended until it shall be determined by an interim Executive Committee acting under this section that it shall be to the advantage of this Association to resume the conduct and management of its affairs and business under all of the other provisions of these By-laws. Officer Succession BE IT RESOLVED, that if consequent upon war or warlike damage or disaster, the Chief Executive Officer of this Association cannot be located by the then acting Head Officer or is unable to assume or to continue normal executive duties, then the authority and duties of the Chief Executive Officer shall, without further action of the Board of Directors, be automatically assumed by one of the following persons in the order designated: Chairman President Division Head/Area Administrator - Within this officer class, officers shall take seniority on the basis of length of service in such office or, in the event of equality, length of service as an officer of the Association. Any one of the above persons who in accordance with this resolution assumes the authority and duties of the Chief Executive Officer shall continue to serve until he resigns or until five-sixths of the other officers who are attached to the then acting Head Office decide in writing he is unable to perform said duties or until the elected Chief Executive Officer of this Association, or a person higher on the above list, shall become available to perform the duties of Chief Executive Officer of the Association. BE IT FURTHER RESOLVED, that anyone dealing with this Association may accept a certification by any three officers that a specified individual is acting as Chief Executive Officer in accordance with this resolution; and that anyone accepting such certification may continue to consider it in force until notified in writing of a change, said notice of change to carry the signatures of three officers of the Association. Alternate Locations The offices of the Association at which its business shall be conducted shall be the main office thereof in each city which is designated as a City Office (and branches, if any), and any other legally authorized location which may be leased or acquired by this Association to carry on its business. During an emergency resulting in any authorized place of business of this Association being unable to function, the business ordinarily conducted at such location shall be relocated elsewhere in suitable quarters, in addition to or in lieu of the locations heretofore mentioned, as may be designated by the Board of Directors or by the Executive Committee or by such persons as are then, in accordance with resolutions adopted from time to time by the Board of Directors dealing with the exercise of authority in the time of such emergency, conducting the affairs of this Association. Any temporarily relocated place of business of this Association shall be returned to its legally authorized location as soon as practicable and such temporary place of business shall then be discontinued. Acting Head Offices BE IT RESOLVED, that in case of and provided because of war or warlike damage or disaster, the General Office of this Association, located in Charlotte, North Carolina, is unable temporarily to continue its functions, the Raleigh office, located in Raleigh, North Carolina, shall automatically and without further action of this Board of Directors, become the "Acting Head Office of this Association"; BE IT FURTHER RESOLVED, that if by reason of said war or warlike damage or disaster, both the General Office of this Association and the said Raleigh Office of this Association are unable to carry on their functions, then and in such case, the Asheville Office of this Association, located in Asheville, North Carolina, shall, without further action of this Board of Directors, become the "Acting Head Office of this Association"; and if neither the Raleigh Office nor the Asheville Office can carry on their functions, then the Greensboro Office of this Association, located in Greensboro, North Carolina, shall, without further action of this Board of Directors, become the "Acting Head Office of this Association"; and if neither the Raleigh Office, the Asheville Office, nor the Greensboro Office can carry on their functions, then the Lumberton Office of this Association, located in Lumberton, North Carolina, shall, without further action of this Board of Directors, become the "Acting Head Office of this Association". The Head Office shall resume its functions at its legally authorized location as soon as practicable. EXHIBIT 7 REPORT OF CONDITION Consolidating domestic and foreign subsidiaries of the First Union National Bank at the close of business on March 31, 2001 published in response to call made by Comptroller of the Currency, under title 12, United States Code, Section 161. Charter Number 33869 Comptroller of the Currency Northeastern District. Statement of Resources and Liabilities
ASSETS Thousand of Dollars ------------------- Cash and balance due from depository institutions: Noninterest-bearing balances and currency and coin.................... 8,580,000 Interest-bearing balances............................................. 2,872,000 Securities.............................................................. ///////// Held-to-maturity securities........................................... 0 Available-for-sale securities......................................... 48,709,000 Federal funds sold and securities purchased under agreements............ ////////// to resell............................................................. 6,742,000 Loans and lease financing receivables: Loan and leases, net of unearned income................................. 122,592,000 LESS: Allowance for loan and lease losses............................... 1,742,000 LESS: Allocated transfer risk reserve................................... 0 Loans and leases, net of unearned income, allowance, and reserve........ 120,850,000 Assets held in trading accounts......................................... 16,337,000 Premises and fixed assets (including capitalized leases)................ 2,825,000 Other real estate owned................................................. 109,000 Investment in unconsolidated subsidiaries and associated................ ////////// companies............................................................... 292,000 Customer's liability to this bank on acceptances outstanding............ 894,000 Intangible assets....................................................... 2,372,000 Other assets............................................................ 14,982,000 Total assets............................................................ 232,608,000 LIABILITIES Deposits: In domestic offices................................................ 132,659,000 Noninterest-bearing.............................................. 19,438,000 Interest-bearing................................................. 113,221,000 In foreign offices, Edge and Agreement subsidiaries, and IBFs...... 12,748,000 Noninterest-bearing.............................................. 80,000 Interest-bearing................................................. 12,668,000 Federal funds purchased and securities sold under agreements to repurchase in domestic offices of the bank and of its Edge and Agreement subsidiaries, and IBFs Federal fund purchased............................................. 21,217,000 Securities sold under agreements to repurchase..................... Trading liabilities..................................................... 10,718,000 Other borrowed money:................................................... 23,817,000 Bank's liability on acceptances executed and outstanding................ 902,000 Subordinated notes and debentures....................................... 5,993,000 Other liabilities....................................................... 8,039,000 Total liabilities....................................................... 216,093,000 Limited-life preferred stock and related surplus........................ 0 EQUITY CAPITAL Perpetual preferred stock and related surplus........................... 161,000 Common Stock............................................................ 455,000 Surplus................................................................. 13,309,000 Retained earnings....................................................... 1,613,000 Accumulated other comprehensive income.................................. 232,000 Total equity capital.................................................... 15,770,000
Total liabilities, limited-life preferred stock and equity.............. ///////// capital............................................................... 232,608,000
EX-99.1 8 dex991.txt FORM OF LETTER OF TRANSMITTAL THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , 2001, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE DELCO REMY INTERNATIONAL, INC. LETTER OF TRANSMITTAL 11% SENIOR SUBORDINATED NOTES DUE 2009 TO: FIRST UNION NATIONAL BANK THE EXCHANGE AGENT By Mail: By Hand before 4:30 p.m. First Union National Bank First Union National Bank Customer Information Center Customer Information Center Corporate Trust Operations-NC 1153 Corporate Trust Operations-NC 1153 1525 West W.T. Harris Blvd.-3C3 1525 West W.T. Harris Blvd.-3C3 Charlotte, NC 28288-1153 Charlotte, NC 28288-1153 Attn: Laura Richardson Attn: Laura Richardson By Overnight Courier and on the By Facsimile: Expiration 704-590-7628 Date only by Hand after 4:30 p.m.: First Union National Bank Confirm by Telephone: Customer Information Center 704-590-7414 Corporate Trust Operations-NC 1153 1525 West W.T. Harris Blvd.-3C3 Charlotte, NC 28288-1153 Attn: Laura Richardson DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. HOLDERS WHO WISH TO BE ELIGIBLE TO RECEIVE NEW NOTES FOR THEIR EXISTING NOTES PURSUANT TO THE EXCHANGE OFFER MUST VALIDLY TENDER (AND NOT WITHDRAW) THEIR EXISTING NOTES TO THE EXCHANGE AGENT PRIOR TO THE EXPIRATION DATE. The undersigned acknowledges receipt of the Prospectus dated , 2001 (the "Prospectus") of Delco Remy International, Inc. (the "Company") and this Letter of Transmittal (the "Letter of Transmittal"), which together constitute the Company's Offer to Exchange (the "Exchange Offer") $165,000,000 principal amount of its 11% Senior Subordinated Notes due 2009 (the "Exchange Notes"), which have been registered under the Securities Act of 1933, as amended (the "Securities Act"), pursuant to a Registration Statement of which the Prospectus is a part, for each $1,000 principal amount of its outstanding 11% Senior Subordinated Notes due 2009 (the "Existing Notes"), of which $165,000,000 principal amount is outstanding, upon the terms and conditions set forth in the Prospectus and this Letter of Transmittal. Other capitalized terms used but not defined herein have the meaning given to them in the Prospectus. For each Existing Note accepted for exchange, the holder of such Existing Note will receive an Exchange Note having a principal amount equal to that of the surrendered Existing Note. Interest on the Exchange Notes will accrue from the last interest payment date on which interest was paid on the Existing Notes surrendered in exchange therefor. Holders of Existing Notes accepted for exchange will be deemed to have waived the right to receive any other payments or accrued interest on the Existing Notes. The Company reserves the right, at any time or from time to time, to extend the Exchange Offer at its discretion, in which event the term "Expiration Date" shall mean the latest time and date to which the Exchange Offer is extended. The Company shall notify holders of the Existing Notes of any extension by means of a press release or other public announcement prior to 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. This Letter of Transmittal is to be used by Holders if: (i) certificates representing Existing Notes are to be physically delivered to the Exchange Agent herewith by Holders; (ii) tender of Existing Notes is to be made by book- entry transfer to the Exchange Agent's account at The Depository Trust Company ("DTC"), pursuant to the procedures set forth in the Prospectus under "The Exchange Offer--Procedures for Tendering Existing Notes" by any financial institution that is a participant in DTC and whose name appears on a security position listing as the owner of Existing Notes or (iii) tender of Existing Notes is to be made according to the guaranteed delivery procedures set forth in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." DELIVERY OF DOCUMENTS TO DTC DOES NOT CONSTITUTE DELIVERY TO THE EXCHANGE AGENT. The term "Holder" with respect to the Exchange Offer means any person: (i) in whose name Existing Notes are registered on the books of the Company or any other person who has obtained a properly completed bond power from the registered Holder, or (ii) whose Existing Notes are held of record by DTC (or its nominee) who desires to deliver such Existing Notes by book-entry transfer at DTC. The undersigned has completed, executed and delivered this Letter of Transmittal to indicate the action the undersigned desires to take with respect to the Exchange Offer. Holders of Existing Notes that are tendering by book-entry transfer to the Exchange Agent's account at DTC can execute the tender through the DTC Automated Tender Offer Program ("ATOP"), for which the transaction will be eligible. DTC participants that are accepting the Exchange Offer must transmit their acceptance to DTC, which will verify the acceptance and execute a book- entry delivery to the Exchange Agent's DTC account. DTC will then send an Agent's Message to the Exchange Agent for its acceptance. DTC participants may also accept the Exchange Offer prior to the Expiration Date by submitting a Notice of Guaranteed Delivery or Agent's Message relating thereto as described herein under Instruction 1, "Guaranteed Delivery Procedures." The instructions included with this Letter of Transmittal must be followed. Questions and requests for assistance or for additional copies of the Prospectus, this Letter of Transmittal or the Notice of Guaranteed Delivery may be directed to the Exchange Agent. See Instruction 11 herein. 2 HOLDERS WHO WISH TO ACCEPT THE EXCHANGE OFFER AND TENDER THEIR EXISTING NOTES MUST COMPLETE THIS LETTER OF TRANSMITTAL IN ITS ENTIRETY. PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL CAREFULLY BEFORE CHECKING ANY BOX BELOW DESCRIPTION OF 11% SENIOR SUBORDINATED NOTES DUE 2009 (EXISTING NOTES) - --------------------------------------------------------------------------------
Name(s) and Address(es) of Registered Holder(s) Aggregate (Please fill Principal Amount Principal Amount in, if Certificate Represented by Tendered (If Less blank) Number(s)* Certificate(s) Than All)** - ------------------------------------------------------------------ ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- ---------------------------------------------------- - -------------------------------------------------------------------
* Need not be completed by holders tendering by book-entry transfer. ** Unless indicated in the column labeled "Principal Amount Tendered," any tendering Holder of Existing Notes will be deemed to have tendered the entire aggregate principal amount represented by the column labeled "Aggregate Principal Amount Represented by Certificate(s)." If the space provided above is inadequate, list the certificate numbers and principal amounts on a separate signed schedule and affix the list to this Letter of Transmittal. The minimum permitted tender is $1,000 in principal amount of Existing Notes. All other tenders must be integral multiples of $1,000. SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS (See Instructions 4, 5, and 6) (See Instructions 1, 5, 6 and 7) To be completed ONLY if certifi- To be completed ONLY if certifi- cates for Exchange Notes issued in cates for Existing Notes in a exchange for Existing Notes ac- principal amount not tendered or cepted for exchange, or Existing not accepted for exchange, are to Notes not tendered or not accepted be sent to someone other than the for exchange, are to be issued in undersigned, or to the undersigned the name of someone other than the at an address other than that undersigned or, if such Existing shown above. Notes are being tendered by book- entry transfer, to someone other than DTC or to another account maintained by DTC. Mail certificate(s) to: Name_______________________________ Issue certificate(s) to: Address ___________________________ Name ______________________________ ___________________________________ Address ___________________________ (Include Zip Code) ___________________________________ ___________________________________ (Include Zip Code) (Tax Identification or Social Security No.) ___________________________________ (Tax Identification or Social Security No.) DTC Acct. No. _____________________ 3 [_]CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE EXCHANGE AGENT'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING: Name of Tendering Institution _______________________________________________ DTC Book-Entry Account No. ___________________ Transaction Code No. _______ [_]CHECK HERE IF TENDERED EXISTING NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE FOLLOWING: Name(s) of Registered Holder(s) _____________________________________________ Window Ticket Number (if any) _______________________________________________ Date of Execution of Notice of Guaranteed Delivery __________________________ IF DELIVERED BY BOOK-ENTRY TRANSFER, PLEASE COMPLETE THE FOLLOWING: Account Number ________________________ Transaction Code Number _____________ [_]CHECK HERE IF YOU ARE A BROKER-DEALER AND ARE RECEIVING NEW NOTES FOR YOUR OWN ACCOUNT IN EXCHANGE FOR EXISTING NOTES THAT WERE ACQUIRED AS A RESULT OF MARKET-MAKING ACTIVITIES OR OTHER TRADING ACTIVITIES AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO. Name:________________________________________________________________________ Address:_____________________________________________________________________ Ladies and Gentlemen: Subject to the terms and conditions of the Exchange Offer, the undersigned hereby tenders to the Company the principal amount of Existing Notes indicated above. Subject to and effective upon the acceptance for exchange of the principal amount of Existing Notes tendered in accordance with this Letter of Transmittal, the undersigned sells, assigns and transfers to, or upon the order of, the Company all right, title and interest in and to the Existing Notes tendered hereby. The undersigned hereby irrevocably constitutes and appoints the Exchange Agent its agent and attorney-in-fact (with full knowledge that the Exchange Agent also acts as the agent of the Company and as Trustee under the Indenture for the Existing Notes and Exchange Notes) with respect to the tendered Existing Notes with full power of substitution to (i) deliver certificates for such Existing Notes to the Company, or transfer ownership of such Existing Notes on the account books maintained by DTC and deliver all accompanying evidence of transfer and authenticity to, or upon the order of, the Company and (ii) present such Existing Notes for transfer on the books of the Company and receive all benefits and otherwise exercise all rights of beneficial ownership of such Existing Notes, all in accordance with the terms and subject to the conditions of the Exchange Offer. The power of attorney granted in this paragraph shall be deemed irrevocable and coupled with an interest. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Existing Notes tendered hereby and that the Company will acquire good and unencumbered title thereto, free and clear of all liens, restrictions, charges and encumbrances and not subject to 4 any adverse claim, when the same are acquired by the Company. The undersigned hereby further represents that any Exchange Notes acquired in exchange for Existing Notes tendered hereby will have been acquired in the ordinary course of business of the Holder receiving such Exchange Notes, whether or not such person is the Holder, that neither the Holder nor any such other person has any arrangement or understanding with any person to participate in the distribution of such Exchange Notes and that neither the Holder nor any such other person is an "affiliate," as defined in Rule 405 under the Securities Act, of the Company or any of its subsidiaries. The undersigned also acknowledges that this Exchange Offer is being made in reliance on an interpretation by the staff of the Securities and Exchange Commission (the "SEC") that the Exchange Notes issued in exchange for the Existing Notes pursuant to the Exchange Offer may be offered for resale, resold and otherwise transferred by holders thereof (other than any such holder that is an "affiliate" of the Company within the meaning of Rule 405 under the Securities Act), without compliance with the registration and prospectus delivery provisions of the Securities Act, provided that such Exchange Notes are acquired in the ordinary course of such holders' business and such holders have no arrangements or understandings with any person to participate in the distribution of such Exchange Notes. If the undersigned is not a broker-dealer, the undersigned represents that it is not engaged in, and does not intend to engage in, a distribution of Exchange Notes. If the undersigned is a broker- dealer that will receive Exchange Notes for its own account in exchange for Existing Notes that were acquired as a result of market-making activities or other trading activities, it acknowledges that it will deliver a prospectus in connection with any resale of such Exchange Notes; however, by so acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Securities Act. The undersigned will, upon request, execute and deliver any additional documents deemed by the Exchange Agent or the Company to be necessary or desirable to complete the assignment, transfer and purchase of the Existing Notes tendered hereby. All authority conferred or agreed to be conferred by this Letter of Transmittal shall survive the death, incapacity or dissolution of the undersigned and every obligation of the undersigned under this Letter of Transmittal shall be binding upon the undersigned's heirs, personal representatives, successors and assigns, trustees in bankruptcy or other legal representatives of the undersigned. This tender may be withdrawn only in accordance with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section of the Prospectus. For purposes of the Exchange Offer, the Company shall be deemed to have accepted validly tendered Existing Notes when, as and if the Company has given oral or written notice thereof to the Exchange Agent. If any tendered Existing Notes are not accepted for exchange pursuant to the Exchange Offer for any reason, certificates for any such unaccepted Existing Notes will be returned (except as noted below with respect to tenders through DTC), without expense, to the undersigned at the address shown below or at such different address as may be indicated under "Special Delivery Instructions" as promptly as practicable after the Expiration Date. The undersigned understands that tenders of Existing Notes pursuant to the procedures described under the caption "The Exchange Offer--Procedures for Tendering Existing Notes" in the Prospectus and in the instructions hereto will constitute a binding agreement between the undersigned and the Company upon the terms and subject to the conditions of the Exchange Offer. Unless otherwise indicated under "Special Issuance Instructions," please issue the certificates representing the Exchange Notes issued in exchange for the Existing Notes accepted for exchange and return any Existing Notes not tendered or not accepted for exchange in the name(s) of the undersigned (or in either such event in the case of the Existing Notes tendered through DTC, by credit to the undersigned's account at DTC). Similarly, unless otherwise indicated under "Special Delivery Instructions," please send the certificates representing the Exchange Notes issued in exchange for the Existing Notes accepted for exchange and any certificates for Existing Notes not tendered or not accepted for exchange (and accompanying documents, as 5 appropriate) to the undersigned at the address shown below the undersigned's signature(s), unless, in either event, tender is being made through DTC. In the event that both "Special Issuance Instructions" and "Special Delivery Instructions" are completed, please issue the certificates representing the Exchange Notes issued in exchange for the Existing Notes accepted for exchange and return any Existing Notes not tendered or not accepted for exchange in the name(s) of, and send said certificates to, the person(s) so indicated. The undersigned recognizes that the Company has no obligation pursuant to the "Special Issuance Instructions" and "Special Delivery Instructions" to transfer any Existing Notes from the name of the registered Holder(s) thereof if the Company does not accept for exchange any of the Existing Notes so tendered. Holders of Existing Notes who wish to tender their Existing Notes and (i) whose Existing Notes are not immediately available or (ii) who cannot deliver their Existing Notes, this Letter of Transmittal or any other documents required hereby to the Exchange Agent, or cannot complete the procedure for book-entry transfer, prior to the Expiration Date, may tender their Existing Notes according to the guaranteed delivery procedures set forth in the Prospectus under the caption "The Exchange Offer--Guaranteed Delivery Procedures." See Instruction 1 regarding the completion of the Letter of Transmittal printed below. 6 SIGNATURE PAGE PLEASE SIGN HERE WHETHER OR NOT EXISTING NOTES ARE BEING PHYSICALLY TENDERED HEREBY X ________________________________________________________ __________, 2001 Date X ________________________________________________________ __________, 2001 Signature(s) of Registered Holder(s) Date or Authorized Signatory Area Code and Telephone Number: __________________________ The above lines must be signed by the registered Holder(s) of Existing Notes as their name(s) appear(s) on the Existing Notes or, if the Existing Notes are tendered by a participant in DTC, as such participant's name appears on a security position listing as the owner of Existing Notes, or by a person or persons authorized to become registered Holder(s) by a properly completed bond power from the registered Holder(s), a copy of which must be transmitted with this Letter of Transmittal. If Existing Notes to which this Letter of Transmittal relates are held of record by two or more joint Holders, then all such holders must sign this Letter of Transmittal. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person must (i) set forth his or her full title below and (ii) unless waived by the Company, submit evidence satisfactory to the Company of such person's authority to act. See Instruction 4 regarding the completion of this Letter of Transmittal printed below. Name(s): _______________________________________________________________________ (Please Print) Capacity: ______________________________________________________________________ (Title) Address: _______________________________________________________________________ (Include Zip Code) Signature(s) Guaranteed by an Eligible Institution (if required by Instruction 4): _____________________________________ (Authorized Signature) _____________________________________ (Title) _____________________________________ (Name of Firm) Dated:_________________, 2001 7 INSTRUCTIONS Forming Part of the Terms and Conditions of the Exchange Offer 1. Delivery of this Letter of Transmittal and Existing Notes; Guaranteed Delivery Procedures. This Letter of Transmittal is to be completed by Holders, either if certificates are to be forwarded herewith or if tenders are to be made pursuant to the procedures for delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry Transfer" section of the Prospectus. Certificates for all physically tendered Existing Notes, or Book-Entry Confirmation, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or manually signed facsimile hereof) and any other documents required by this Letter of Transmittal, must be received by the Exchange Agent at one of the addresses set forth herein on or prior to the Expiration Date, or the tendering Holder must comply with the guaranteed delivery procedures set forth below. Existing Notes tendered hereby must be in denominations of principal amount of $1,000 and any integral multiple thereof. Holders whose certificates for Existing Notes are not immediately available or who cannot deliver their certificates and all other required documents to the Exchange Agent on or prior to the Expiration Date, or who cannot complete the procedure for book-entry transfer on a timely basis, may tender their Existing Notes pursuant to the guaranteed delivery procedures set forth in "The Exchange Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to such procedures, (i) such tender must be made through an Eligible Institution (as defined in Instruction 4 below), (ii) prior to the Expiration Date, the Exchange Agent must receive from such Eligible Institution a properly completed and duly executed Letter of Transmittal (or facsimile thereof) and Notice of Guaranteed Delivery (by facsimile transmission, mail or hand delivery), substantially in the form provided by the Company, setting forth the name and address of the Holder of Existing Notes and the amount of Existing Notes tendered, stating that the tender is being made thereby and guaranteeing that, within five New York Stock Exchange ("NYSE") trading days after the date of execution of the Notice of Guaranteed Delivery, the certificates for all physically tendered Existing Notes, or a Book-Entry Confirmation, and any other documents required by this Letter of Transmittal will be deposited by the Eligible Institution with the Exchange Agent, and (iii) the certificates for all physically tendered Existing Notes, in proper form for transfer, or a Book- Entry Confirmation, as the case may be, and all other documents required by this Letter of Transmittal, are received by the Exchange Agent within five NYSE trading days after the date of execution of the Notice of Guaranteed Delivery. THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE EXISTING NOTES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE TENDERING HOLDERS, BUT THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF EXISTING NOTES ARE SENT BY MAIL, IT IS SUGGESTED THAT THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE EXPIRATION DATE TO PERMIT THE DELIVERY TO THE EXCHANGE AGENT PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE. See "The Exchange Offer" section in the Prospectus. 2. Tender by Holder. Only a Holder of Existing Notes may tender such Existing Notes in the Exchange Offer. Any beneficial holder of Existing Notes who is not the registered Holder and who wishes to tender should arrange with the registered Holder to execute and deliver this Letter of Transmittal on his or her behalf or must, prior to completing and executing this Letter of Transmittal and delivering his or her Existing Notes, either make appropriate arrangements to register ownership of the Existing Notes in such holder's name or obtain a properly completed bond power from the registered Holder. 3. Partial Tenders. Tenders of Existing Notes will be accepted only in integral multiples of $1,000. If less than the entire principal amount of any Existing Notes is tendered, the tendering Holder should fill in the principal amount tendered in the fourth column of the box entitled "Description of 11% Senior Subordinated 8 Notes due 2009 (Existing Notes)" above. The entire principal amount of Existing Notes delivered to the Exchange Agent will be deemed to have been tendered unless otherwise indicated. If the entire principal amount of a Holder's Existing Notes is not tendered, then Existing Notes for the principal amount of Existing Notes not tendered and a certificate or certificates representing Exchange Notes issued in exchange for any Existing Notes accepted for exchange will be sent to the Holder at his or her registered address (unless a different address is provided in the appropriate box on this Letter of Transmittal) promptly after the Existing Notes are accepted for exchange. 4. Signatures on this Letter of Transmittal; Endorsements and Powers of Attorney; Guarantee of Signatures. If this Letter of Transmittal is signed by the registered Holder of the Existing Notes tendered hereby, the signature must correspond exactly with the name as written on the face of the certificates without any change whatsoever. If any tendered Existing Notes are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. If any tendered Existing Notes are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate copies of this Letter of Transmittal as there are different registrations of certificates. When this Letter of Transmittal is signed by the registered Holder(s) of the Existing Notes specified herein and tendered hereby, no endorsements of certificates or separate bond powers are required. If, however, the Exchange Notes are to be issued, or any Existing Notes not tendered or not accepted for exchange are to be reissued, to a person or persons other than the registered Holder(s), then endorsements of any certificate(s) transmitted hereby or separate bond powers are required. Signatures on such certificate(s) or power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal is signed by a person other than the registered Holder(s) of any certificate(s) specified herein, such certificate(s) must be endorsed or accompanied by appropriate bond powers or powers of attorney, in each case signed exactly as the name or names on the registered Holder(s) appear(s) on the certificate(s) and signatures on such certificate(s) or power(s) must be guaranteed by an Eligible Institution. If this Letter of Transmittal or any certificates, bond powers or powers of attorney are signed by trustees, executors, administrators, guardians, attorneys-in-fact, officers of corporations or others acting in a fiduciary or representative capacity, such persons should so indicate when signing and, unless waived by the Company, proper evidence satisfactory to the Company of their authority to so act must be submitted. Endorsements on certificates for Existing Notes or signatures on bond powers or powers of attorney required by this Instruction 4 must be guaranteed by a firm which is a participant in a recognized signature guarantee medallion program (an "Eligible Institution"). Signatures on this Letter of Transmittal must be guaranteed by an Eligible Institution unless the Existing Notes are tendered (i) by a registered Holder of Existing Notes (which term, for purposes of the Exchange Offer, includes any DTC participant whose name appears on a security position listing as the Holder of such Existing Notes) who has not completed the box entitled "Special Issuance Instructions" or "Special Delivery Instructions" on this Letter of Transmittal, or (ii) for the account of an Eligible Institution. 5. Special Issuance and Delivery Instructions. Tendering Holders should indicate, in the applicable box or boxes, the name and address to which Exchange Notes or substitute Existing Notes not tendered or not accepted for exchange are to be issued or sent, if different from the name and address of the person signing this Letter of Transmittal (or in the case of a tender of Existing Notes through DTC, if different from DTC). In the case of issuance in a different name, the taxpayer identification or social security number of the person named must also be indicated. Holders tendering Existing Notes by book- entry transfer may request that Exchange 9 Notes issued in exchange for Existing Notes accepted for exchange or Existing Notes not tendered or accepted for exchange be credited to such account maintained at DTC as such Holder may designate hereon. If no such instructions are given, such Exchange Notes or Existing Notes not exchanged will be returned to the name and address of the person signing this Letter of Transmittal. 6. Tax Identification Number. Federal income tax law requires that a Holder whose Existing Notes are accepted for exchange must provide the Company (as payer) with his, her or its correct Taxpayer Identification Number ("TIN"), which, in the case of an exchanging Holder who is an individual, is his or her social security number. If the Company is not provided with the correct TIN or an adequate basis for exemption, such Holder may be subject to a $50 penalty imposed by the Internal Revenue Service (the "IRS"), and payments made with respect to the Exchange Notes or Exchange Offer may be subject to backup withholding at varying rates up to 31%. If withholding results in an overpayment of taxes, a refund may be obtained. Exempt Holders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9." To prevent backup withholding, each exchanging Holder must provide his, her or its correct TIN by completing the Substitute Form W-9 included below in this Letter of Transmittal, certifying that the TIN provided is correct (or that such Holder is awaiting a TIN) and that the Holder is exempt from backup withholding because (i) the Holder has not been notified by the IRS that he, she or it is subject to backup withholding as a result of a failure to report all interest or dividends, or (ii) the IRS has notified the Holder that he, she or it is no longer subject to backup withholding. In order to satisfy the Company that a foreign individual qualifies as an exempt recipient, such Holder must submit a statement signed under penalty of perjury attesting to such exempt status. Such statements may be obtained from the Exchange Agent. If the Existing Notes are in more than one name or are not in the name of the actual owner, consult the substitute Form W-9 for information on which TIN to report. If you do not provide your TIN to the Company within 60 days, backup withholding may begin and continue until you furnish your TIN to the Company. 7. Transfer Taxes. The Company will pay all transfer taxes, if any, applicable to the exchange of Existing Notes pursuant to the Exchange Offer. If, however, certificates representing Exchange Notes or Existing Notes not tendered or accepted for exchange are to be delivered to, or are to be registered or issued in the name of, any person(s) other than the registered Holder(s) of the Existing Notes tendered hereby, or if tendered Existing Notes are registered in the name of any person other than the person signing this Letter of Transmittal, or if a transfer tax is imposed for any reason other than the exchange of Existing Notes pursuant to the Exchange Offer, then the amount of any such transfer taxes (whether imposed on the registered Holder(s) or on any other person(s)) will be payable by the tendering Holder(s). If satisfactory evidence of payment of such taxes or exemption therefrom is not submitted herewith, the amount of such transfer taxes will be billed directly to such tendering Holder(s). Except as provided in this Instruction 7, it will not be necessary for transfer tax stamps to be affixed to the Existing Notes listed in this Letter of Transmittal. 8. Waiver of Conditions. The Company reserves the absolute right to amend, waive or modify conditions to the Exchange Offer in the case of any Existing Notes tendered (and to refuse to do so). 9. No Conditional Transfers. No alternative, conditional, irregular or contingent tenders will be accepted. All tendering Holders of Existing Notes, by execution of this Letter of Transmittal, shall waive any right to receive notice of the acceptance of their Existing Notes for exchange. Neither the Company, the Exchange Agent nor any other person is obligated to give notice of any defect or irregularity with respect to any tender of Existing Notes, nor shall any of them incur any liability for failure to give any such notice. 10 10. Mutilated, Lost, Stolen or Destroyed Existing Notes. Any tendering Holder whose Existing Notes have been mutilated, lost, stolen or destroyed should contact the Exchange Agent at one of the addresses indicated herein for further instructions. 11. Requests for Assistance or Additional Copies. Questions and requests for assistance for additional copies of the Prospectus, this Letter of Transmittal, the Notice of Guaranteed Delivery or the "Guidelines for Certification of Taxpayer Identification Number" on Substitute Form W-9 may be directed to the Exchange Agent at one of the addresses specified in the Prospectus. (DO NOT WRITE IN THE SPACE BELOW) Account Number:__________________ Transaction Code Number:_________
Certificate Existing Existing Surrendered Notes Tendered Notes Accepted ---------------------------------------------------------------------------- ---------------------------------------------------------------------------- ----------------------------------------------------------------------------
Delivery Prepared By: _______ Checked By: _________ Dated: _______ PAYER'S NAME: DELCO REMY INTERNATIONAL, INC. Name (if joint names, list first and circle the name of the person or entity whose number you enter in Part 1 below. See instructions if your name has changed.) SUBSTITUTE Form W-9 ___________________________________________________ Department of Address ___________________________________________ the Treasury City, state and ZIP code __________________________ Internal List account number(s) here (optional) ____________ Revenue Service ----------------------------------------------------- Part 1--PLEASE PROVIDE YOUR Social security TAXPAYER IDENTIFICATION NUMBER number or TIN ("TIN") IN THE BOX AT RIGHT AND CERTIFY BY SIGNING AND ----------------- DATING BELOW. Payer's Request for TIN Part 2--Check the box if you are NOT subject to backup withholding under the provisions of section 3408(a)(1)(C) of the Internal Revenue Code because (1) you have not been notified that you are subject to backup withholding as a result of failure to report all interest or dividends or (2) the Internal Revenue Service has notified you that you are no longer subject to backup withholding. [_] ----------------------------------------------------- ----------------------------------------------------- CERTIFICATION--UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT THE IN- FORMATION PROVIDED ON THIS FORM IS TRUE, CORRECT, AND COMPLETE. Part 3 Awaiting TIN [_] SIGNATURE _____________ DATE ________ NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING AT VARYING RATES UP TO 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE EXCHANGE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. 11 EX-99.2 9 dex992.txt FORM OF NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR 11% SENIOR SUBORDINATED NOTES DUE 2009 OF DELCO REMY INTERNATIONAL, INC. As set forth in the Prospectus dated , 2001 (the "Prospectus") of Delco Remy International, Inc. (the "Company") and in the accompanying Letter of Transmittal (the "Letter of Transmittal"), this form or one substantially equivalent hereto must be used to accept the Company's offer to exchange (the "Exchange Offer") all of its outstanding 11% Senior Subordinated Notes due 2009 (the "Existing Notes") for its 11% Senior Subordinated Notes due 2009 which have been registered under the Securities Act of 1933, as amended, if certificates for the Existing Notes are not immediately available or if the Existing Notes, the Letter of Transmittal or any other documents required thereby cannot be delivered to the Exchange Agent, or the procedure for book- entry transfer cannot be completed, prior to 5:00 P.M., New York City time, on the Expiration Date (as defined below). This form may be delivered by an Eligible Institution by hand or transmitted by facsimile transmission, overnight courier or mail to the Exchange Agent as set forth below. Capitalized terms used but not defined herein have the meaning given to them in the Prospectus. THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON , UNLESS THE OFFER IS EXTENDED (THE "EXPIRATION DATE"). TENDERS OF EXISTING NOTES MAY BE WITHDRAWN AT ANY TIME PRIOR TO 5:00 P.M. ON THE EXPIRATION DATE. To: First Union National Bank The Exchange Agent By Mail: By Hand before 4:30 p.m. First Union National Bank First Union National Bank Customer Information Center Customer Information Center Corporate Trust Operations--NC 1153 Corporate Trust Operations--NC 1153 1525 West W.T. Harris Blvd.--3C3 1525 West W.T. Harris Blvd.--3C3 Charlotte, NC 28288-1153 Charlotte, NC 28288-1153 Attention: Laura Richardson Attention: Laura Richardson By Overnight Courier and on the By Facsimile: Expiration Date 704-590-7028 only by Hand after 4:30 p.m.: First Union National Bank Customer Information Center Confirm by Telephone Corporate Trust Operations--NC 1153 704-590-7414 1525 West W.T. Harris Blvd.--3C3 Charlotte, NC 28288-1153 Attention: Laura Richardson DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE, OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This form is not to be used to guarantee signatures. If a signature on the Letter of Transmittal to be used to tender Existing Notes is required to be guaranteed by an "Eligible Institution" under the instructions thereto, such signature guarantee must appear in the space provided therefor in the Letter of Transmittal. The undersigned hereby tenders to the Company, upon the terms and subject to the conditions set forth in the Prospectus and the Letter of Transmittal (which together constitute the "Exchange Offer"), receipt of which are hereby acknowledged, (fill in number of Existing Notes) Existing Notes pursuant to the guaranteed delivery procedures set forth in the Prospectus and Instruction 1 of the Letter of Transmittal. The undersigned understands that tenders of Existing Notes will be accepted only in principal amounts equal to $1,000 or integral multiples thereof. The undersigned understands that tenders of Existing Notes pursuant to the Exchange Offer may not be withdrawn after 5:00 p.m., New York City time, on the Expiration Date. All authority herein conferred or agreed to be conferred by this Notice of Guaranteed Delivery shall survive the death, incapacity or dissolution of the undersigned and every obligation of the undersigned under this Notice of Guaranteed Delivery shall be binding upon the heirs, personal representatives, executors, administrators, successors, assigns, trustees in bankruptcy and other legal representatives of the undersigned. NOTE: SIGNATURES MUST BE PROVIDED WHERE INDICATED BELOW. Certificate No(s). for Existing Name(s) of Record Holder(s): Notes (if available): _____________________________________ _____________________________________ _____________________________________ _____________________________________ PLEASE PRINT OR TYPE Principal Amount of Existing Notes: _____________________________________ Address: _____________________________________ If Existing Notes will be delivered _____________________________________ by book-entry transfer at the Depositor Trust Company, Depository Account No.: Area code and Tel. No. ______________ _____________________________________ Signature(s): _____________________________________ _____________________________________ Dated: , 2001 This Notice of Guaranteed Delivery must be signed by the registered holder(s) of Existing Notes exactly as its (their) name(s) appear(s) on the certificate(s) for Existing Notes covered hereby or on a DTC security position listing naming it (them) as the owner of such Existing Notes, or by person(s) authorized to become registered holder(s) by endorsements and documents transmitted with this Notice of Guaranteed Delivery. If signature is by a trustee, executor, administrator, guardian, attorney-in-fact, officer or other person acting in a fiduciary or representative capacity, such person(s) must provide the following information: PLEASE PRINT NAME(S), TITLE(S) AND ADDRESS(ES) Name(s): _______________________________________________________________________ Capacity(ies): _________________________________________________________________ Address(es): ___________________________________________________________________ GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a member firm of a registered national securities exchange or of the National Association of Securities Dealers, Inc., or a commercial bank or trust company having an office or correspondent in the United States or an "Eligible Guarantor Institution" as defined in Rule l7Ad-15 under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), hereby (a) represents that the tender of Existing Notes effected hereby complies with Rule l4e-4 under the Exchange Act and (b) guarantees to deliver to the Exchange Agent a certificate or certificates representing the Existing Notes tendered hereby, in proper form for transfer (or a confirmation of the book-entry transfer of such Existing Notes into the Exchange Agent's account at DTC, pursuant to the procedures for book-entry transfer set forth in the Prospectus), and a properly completed and duly executed Letter of Transmittal (or manually signed facsimile thereof) together with any required signatures and any other required documents, at one of the Exchange Agent's addresses set forth above, within five New York Stock Exchange trading days after the date of execution of this Notice of Guaranteed Delivery. THE UNDERSIGNED ACKNOWLEDGES THAT IT MUST DELIVER THE LETTER OF TRANSMITTAL AND EXISTING NOTES TENDERED HEREBY TO THE EXCHANGE AGENT WITHIN THE TIME PERIOD SPECIFIED FORTH ABOVE AND THAT ANY FAILURE TO DO SO COULD RESULT IN FINANCIAL LOSS TO THE UNDERSIGNED. Name of Firm: _______________________ _____________________________________ Authorized Signature Address: ____________________________ Zip Code Name: _______________________________ Area Code Please Print or Type and Tel. No.: _______________________ Date: _________, 2001 NOTE: DO NOT SEND EXISTING NOTES WITH THIS FORM; EXISTING NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL SO THAT THEY ARE RECEIVED BY THE EXCHANGE AGENT WITHIN THE TIME PERIOD SET FORTH ABOVE. EX-99.3 10 dex993.txt LETTER TO HOLDERS TO HOLDERS OF 11% SENIOR SUBORDINATED NOTES DUE 2009 Delco Remy International, Inc. is offering to exchange (the "Exchange Offer") up to $165,000,000 of its newly registered 11% Senior Subordinated Notes due 2009 ("New Notes") for its outstanding 11% Senior Subordinated Notes due 2009 ("Existing Notes"). Briefly, you may either: a. Tender all or some of your Existing Notes, along with a completed and executed Letter of Transmittal, and receive registered New Notes in exchange; or b. Retain your Existing Notes. All tendered Existing Notes must be received on or prior to , 2001 at 5:00 p.m., New York City Time, (the "Expiration Date"), as shown in the accompanying Prospectus. Please review the enclosed Letter of Transmittal and Prospectus carefully. If you have any questions on the terms of the Exchange Offer or questions regarding the appropriate procedures for tendering your Existing Notes and the Letter of Transmittal, please call 704-590-7414 or write First Union National Bank, Customer Information Center, Corporate Trust Operations--NC 1153, 1525 West W.T. Harris Blvd.--3C3, Charlotte, NC 28288-1153. EX-99.4 11 dex994.txt LETTER TO BROKERS, DEALERS, ET AL. Delco Remy International, Inc. Offer for all Outstanding 11% Senior Subordinated Notes Due 2009 in Exchange for 11% Senior Subordinated Notes Due 2009 which Have Been Registered Under the Securities Act of 1933, As Amended To: Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. Delco Remy International, Inc. (the "Company") is offering upon and subject to the terms and conditions set forth in the Prospectus, dated , 2001 (the "Prospectus"), and the enclosed Letter of Transmittal (the "Letter of Transmittal"), to exchange (the "Exchange Offer") its 11% Senior Subordinated Notes Due 2009 which have been registered under the Securities Act of 1933, as amended, for its outstanding 11% Senior Subordinated Notes Due 2009 (the "Existing Notes"). The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated April 19, 2001, by and among the Company, , as Guarantor, Credit Suisse First Boston Corporation, and Deutsche Banc Alex. Brown. We are requesting that you contact your clients for whom you hold Existing Notes regarding the Exchange Offer. For your information and for forwarding to your clients for whom you hold Existing Notes registered in your name or in the name of your nominee, or who hold Existing Notes registered in their own names, we are enclosing the following documents: 1. Prospectus dated , 2001, 2. The Letter of Transmittal for your use and for the information of your clients, 3. A Notice of Guaranteed Delivery to be used to accept the Exchange Offer if certificates for Existing Notes are not immediately available or time will not permit all required documents to reach the Exchange Agent prior to the Expiration Date (as defined below) or if the procedure for book-entry transfer cannot be completed on a timely basis, 4. A form of letter which may be sent to your clients for whose account you hold Existing Notes registered in your name or the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Exchange Offer, and 5. Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. Your prompt action is requested. The Exchange Offer will expire at 5:00 p.m., New York City time on , 2001, unless extended by the Company (the "Expiration Date"). Existing Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. To participate in the Exchange Offer, a duly executed and properly completed Letter of Transmittal (or facsimile thereof), with any required signature guarantees and any other required documents, should be sent to the Exchange Agent and certificates representing the Existing Notes should be delivered to the Exchange Agent, all in accordance with the instructions set forth in the Letter of Transmittal and the Prospectus. If holders of Existing Notes wish to tender, but it is impracticable for them to forward their certificates for Existing Notes prior to the expiration of the Exchange Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures described in the Prospectus under "The Exchange Offer--Guaranteed Delivery Procedures." The Company will, upon request, reimburse brokers, dealers, commercial banks and trust companies for reasonable and necessary costs and expenses incurred by them in forwarding the Prospectus and the related documents to the beneficial owners of Existing Notes held by them as nominee or in a fiduciary capacity. The Company will pay or cause to be paid all stock transfer taxes applicable to the exchange of Existing Notes pursuant to the Exchange Offer, except as set forth in Instruction 7 of the Letter of Transmittal. Any inquiries you may have with respect to the Exchange Offer, or requests for additional copies of the enclosed materials, should be directed to First Union National Bank, the Exchange Agent for the Existing Notes, at its address and telephone number set forth on the front of the Letter of Transmittal. Very truly yours, Delco Remy International, Inc. NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY PERSON AS AN AGENT OF THE COMPANY OR THE EXCHANGE AGENT, OR AUTHORIZE YOU OR ANY OTHER PERSON TO USE ANY DOCUMENT OR MAKE ANY STATEMENTS ON BEHALF OF EITHER OF THEM WITH RESPECT TO THE EXCHANGE OFFER, EXCEPT FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS OR THE LETTER OF TRANSMITTAL. Enclosures EX-99.5 12 dex995.txt LETTER TO CLIENTS Offer for all Outstanding 11% Senior Subordinated Notes due 2009 in Exchange for 11% Senior Subordinated Notes due 2009 of Delco Remy International, Inc. which Have Been Registered Under the Securities Act of 1933, As Amended To Our Clients: Enclosed for your consideration is a Prospectus, dated , 2001 (the "Prospectus"), and the related Letter of Transmittal (the "Letter of Transmittal"), relating to the offer (the "Exchange Offer") of Delco Remy International, Inc. (the "Company") to exchange its 11% Senior Subordinated Notes Due 2009, which have been registered under the Securities Act of 1933, as amended (the "New Notes"), for its outstanding 11% Senior Subordinated Notes Due 2009 (the "Existing Notes"), upon the terms and subject to the conditions described in the Prospectus and the Letter of Transmittal. The Exchange Offer is being made in order to satisfy certain obligations of the Company contained in the Registration Rights Agreement dated April 19, 2001, by and among the Company, , as Guarantor, Credit Suisse First Boston Corporation, Deutsche Banc Alex. Brown. This material is being forwarded to you as the beneficial owner of the Existing Notes carried by us in your account but not registered in your name. A tender of such Existing Notes may only be made by us as the holder of record and pursuant to your instructions. Accordingly, we request instructions as to whether you wish us to tender on your behalf the Existing Notes held by us for your account, pursuant to the terms and conditions set forth in the enclosed Prospectus and Letter of Transmittal. Your instructions should be forwarded to us as promptly as possible in order to permit us to tender the Existing Notes on your behalf in accordance with the provisions of the Exchange Offer. The Exchange Offer will expire at 5:00 p.m., New York City time, on , 2001, unless extended by the Company (the "Expiration Date"). Any Existing Notes tendered pursuant to the Exchange Offer may be withdrawn at any time before the Expiration Date. Your attention is directed to the following: 1. The Exchange Offer is for any and all Existing Notes. 2. The Exchange Offer is subject to certain conditions set forth in the Prospectus in the section captioned "The Exchange Offer--Conditions of the Exchange Offer". 3. Any transfer taxes incident to the transfer of Existing Notes from the holder to the Company will be paid by the Company, except as otherwise provided in the Instructions in the Letter of Transmittal. 4. The Exchange Offer expires at 5:00 p.m., New York City time, on , 2001, unless extended by the Company. If you wish to have us tender your Existing Notes, please so instruct us by completing, executing and returning to us the instruction form on the back of this letter. The Letter of Transmittal is furnished to you for information only and may not be used directly by you to tender Existing Notes. INSTRUCTIONS WITH RESPECT TO THE EXCHANGE OFFER The undersigned acknowledge(s) receipt of your letter and the enclosed material referred to therein relating to the Exchange Offer made by Delco Remy International, Inc. with respect to its Existing Notes. This will instruct you to tender the Existing Notes held by you for the account of the undersigned, upon and subject to the terms and conditions set forth in the Prospectus and the related Letter of Transmittal. Please tender the Existing Notes held by you for any account as indicated below:
Aggregate Principal Amount of Existing Notes -------------------------- 11% Senior Subordinated Notes Due 2009...............
[_]Please do not tender any Existing Notes held by you for my account. Dated: , 2001 _____________________________________ Signature(s) _____________________________________ _____________________________________ Please print name(s) here _____________________________________ _____________________________________ Address(es) _____________________________________ Area Code and Telephone Number _____________________________________ Tax Identification or Social Security Number(s) None of the Existing Notes held by us for your account will be tendered unless we receive written instructions from you to do so. Unless specific contrary instructions are given in the space provided, your signature(s) hereon shall constitute an instruction to us to tender all the Existing Notes held by us for your account. EX-99.6 13 dex996.txt FORM W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 Guidelines for Determining the Proper Identification Number to Give the Payer.-- Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e. 00-0000000. The table below will help determine the number to give the payer. - ------------------------------------------------
Give the SOCIAL SECURITY For this type of account: number of -- - ------------------------------------------------ 1. An individual's The individual account 2. Two or more The actual owner of individuals the account or, if (joint account) combined funds, any one of the individuals (1) 3. Husband and wife The actual owner of (joint account) the account or, if joint funds, either person (1) 4. Custodian account of a The minor (2) minor (Uniform Gift to Minors Act) 5. Adult and minor (joint The adult or, if account) the minor is the only contributor, the minor (1) 6. Account in the name of The ward, minor, or guardian or committee incompetent person for a designated ward, (3) minor, or incompetent person 7.a. The usual revocable The grantor-trustee savings trust account (1) (grantor is also trustee) b. So-called trust The actual owner account that is (1) not a legal or valid trust under state law 8. Sole proprietorship The owner (4) account - ------------------------------------------------
Give the EMPLOYER IDENTIFICATION For this type of account: number of -- - ------------------------------------------------ 9. A valid trust, estate, The legal entity or pension trust (Do not furnish the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) (5) 10. Corporate account The corporation 11. Religious, charitable, The organization or educational organization account 12. Partnership account held The partnership in the name of the business 13. Association, club, or The organization other tax-exempt organization 14. A broker or registered The broker or nominee nominee 15. Account with the The public entity Department of Agriculture in the name of a public entity (such as a state or local government, school district, or prison) that receives agricultural program payments - ------------------------------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. Note: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. -----END PRIVACY-ENHANCED MESSAGE-----