Distribution & Supply Agreement

Exhibit 10.3


DISTRIBUTION AND SUPPLY AGREEMENT*


DRA, INC.


This Agreement is entered into July 31, 1994, by DRA, Inc., a company organized under the laws of the State of Delaware ("DRA"), and General Motors Corporation, a company organized under the laws of the State of Delaware ("GM"), through its Service Parts Operations ("SPO").


INTRODUCTION


This Agreement is entered into with reference to the following facts:


A. DR International, Inc. ("DRI"), DRA and GM have entered into the Asset
Purchase Agreement dated July 13, 1994, ("Asset Purchase Agreement"),
pursuant to which DRA will purchase from GM certain of the assets, and will
assume certain of the liabilities, of the Delco Remy Heavy Duty Starter
Motors and Generators business ("HDO"), the Delco Remy Heavy Duty Starter
Motors and Generators Remanufacturing business ("HDO Reman"), the Delco
Remy Light Duty Starter Motors business ("LDO"), the Delco Remy Light Duty
Starter Motors Remanufacturing business ("LD Reman") and the Powder Metal
Forge business ("PMF" and collectively with HDO, HDO Reman, LD Reman and
LDO, the "Businesses") of the Delco Remy Division of GM (together with any
successor unit of GM, the "Delco Remy Division").


B. Following Closing under the Asset Purchase Agreement, DRA will own and
operate that portion of the operations of Delco Remy Division which
supplied heavy duty starter motors and generators, and light duty starter
motors to SPO for distribution in the United States and Canada. The purpose
of this Agreement is to set forth the terms and conditions under which DRA
will supply such products to SPO (including to SPO through Delco Remy
Division or another GM operation). Capitalized terms used but


* Portions of this Exhibit 10.3 were omitted and filed separately with the Secretary of the Securities and Exchange Commission (the"Commission") pursuant to an application for confidential treatment filed with the Commission pursuant to Rule 406 under the Securities Act of 1933. Such portions are marked by the word "Redacted."


not otherwise defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement.


NOW, THEREFORE, in consideration of the mutual promises contained herein and intending to be legally bound, DRA and GM hereby agree as follows:


I. GRANT


1.1 Exclusive Distributor For LDO Branded Products. DRA hereby appoints GM
---------------------------------------------- to be DRA's exclusive distributor of LDO Branded Products, as hereinafter defined, within the Territory, as hereinafter defined (the "LDO Branded Territory"). Subject to the terms of this Agreement, including Section 1.5 hereof, for so long as this Agreement remains in effect DRA shall not, and shall not authorize any other party to, offer or sell LDO Branded Products within the Territory.


1.2 Exclusive Distributor for LDO Unbranded Products. DRA hereby appoints
------------------------------------------------ GM to be DRA's exclusive distributor of LDO Unbranded Products, as hereinafter defined, within the Territory only to those customers specified on Exhibit A
--------- attached hereto (the "LDO Unbranded Territory"). Subject to the terms of this Agreement, including Section 1.5 hereof, for so long as this Agreement remains in effect DRA shall not, and shall not authorize any other party to, offer or sell LDO Unbranded Products within the LDO Unbranded Territory.


1.3 Exclusive Distributor For HDO Branded and HDO Unbranded Products To
------------------------------------------------------------------- SPO Customers. DRA hereby appoints GM to be DRA's exclusive distributor of HDO - ------------- Branded Products and HDO Unbranded Products, each as hereinafter defined, within the Territory to those GM authorized dealers and wholesale distributors ("WDs") as are being serviced by SPO as of the Closing Date under the Asset Purchase Agreement and such additional dealers and WDs as may be requested by GM from time to time and consented to by DRA, which consent shall not be unreasonably withheld (the "HDO Territory"). Subject


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to the terms of this Agreement, including Section 1.5 hereof, for so long as this Agreement remains in effect DRA shall not, and shall not authorize any other party to, offer or sell HDO Products to those GM authorized dealers or WDs as are being serviced by SPO as of the Closing Date under the Asset Purchase Agreement.


1.4 Products Defined. For purposes of this Agreement: (i) "LDO Branded
---------------- Products" shall mean those light duty starter motors that carry the trademark "Delco Remy" or other trademark owned and specified by GM (other than "Remy") and their associated service parts, components and assemblies and any replacements therefor, (ii) "LDO Unbranded Products" shall mean those light duty starter motors and their associated service parts, components and assemblies and any replacements therefor other than those which are branded "Delco Remy" or other trademark owned and specified by GM (other than "Remy"); (iii) "HDO Branded Products" shall mean those heavy duty starter motors and generators that carry the trademark "Delco Remy" or other trademark owned and specified by GM (other than "Remy"), and their associated service parts, components and assemblies and any replacements therefor described in Exhibit B; and (iv) "HDO
--------- Unbranded Products" shall mean those heavy duty starter motors and generators and their associated service parts, components and assemblies and any replacements therefor other than those which are branded "Delco Remy" or other trademark owned and specified by GM (other than "Remy"); provided, however, that the terms defined in clauses (i), (ii), (iii), and (iv) respectively, shall not include such products (a) supplied as original equipment to original equipment manufacturers ("OEMs") or (b) distributed by DRA and/or such OEMs other than GM to service the aftermarket for such other OEMs. LDO Branded Products and LDO Unbranded Products are sometimes referred to herein together as "LDO Products." Similarly, HDO Branded Products and HDO Unbranded Products are sometimes referred to herein together as "HDO Products".


1.5 Other Distribution. GM presently solicits sales from, and distributes
------------------ LDO Branded Products and HDO Branded Products to GM dealers, WDs, and other accounts, and it is the intent of the parties hereunder that such LDO Branded Products distribution and HDO


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Branded Products distribution will conform to separate templates to be promptly agreed upon by the parties. Prior to Closing under the Asset Purchase Agreement, GM's Delco Remy Division had responsibility for distribution of HDO Branded Products to other than GM dealers, WDs, and other types of accounts currently served by SPO, and it is the intent of the parties hereunder that such distribution will be continued by DRA consistent with past practice. Except as expressly set forth in this Agreement, nothing herein shall prohibit DRA's solicitations of sales and distribution of LDO Branded Products, LDO Unbranded Products, HDO Branded Products or HDO Unbranded Products.


1.6 Territory Defined. For purposes of this Agreement, the term
----------------- "Territory" shall mean the 50 United States plus the District of Columbia, and Canada. Notwithstanding the foregoing, GM shall have the nonexclusive right to sell HDO and LDO Products purchased from DRA pursuant to this Agreement to GM authorized dealers and wholesale distributors located outside the Territory who are being serviced by SPO.


II. DUTIES OF DRA AND GM


2.1 Best Efforts; Good Name. GM shall use its best effort to aggressively
----------------------- market the LDO Products and HDO Branded Products within the applicable Territory in accordance with the terms of this Agreement and as DRA may direct from time to time. In the process of pursuing these efforts, GM shall, and shall instruct its employees and other representatives to, conduct itself and themselves in a manner consistent with professional and accepted business standards and practices consistent with the good name of GM, Delco Remy and DRA.


2.2 Staff and Personnel. GM shall employ and maintain sufficient qualified
------------------- staff and sales personnel to meet its obligations hereunder.


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2.3 Qualification To Do Business. GM shall make such filings and take
---------------------------- such action as may be required to qualify to do business under all applicable state and local laws in order to perform the services contemplated by this Agreement.


2.4 Price and Terms of Sales: Warranty: Royalties.
---------------------------------------------
(a) GM shall have the absolute right to establish the prices, charges, terms and conditions governing the sale of LDO Branded Products, LDO Unbranded Products sold to the customers listed on Exhibit A and HDO Products under this Agreement, within each applicable Territory but agrees to consult with and reasonably consider the advice of DRA regarding such prices, charges, terms and conditions. In each case, GM shall give DRA prompt written notice of its prices to its customers consistent with the provisions of Section 3.2 of this Agreement. Included within GM's responsibility under this paragraph and at GM's sole cost and expense shall be the scope and application of any warranty accompanying GM's resale of LDO Products and HDO Branded Products, and the administration of such warranties and any other liabilities associated with such warranty.


(b) Direct Sales of Certain LDO Unbranded Products by DRA. DRA shall
----------------------------------------------------- have the absolute right to establish the prices, charges, terms and conditions governing the sale of LDO Unbranded Products sold by DRA and DRA shall give prompt written notice to GM prior to DRA's notice to such customers, but in no event less than thirty (30) days prior to such prices becoming effective. To the extent DRA sells LDO Unbranded Products to customers in the Territory excluding GM or its Affiliates, DRA shall pay to GM a royalty equal to 3% of the Net Sales Price for all sales of LDO Unbranded Products to such customers. For purposes of this Agreement, "Affiliate" shall mean any other company or partnership in which GM owns, directly or indirectly, more than fifty percent (50%) of the outstanding capital stock or other equity interest. The "Net Sales Price" shall be the gross sales price as reflected on DRA's invoice before adding thereto transportation, insurance and similar charges and any sales, use, gross receipts or similar taxes charged to the customer on the invoice, but after deducting incentive, quantity or distribution channel discounts reflected on the invoice (but not after deducting any cash or early payment discounts). The aggregate


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royalty due GM for all sales in the immediately preceding calendar month shall be paid net 30 days.


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