-----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, NZk7+0BQ76Ad7Osy16qeXy7se9s9Jw/phA2cqgf4RdPPQGLybuBVZLmLZdAi8evU wcQkNQIC0nAW8pYEXXdcqQ== 0000950144-02-002108.txt : 20020415 0000950144-02-002108.hdr.sgml : 20020415 ACCESSION NUMBER: 0000950144-02-002108 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20011231 FILED AS OF DATE: 20020307 FILER: COMPANY DATA: COMPANY CONFORMED NAME: GENUINE PARTS CO CENTRAL INDEX KEY: 0000040987 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-MOTOR VEHICLE SUPPLIES & NEW PARTS [5013] IRS NUMBER: 580254510 STATE OF INCORPORATION: GA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-05690 FILM NUMBER: 02569464 BUSINESS ADDRESS: STREET 1: 2999 CIRCLE 75 PARKWAY CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 4049531700 MAIL ADDRESS: STREET 1: 2999 CIRCLE 75 PARKWAY CITY: ATLANTA STATE: GA ZIP: 30339 10-K 1 g74408e10-k.htm GENUINE PARTS COMPANY e10-k
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-K

     
(Mark One)    
[X]   ANNUAL REPORT PURSUANT TO SECTION 13 OF
THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended: December 31, 2001

OR
 
[  ]   TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 1-5690

GENUINE PARTS COMPANY
(Exact name of Registrant as specified in its Charter)

     
Georgia   58-0254510
(State of Incorporation)   (IRS Employer Identification No.)

2999 Circle 75 Parkway, Atlanta, Georgia 30339
(Address of Principal Executive Offices) (Zip Code)

Registrant’s telephone number, including area code: (770) 953-1700.

     Securities registered pursuant to Section 12(b) of the Act and the Exchange on which such securities are registered:

Common Stock, Par Value, $1 Per Share
New York Stock Exchange

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

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

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

     The aggregate market value of the Registrant’s Common Stock (based upon the closing sales price reported by the New York Stock Exchange and published in The Wall Street Journal for February 7, 2002) held by non-affiliates as of February 7, 2002 was approximately $5,896,007,166.

     The number of shares outstanding of Registrant’s Common Stock, as of February 7, 2002: 173,820,966

     Certain portions of the Company’s Annual Report to Shareholders for the fiscal year ended December 31, 2001 (the “Annual Report”) are incorporated by reference into this Form 10-K. Other than those portions of the Annual Report specifically incorporated by reference pursuant to Items 5 through 8 of Part II hereof, no other portions of the Annual Report shall be deemed so incorporated.

     Certain portions of the Company’s definitive Proxy Statement for the Annual Meeting of Shareholders to be held on April 15, 2002 (the “Proxy Statement”) filed pursuant to Rule 14a-6 of the Securities Exchange Act of 1934, as amended, are incorporated by reference into this Form 10-K. Other than those portions of the Proxy Statement specifically incorporated by reference pursuant to Items 10 through 13 of Part III hereof, no other portions of the Proxy Statement shall be deemed so incorporated.



 


PART I.
ITEM I. BUSINESS.
ITEM 2. PROPERTIES.
ITEM 3. LEGAL PROCEEDINGS.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
PART II.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
ITEM 6. SELECTED FINANCIAL DATA.
ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
ITEM 11. EXECUTIVE COMPENSATION.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
SIGNATURES.
Note Purchase Agreement, dated November 30, 2000
Amendment No. 10 to Pension Plan
Amendment No. 3 to Tax-Deferred Savings Plan
Amendment No. 4 to Supplemental Retirement Plan
Trust Agreement with Supplemental Retirement Plan
Amendment No. 1 to the Trust Agreement
Group Insurance Plan for Employees January 1, 2000
Sections and Pages of the Annual Report for 2001
Subsidiaries of the Company
Consent of Independent Auditors


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PART I.

ITEM I.      BUSINESS.

     Genuine Parts Company, a Georgia corporation incorporated on May 7, 1928, is a service organization engaged in the distribution of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. In 2001, business was conducted throughout most of the United States, in Canada and in Mexico from approximately 1,800 locations. As used in this report, the “Company” refers to Genuine Parts Company and its subsidiaries, except as otherwise indicated by the context; and the terms “automotive parts” and “industrial parts” refer to replacement parts in each respective category.

Segment Data. For information regarding segment data, refer to the Company’s Audited Financial Statements as set forth on pages 17 and 33 of the Annual Report to Shareholders for 2001.

Competition – General. The distribution business, which includes all segments of the Company’s business, is highly competitive with the principal methods of competition being product quality, sufficiency of inventory, price and the ability to give the customer prompt and dependable service. The Company anticipates no decline in competition in any of its business segments in the foreseeable future.

Employees. As of December 31, 2001, the Company employed approximately 31,000 persons.

AUTOMOTIVE PARTS GROUP.

     The Automotive Parts Group, the largest division of the Company, distributes automotive replacement parts and accessory items. The Company is the largest member of the National Automotive Parts Association (“NAPA”), a voluntary trade association formed in 1925 to provide nationwide distribution of automotive parts. In addition to over 300,000 available part numbers, the Company, in conjunction with NAPA, offers complete inventory, cataloging, marketing, training and other programs in the automotive aftermarket. The Automotive Parts Group is working to develop additional channels of distribution through e-commerce initiatives.

     During 2001, the Company’s Automotive Parts Group included NAPA automotive parts distribution centers and automotive parts stores (“auto parts stores” or “NAPA AUTO PARTS stores”) owned in the United States by Genuine Parts Company; automotive parts distribution centers and auto parts stores in Canada owned and operated by UAP, a wholly-owned subsidiary; auto parts stores in the United States operated by corporations in which Genuine Parts Company owned either a minority or majority interest; auto parts stores in Canada operated by corporations in which UAP owned a 50% interest; distribution centers owned by Balkamp, Inc., a majority-owned subsidiary; rebuilding plants owned by the Company and operated by its Rayloc division; distribution centers of ACDelco, Motorcraft and other automotive supplies owned and operated by Johnson Industries, a wholly-owned subsidiary; and automotive parts distribution centers and automotive parts stores in Mexico, owned and operated by Grupo Auto Todo, S.A. de C.V. (“Auto Todo”), a company in which a wholly-owned subsidiary of Genuine Parts Company owns a controlling interest.

     In 2001, Johnson Industries acquired Coach and Motors, a single branch distribution center in Detroit, Michigan. The Automotive Parts Group acquired Morgan’s Auto Supply, four NAPA stores in Maine; Taylor Automotive, four NAPA stores in Indiana and Granger Supply Company, one NAPA store in Utah.

     The Company has a 15% interest in Mitchell Repair Information (“MRIC”), a subsidiary of Snap-on Incorporated. MRIC is a leading diagnostic and repair information company with over 35,000 North American subscribers linked to its services and information databases. MRIC’s core product, “Mitchell ON-DEMAND”, is a premier electronic repair information source in the automotive aftermarket.

     The Company’s NAPA automotive parts distribution centers distribute replacement parts (other than body parts) for substantially all motor vehicle makes and models in service in the United States, including imported vehicles, trucks, SUV’s, buses, motorcycles, recreational vehicles and farm vehicles. In addition, the Company distributes small engines and replacement parts for farm equipment and heavy duty equipment. The Company’s inventories also include accessory items for such vehicles and equipment, and supply items used by a wide variety of customers in the automotive aftermarket, such as repair shops, service stations, fleet operators, automobile and truck dealers, leasing companies, bus and truck lines, mass merchandisers, farms, industrial concerns and individuals who perform their own maintenance and parts installation. Although the Company’s domestic automotive operations purchase from more than 65 different suppliers, approximately 61% of 2001 automotive parts inventories were purchased from 10 major suppliers. Since 1931, the Company has had return privileges with most of its suppliers, which has protected the Company from inventory obsolescence.

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Distribution System. In 2001, Genuine Parts Company operated 61 domestic NAPA automotive parts distribution centers located in 38 states and approximately 840 domestic company-owned NAPA AUTO PARTS stores located in 43 states. At December 31, 2001, Genuine Parts Company owned either a minority or majority interest in 56 corporations which operated approximately 120 auto parts stores in 29 states.

     UAP, founded in 1926, is a Canadian leader in the distribution, marketing, and rebuilding of replacement parts and accessories for automobiles and trucks. UAP has annual sales of approximately $747 million Canadian ($482 million US) and employs approximately 4,200 people. UAP operates a network of 15 distribution centers supplying approximately 603 UAP/NAPA auto parts and 53 TRACTION wholesalers, which supply parts to small fleet owners and operators. These include approximately 170 company owned stores, 30 joint venture or progressive owners in which UAP owns a 50% interest, and approximately 406 independently owned stores. UAP supplies bannered installers and independent installers in all provinces of Canada, as well as networks of service stations and repair shops operating under the banners of national accounts. UAP is licensed to and uses the NAPA® name in Canada.

     In Mexico, Auto Todo owns and operates 10 distribution centers and 18 auto parts stores. Auto Todo is licensed to and uses the NAPA® name in Mexico.

     The Company’s distribution centers serve approximately 5,000 independently owned NAPA AUTO PARTS stores located throughout the market areas served. NAPA AUTO PARTS stores, in turn, sell to a wide variety of customers in the automotive aftermarket. Collectively, these independent automotive parts stores account for approximately 25% of the Company’s total sales with no automotive parts store or group of automotive parts stores with individual or common ownership accounting for more than 0.5% of the total sales of the Company.

Products. Distribution centers have access to over 300,000 different parts and related supply items. Each item is cataloged and numbered for identification and accessibility. Significant inventories are carried to provide for fast and frequent deliveries to customers. Most orders are filled and shipped the same day as received. The majority of sales are on terms which require payment within 30 days of the statement date. The Company does not manufacture any of the products it distributes. The majority of products are distributed under the NAPA® name, a mark licensed to the Company by NAPA.

Related Operations. A majority-owned subsidiary of Genuine Parts Company, Balkamp, Inc. (“Balkamp”), distributes a wide variety of replacement parts and accessory items for passenger cars, heavy duty vehicles, motorcycles and farm equipment. In addition, Balkamp distributes service items such as testing equipment, lubricating equipment, gauges, cleaning supplies, chemicals and supply items used by repair shops, fleets, farms and institutions. Balkamp packages many of the approximately 24,000 part numbers which constitute the “Balkamp” line of products which are distributed to the members of NAPA. These products are categorized in 160 different product groups purchased from more than 400 domestic suppliers and 130 foreign manufacturers. In addition to the Balkamp line of products, Balkamp distributes approximately 100 part numbers of nationally branded consumer appearance products and oils through their Automotive Redistribution Center. These products are cataloged separately for convenience for NAPA customers. BALKAMP®, a federally registered trademark, is important to the sales and marketing promotions of the Balkamp organization. Balkamp has four distribution centers located in Indianapolis and Plainfield, Indiana, Greenwood, Mississippi, and West Jordan, Utah.

     Johnson Industries (“Johnson”), a wholly-owned subsidiary of the Company, is an independent distributor of ACDelco, Motorcraft and other automotive supplies. Johnson, founded in 1924, sells primarily to large fleets and new car dealers as well as providing ACDelco products to NAPA members. Johnson has 12 distribution centers throughout the U.S.

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     The Company, through its Rayloc division, also operates five plants where certain small automotive parts are rebuilt. These products are distributed to the members of NAPA under the NAPA brand name. Rayloc® is a mark licensed to the Company by NAPA.

Segment Data. In the year ended December 31, 2001, sales from the Automotive Parts Group approximated 51% of the Company’s net sales as compared to 50% in 2000 and 51% in 1999.

Service to NAPA AUTO PARTS Stores. The Company believes that the quality and the range of services provided to its automotive parts customers constitute a significant advantage for its automotive parts distribution system. Such services include fast and frequent delivery, obsolescence protection, parts cataloging (including the use of computerized NAPA AUTO PARTS catalogs) and stock adjustment through a continuing parts classification system which allows independent jobbers to return certain merchandise on a scheduled basis. The Company offers its NAPA AUTO PARTS store customers various management aids, marketing aids and service on topics such as inventory control, cost analysis, accounting procedures, group insurance and retirement benefit plans, marketing conferences and seminars, sales and advertising manuals and training programs. Point of sale/inventory management is available through TAMS® (Total Automotive Management Systems), a computer system designed and developed by the Company for the NAPA AUTO PARTS store.

     In association with NAPA, the Company has developed and refined an inventory classification system to determine optimum distribution center and auto parts store inventory levels for automotive parts stocking based on automotive registrations, usage rates, production statistics, technological advances and other similar factors. This system, which undergoes continuous analytical review, is an integral part of the Company’s inventory control procedures and comprises an important feature of the inventory management services, which the Company makes available to its NAPA AUTO PARTS store customers. Over the last 10 years, losses to the Company from obsolescence have been insignificant, and the Company attributes this to the successful operation of its classification system, which involves product return privileges with most of its suppliers.

Competition. In the distribution of automotive parts, the Company competes with automobile manufacturers (some of which sell replacement parts for vehicles built by other manufacturers as well as those which they build themselves), automobile dealers, warehouse clubs and large automotive parts retail chains. In addition, the Company competes with the distributing outlets of parts manufacturers, oil companies, mass merchandisers, including national retail chains, and with other parts distributors and jobbers.

NAPA. The Company is a member of the National Automotive Parts Association, a voluntary association formed in 1925 to provide nationwide distribution of automotive replacement parts. NAPA, which neither buys nor sells automotive parts, functions as a trade association whose members in 2001 operated 68 distribution centers located throughout the United States, 61 of which were owned and operated by the Company. NAPA develops marketing concepts and programs that may be used by its members. It is not involved in the chain of distribution.

     Among the automotive lines that each NAPA member purchases and distributes are certain lines designated, cataloged, advertised and promoted as “NAPA” lines. The members are not required to purchase any specific quantity of parts so designated and may, and do, purchase competitive lines from other supply sources.

     The Company and the other NAPA members use the federally registered trademark NAPA® as part of the trade name of their distribution centers and parts stores. The Company contributes to NAPA’s national advertising program, which is designed to increase public recognition of the NAPA name and to promote NAPA product lines.

     The Company is a party, together with other members of NAPA and NAPA itself, to a consent decree entered by the Federal District Court in Detroit, Michigan, on May 4, 1954. The consent decree enjoins certain practices under the federal antitrust laws, including the use of exclusive agreements with manufacturers of automotive parts, allocation or division of territories among several NAPA members, fixing of prices or terms of sale for such parts among such members, and agreements to adhere to any uniform policy in selecting parts customers or determining the number and location of, or arrangements with, auto parts customers.

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INDUSTRIAL PARTS GROUP.

     The Industrial Parts Group distributes industrial replacement parts and related supplies throughout the United States, Canada, and Mexico. This Group distributes industrial bearings and power transmission equipment replacement parts, including hydraulic and pneumatic products, material handling components, agricultural and irrigation equipment and related supplies. The Group is continuing to enhance their internet-based procurement solutions with MotionMRO.com.

     The Company distributes industrial parts in the United States through Motion Industries, Inc. (“Motion”), headquartered in Birmingham, Alabama. Motion Industries is a wholly-owned subsidiary of the Company. In Canada, industrial parts are distributed by Motion Industries (Canada), Inc. [“Motion (Canada)”], an operating group in the North American structure. Motion (Canada)’s service area includes nine provinces of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland, Nova Scotia, Ontario, Quebec, and Saskatchewan. In Mexico, industrial parts are distributed by another operating division, Motion Industries (Mexico) [(“Motion (Mexico)”], through a partnership with power transmission specialist Refacciones Industriales de Mexico (RIMSA). Motion (Mexico) serves the market through seven locations in seven major Mexican cities. The Company has return privileges with most of its suppliers, which has protected the Company from inventory obsolescence.

     As of December 31, 2001, the Group served more than 150,000 customers in all types of industries located throughout the United States, Mexico and Canada.

Distribution System. In North and South America, the Industrial Parts Group operates 503 branches, nine distribution centers, three redistribution centers, and 27 service centers. The distribution centers stock and distribute more than 200,000 different items purchased from more than 250 different suppliers. Approximately 65% of 2001 total industrial purchases were made from 10 major suppliers. Sales are generated from the Group’s branches located in 48 states, nine provinces in Canada, and seven cities in Mexico. Each branch has warehouse facilities that stock significant amounts of inventory representative of the lines of products used by customers in the respective market area served.

     Motion (Canada) operates an industrial parts and two distribution centers for the 64 Canadian locations serving industrial and agricultural markets. Motion (Canada) also distributes irrigation systems and related supplies.

Products. The Industrial Parts Group distributes a wide variety of products to its customers, primarily industrial concerns, to maintain and operate plants, machinery and equipment. Products include such items as hoses, belts, bearings, pulleys, pumps, valves, chains, gears, sprockets, speed reducers and electric motors. The nature of this Group’s business demands the maintenance of large inventories and the ability to provide prompt and demanding delivery requirements. Virtually all of the products distributed are installed by the customer. Most orders are filled immediately from existing stock and deliveries are normally made within 24 hours of receipt of order. The majority of all sales are on open account.

Related Information. Non-exclusive distributor agreements are in effect with most of the Group’s suppliers. The terms of these agreements vary; however, it has been the experience of the Group that the custom of the trade is to treat such agreements as continuing until breached by one party, or until terminated by mutual consent.

Integrated Supply. Motion’s integrated supply process reduces the costs associated with MRO (Maintenance, Repair and Operation) inventory management, but also enables the manufacturing customer to focus on its core competency, free working capital associated with inventories, improve service levels to end-users, and allow management to focus on more strategic concerns. Motion’s integrated supply process analyzes a customer’s current operation to develop integration goals and then provides solutions based on industry’s accepted best practices.

Segment Data. In the year ended December 31, 2001, sales from the Company’s Industrial Parts Group approximated 27% of the Company’s net sales as compared to 28% in 2000 and 27% in 1999.

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Competition. The Industrial Parts Group competes with other distributors specializing in the distribution of such items, general line distributors and others who have developed or joined integrated supply programs. To a lesser extent, the Group competes with manufacturers that sell directly to the customer.

OFFICE PRODUCTS GROUP.

     The Office Products Group, operated through S. P. Richards Company (“S. P. Richards”), a wholly-owned subsidiary of the Company, is headquartered in Atlanta, Georgia. S. P. Richards is engaged in the wholesale distribution of a broad line of office and other products that are used in the daily operation of businesses, schools, offices and institutions. Office products fall into the general categories of computer supplies, imaging supplies, office machines, general office supplies, janitorial supplies, breakroom supplies, and office furniture. Horizon USA Data Supplies, Inc., a wholly-owned subsidiary of S. P. Richards, is a computer supplies distributor headquartered in Reno, Nevada. In 2001, Horizon opened facilities in Toronto, Canada and Cranbury, New Jersey. The Office Products Group is developing several web-based products to benefit resellers, manufacturers and consumers.

     The Office Products Group is represented in Canada through Norwestra Sales (1992), Inc. (“Norwestra”). With its headquarters near Vancouver, British Columbia, Norwestra services office product resellers throughout Western Canada with locations in Vancouver, Toronto, Calgary and Winnipeg.

     The Office Products Group distributes computer supplies including diskettes, printer supplies, printout paper and printout binders; office furniture to include desks, credenzas, chairs, chair mats, partitions, files and computer furniture; office machines to include telephones, answering machines, calculators, typewriters, shredders and copiers; and general office supplies to include copier supplies, desk accessories, business forms, accounting supplies, binders, report covers, writing instruments, note pads, envelopes, secretarial supplies, mailroom supplies, filing supplies, art/drafting supplies, janitorial supplies, breakroom supplies and audio visual supplies. The Company has return privileges with most of its suppliers, which has protected the Company from inventory obsolescence.

     The Office Products Group distributes more than 30,000 items to over 6,000 office supply dealers from 44 facilities located in 28 states and Canada. Approximately 50% of 2001 total office products purchases were made from 10 major suppliers.

     The Office Products Group sells to resellers of office products. Customers are offered comprehensive marketing programs, which include flyers, other promotional material and personalized product catalogs. The marketing programs are supported by all the Group’s distribution centers which stock all cataloged products and have the capability to provide overnight delivery.

     While many recognized brand-name items are carried in inventory, S. P. Richards also markets items produced for it under its own SPARCO® brand name, as well as its NATURE SAVER® brand of recycled products, Elite Image™ printer supplies, Brittannia brand of fashionable writing instruments, and Compucessory™ brand of computer supplies and accessories.

Segment Data. In the year ended December 31, 2001, sales from the Company’s Office Products Group approximated 17% of the Company’s net sales as compared to 16% in 2000 and 15% in 1999.

Competition. In the distribution of office supplies to retail dealers, S. P. Richards competes with many other wholesale distributors as well as with manufacturers of office products and large national retail chains.

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ELECTRICAL/ELECTRONIC MATERIALS GROUP.

     The Electrical/Electronic Materials Group was formed on July 1, 1998 through the acquisition of EIS, Inc. (“EIS”). This Group distributes materials for the manufacture and repair of electrical and electronic apparatus. With branch locations in 36 cities nationwide and in Mexico, this Group stocks over 100,000 items, from insulating and conductive materials to assembly tools and test equipment. This Group also has three manufacturing facilities that provide custom fabricated parts and one manufacturing plant that produces printed circuit board drillroom products. The Electrical/Electronic Materials Group is an important single source to original equipment manufacturers, repair shops, the electronic assembly market, and printed circuit board manufacturers. EIS actively utilizes its E-commerce Internet site to present its products to customers while allowing these on-line visitors to conveniently purchase from a large product assortment.

     In 2001, the Company distributed electrical materials through EIS, headquartered in Atlanta, Georgia. Electronic materials were distributed through EIS’s operating divisions, Com-Kyl and Circuit Supply. Both electrical and electronic products are distributed from warehouse locations in major user markets throughout the U.S. The Company has return privileges with most of its suppliers, which has protected the Company from inventory obsolescence.

Products. The Electrical/Electronic Materials Group distributes a wide variety of products to customers from over 400 vendors. Products include such items as magnet wire, copper clad laminate, conductive materials, insulating and shielding materials, assembly tools, test equipment, adhesives and chemicals, pressure sensitive tapes, solder, anti-static products, and thermal management products. To meet the prompt delivery demands of its customers, this Group maintains large inventories. The majority of sales are on open account. Approximately 50% of 2001 total Electrical/Electronic Materials Group purchases were made from 25 major suppliers.

Integrated Supply. The Electrical/Electronic Materials Group’s integrated supply programs are a part of the marketing strategy, as a greater number of customers—especially national accounts—are given the opportunity to participate in this low-cost, high-service capability. The Group developed AIMS (Advanced Inventory Management System), a totally integrated, highly automated solution for inventory management. The Group’s Integrated Supply offering also includes SupplyPro, an electronic vending dispenser used to eliminate costly tool crib, or in-house stores, at customer warehouse facilities.

Segment Data. In the year ended December 31, 2001 sales from the Company’s Electrical/Electronic Materials Group approximated 5% of the Company’s sales, as compared to 6% in 2000 and 7% in 1999.

Competition. The Electrical/Electronic Materials Group competes with other distributors specializing in the distribution of electrical and electronic products, general line distributors, and, to a lesser extent, manufacturers that sell directly to customers.

* * * * * * * * * *

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Executive Officers of the Company. The table below sets forth the name and age of each person deemed to be an executive officer of the Company as of February 7, 2002, the position or office held by each and the period during which each has served as such. Each executive officer is elected by the Board of Directors and serves at the pleasure of the Board of Directors until his successor has been elected and has qualified, or until his earlier death, resignation, removal, retirement or disqualification.

                 
                Year First
Name   Age   Position of Office   Assumed Position

 
 
 
Larry L. Prince     63     Chairman of the Board of Directors and
Chief Executive Officer
  1990/1989
Thomas C. Gallagher     54     President and Chief Operating Officer   1990
George W. Kalafut     67     Executive Vice President   1991
Jerry W. Nix     56     Executive Vice President – Finance *   2000
Edward Van Stedum     52     Senior Vice President-Human Resources   1996

*   Also serves as the Company’s Principal Financial and Accounting Officer.

     All executive officers have been employed by and have served as officers of the Company for at least the last five years.

Forward Looking Statements. Statements in this report or incorporated herein constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company cautions that its forward-looking statements involve risks and uncertainties. The Company undertakes no duty to update its forward-looking statements, which reflect the Company’s beliefs, expectations, and plans as of the present. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors include, but are not limited to, changes in general economic conditions, the growth rate of the market for the Company’s products and services, the ability to maintain favorable supplier arrangements and relationships, competitive product and pricing pressures, the effectiveness of the Company’s promotional, marketing and advertising programs, changes in laws and regulations, including changes in accounting and taxation guidance, the uncertainties of litigation, as well as other risks and uncertainties discussed from time to time in the Company’s filings with the Securities and Exchange Commission.

ITEM 2.      PROPERTIES.

     The Company’s headquarters and Automotive Parts Group headquarters are located in two adjacent office buildings owned by Genuine Parts Company in Atlanta, Georgia.

     The Company’s Automotive Parts Group currently operates 61 NAPA Distribution Centers in the United States distributed among eight geographic divisions. Approximately 90% of the distribution center properties are owned by the Company. At December 31, 2001, the Company operated approximately 840 NAPA AUTO PARTS stores located in 43 states, and the Company owned either a minority or majority interest in approximately 120 additional auto parts stores located in 29 states. Other than NAPA AUTO PARTS stores located within Company owned distribution centers, most of the automotive parts stores in which the Company has an ownership interest were operated in leased facilities. In addition, UAP operated 15 distribution centers and approximately 200 automotive parts and TRACTION stores in Canada, and Auto Todo operates 10 distribution centers and 18 stores in Mexico. The Company’s Automotive Parts Group also operates four Balkamp distribution centers, five Rayloc rebuilding plants, one transfer and shipping facility, and twelve Johnson Industries distribution centers.

     The Company’s Industrial Parts Group, operating through Motion, Motion (Canada) and Motion (Mexico), operates 9 distribution centers, 3 redistribution centers, 27 service centers and 503 branches. Approximately 90% of these branches are operated in leased facilities.

     The Company’s Office Products Group operates 40 facilities in the United States and 4 facilities in Canada distributed among the Group’s five geographic divisions. Approximately 75% of these facilities are operated in leased buildings.

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     The Company’s Electrical/Electronic Materials Group operates in 34 cities in the United States and 2 cities in Mexico. All of this Group’s 36 facilities are operated in leased buildings except three facilities, which are owned.

     For additional information regarding rental expense on leased properties, see “Note 5 of Notes to Consolidated Financial Statements” on Page 30 of the Company’s Annual Report to Shareholders for the year ended December 31, 2001.

ITEM 3.      LEGAL PROCEEDINGS.

     The Company is subject to various legal and governmental proceedings, many involving routine litigation incidental to the businesses. At any given time, the Company is a party to several hundred product liability and other lawsuits resulting from its national distribution of automotive parts and supplies. Many of these involve claims of personal injury allegedly resulting from the use of automotive parts distributed by the Company. While litigation of any type contains an element of uncertainty, the Company believes that its defense and ultimate resolution of pending and reasonably anticipated claims will continue to occur within the ordinary course of the Company’s business, and that resolution of these claims will not have a material adverse effect on the Company’s operations or consolidated business and financial condition.

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

     Not applicable.

PART II.

ITEM 5.      MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     Information required by this item is set forth under the heading “Market and Dividend Information” on Page 16 of the Company’s Annual Report to Shareholders for the year ended December 31, 2001, and is incorporated herein by reference. During the year of 2001, the Company issued an aggregate of approximately 643,303 shares of Company stock in connection with the acquisition of three companies. This number of shares is subject to change based upon closing amount settlements, indemnification obligations and the satisfaction of earnout thresholds. All such shares were issued in transactions exempt from registration pursuant to Section 4(2) of the Securities Act of 1933, as amended, and the regulations thereunder. Such acquisitions were: Johnson Industries, Inc. which closed on January 5, 1999 (additional earnout shares issued in 2001); Morgan’s Auto Supply, which closed January 1, 2001; Taylor Automotive, Incorporated and Tayco, Inc., which closed March 1, 2001; and Granger Supply Company, Inc., which closed March 31, 2001.

ITEM 6.      SELECTED FINANCIAL DATA.

     Information required by this item is set forth under the heading “Selected Financial Data” on Page 16 of the Company’s Annual Report to Shareholders for the year ended December 31, 2001, and is incorporated herein by reference.

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

     Information required by this item is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Pages 18 through 21 of the Company’s Annual Report to Shareholders for the year ended December 31, 2001, and is incorporated herein by reference.

ITEM 7A.    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

     Information related to this item is set forth under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” on Pages 18 through 21 and under “Note 3 – Credit Facilities” on Pages 29 and 30 of the Company’s Annual Report to Shareholders for the year ended December 31, 2001, and is incorporated herein by reference.

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ITEM 8.         FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

     Information required by this item is set forth in the consolidated financial statements on Pages 17 and 23 through 33, in “Report of Independent Auditors” on Page 22, and under the heading “Quarterly Results of Operations” on Page 21, of the Company’s Annual Report to Shareholders for the year ended December 31, 2001, and is incorporated herein by reference.

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

     Not applicable.

PART III.

ITEM 10.       DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     Information required by this item is set forth under the headings “Nominees for Director” and “Members of the Board of Directors Continuing in Office” on Pages 3 through 5 of the definitive proxy statement for the Company’s Annual Meeting to be held on April 15, 2002, and is incorporated herein by reference. Certain information required by this Item is included in and incorporated by reference to Item 1 of Part I of this Annual Report on Form 10-K.

ITEM 11.       EXECUTIVE COMPENSATION.

     Information required by this item is set forth under the heading “Executive Compensation and Other Benefits” on Pages 8 and 9, and under the headings “Compensation Committee Interlocks and Insider Participation”, “Compensation Pursuant to Plans” and “Termination of Employment and Change of Control Arrangements” on Pages 12 through 15 of the definitive proxy statement for the Company’s Annual Meeting to be held on April 15, 2002, and is incorporated herein by reference. In no event shall the information contained in the definitive proxy statement for the Company’s 2001 Annual Meeting on Pages 10 through 12 under the heading “Compensation and Stock Option Committee Report on Executive Compensation”; on Pages 16 and 17 under the heading “Performance Graph”; or on Pages 17 and 18 under the heading “Audit Committee Report” be incorporated herein by reference.

ITEM 12.       SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

     Information required by this item is set forth under the headings “Common Stock Ownership of Certain Beneficial Owners” and “Common Stock Ownership of Management” on Pages 5 through 8 of the definitive proxy statement for the Company’s Annual Meeting to be held on April 15, 2002, and is incorporated herein by reference.

ITEM 13.       CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

     Not applicable.

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PART IV.

ITEM 14.       EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

     (a)  (1) and (2) The response to this portion of Item 14 is submitted as a separate section of this report.

     (3)  The following Exhibits are filed as part of this report in Item 14(c):

     
Exhibit 3.1   Restated Articles of Incorporation of the Company, dated as of April 18, 1988, and as amended April 17, 1989 and amendments to the Restated Articles of Incorporation of the Company, dated as of November 20, 1989 and April 18, 1994. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 3, 1995.)
     
Exhibit 3.2   By-laws of the Company, as amended February 19, 2001. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 12, 2001.)
     
Exhibit 4.1   Shareholder Protection Rights Agreement, dated as of November 15, 1999, between the Company and SunTrust Bank, Atlanta, as Rights Agent. (Incorporated herein by reference from the Company’s Report on Form 8-K, dated November 15, 1999.)
     
Exhibit 4.2   Specimen Common Stock Certificate. (Incorporated herein by reference from the Company’s Registration Statement on Form S-1, Registration No. 33-63874.)
     
Exhibit 4.3   Note Purchase Agreement, dated November 30, 2001.
     
Instruments with respect to long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis have not been filed. The Registrant agrees to furnish to the Commission a copy of each such instrument upon request.
     
Exhibit 10.1 *   1988 Stock Option Plan. (Incorporated herein by reference from the Company’s Annual Meeting Proxy Statement, dated March 9, 1988.)
     
Exhibit 10.2 *   Form of Amendment to Deferred Compensation Agreement, adopted February 13, 1989, between the Company and certain executive officers of the Company. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 15, 1989.)
     
Exhibit 10.3 *   Form of Agreement adopted February 13, 1989, between the Company and certain executive officers of the Company providing for a supplemental employee benefit upon a change in control of the Company. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 15, 1989.)
     
Exhibit 10.4 *   Genuine Parts Company Supplemental Retirement Plan, effective January 1, 1991. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 8, 1991.)
     
Exhibit 10.5 *   1992 Stock Option and Incentive Plan, effective April 20, 1992. (Incorporated herein by reference from the Company’s Annual Meeting Proxy Statement, dated March 6, 1992.)
     
Exhibit 10.6 *   Restricted Stock Agreement dated March 31, 1994, between the Company and Larry L. Prince. (Incorporated herein by reference from the Company’s Form 10-Q, dated May 6, 1994.)
     
Exhibit 10.7 *   Restricted Stock Agreement dated March 31, 1994, between the Company and Thomas C. Gallagher. (Incorporated herein by reference from the Company’s Form 10-Q, dated May 6, 1994.)

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Exhibit 10.8 *   The Genuine Parts Company Restated Tax-Deferred Savings Plan, effective January 1, 1993. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 3, 1995.)
     
Exhibit 10.9 *   Amendment No. 2 to the Genuine Parts Company Supplemental Retirement Plan, effective January 1, 1995. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 3, 1995.)
     
Exhibit 10.10 *   Genuine Partnership Plan, as amended and restated January 1, 1994. (Incorporated herein by reference form the Company’s Annual Report on Form 10-K, dated March 3, 1995.)
     
Exhibit 10.11 *   Genuine Parts Company Pension Plan, as amended and restated effective January 1, 1989. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 3, 1995.)
     
Exhibit 10.12 *   Amendment No. 1 to the Genuine Partnership Plan, effective September 1, 1995. (Incorporated herein by reference to the Company’s Form 10-K, dated March 7, 1996.)
     
Exhibit 10.13 *   Amendment No. 1 to the Genuine Parts Company Pension Plan, effective April 1, 1995. (Incorporated herein by reference to the Company’s Form 10-K, dated March 7, 1996.)
     
Exhibit 10.14 *   Amendment No. 2 to the Genuine Parts Company Pension Plan, dated September 28, 1995, effective January 1, 1995. (Incorporated herein by reference to the Company’s Form 10-K, dated March 7, 1996.)
     
Exhibit 10.15 *   Genuine Parts Company Directors’ Deferred Compensation Plan, effective November 1, 1996. (Incorporated herein by reference to the Company’s Form 10-K, dated March 10, 1997.)
     
Exhibit 10.16 *   Amendment No. 3 to the Genuine Parts Company Pension Plan dated May 24, 1996, effective January 1, 1996. (Incorporated herein by reference to the Company’s Form 10-K, dated March 10, 1997.)
     
Exhibit 10.17 *   Amendment No. 4 to the Genuine Parts Company Pension Plan dated December 3, 1996, effective January 1, 1996. (Incorporated herein by reference to the Company’s Form 10-K, dated March 10, 1997.)
     
Exhibit 10.18 *   Amendment No. 2 to the Genuine Partnership Plan, dated December 3, 1996, effective November 1, 1996. (Incorporated herein by reference to the Company’s Form 10-K, dated March 10, 1997.)
     
Exhibit 10.19 *   Amendment No. 4-A to the Genuine Parts Company Pension Plan, dated August 29, 1997, effective January 1, 1996. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1998.)
     
Exhibit 10.20 *   Amendment No. 5 to the Genuine Parts Company Pension Plan, dated August 7, 1997. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1998.)
     
Exhibit 10.21 *   Amendment No. 6 to the Genuine Parts Company Pension Plan, dated October 6, 1997, effective January 1, 1997. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1998.)

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Exhibit 10.22 *   Amendment No. 3 to the Genuine Partnership Plan, dated August 7, 1997. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1998.)
     
Exhibit 10.23 *   Amendment No. 3 to the Genuine Parts Company Supplemental Retirement Plan, dated August 29, 1997, effective August 15, 1997. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1998.)
     
Exhibit 10.24 *   Genuine Parts Company Death Benefit Plan, effective July 15, 1997. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1998.)
     
Exhibit 10.25 *   Amendment No. 4 to the Genuine Partnership Plan, dated August 19, 1998, effective January 1, 1998. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1999.)
     
Exhibit 10.26 *   Amendment No. 5 to the Genuine Partnership Plan, dated December 7, 1998, effective January 1, 1999. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1999.)
     
Exhibit 10.27 *   Amendment No. 6 to the Genuine Partnership Plan, dated December 7, 1998, effective January 1, 1994. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1999.)
     
Exhibit 10.28 *   Amendment No. 7 to the Genuine Parts Company Pension Plan, dated August 19, 1998, effective January 1, 1998. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1999.)
     
Exhibit 10.29 *   Genuine Parts Company 1999 Long-Term Incentive Plan. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1999.)
     
Exhibit 10.30 *   Genuine Parts Company 1999 Annual Incentive Bonus Plan, effective April 19, 1995. (Incorporated herein by reference from the Company’s Annual Report on Form 10-K, dated March 10, 1999.)
     
Exhibit 10.31 *   Restricted Stock Agreement dated February 25, 1999, between the Company and Larry L. Prince. (Incorporated herein by reference from the Company’s Form 10-Q, dated May 3, 1999.)
     
Exhibit 10.32 *   Restricted Stock Agreement dated February 25, 1999, between the Company and Thomas C. Gallagher. (Incorporated herein by reference from the Company’s Form 10-Q, dated May 3, 1999.)
     
Exhibit 10.33 *   Amendment No. 8 to the Genuine Parts Company Pension Plan, dated January 26, 1999, effective September 30, 1998. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.34 *   Amendment No. 9 to the Genuine Parts Company Pension Plan, dated December 30, 1999, effective January 1, 1989; December 31, 1999; and January 1, 2000. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)

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Exhibit 10.35 *   Amendment to the Genuine Parts Company 1992 Stock Option and Incentive Plan, dated April 19, 1999, effective April 19, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.36 *   Amendment to the Genuine Parts Company Tax-Deferred Savings Plan, dated April 19, 1999, effective April 19, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.37 *   Amendment to the Genuine Parts Company Original Deferred Compensation Plan, dated April 19, 1999, effective April 19, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.38 *   Amendment to the Genuine Parts Company Directors’ Deferred Compensation Plan, dated April 19, 1999, effective April 19, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.39 *   Amendment to the Genuine Parts Company Supplemental Retirement Plan, dated April 19, 1999, effective April 19, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.40 *   Amendment No. 7 to the Genuine Partnership Plan, dated January 26, 1999, effective January 1, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.41 *   Amendment No. 8 to the Genuine Partnership Plan, dated February 4, 1999, effective January 1, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.42 *   Amendment No. 9 to the Genuine Partnership Plan, dated April 5, 1999, effective April 1, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.43 *   Amendment No. 10 to the Genuine Partnership Plan, dated December 30, 1999, effective November 30, 1999. (Incorporated herein by reference from the Company’s Form 10-K, dated March 10, 2000.)
     
Exhibit 10.44*   Amendment No. 11 to the Genuine Partnership Plan, dated January 19, 2001, effective April 1, 2000. (Incorporated herein by reference from the Company’s Form 10-K, dated March 12, 2001.)
     
Exhibit 10.45*   Amendment No. 12 to the Genuine Partnership Plan, dated January 19, 2001, effective December 29, 2000. (Incorporated herein by reference from the Company’s Form 10-K, dated March 12, 2001.)
     
Exhibit 10.46*   Amendment No. 10 to the Genuine Parts Company Pension Plan, dated November 28, 2001, effective July 1, 2001.
     
Exhibit 10.47*   Amendment No. 3 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 28, 2001, effective July 1, 2001.
     
Exhibit 10.48*   Amendment No. 4 to the Genuine Parts Company Supplemental Retirement Plan, dated November 28, 2001, effective July 1, 2001.
     
Exhibit 10.49*   Trust Agreement Executed in Conjunction with the Genuine Parts Company Supplemental Retirement Plan, dated July 1, 2001, effective July 1, 2001.

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Exhibit 10.50*   Amendment No. 1 to the Trust Agreement Executed in Conjunction with the Genuine Parts Company Non-Qualified Deferred Compensation Plans, dated December 5, 2001, effective July 1, 2001.
     
Exhibit 10.51*   Group Insurance Plan for Employees of Genuine Parts Company, as amended and restated effective January 1, 2000.
     
    * Indicates executive compensation plans and arrangements.
     
Exhibit 13   The following sections and pages of the 2001 Annual Report to Shareholders:
     
    - - Selected Financial Data on Page 16
    - - Market and Dividend Information on Page 16
    - - Management’s Discussion and Analysis of Financial Condition on Pages 18-21
    - - Quarterly Results of Operations on Page 21
    - - Segment Data on Page 17
    - - Report of Independent Auditors on Page 22
    - - Consolidated Financial Statements and Notes to Consolidated Financial Statements on Pages 23-33.
     
Exhibit 21   Subsidiaries of the Company
     
Exhibit 23   Consent of Independent Auditors

(b)   Reports on Form 8-K. There were no Reports on Form 8-K filed for the period ended December 31, 2001.
 
(c)   Exhibits. The response to this portion of Item 14 is submitted as a separate section of this report.
 
(d)   Financial Statement Schedules. The response to this portion of Item 14 is submitted as a separate section of this report.

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SIGNATURES.

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

GENUINE PARTS COMPANY

             
 
 
/s/ Larry L. Prince   3/7/02   /s/ Jerry W. Nix   3/7/02

 
Larry L. Prince   (Date)   Jerry W. Nix   (Date)
Chairman of the Board       Executive Vice President – Finance    
and Chief Executive Officer       (Principal Financial and Accounting Officer)    

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

             
/s/ Richard W. Courts II   2/18/02   /s/ Bradley Currey, Jr.   2/18/02

 
Richard W. Courts II   (Date)   Bradley Currey, Jr.   (Date)
Director       Director    
             
        /s/ Robert P. Forrestal   2/18/02

 
Jean Douville   (Date)   Robert P. Forrestal   (Date)
Director       Director    
             
/s/ Thomas C. Gallagher   2/18/02   /s/ Michael M. E. Johns   2/18/02

 
Thomas C. Gallagher   (Date)   Michael M. E. Johns   (Date)
Director       Director    
President and Chief Operating Officer            
             
/s/ J. Hicks Lanier   2/18/02   /s/ Larry L. Prince   2/18/02

 
J. Hicks Lanier   (Date)   Larry L. Prince   (Date)
Director       Director, Chairman of the Board and Chief Executive Officer
             
/s/ Alana S. Shepherd   2/18/02   /s/ Lawrence G. Steiner   2/18/02

 
Alana S. Shepherd   (Date)   Lawrence G. Steiner   (Date)
Director       Director    
             
/s/ James B. Williams   2/18/02        

James B. Williams   (Date)        
Director            

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Annual Report on Form 10-K

Item 14(a)(1) and (2),(c) and (d)

List of Financial Statements

Certain Exhibits

Year Ended December 31, 2001

Genuine Parts Company

Atlanta, Georgia


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Form 10-K – Item 14(a)(1) and (2)

Genuine Parts Company and Subsidiaries

Index of Financial Statements

The following consolidated financial statements of Genuine Parts Company and Subsidiaries, included in the annual report of the registrant to its shareholders for the year ended December 31, 2001, are incorporated by reference in Item 8:

      Consolidated balance sheets – December 31, 2001 and 2000
 
      Consolidated statements of income – Years ended December 31, 2001, 2000 and 1999
 
      Consolidated statements of cash flows – Years ended December 31, 2001, 2000 and 1999
 
      Notes to consolidated financial statements – December 31, 2001

The following consolidated financial statement schedule of Genuine Parts Company and subsidiaries is included in Item 14(d):

      Schedule II – Valuation and Qualifying Accounts

All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.


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Annual Report on Form 10-K
Item 14(d)
Financial Statement Schedule II – Valuation and Qualifying Accounts
Genuine Parts Company and Subsidiaries

                                             
        Balance at   Charged                   Balance at
        Beginning   to Costs   Other           End
        of Period   and Expenses   Additions   Deductions   of Period
       
 
 
 
 

Year ended December 31, 1999:
                                       
   
Reserves and allowances deducted from asset accounts:
                                       
   
     Allowance for uncollectible accounts
  $ 5,018,902     $ 14,402,137     $ 1,479,685 1   $ (13,972,115 )2   $ 6,928,609  

Year ended December 31, 2000:
                                       
   
Reserves and allowances deducted from asset accounts:
                                       
   
     Allowance for uncollectible accounts
    6,928,609       13,875,788             (13,433,963 )2     7,370,434  

Year ended December 31, 2001:
                                       
   
Reserves and allowances deducted from asset accounts:
                                       
   
     Allowance for uncollectible accounts
    7,370,434       26,515,715             (24,621,880 )2     9,264,269  
   
     Reserve for facility consolidations
  $     $ 18,300,000 4   $     $ (400,000 )3   $ 17,900,000  

1   Allowance for uncollectible accounts related to significant acquisitions.
 
2   Uncollectible accounts written off, net of recoveries.
 
3   Facility consolidation expenses paid in 2001.
 
4   Facility consolidation expenses accrued in 2001.


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ANNUAL REPORT ON FORM 10-K

ITEM 14(a)(3)

LIST OF EXHIBITS

     The following Exhibits are filed as a part of this Report:

     
4.3   Note Purchase Agreement, dated November 30, 2001.
     
10.46*   Amendment No. 10 to the Genuine Parts Company Pension Plan, dated November 28, 2001, effective July 1, 2001.
     
10.47*   Amendment No. 3 to the Genuine Parts Company Tax-Deferred Savings Plan, dated November 28, 2001, effective July 1, 2001.
     
10.48*   Amendment No. 4 to the Genuine Parts Company Supplemental Retirement Plan, dated November 28, 2001, effective July 1, 2001.
     
10.49*   Trust Agreement Executed in Conjunction with the Genuine Parts Company Supplemental Retirement Plan, dated July 1, 2001, effective July 1, 2001.
     
10.50*   Amendment No. 1 to the Trust Agreement Executed in Conjunction with the Genuine Parts Company Non-Qualified Deferred Compensation Plans, dated December 5, 2001, effective July 1, 2001.
     
10.51*   Group Insurance Plan for Employees of Genuine Parts Company, as amended and restated effective January 1, 2000.
     
13   The following Sections and Pages of Annual Report to Shareholders for 2001:
    - - Selected Financial Data on Page 16
    - - Market and Dividend Information on Page 16
    - - Management’s Discussion and Analysis of Financial Condition on Pages 18 – 21
    - - Quarterly Results of Operations on Page 21
    - - Segment Data on Page 17
    - - Report of Independent Auditors on Page 22
    - - Consolidated Financial Statements and Notes to Consolidated Financial Statements on Pages 23 – 33
     
21   Subsidiaries of the Company
     
23   Consent of Independent Auditors


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The following Exhibits are incorporated by reference as set forth in Item 14 on pages 11-15 of this Form 10-K:

                 
    - -     3.1     Restated Articles of Incorporation of the Company, dated April 18, 1988, and as amended April 17, 1989 and amendments to the Restated Articles of Incorporation of the Company, dated November 20, 1989 and April 18, 1994.
    - -     3.2     By-laws of the Company, as amended February 19, 2001.
    - -     4.1     Shareholder Protection Rights Agreement, dated November 15, 1999, between the Company and SunTrust Bank, Atlanta, as Rights Agent. (Incorporated herein by reference from the Company’s Report on Form 8-K, dated November 15, 1999.)
    - -     4.2     Specimen Common Stock Certificate. (Incorporated herein by reference from the Company’s Registration Statement on Form S-1, Registration No. 33-63874)
                 
    Instruments with respect to long-term debt where the total amount of securities authorized thereunder does not exceed 10% of the total assets of the Registrant and its subsidiaries on a consolidated basis have not been filed. The Registrant agrees to furnish to the Commission a copy of each such instrument upon request.
                 
    - -     10.1*     1988 Stock Option Plan.
    - -     10.2*     Form of Amendment to Deferred Compensation Agreement adopted February 13, 1989, between the Company and certain executive officers of the Company.
    - -     10.3*     Form of Agreement adopted February 13, 1989, between the Company and certain executive officers of the Company providing for a supplemental employee benefit upon a change in control of the Company.
    - -     10.4*     Genuine Parts Company Supplemental Retirement Plan, effective January 1, 1991.
    - -     10.5*     1992 Stock Option and Incentive Plan, effective April 20, 1992.
    - -     10.6*     Restricted Stock Agreement dated March 31, 1994, between the Company and Larry L. Prince.
    - -     10.7*     Restricted Stock Agreement dated March 31, 1994, between the Company and Thomas C. Gallagher.
    - -     10.8*     The Genuine Parts Company Restated Tax-Deferred Savings Plan, effective January 1, 1993.
    - -     10.9*     Amendment No. 2 to the Genuine Parts Company Supplemental Retirement Plan, effective January 1, 1995.
    - -     10.10*     Genuine Partnership Plan, as amended and restated January 1, 1994.
    - -     10.11*     Genuine Parts Company Pension Plan, as amended and restated, effective January 1, 1989.
    - -     10.12*     Amendment No. 1 to the Genuine Partnership Plan, effective September 1, 1995.
    - -     10.13*     Amendment No. 1 to the Genuine Parts Company Pension Plan, effective April 1, 1995.
    - -     10.14*     Amendment No. 2 to the Genuine Parts Company Pension Plan, dated September 28, 1995, effective January 1, 1995.
    - -     10.15*     Genuine Parts Company Directors’ Deferred Compensation Plan, effective November 1, 1996.


Table of Contents

                 
    - -     10.16*     Amendment No. 3 to the Genuine Parts Company Pension Plan, dated May 24, 1996, effective January 1, 1996.
    - -     10.17*     Amendment No. 4 to the Genuine Parts Company Pension Plan, dated December 3, 1996, effective January 1, 1996.
    - -     10.18*     Amendment No. 2 to the Genuine Partnership Plan, dated December 3, 1996, effective November 1, 1996.
    - -     10.19*     Amendment No. 4-A to the Genuine Parts Company Pension Plan, dated August 29, 1997, effective January 1, 1996.
    - -     10.20*     Amendment No. 5 to the Genuine Parts Company Pension Plan, dated August 7, 1997.
    - -     10.21*     Amendment No. 6 to the Genuine Parts Company Pension Plan, dated October 6, 1997, effective January 1, 1997.
    - -     10.22*     Amendment No. 3 to the Genuine Partnership Plan, dated August 7, 1997.
    - -     10.23*     Amendment No. 3 to the Genuine Parts Company Supplemental Retirement Plan, dated August 29, 1997, effective August 15, 1997.
    - -     10.24*     Genuine Parts Company Death Benefit Plan, effective July 15, 1997.
    - -     10.25*     Amendment No. 4 to the Genuine Partnership Plan, dated August 19, 1998, effective January 1, 1998.
    - -     10.26*     Amendment No. 5 to the Genuine Partnership Plan, dated December 7, 1998, effective January 1, 1999.
    - -     10.27*     Amendment No. 6 to the Genuine Partnership Plan, dated December 7, 1998, effective January 1, 1994.
    - -     10.28*     Amendment No. 7 to the Genuine Parts Company Pension Plan, dated August 19, 1998, effective January 1, 1998.
    - -     10.29*     Genuine Parts Company 1999 Long-Term Incentive Plan.
    - -     10.30*     Genuine Parts Company 1999 Annual Incentive Bonus Plan.
    - -     10.31*     Restricted Stock Agreement dated February 25, 1999, between the Company and Larry L. Prince.
    - -     10.32*     Restricted Stock Agreement dated February 25, 1999, between the Company and Thomas C. Gallagher.
    - -     10.33*     Amendment No. 8 to the Genuine Parts Company Pension Plan, dated January 26, 1999, effective September 30, 1998.
    - -     10.34*     Amendment No. 9 to the Genuine Parts Company Pension Plan, dated December 30, 1999, effective January 1, 1989; December 31, 1999; and January 1, 2000.
    - -     10.35*     Amendment to the Genuine Parts Company 1992 Stock Option and Incentive Plan, dated April 19, 1999, effective April 19, 1999.
    - -     10.36*     Amendment to the Genuine Parts Company Tax-Deferred Savings Plan, dated April 19, 1999, effective April 19, 1999.
    - -     10.37*     Amendment to the Genuine Parts Company Original Deferred Compensation Plan, dated April 19, 1999, effective April 19, 1999.
    - -     10.38*     Amendment to the Genuine Parts Company Directors’ Deferred Compensation Plan, dated April 19, 1999, effective April 19, 1999.
    - -     10.39*     Amendment to the Genuine Parts Company Supplemental Retirement Plan, dated April 19, 1999, effective April 19, 1999.
    - -     10.40*     Amendment No. 7 to the Genuine Partnership Plan, dated January 26, 1999, effective January 1, 1999.
    - -     10.41*     Amendment No. 8 to the Genuine Partnership Plan, dated February 4, 1999, effective January 1, 1999.
    - -     10.42*     Amendment No. 9 to the Genuine Partnership Plan, dated April 5, 1999, effective April 1, 1999.
    - -     10.43*     Amendment No. 10 to the Genuine Partnership Plan, dated December 30, 1999, effective November 30, 1999.
    - -     10.44*     Amendment No. 11 to the Genuine Partnership Plan, dated January 19, 2001, effective April 1, 2000.
    - -     10.45*     Amendment No. 12 to the Genuine Partnership Plan, dated January 19, 2001, effective December 29, 2000.

*   Indicates executive compensation plans and arrangements.

EX-4.3 3 g74408ex4-3.txt NOTE PURCHASE AGREEMENT, DATED NOVEMBER 30, 2000 ================================================================================ EXHIBIT 4.3 GENUINE PARTS COMPANY $250,000,000 5.86% Series A Senior Notes due November 30, 2008 $250,000,000 6.23% Series B Senior Notes due November 30, 2011 NOTE PURCHASE AGREEMENT Dated as of November 30, 2001 ================================================================================ TABLE OF CONTENTS 1. AUTHORIZATION OF NOTES......................................................................1 2. SALE AND PURCHASE OF NOTES..................................................................2 3. CLOSING.....................................................................................2 4. CONDITIONS TO CLOSING.......................................................................2 4.1. Representations and Warranties.....................................................3 4.2. Performance; No Default............................................................3 4.3. Compliance Certificates............................................................3 4.4. Opinions of Counsel................................................................3 4.5. Purchase Permitted By Applicable Law, etc..........................................3 4.6. Sale of Other Notes................................................................4 4.7. Payment of Special Counsel Fees....................................................4 4.8. Private Placement Number...........................................................4 4.9. Changes in Corporate Structure.....................................................4 4.10. Proceedings and Documents..........................................................4 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............................................5 5.1. Organization; Power and Authority..................................................5 5.2. Authorization, etc.................................................................5 5.3. Disclosure.........................................................................5 5.4. Organization and Ownership of Shares of Subsidiaries...............................6 5.5. Financial Statements...............................................................6 5.6. Compliance with Laws, Other Instruments, etc.......................................7 5.7. Governmental Authorizations, etc...................................................7 5.8. Litigation; Observance of Statutes and Orders......................................7 5.9. Taxes..............................................................................8 5.10. Title to Property; Leases..........................................................8 5.11. Licenses, Permits, etc.............................................................8 5.12. Compliance with ERISA..............................................................8 5.13. Private Offering by the Company....................................................9 5.14. Use of Proceeds; Margin Regulations................................................10 5.15. Existing Indebtedness..............................................................10 5.16. Foreign Assets Control Regulations, etc............................................10 5.17. Status under Certain Statutes......................................................11 6. REPRESENTATIONS OF THE PURCHASER............................................................11 6.1. Purchase for Investment............................................................11 6.2. Source of Funds....................................................................11
7. INFORMATION AS TO COMPANY...................................................................12 7.1. Financial and Business Information.................................................12 7.2. Officer's Certificate..............................................................15 7.3. Inspection.........................................................................16 8. PREPAYMENT OF THE NOTES.....................................................................16 8.1. Payment at Maturity................................................................16 8.2. Optional Prepayments with Make-Whole Amount........................................16 8.3. Allocation of Partial Prepayments..................................................17 8.4. Maturity; Surrender, etc...........................................................17 8.5. Purchase of Notes..................................................................17 8.6. Make-Whole Amount..................................................................18 8.7. Offer to Prepay Notes Upon Certain Asset Sales.....................................20 9. AFFIRMATIVE COVENANTS.......................................................................22 9.1. Compliance with Law................................................................22 9.2. Insurance..........................................................................23 9.3. Maintenance of Properties..........................................................23 9.4. Payment of Taxes...................................................................23 9.5. Corporate Existence, etc...........................................................24 10. NEGATIVE COVENANTS..........................................................................24 10.1. Limitation on Debt and Priority Debt...............................................24 10.2. Fixed Charge Coverage Ratio........................................................24 10.3. Merger, Consolidation, etc.........................................................24 10.4. Transactions with Affiliates.......................................................25 11. EVENTS OF DEFAULT...........................................................................25 12. REMEDIES ON DEFAULT, ETC....................................................................27 12.1. Acceleration.......................................................................27 12.2. Other Remedies.....................................................................28 12.3. Rescission.........................................................................29 12.4. No Waivers or Election of Remedies, Expenses, etc..................................29 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES...............................................29 13.1. Registration of Notes..............................................................29 13.2. Transfer and Exchange of Notes.....................................................30 13.3. Replacement of Notes...............................................................30 14. PAYMENTS ON NOTES...........................................................................31 14.1. Place of Payment...................................................................31
- ii - 14.2. Home Office Payment................................................................31 15. EXPENSES, ETC...............................................................................32 15.1. Transaction Expenses...............................................................32 15.2. Survival...........................................................................32 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT................................32 17. AMENDMENT AND WAIVER........................................................................33 17.1. Requirements.......................................................................33 17.2. Solicitation of Holders of Notes...................................................33 17.3. Binding Effect, etc................................................................34 17.4. Notes held by Company, etc.........................................................34 18. NOTICES.....................................................................................34 19. REPRODUCTION OF DOCUMENTS...................................................................35 20. CONFIDENTIAL INFORMATION....................................................................35 21. SUBSTITUTION OF PURCHASER...................................................................36 22. MISCELLANEOUS...............................................................................37 22.1. Successors and Assigns.............................................................37 22.2. Payments Due on Non-Business Days..................................................37 22.3. Severability.......................................................................37 22.4. Construction; Accounting Concepts..................................................37 22.5. Counterparts.......................................................................38 22.6. Governing Law......................................................................38
- iii - SCHEDULE A INFORMATION RELATING TO PURCHASERS SCHEDULE B DEFINED TERMS SCHEDULE 4.9 Changes in Corporate Structure SCHEDULE 5.3 Disclosure Materials SCHEDULE 5.4 Subsidiaries of the Company and Ownership of Subsidiary Stock SCHEDULE 5.5 Financial Statements SCHEDULE 5.8 Certain Litigation SCHEDULE 5.11 Patents, etc. SCHEDULE 5.15 Existing Indebtedness EXHIBIT 1.1 Form of 5.86% Series A Senior Note due November 30, 2008 EXHIBIT 1.2 Form of 6.23% Series B Senior Note due November 30, 2011 EXHIBIT 4.4(a)(i) Form of Opinion of Special Counsel for the Company EXHIBIT 4.4(a)(ii) Form of Opinion of General Counsel for the Company EXHIBIT 4.4(b) Form of Opinion of Special Counsel for the Purchasers - iv - GENUINE PARTS COMPANY 2999 Circle 75 Parkway Atlanta, Georgia 30339 $250,000,000 5.86% Series A Senior Notes due November 30, 2008 $250,000,000 6.23% Series B Senior Notes due November 30, 2011 November 30, 2001 TO EACH OF THE PURCHASERS LISTED IN THE ATTACHED SCHEDULE A: Ladies and Gentlemen: GENUINE PAR0TS COMPANY, a Georgia corporation (together with its successors and assigns, the "COMPANY"), agrees with you as follows: 1. AUTHORIZATION OF NOTES. The Company will authorize the issue and sale of: (a) $250,000,000 aggregate principal amount of its 5.86% Series A Senior Notes due November 30, 2008 (including any amendments, restatements or modifications from time to time, the "SERIES A NOTES", such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter defined)); and (b) $250,000,000 aggregate principal amount of its 6.23% Series B Senior Notes due November 30, 2011 (including any amendments, restatements or modifications from time to time, the "SERIES B NOTES", such term to include any such notes issued in substitution therefor pursuant to Section 13 of this Agreement or the Other Agreements (as hereinafter defined)). The Series A Notes and the Series B Notes are referred to herein, collectively, as the "NOTES." The Series A Notes and the Series B Notes shall be substantially in the form set out in Exhibit 1.1 and Exhibit 1.2, respectively, with such changes therefrom, if any, as may be approved by you and the Company. Certain capitalized terms used in this Agreement are defined in Schedule B; references to a "Schedule" or an "Exhibit" are, unless otherwise specified, references to a Schedule or an Exhibit attached to this Agreement; references to Sections are, unless otherwise specified, references to Sections of this Agreement. 2. SALE AND PURCHASE OF NOTES. Subject to the terms and conditions of this Agreement, the Company will issue and sell to you and you will purchase from the Company, at the Closing provided for in Section 3, Notes in the principal amount and in the Series specified below your name in Schedule A at the purchase price of 100% of the principal amount thereof. Contemporaneously with entering into this Agreement, the Company is entering into separate Note Purchase Agreements (the "OTHER AGREEMENTS") identical with this Agreement with each of the other purchasers named in Schedule A (the "OTHER PURCHASERS"), providing for the sale at such Closing to each of the Other Purchasers of Notes in the principal amount and in the Series specified opposite its name in Schedule A. Your obligation hereunder and the obligations of the Other Purchasers under the Other Agreements are several and not joint obligations and you shall have no obligation under any Other Agreement and no liability to any Person for the performance or non-performance by any Other Purchaser thereunder. This Agreement and the Other Agreements shall constitute one single agreement for purposes of New York General Obligations Law section 5-501. 3. CLOSING. The sale and purchase of the Notes to be purchased by you and the Other Purchasers shall occur at the offices of Bingham Dana LLP, 399 Park Avenue, New York, NY 10022, at 10:00 a.m., New York time, at a closing (the "CLOSING") on November 30, 2001. At the Closing the Company will deliver to you the Notes to be purchased by you in the form of a single Note for each Series (or such greater number of Notes for each Series in denominations of at least $250,000 as you may request) dated the date of the Closing and registered in your name (or in the name of your nominee), against delivery by you to the Company or its order of immediately available funds in the amount of the purchase price therefor by wire transfer of immediately available funds for the account of the Company to account number 8800248216 at SunTrust Bank, Atlanta, Georgia 30302, ABA number 061000104. If at the Closing the Company shall fail to tender such Notes to you as provided above in this Section 3, or any of the conditions specified in Section 4, shall not have been fulfilled to your satisfaction, you shall, at your election, be relieved of all further obligations under this Agreement, without thereby waiving any rights you may have by reason of such failure or such nonfulfillment. 4. CONDITIONS TO CLOSING. - 2 - Your obligation to purchase and pay for the Notes to be sold to you at the Closing is subject to the fulfillment to your satisfaction, prior to or at the Closing, of the following conditions: 4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company in this Agreement shall be correct when made and at the time of the Closing. 4.2. PERFORMANCE; NO DEFAULT. The Company shall have performed and complied with all agreements and conditions contained in this Agreement required to be performed or complied with by it prior to or at the Closing and after giving effect to the issue and sale of the Notes (and the application of the proceeds thereof as contemplated by Section 5.14) no Default or Event of Default shall have occurred and be continuing. 4.3. COMPLIANCE CERTIFICATES. (A) Officer's Certificate. The Company shall have delivered to you an Officer's Certificate, dated the date of the Closing, certifying that the conditions specified in Sections 4.1, 4.2 and 4.9 have been fulfilled. (B) Secretary's Certificate. The Company shall have delivered to you a certificate certifying as to the resolutions attached thereto and other corporate proceedings relating to the authorization, execution and delivery of the Notes and the Agreements. 4.4. OPINIONS OF COUNSEL. You shall have received opinions in form and substance satisfactory to you, dated the date of the Closing (a)(i) from Alston & Bird LLP, special counsel for the Company, covering the matters set forth in Exhibit 4.4(a)(i) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you), (ii) from Scott Smith, Esq., general counsel for the Company, covering the matters set forth in Exhibit 4.4(a)(ii) and covering such other matters incident to the transactions contemplated hereby as you or your counsel may reasonably request (and the Company hereby instructs its counsel to deliver such opinion to you) and (b) from Bingham Dana LLP, your special counsel in connection with such transactions, substantially in the form set forth in Exhibit 4.4(b) and covering such other matters incident to such transactions as you may reasonably request. 4.5. PURCHASE PERMITTED BY APPLICABLE LAW, ETC. - 3 - On the date of the Closing your purchase of Notes shall (a) be permitted by the laws and regulations of each jurisdiction to which you are subject, without recourse to provisions (such as Section 1405(a)(8) of the New York Insurance Law) permitting limited investments by insurance companies without restriction as to the character of the particular investment, (b) not violate any applicable law or regulation (including, without limitation, Regulation T, U or X of the Board of Governors of the Federal Reserve System) and (c) not subject you to any tax, penalty or liability under or pursuant to any applicable law or regulation, which law or regulation was not in effect on the date hereof. If requested by you, you shall have received an Officer's Certificate certifying as to such matters of fact as you may reasonably specify to enable you to determine whether such purchase is so permitted. 4.6. SALE OF OTHER NOTES. Contemporaneously with the Closing the Company shall sell to the Other Purchasers and the Other Purchasers shall purchase the Notes to be purchased by them at the Closing as specified in Schedule A. 4.7. PAYMENT OF SPECIAL COUNSEL FEES. Without limiting the provisions of Section 15.1, the Company shall have paid on or before the Closing the fees, charges and disbursements of your special counsel referred to in Section 4.4(b) to the extent reflected in a statement of such counsel rendered to the Company at least one Business Day prior to the Closing. 4.8. PRIVATE PLACEMENT NUMBER. A Private Placement number issued by Standard & Poor's CUSIP Service Bureau, a division of The McGraw-Hill Companies (in cooperation with the Securities Valuation Office of the National Association of Insurance Commissioners) shall have been obtained for each Series of Notes. 4.9. CHANGES IN CORPORATE STRUCTURE. Except as specified in Schedule 4.9, the Company shall not have changed its jurisdiction of incorporation or been a party to any merger or consolidation and shall not have succeeded to all or any substantial part of the liabilities of any other entity, at any time following the date of the most recent financial statements referred to in Schedule 5.5. 4.10. PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in connection with the transactions contemplated by this Agreement and all documents and instruments incident - 4 - to such transactions shall be satisfactory to you and your special counsel, and you and your special counsel shall have received all such counterpart originals or certified or other copies of such documents as you or they may reasonably request. 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents and warrants to you that: 5.1. ORGANIZATION; POWER AND AUTHORITY. The Company is a corporation duly organized, validly existing and in good standing under the laws of its jurisdiction of incorporation, and is duly qualified as a foreign corporation and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. The Company has the corporate power and authority to own or hold under lease the properties it purports to own or hold under lease, to transact the business it transacts and proposes to transact, to execute and deliver this Agreement and the Other Agreements and the Notes and to perform the provisions hereof and thereof. 5.2. AUTHORIZATION, ETC. This Agreement and the Other Agreements and the Notes have been duly authorized by all necessary corporate action on the part of the Company, and this Agreement constitutes, and upon execution and delivery thereof each Note will constitute, a legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by (a) applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors' rights generally and (b) general principles of equity (regardless of whether such enforceability is considered in a proceeding in equity or at law). 5.3. DISCLOSURE. The Company, through its agent, SunTrust Capital Markets, Inc. has delivered to you and each Other Purchaser a copy of a Confidential Offering Memorandum, dated October 2001 (the "MEMORANDUM"), relating to the transactions contemplated hereby. This Agreement, the Memorandum, the filings by the Company with the Securities and Exchange Commission, the documents, certificates or other writings identified in Schedule 5.3 and the financial statements listed in Schedule 5.5, taken as a whole, do not contain any untrue statement of a material fact or omit to state any material fact - 5 - necessary to make the statements therein not misleading in light of the circumstances under which they were made. Except as disclosed in the Memorandum or as expressly described in Schedule 5.3, or in one of the documents, certificates or other writings identified therein, or in the financial statements listed in Schedule 5.5, since December 31, 2000, there has been no change in the financial condition, operations, business or properties of the Company or any of its Subsidiaries except changes that individually or in the aggregate would not reasonably be expected to have a Material Adverse Effect. 5.4. ORGANIZATION AND OWNERSHIP OF SHARES OF SUBSIDIARIES. (A) Schedule 5.4 is (except as noted therein) a complete and correct list of the Company's Subsidiaries, showing, as to each Subsidiary, the correct name thereof, the jurisdiction of its organization, and the percentage of shares of each class of its capital stock or similar equity interests outstanding owned by the Company and each other Subsidiary. (B) All of the outstanding shares of capital stock or similar equity interests of each Subsidiary shown in Schedule 5.4 as being owned by the Company and its Subsidiaries have been validly issued, are fully paid and nonassessable and are owned by the Company or another Subsidiary free and clear of any Lien (except as otherwise disclosed in Schedule 5.4). (C) Each Subsidiary identified in Schedule 5.4 is a corporation or other legal entity duly organized, validly existing and in good standing under the laws of its jurisdiction of organization, and is duly qualified as a foreign corporation or other legal entity and is in good standing in each jurisdiction in which such qualification is required by law, other than those jurisdictions as to which the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect. Each such Subsidiary has the corporate or other power and authority to own or hold under lease the properties it purports to own or hold under lease and to transact the business it transacts and proposes to transact. 5.5. FINANCIAL STATEMENTS. The Company has delivered to each Purchaser copies of the financial statements of the Company and its Subsidiaries listed on Schedule 5.5. All of said financial statements (including in each case the related schedules and notes) fairly present in all material respects the consolidated financial position of the Company and its Subsidiaries as of the respective dates specified in such Schedule and the consolidated results of their operations and cash flows for the respective periods so specified and have been prepared in accordance with - 6 - GAAP consistently applied throughout the periods involved except as set forth in the notes thereto (subject, in the case of any interim financial statements, to normal year-end adjustments). 5.6. COMPLIANCE WITH LAWS, OTHER INSTRUMENTS, ETC. The execution, delivery and performance by the Company of this Agreement, the Other Agreements and the Notes will not (a) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of the Company or any Subsidiary under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other Material agreement or instrument to which the Company or any Subsidiary is bound or by which the Company or any Subsidiary or any of their respective properties may be bound or affected, (b) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental Authority applicable to the Company or any Subsidiary or (c) violate any provision of any statute or other rule or regulation of any Governmental Authority applicable to the Company or any Subsidiary. 5.7. GOVERNMENTAL AUTHORIZATIONS, ETC. No consent, approval or authorization of, or registration, filing or declaration with, any Governmental Authority is required in connection with the execution, delivery or performance by the Company of this Agreement or the Notes. 5.8. LITIGATION; OBSERVANCE OF STATUTES AND ORDERS. (A) Except as disclosed in Schedule 5.8, there are no actions, suits or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary or any property of the Company or any Subsidiary in any court or before any arbitrator of any kind or before or by any Governmental Authority that, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. (B) Neither the Company nor any Subsidiary is in default under any order, judgment, decree or ruling of any court, arbitrator or Governmental Authority or is in violation of any applicable law, ordinance, rule or regulation (including without limitation Environmental Laws) of any Governmental Authority, which default or violation, individually or in the aggregate, would reasonably be expected to have a Material Adverse Effect. - 7 - 5.9. TAXES. The Company and its Subsidiaries have filed all income tax returns that are required to have been filed in any jurisdiction, and have paid all taxes shown to be due and payable on such returns and all other taxes and assessments payable by them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, except for any taxes and assessments (a) the amount of which is not individually or in the aggregate Material or (b) the amount, applicability or validity of which is currently being contested in good faith by appropriate proceedings and with respect to which the Company or a Subsidiary, as the case may be, has established adequate reserves in accordance with GAAP. The Federal income tax liabilities of the Company and its Subsidiaries have been determined by the Internal Revenue Service and paid for all fiscal years up to and including the fiscal year ended December 31, 2000. 5.10. TITLE TO PROPERTY; LEASES. The Company and its Subsidiaries have good and sufficient title to their respective Material properties, including all such properties reflected in the most recent audited balance sheet referred to in Section 5.5 or purported to have been acquired by the Company or any Subsidiary after said date (except as sold or otherwise disposed of in the ordinary course of business), in each case free and clear of Liens prohibited by this Agreement, except for those defects in title and Liens that, individually or in the aggregate, would not have a Material Adverse Effect. All Material leases are valid and subsisting and are in full force and effect in all material respects. 5.11. LICENSES, PERMITS, ETC. Except as disclosed in Schedule 5.11, the Company and its Subsidiaries own or possess all licenses, permits, franchises, authorizations, patents, copyrights, service marks, trademarks and trade names, or rights thereto, that are Material, without known conflict with the rights of others, except for those conflicts that, individually or in the aggregate, would not have a Material Adverse Effect. 5.12. COMPLIANCE WITH ERISA. (A) The Company and each ERISA Affiliate have operated and administered each Plan in compliance with all applicable laws except for such instances of noncompliance as have not resulted in and could not reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any ERISA Affiliate has incurred any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code - 8 - relating to employee benefit plans (as defined in section 3 of ERISA), and no event, transaction or condition has occurred or exists that would reasonably be expected to result in the incurrence of any such liability by the Company or any ERISA Affiliate, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate, in either case pursuant to Title I or IV of ERISA or to such penalty or excise tax provisions or to section 401(a)(29) or 412 of the Code, other than such liabilities or Liens as would not be individually or in the aggregate Material. (B) The present value of the aggregate benefit liabilities under each of the Plans (other than Multiemployer Plans), determined as of the end of such Plan's most recently ended plan year on the basis of the actuarial assumptions specified for funding purposes in such Plan's most recent actuarial valuation report, did not exceed the aggregate current value of the assets of such Plan allocable to such benefit liabilities by more than $25,000,000 in the case of any single Plan and by more than $50,000,000 in the aggregate for all Plans. The term "BENEFIT LIABILITIES" has the meaning specified in section 4001 of ERISA and the terms "CURRENT VALUE" and "PRESENT VALUE" have the meaning specified in section 3 of ERISA. (C) The Company and its ERISA Affiliates have not incurred withdrawal liabilities (and are not subject to contingent withdrawal liabilities) under section 4201 or 4204 of ERISA in respect of Multiemployer Plans that individually or in the aggregate are Material. (D) The expected postretirement benefit obligation (determined as of the last day of the Company's most recently ended fiscal year in accordance with Financial Accounting Standards Board Statement No. 106, without regard to liabilities attributable to continuation coverage mandated by section 4980B of the Code) of the Company and its Subsidiaries is not Material. (E) The execution and delivery of this Agreement and the issuance and sale of the Notes hereunder will not involve any transaction that is subject to the prohibitions of section 406 of ERISA or in connection with which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of the Code. The representation by the Company in the first sentence of this Section 5.12(e) is made in reliance upon and subject to the accuracy of your representation in Section 6.2 as to the sources of the funds to be used to pay the purchase price of the Notes to be purchased by you. 5.13. PRIVATE OFFERING BY THE COMPANY. - 9 - Neither the Company nor anyone acting on its behalf has offered the Notes or any similar securities for sale to, or solicited any offer to buy any of the same from, or otherwise approached or negotiated in respect thereof with, any Person other than you, the Other Purchasers and not more than thirty-six (36) other Institutional Investors, each of which has been offered the Notes at a private sale for investment. Neither the Company nor anyone acting on its behalf has taken, or will take, any action that would subject the issuance or sale of the Notes to the registration requirements of Section 5 of the Securities Act. 5.14. USE OF PROCEEDS; MARGIN REGULATIONS. The Company will apply the proceeds of the sale of the Notes to repay existing Indebtedness, for general corporate purposes and for any other lawful purpose. No part of the proceeds from the sale of the Notes hereunder will be used, directly or indirectly, for the purpose of buying or carrying any margin stock within the meaning of Regulation U of the Board of Governors of the Federal Reserve System (12 CFR 221), or for the purpose of buying or carrying or trading in any securities under such circumstances as to involve the Company in a violation of Regulation X of said Board (12 CFR 224) or to involve any broker or dealer in a violation of Regulation T of said Board (12 CFR 220). Margin stock does not constitute more than 10% of the value of the consolidated assets of the Company and its Subsidiaries and the Company does not have any present intention that margin stock will constitute more than 10% of the value of such assets. As used in this Section, the terms "MARGIN STOCK" and "PURPOSE OF BUYING OR CARRYING" shall have the meanings assigned to them in said Regulation U. 5.15. EXISTING INDEBTEDNESS. Except as described therein, Schedule 5.15 sets forth a complete and correct list of all outstanding Indebtedness of the Company and its Subsidiaries as of September 30, 2001, since which date there has been no Material change in the amounts, interest rates, sinking funds, installment payments or maturities of the Indebtedness of the Company or its Subsidiaries. Neither the Company nor any Subsidiary is in default and no waiver of default is currently in effect, in the payment of any principal or interest on any Indebtedness of the Company or such Subsidiary and no event or condition exists with respect to any Indebtedness of the Company or any Subsidiary the outstanding principal amount of which exceeds $50,000,000 that would permit (or that with notice or the lapse of time, or both, would permit) one or more Persons to cause such Indebtedness to become due and payable before its stated maturity or before its regularly scheduled dates of payment. 5.16. FOREIGN ASSETS CONTROL REGULATIONS, ETC. - 10 - Neither the sale of the Notes by the Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. 5.17. STATUS UNDER CERTAIN STATUTES. Neither the Company nor any Subsidiary is subject to regulation under the Investment Company Act of 1940, as amended, the Public Utility Holding Company Act of 1935, as amended, the Interstate Commerce Act, as amended, or the Federal Power Act, as amended. 6. REPRESENTATIONS OF THE PURCHASER. 6.1. PURCHASE FOR INVESTMENT. You represent that you are purchasing the Notes for your own account or for one or more separate accounts maintained by you or for the account of one or more pension or trust funds and not with a view to the distribution thereof, provided that the disposition of your or their property shall at all times be within your or their control. You understand that the Notes have not been registered under the Securities Act and may be resold only if registered pursuant to the provisions of the Securities Act or if an exemption from registration is available, except under circumstances where neither such registration nor such an exemption is required by law, and that the Company is not required to register the Notes. 6.2. SOURCE OF FUNDS. You represent that at least one of the following statements is an accurate representation as to each source of funds (a "SOURCE") to be used by you to pay the purchase price of the Notes to be purchased by you hereunder: (A) the Source is an "insurance company general account" within the meaning of Department of Labor Prohibited Transaction Exemption ("PTE") 95-60 (issued July 12, 1995) and there is no employee benefit plan, treating as a single plan, all plans maintained by the same employer or employee organization, with respect to which the amount of the general account reserves and liabilities for all contracts held by or on behalf of such plan, exceeds ten percent (10%) of the total reserves and liabilities of such general account (exclusive of separate account liabilities) plus surplus, as set forth in the NAIC Annual Statement filed with your state of domicile; or - 11 - (B) the Source is either (i) an insurance company pooled separate account, within the meaning of PTE 90-1 (issued January 29, 1990), or (ii) a bank collective investment fund, within the meaning of the PTE 91-38 (issued July 12, 1991) and, except as you have disclosed to the Company in writing pursuant to this paragraph (b), no employee benefit plan or group of plans maintained by the same employer or employee organization beneficially owns more than 10% of all assets allocated to such pooled separate account or collective investment fund; or (C) the Source constitutes assets of an "investment fund" (within the meaning of Part V of the QPAM Exemption) managed by a "qualified professional asset manager" or "QPAM" (within the meaning of Part V of the QPAM Exemption), no employee benefit plan's assets that are included in such investment fund, when combined with the assets of all other employee benefit plans established or maintained by the same employer or by an affiliate (within the meaning of Section V(c)(1) of the QPAM Exemption) of such employer or by the same employee organization and managed by such QPAM, exceed 20% of the total client assets managed by such QPAM, the conditions of Part I(c) and (g) of the QPAM Exemption are satisfied, neither the QPAM nor a person controlling or controlled by the QPAM (applying the definition of "control" in Section V(e) of the QPAM Exemption) owns a 5% or more interest in the Company and (i) the identity of such QPAM and (ii) the names of all employee benefit plans whose assets are included in such in-vestment fund have been disclosed to the Company in writing pursuant to this paragraph (c); or (D) the Source is a governmental plan; or (E) the Source is one or more employee benefit plans, or a separate account or trust fund comprised of one or more employee benefit plans, each of which has been identified to the Company in writing pursuant to this paragraph (e); or (F) the Source does not include assets of any employee benefit plan, other than a plan exempt from the coverage of ERISA. As used in this Section 6.2, the terms "EMPLOYEE BENEFIT PLAN", "GOVERNMENTAL PLAN", "PARTY IN INTEREST" and "SEPARATE ACCOUNT" shall have the respective meanings assigned to such terms in section 3 of ERISA. 7. INFORMATION AS TO COMPANY. 7.1. FINANCIAL AND BUSINESS INFORMATION. - 12 - The Company shall deliver to each holder of Notes that is an Institutional Investor: (A) Quarterly Statements -- within 60 days after the end of each quarterly fiscal period in each fiscal year of the Company (other than the last quarterly fiscal period of each such fiscal year), duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries as at the end of such quarter, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such quarter and (in the case of the second and third quarters) for the portion of the fiscal year ending with such quarter, setting forth in each case in comparative form the figures for the corresponding periods in the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP applicable to quarterly financial statements generally, and certified by a Senior Financial Officer as fairly presenting, in all material respects, the financial position of the companies being reported on and their results of operations and cash flows, subject to changes resulting from year-end adjustments, provided that delivery within the time period specified above of copies of the Company's Quarterly Report on Form 10-Q prepared in compliance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(a); (B) Annual Statements -- within 105 days after the end of each fiscal year of the Company, duplicate copies of, (i) a consolidated balance sheet of the Company and its Subsidiaries, as at the end of such year, and (ii) consolidated statements of income, changes in shareholders' equity and cash flows of the Company and its Subsidiaries, for such year, setting forth in each case in comparative form the figures for the previous fiscal year, all in reasonable detail, prepared in accordance with GAAP, and accompanied by an opinion thereon of independent certified public accountants of recognized national standing, which opinion shall state that such financial statements present fairly, in all material respects, the financial position of the companies being reported upon and their results of operations and cash flows and have been prepared in conformity with - 13 - GAAP, and that the examination of such accountants in connection with such financial statements has been made in accordance with generally accepted auditing standards, and that such audit provides a reasonable basis for such opinion in the circumstances, provided that the delivery within the time period specified above of the Company's Annual Report on Form 10-K for such fiscal year (together with the Company's annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.1(b); (C) SEC and Other Reports -- promptly upon their becoming available, one copy of (i) each financial statement, report, notice or proxy statement sent by the Company or any Subsidiary to public securities holders generally, and (ii) each regular or periodic report, each registration statement that shall have become effective (without exhibits except as expressly requested by such holder), and each final prospectus and all amendments thereto filed by the Company or any Subsidiary with the Securities and Exchange Commission; (D) Notice of Default or Event of Default -- promptly, and in any event within five days after a Responsible Officer becoming aware of the existence of any Default or Event of Default, a written notice specifying the nature and period of existence thereof and what action the Company is taking or proposes to take with respect thereto; (E) ERISA Matters -- promptly, and in any event within five days after a Responsible Officer becoming aware of any of the following, a written notice setting forth the nature thereof and the action, if any, that the Company or an ERISA Affiliate proposes to take with respect thereto: (i) with respect to any Plan, any reportable event, as defined in section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof; or (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Company or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan; or - 14 - (iii) any event, transaction or condition that could result in the incurrence of any liability by the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Company or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, would reasonably be expected to have a Material Adverse Effect; and (F) Requested Information -- with reasonable promptness, such other data and information relating to the business, operations, affairs, financial condition, assets or properties of the Company or any of its Subsidiaries or relating to the ability of the Company to perform its obligations hereunder and under the Notes as from time to time may be reasonably requested by any such holder of Notes. 7.2. OFFICER'S CERTIFICATE. Each set of financial statements delivered to a holder of Notes pursuant to Section 7.1(a) or Section 7.1(b) hereof shall be accompanied by a certificate of a Senior Financial Officer setting forth: (A) Covenant Compliance -- the information (including detailed calculations) required in order to establish whether the Company was in compliance with the requirements of Section 8.7, Section 10.1 and Section 10.2 hereof, inclusive, during the quarterly or annual period covered by the statements then being furnished (including with respect to each such Section, where applicable, the calculations of the maximum or minimum amount, ratio or percentage, as the case may be, permissible under the terms of such Sections, and the calculation of the amount, ratio or percentage then in existence); and (B) Event of Default -- a statement that such officer has reviewed the relevant terms hereof and has made, or caused to be made, under his or her supervision, a review of the transactions and conditions of the Company and its Subsidiaries from the beginning of the quarterly or annual period covered by the statements then being furnished to the date of the certificate and that such review shall not have disclosed the existence during such period of any condition or event that constitutes a Default or an Event of Default or, if any such condition or event existed or exists (including, without limitation, any such event or condition resulting from the failure of the Company or any Subsidiary to comply with any Environmental Law), specifying the nature and period of - 15 - existence thereof and what action the Company shall have taken or proposes to take with respect thereto. 7.3. INSPECTION. The Company shall permit the representatives of each holder of Notes that is an Institutional Investor: (A) No Default -- if no Default or Event of Default then exists, at the expense of such holder and upon reasonable prior notice to the Company, to visit the principal executive office of the Company, to discuss the affairs, finances and accounts of the Company and its Subsidiaries with the Company's officers, and, with the consent of the Company (which consent will not be unreasonably withheld) to visit the other offices and properties of the Company and each Subsidiary, all at such reasonable times and as often as may be reasonably requested in writing; and (B) Default -- if a Default or Event of Default then exists, at the expense of the Company to visit and inspect any of the offices or properties of the Company or any Subsidiary, to examine all their respective books of account, records, reports and other papers, to make copies and extracts therefrom, and to discuss their respective affairs, finances and accounts with their respective officers and independent public accountants (and by this provision the Company authorizes said accountants to discuss the affairs, finances and accounts of the Company and its Subsidiaries), all at such times and as often as may be requested. 8. PREPAYMENT OF THE NOTES. 8.1. PAYMENT AT MATURITY. (A) Series A Notes. There are no scheduled prepayments on the Series A Notes. The entire principal amount of the Series A Notes (if not previously paid pursuant to Section 8.2, Section 8.7 or Section 12.1), together with interest accrued thereon, is due and payable on November 30, 2008. (B) Series B Notes. There are no scheduled prepayments on the Series B Notes. The entire principal amount of the Series B Notes (if not previously paid pursuant to Section 8.2, Section 8.7 or Section 12.1), together with interest accrued thereon, is due and payable on November 30, 2011. 8.2. OPTIONAL PREPAYMENTS WITH MAKE-WHOLE AMOUNT. - 16 - The Company may, at its option, upon notice as provided below, prepay at any time all, or from time to time any part of, the Notes pro rata among Notes of all Series in accordance with the respective principal amounts thereof, in a principal amount of not less than $10,000,000 in the case of a partial prepayment, at 100% of the principal amount so prepaid, plus the Make-Whole Amount determined for the prepayment date with respect to such principal amount. The Company will give each holder of Notes written notice of each optional prepayment under this Section 8.2 not less than 30 days and not more than 60 days prior to the date fixed for such prepayment. Each such notice shall specify such date, the aggregate principal amount of the Notes to be prepaid on such date, the principal amount of each Note held by such holder to be prepaid (determined in accordance with Section 8.3), and the interest to be paid on the prepayment date with respect to such principal amount being prepaid, and shall be accompanied by a certificate of a Senior Financial Officer as to the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of the prepayment), setting forth the details of such computation. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. 8.3. ALLOCATION OF PARTIAL PREPAYMENTS. In the case of each partial prepayment of the Notes pursuant to Section 8.2, the principal amount of the Notes to be prepaid shall be allocated among all of the Notes pro rata among Notes of all Series in accordance with the respective principal amounts thereof at the time outstanding in proportion, as nearly as practicable, to the respective unpaid principal amounts thereof not theretofore called for prepayment. 8.4. MATURITY; SURRENDER, ETC. In the case of each prepayment of Notes pursuant to this Section 8, the principal amount of each Note to be prepaid shall mature and become due and payable on the date fixed for such prepayment, together with interest on such principal amount accrued to such date and the applicable Make-Whole Amount, if any. From and after such date, unless the Company shall fail to pay such principal amount when so due and payable, together with the interest and Make-Whole Amount, if any, as aforesaid, interest on such principal amount shall cease to accrue. Any Note paid or prepaid in full shall be surrendered to the Company and cancelled and shall not be reissued, and no Note shall be issued in lieu of any prepaid principal amount of any Note. 8.5. PURCHASE OF NOTES. - 17 - The Company will not and will not permit any Affiliate to purchase, redeem, prepay or otherwise acquire, directly or indirectly, any of the outstanding Notes except (a) upon the payment or prepayment of the Notes in accordance with the terms of this Agreement and the Notes or (b) pursuant to an offer to purchase made by the Company or an Affiliate pro rata to the holders of all Notes of all Series in accordance with the respective principal amounts thereof at the time outstanding upon the same terms and conditions. Any such offer shall provide each holder with sufficient information to enable it to make an informed decision with respect to such offer, and shall remain open for at least 20 Business Days. If the holders of more than 20% of the principal amount of the Notes then outstanding accept such offer, the Company shall promptly notify the remaining holders of such fact and the expiration date for the acceptance by holders of Notes of such offer shall be extended by the number of days necessary to give each such remaining holder at least 5 Business Days from its receipt of such notice to accept such offer. The Company will promptly cancel all Notes acquired by it or any Affiliate pursuant to any payment, prepayment or purchase of Notes pursuant to any provision of this Agreement and no Notes may be issued in substitution or exchange for any such Notes. 8.6. MAKE-WHOLE AMOUNT. The term "MAKE-WHOLE AMOUNT" means, with respect to any Note, an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments with respect to the Called Principal of such Note over the amount of such Called Principal, provided that the Make-Whole Amount may in no event be less than zero. For the purposes of determining the Make-Whole Amount, the following terms have the following meanings: "CALLED PRINCIPAL" means, with respect to any Note, the principal of such Note that is to be prepaid pursuant to Section 8.2 or Section 8.7 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. "DISCOUNTED VALUE" means, with respect to the Called Principal of any Note, the amount obtained by discounting all Remaining Scheduled Payments with respect to such Called Principal from their respective scheduled due dates to the Settlement Date with respect to such Called Principal, in accordance with accepted financial practice and at a discount factor (applied on the same periodic basis as that on which interest on the Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal. "REINVESTMENT YIELD" means, with respect to the Called Principal of any Note, .50% (or in the case of determining the Make-Whole Amount in connection with a prepayment under Section 8.7,1.00%) over the yield to - 18 - maturity implied by (i) the yields reported, as of 10:00 A.M. (New York City time) on the second Business Day preceding the Settlement Date with respect to such Called Principal, on the display designated as "Page 678" on the Telerate Access Service (or such other display as may replace Page 678 on Telerate Access Service) for actively traded U.S. Treasury securities having a maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not reported as of such time or the yields reported as of such time are not ascertainable, the Treasury Constant Maturity Series Yields reported, for the latest day for which such yields have been so reported as of the second Business Day preceding the Settlement Date with respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any comparable successor publication) for actively traded U.S. Treasury securities having a constant maturity equal to the Remaining Average Life of such Called Principal as of such Settlement Date. Such implied yield will be determined, if necessary, by (a) converting U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted financial practice and (b) interpolating linearly between (1) the actively traded U.S. Treasury security with the maturity closest to and greater than the Remaining Average Life and (2) the actively traded U.S. Treasury security with the maturity closest to and less than the Remaining Average Life. "REMAINING AVERAGE LIFE" means, with respect to any Called Principal, the number of years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called Principal into (ii) the sum of the products obtained by multiplying (a) the principal component of each Remaining Scheduled Payment with respect to such Called Principal by (b) the number of years (calculated to the nearest one-twelfth year) that will elapse between the Settlement Date with respect to such Called Principal and the scheduled due date of such Remaining Scheduled Payment. "REMAINING SCHEDULED PAYMENTS" means, with respect to the Called Principal of any Note, all payments of such Called Principal and interest thereon that would be due after the Settlement Date with respect to such Called Principal if no payment of such Called Principal were made prior to its scheduled due date, provided that if such Settlement Date is not a date on which interest payments are due to be made under the terms of the Notes, then the amount of the next succeeding scheduled interest payment will be reduced by the amount of interest accrued to such Settlement Date and required to be paid on such Settlement Date pursuant to Section 8.2, Section 8.7 or 12.1. "SETTLEMENT DATE" means, with respect to the Called Principal of any Note, the date on which such Called Principal is to be prepaid pursuant to Section 8.2, Section 8.7 or has become or is declared to be immediately due and payable pursuant to Section 12.1, as the context requires. - 19 - 8.7. OFFER TO PREPAY NOTES UPON CERTAIN ASSET SALES. (A) Notice of Significant Asset Sale Event. The Company will, within ten Business Days after the occurrence of a Significant Asset Sale Event, give an Asset Sale Notice to each holder of Notes specifying, among other things, whether the Excess Proceeds attributable to such Significant Asset Sale Event will be applied to either or both (in the case of both, specifying the relevant amounts to be applied to each application) a Property Reinvestment Application or to a prepayment of the Notes as provided in this Section 8.7. If such notice specifies application of all or a part of such Excess Proceeds to a Property Reinvestment Application, then the Company shall be obligated so to apply such amount of Excess Proceeds within 180 days after the occurrence of the Significant Asset Sale Event; provided that, at any time during such period, the Company may apply such amount of Excess Proceeds to a prepayment of the Notes as provided in this Section 8.7 in lieu of a Property Reinvestment Application, provided further that the failure to apply such amount of Excess Proceeds to either a Property Reinvestment Application or to the prepayment of the Notes prior to the expiration of such period shall constitute an Event of Default. Until such time as the entire amount reserved for a Property Reinvestment Application has been applied as provided in the preceding sentence, the Company shall apply the entire amount of Excess Proceeds arising from any subsequent Significant Asset Sale Event to the prepayment of the Notes as provided in this Section 8.7. If the notice referred to in the first sentence of this Section 8.7(a) shall specify a prepayment of the Notes, such notice shall contain and constitute an offer to prepay Notes as described in subparagraph (b) of this Section 8.7 and shall be accompanied by the certificate described in subparagraph (e) of this Section 8.7. (B) Offer to Prepay Notes. The offer to prepay Notes contemplated by subparagraph (a) of this Section 8.7 shall be an offer to prepay, in accordance with and subject to this Section 8.7, all or a portion of the Notes held by each holder (in this case only, "holder" in respect of any Note registered in the name of a nominee for a disclosed beneficial owner shall mean such beneficial owner) on a date specified in such offer (the "PROPOSED PREPAYMENT DATE") that is not less than 30 days and not more than 60 days after the date of such offer (if the Proposed Prepayment Date shall not be specified in such offer, the Proposed Prepayment Date shall be the 30th day after the date of such offer). The offer to prepay Notes under this subparagraph (b) shall be made pro rata to each holder of Notes (without regard to Series) in an aggregate amount equal to the Excess Proceeds (as defined below). - 20 - (C) Acceptance; Rejection. A holder of Notes may accept the offer to prepay made pursuant to this Section 8.7 by causing a notice of such acceptance to be delivered to the Company not more than 10 Business Days after receipt of the offer to prepay the Notes pursuant to this Section 8.7. A failure by a holder of Notes to respond to an offer to prepay made pursuant to this Section 8.7 shall be deemed to constitute a rejection of such offer by such holder. (D) Prepayment. Prepayment of the Notes to be prepaid pursuant to this Section 8.7 shall be at 100% of the principal amount of such Notes, plus the Make-Whole Amount determined for the date of prepayment with respect to such principal amount, together with interest on such Notes accrued to the date of prepayment. The prepayment shall be made on the Proposed Prepayment Date. (E) Officer's Certificate. Each offer to prepay the Notes pursuant to this Section 8.7 shall be accompanied by a certificate, executed by a Senior Financial Officer of the Company and dated the date of such offer, specifying: (i) the Proposed Prepayment Date; (ii) that such offer is made pursuant to this Section 8.7; (iii) the principal amount of each Note offered to be prepaid; (iv) the estimated Make-Whole Amount due in connection with such prepayment (calculated as if the date of such notice were the date of prepayment); (v) the interest that would be due on each Note offered to be prepaid, accrued to the Proposed Prepayment Date; (v) that the conditions of this Section 8.7 have been fulfilled; and (vi) in reasonable detail, the nature and date of the Significant Asset Sale Event. Two Business Days prior to such prepayment, the Company shall deliver to each holder of Notes a certificate of a Senior Financial Officer specifying the calculation of such Make-Whole Amount as of the specified prepayment date. (F) "Significant Asset Sale Event" and "Excess Proceeds" Defined. (i) "SIGNIFICANT ASSET SALE EVENT" means any sale, lease or other disposition of assets (including, without limitation, the sale of stock or other equity interests in its Subsidiaries) (sometimes hereinafter referred to, except for Excluded Sales, as an "ASSET DISPOSITION") of the Company and its Subsidiaries in which the book value of such assets, when added to the book value of all other assets sold, leased or otherwise disposed of by the Company and its Subsidiaries during any period of 365 consecutive days, exceeds 20% of the book value of Consolidated Total Assets, determined as of the end of the fiscal quarter immediately preceding such Asset Disposition (the "THRESHOLD AMOUNT"); provided that each of the following transactions shall be excluded - 21 - from any determination of a Significant Asset Sale Event (collectively, the "EXCLUDED SALES"): (a) the sale, lease or other disposition of assets in the ordinary course of business of the Company and its Subsidiaries, (b) Excluded Sale and Leaseback Transactions, (c) any transfer of assets from the Company to any Subsidiary or from any Subsidiary to the Company or another Subsidiary, and (d) Receivables and related assets sold in connection with Securitization Transactions. (ii) "EXCESS PROCEEDS" shall mean the aggregate Net Proceeds attributable to the amount by which (I) the book value of all assets sold, leased or otherwise disposed of by the Company and its Subsidiaries during any period of 365 consecutive days (excluding all Excluded Sales) exceeds (II) the Threshold Amount. The aggregate Net Proceeds so attributable in any such period shall be equal to zero until the book value of all assets subject to an Asset Disposition during such period shall equal the Threshold Amount and shall be equal to 100% of the Net Proceeds received in respect of all Asset Dispositions consummated thereafter during such period, provided, however, that the Net Proceeds attributable to any Asset Disposition which causes the Threshold Amount to be exceeded for the first time in any such period shall be deemed to have been allocated ratably to the portion of such book value necessary to reach the Threshold Amount and the portion of such book value in excess thereof, and the latter (but not the former) shall constitute a portion of Excess Proceeds. 9. AFFIRMATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 9.1. COMPLIANCE WITH LAW. The Company will and will cause each of its Subsidiaries to comply with all laws, ordinances or governmental rules or regulations to which each of them is subject, including, without limitation, Environmental Laws, and will obtain and maintain in effect all licenses, certificates, permits, franchises and other governmental authorizations necessary to the ownership of their respective properties or to the conduct of their respective businesses, in each case to the extent necessary to ensure that non-compliance with such laws, ordinances or governmental rules or regulations or failures to obtain or maintain in effect such licenses, certificates, permits, franchises and other governmental authorizations would not reasonably be expected, individually or in the aggregate, to have a materially adverse effect on the business, operations, - 22 - affairs, financial condition, properties or assets of the Company and its Subsidiaries taken as a whole. 9.2. INSURANCE. The Company will and will cause each of its Subsidiaries to maintain, with financially sound and reputable insurers, insurance with respect to their respective properties and businesses against such casualties and contingencies, of such types, on such terms and in such amounts (including deductibles, co-insurance and self-insurance, if adequate reserves are maintained with respect thereto) as is customary in the case of entities of established reputations engaged in the same or a similar business and similarly situated. 9.3. MAINTENANCE OF PROPERTIES. The Company will and will cause each of its Subsidiaries to maintain and keep, or cause to be maintained and kept, their respective properties in good repair, working order and condition (other than ordinary wear and tear), so that the business carried on in connection therewith may be properly conducted at all times, provided that this Section shall not prevent the Company or any Subsidiary from discontinuing the operation and the maintenance of any of its properties if such discontinuance is desirable in the conduct of its business and the Company has concluded that such discontinuance would not, individually or in the aggregate, have a materially adverse effect on the business, operations, affairs, financial condition, properties or assets of the Company and its Subsidiaries taken as a whole. 9.4. PAYMENT OF TAXES. The Company will and will cause each of its Subsidiaries to file all income tax or similar tax returns required to be filed in any jurisdiction and to pay and discharge all taxes shown to be due and payable on such returns and all other taxes, assessments, governmental charges, or levies payable by any of them, to the extent such taxes and assessments have become due and payable and before they have become delinquent, provided that neither the Company nor any Subsidiary need pay any such tax or assessment if (a) the amount, applicability or validity thereof is contested by the Company or such Subsidiary on a timely basis in good faith and in appropriate proceedings, and the Company or a Subsidiary has established adequate reserves therefor in accordance with GAAP on the books of the Company or such Subsidiary or (b) the nonpayment of all such taxes and assessments in the aggregate would not reasonably be expected to have a materially adverse effect on the business, operations, affairs, financial condition, properties or assets of the Company and its Subsidiaries taken as a whole. - 23 - 9.5. CORPORATE EXISTENCE, ETC. Except for sales, leases and other dispositions of assets of the Company and its Subsidiaries effected in compliance with Section 8.7, and subject to Section 10.3, the Company will at all times preserve and keep in full force and effect its corporate existence, and will preserve and keep in full force and effect the corporate existence of each of its Subsidiaries (unless merged into the Company or a Subsidiary) and all rights and franchises of the Company and its Subsidiaries unless, in the good faith judgment of the Company, the termination of or failure to preserve and keep in full force and effect such corporate existence, right or franchise would not, individually or in the aggregate, have a materially adverse effect on the business, operations, affairs, financial condition, properties or assets of the Company and its Subsidiaries taken as a whole. 10. NEGATIVE COVENANTS. The Company covenants that so long as any of the Notes are outstanding: 10.1. LIMITATION ON DEBT AND PRIORITY DEBT. (A) The Company will not at any time permit Consolidated Debt to exceed 55% of Consolidated Total Capitalization. (B) The Company will not at any time permit Priority Debt to exceed 20% of Consolidated Net Worth. 10.2. FIXED CHARGE COVERAGE RATIO. The Company will not at any time permit EBITDAR for any period of four consecutive fiscal quarters of the Company (commencing with the period ending December 31, 2001) to be less than 250% of Fixed Charges for such period. 10.3. MERGER, CONSOLIDATION, ETC. The Company shall not consolidate with or merge with any other corporation or convey, transfer or lease substantially all of its assets in a single transaction or series of transactions to any Person unless: (A) the successor formed by such consolidation or the survivor of such merger or the Person that acquires by conveyance, transfer or lease substantially all of the assets of the Company as an entirety, as the case may be, shall be a solvent corporation organized and existing under the laws of the United States or any State thereof (including the District of - 24 - Columbia), and, if the Company is not such corporation, such corporation shall have executed and delivered to each holder of any Notes its assumption of the due and punctual performance and observance of each covenant and condition of this Agreement, the Other Agreements and the Notes; and (B) immediately after giving effect to such transaction, no Default or Event of Default shall have occurred and be continuing. No such conveyance, transfer or lease of substantially all of the assets of the Company shall have the effect of releasing the Company or any successor corporation that shall theretofore have become such in the manner prescribed in this Section from its liability under this Agreement or the Notes. 10.4. TRANSACTIONS WITH AFFILIATES. The Company will not and will not permit any Subsidiary to enter into directly or indirectly any Material transaction or Material group of related transactions (including without limitation the purchase, lease, sale or exchange of properties of any kind or the rendering of any service) with any Affiliate (other than the Company or another Subsidiary), except pursuant to the reasonable requirements of the Company's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Company or such Subsidiary than would be obtainable in a comparable arm's-length transaction with a Person not an Affiliate. 11. EVENTS OF DEFAULT. An "EVENT OF DEFAULT" shall exist if any of the following conditions or events shall occur and be continuing: (A) the Company defaults in the payment of any principal or Make-Whole Amount, if any, on any Note when the same becomes due and payable, whether at maturity or at a date fixed for prepayment or by declaration or otherwise; or (B) the Company defaults in the payment of any interest on any Note for more than five Business Days after the same becomes due and payable; or (C) the Company defaults in the performance of or compliance with any term contained in Sections 10.1 through 10.4; or (D) the Company defaults in the performance of or compliance with any term contained herein (other than those referred to in - 25 - paragraphs (a), (b) and (c) of this Section 11) and such default is not remedied within 30 days after the earlier of (i) a Responsible Officer obtaining actual knowledge of such default and (ii) the Company receiving written notice of such default from any holder of a Note (any such written notice to be identified as a "notice of default" and to refer specifically to this paragraph (d) of Section 11); or (E) any representation or warranty made in writing by or on behalf of the Company or by any officer of the Company in this Agreement or in any writing furnished in connection with the transactions contemplated hereby proves to have been false or incorrect in any material respect on the date as of which made; or (F) (i) the Company or any Significant Subsidiary is in default (as principal or as guarantor or other surety) in the payment of any principal of or premium or make-whole amount or interest on any Indebtedness that is outstanding in an aggregate principal amount of at least $50,000,000 beyond any period of grace provided with respect thereto, or (ii) the Company or any Significant Subsidiary is in default in the performance of or compliance with any term of any evidence of any Indebtedness in an aggregate outstanding principal amount of at least $50,000,000 or of any mortgage, indenture or other agreement relating thereto or any other condition exists, and as a consequence of such default or condition such Indebtedness has become, or has been declared due and payable before its stated maturity or before its regularly scheduled dates of payment; or (G) the Company or any Significant Subsidiary (i) is generally not paying, or admits in writing its inability to pay, its debts as they become due, (ii) files, or consents by answer or otherwise to the filing against it of, a petition for relief or reorganization or arrangement or any other petition in bankruptcy, for liquidation or to take advantage of any bankruptcy, insolvency, reorganization, moratorium or other similar law of any jurisdiction, (iii) makes an assignment for the benefit of its creditors, (iv) consents to the appointment of a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, (v) is adjudicated as insolvent or to be liquidated, or (vi) takes corporate action for the purpose of any of the foregoing; or (H) a court or governmental authority of competent jurisdiction enters an order appointing, without consent by the Company or any of its Significant Subsidiaries, a custodian, receiver, trustee or other officer with similar powers with respect to it or with respect to any substantial part of its property, or constituting an order for relief or approving a - 26 - petition for relief or reorganization or any other petition in bankruptcy or for liquidation or to take advantage of any bankruptcy or insolvency law of any jurisdiction, or ordering the dissolution, winding-up or liquidation of the Company or any of its Significant Subsidiaries, or any such petition shall be filed against the Company or any of its Significant Subsidiaries and such petition shall not be dismissed within 60 days; or (I) a final judgment or judgments for the payment of money aggregating in excess of $50,000,000 are rendered against one or more of the Company and its Significant Subsidiaries and which judgments are not, within 60 days after entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within 60 days after the expiration of such stay; or (J) if (i) any Plan shall fail to satisfy the minimum funding standards of ERISA or the Code for any plan year or part thereof or a waiver of such standards or extension of any amortization period is sought or granted under section 412 of the Code, (ii) a notice of intent to terminate any Plan shall have been or is reasonably expected to be filed with the PBGC or the PBGC shall have instituted proceedings under ERISA section 4042 to terminate or appoint a trustee to administer any Plan or the PBGC shall have notified the Company or any ERISA Affiliate that a Plan may become a subject of any such proceedings, (iii) the aggregate "amount of unfunded benefit liabilities" (within the meaning of section 4001(a)(18) of ERISA) under all Plans, determined in accordance with Title IV of ERISA, shall exceed $50,000,000, (iv) the Company or any ERISA Affiliate shall have incurred or is reasonably expected to incur any liability pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, (v) the Company or any ERISA Affiliate withdraws from any Multiemployer Plan, or (vi) the Company or any Subsidiary establishes or amends any employee welfare benefit plan that provides post-employment welfare benefits in a manner that would increase the liability of the Company or any Subsidiary thereunder; and any such event or events described in clauses (i) through (vi) above, either individually or together with any other such event or events, would reasonably be expected to have a Materially Adverse Effect. As used in Section 11(j), the terms "EMPLOYEE BENEFIT PLAN" and "EMPLOYEE WELFARE BENEFIT PLAN" shall have the respective meanings assigned to such terms in Section 3 of ERISA. 12. REMEDIES ON DEFAULT, ETC. 12.1. ACCELERATION. - 27 - (A) If an Event of Default with respect to the Company described in paragraph (g) or (h) of Section 11 (other than an Event of Default described in clause (i) of paragraph (g) or described in clause (vi) of paragraph (g) by virtue of the fact that such clause encompasses clause (i) of paragraph (g)) has occurred, all the Notes then outstanding shall automatically become immediately due and payable. (B) If any other Event of Default has occurred and is continuing, any holder or holders of more than 66% in principal amount of the Notes at the time outstanding may at any time at its or their option, by notice or notices to the Company, declare all the Notes then outstanding to be immediately due and payable. (C) If any Event of Default described in paragraph (a) or (b) of Section 11 has occurred and is continuing, any holder or holders of Notes at the time outstanding affected by such Event of Default may at any time, at its or their option, by notice or notices to the Company, declare all the Notes held by it or them to be immediately due and payable. Upon any Notes becoming due and payable under this Section 12.1, whether automatically or by declaration, such Notes will forthwith mature and the entire unpaid principal amount of such Notes, plus (x) all accrued and unpaid interest thereon and (y) the Make-Whole Amount determined in respect of such principal amount (to the full extent permitted by applicable law), shall all be immediately due and payable, in each and every case without presentment, demand, protest or further notice, all of which are hereby waived. The Company acknowledges, and the parties hereto agree, that each holder of a Note has the right to maintain its investment in the Notes free from repayment by the Company (except as herein specifically provided for) and that the provision for payment of a Make-Whole Amount by the Company in the event that the Notes are prepaid or are accelerated as a result of an Event of Default, is intended to provide compensation for the deprivation of such right under such circumstances. 12.2. OTHER REMEDIES. If any Default or Event of Default has occurred and is continuing, and irrespective of whether any Notes have become or have been declared immediately due and payable under Section 12.1, the holder of any Note at the time outstanding may proceed to protect and enforce the rights of such holder by an action at law, suit in equity or other appropriate proceeding, whether for the specific performance of any agreement contained herein or in any Note, or for an injunction against a violation of any of the terms hereof or thereof, or in - 28 - aid of the exercise of any power granted hereby or thereby or by law or otherwise. 12.3. RESCISSION. At any time after any Notes have been declared due and payable pursuant to clause (b) or (c) of Section 12.1, the holders of not less than 50% in principal amount of the Notes then outstanding, by written notice to the Company, may rescind and annul any such declaration and its consequences if (a) the Company has paid all overdue interest on the Notes, all principal of and Make-Whole Amount, if any, on any Notes that are due and payable and are unpaid other than by reason of such declaration, and all interest on such overdue principal and Make-Whole Amount, if any, and (to the extent permitted by applicable law) any overdue interest in respect of any Series of Notes, at the Default Rate for such Series, (b) all Events of Default and Defaults, other than non-payment of amounts that have become due solely by reason of such declaration, have been cured or have been waived pursuant to Section 17, and (c) no judgment or decree has been entered for the payment of any monies due pursuant hereto or to the Notes. No rescission and annulment under this Section 12.3 will extend to or affect any subsequent Event of Default or Default or impair any right consequent thereon. 12.4. NO WAIVERS OR ELECTION OF REMEDIES, EXPENSES, ETC. No course of dealing and no delay on the part of any holder of any Note in exercising any right, power or remedy shall operate as a waiver thereof or otherwise prejudice such holder's rights, powers or remedies. No right, power or remedy conferred by this Agreement or by any Note upon any holder thereof shall be exclusive of any other right, power or remedy referred to herein or therein or now or hereafter available at law, in equity, by statute or otherwise. Without limiting the obligations of the Company under Section 15, the Company will pay to the holder of each Note on demand such further amount as shall be sufficient to cover all costs and expenses of such holder incurred in any enforcement or collection under this Section 12, including, without limitation, reasonable attorneys' fees, expenses and disbursements. 13. REGISTRATION; EXCHANGE; SUBSTITUTION OF NOTES. 13.1. REGISTRATION OF NOTES. The Company shall keep at its principal executive office a register for the registration and registration of transfers of Notes. The name and address of each holder of one or more Notes, each transfer thereof and the name and address of each transferee of one or more Notes shall be registered in such register. Prior to due presentment for registration of transfer, the Person in - 29 - whose name any Note shall be registered shall be deemed and treated as the owner and holder thereof for all purposes hereof, and the Company shall not be affected by any notice or knowledge to the contrary. The Company shall give to any holder of a Note that is an Institutional Investor promptly upon request therefor, a complete and correct copy of the names and addresses of all registered holders of Notes. 13.2. TRANSFER AND EXCHANGE OF NOTES. Upon surrender of any Note at the principal executive office of the Company for registration of transfer or exchange (and in the case of a surrender for registration of transfer, duly endorsed or accompanied by a written instrument of transfer duly executed by the registered holder of such Note or his attorney duly authorized in writing and accompanied by the address for notices of each transferee of such Note or part thereof), the Company shall execute and deliver, at the Company's expense (except as provided below), one or more new Notes of the same Series (as requested by the holder thereof) in exchange therefor, in an aggregate principal amount equal to the unpaid principal amount of the surrendered Note. Each such new Note shall be payable to such Person as such holder may request and shall be substantially in the form of the Note for such Series set forth in of Exhibit 1.1 or Exhibit 1.2, as the case may be. Each such new Note shall be dated and bear interest from the date to which interest shall have been paid on the surrendered Note or dated the date of the surrendered Note if no interest shall have been paid thereon. The Company may require payment of a sum sufficient to cover any stamp tax or governmental charge imposed in respect of any such transfer of Notes. Notes shall not be transferred in denominations of less than $100,000, provided that if necessary to enable the registration of transfer by a holder of its entire holding of Notes, one Note may be in a denomination of less than $100,000. Any transferee, by its acceptance of a Note registered in its name (or the name of its nominee), shall be deemed to have made the representation set forth in Section 6.2. 13.3. REPLACEMENT OF NOTES. Upon receipt by the Company of evidence reasonably satisfactory to it of the ownership of and the loss, theft, destruction or mutilation of any Note (which evidence shall be, in the case of an Institutional Investor, notice from such Institutional Investor of such ownership and such loss, theft, destruction or mutilation), and (A) in the case of loss, theft or destruction, of indemnity reasonably satisfactory to it (provided that if the holder of such Note is, or is a nominee for, an original Purchaser or another holder of a Note with a - 30 - minimum net worth of at least $50,000,000, such Person's own unsecured agreement of indemnity shall be deemed to be satisfactory), or (B) in the case of mutilation, upon surrender and cancellation thereof, the Company at its own expense shall execute and deliver, in lieu thereof, a new Note of the same Series, dated and bearing interest from the date to which interest shall have been paid on such lost, stolen, destroyed or mutilated Note or dated the date of such lost, stolen, destroyed or mutilated Note if no interest shall have been paid thereon. 14. PAYMENTS ON NOTES. 14.1. PLACE OF PAYMENT. Subject to Section 14.2, payments of principal, Make-Whole Amount, if any, and interest becoming due and payable on the Notes shall be made in Atlanta, Georgia at the principal office of the Company in such jurisdiction. The Company may at any time, by notice to each holder of a Note, change the place of payment of the Notes so long as such place of payment shall be either the principal office of the Company in such jurisdiction or the principal office of a bank or trust company in such jurisdiction. 14.2. HOME OFFICE PAYMENT. So long as you or your nominee shall be the holder of any Note, and notwithstanding anything contained in Section 14.1 or in such Note to the contrary, the Company will pay all sums becoming due on such Note for principal, Make-Whole Amount, if any, and interest by the method and at the address specified for such purpose below your name in Schedule A, or by such other method or at such other address as you shall have from time to time specified to the Company in writing for such purpose, without the presentation or surrender of such Note or the making of any notation thereon, except that upon written request of the Company made concurrently with or reasonably promptly after payment or prepayment in full of any Note, you shall surrender such Note for cancellation, reasonably promptly after any such request, to the Company at its principal executive office or at the place of payment most recently designated by the Company pursuant to Section 14.1. Prior to any sale or other disposition of any Note held by you or your nominee you will, at your election, either endorse thereon the amount of principal paid thereon and the last date to which interest has been paid thereon or surrender such Note to the Company in exchange for a new Note or Notes pursuant to Section 13.2. The Company will afford the benefits of this Section 14.2 to any Institutional Investor that is the direct or indirect transferee of any Note purchased by you - 31 - under this Agreement and that has made the same agreement relating to such Note as you have made in this Section 14.2. 15. EXPENSES, ETC. 15.1. TRANSACTION EXPENSES. Whether or not the transactions contemplated hereby are consummated, the Company will pay all costs and expenses (including reasonable attorneys' fees of a special counsel and, if reasonably required, local or other counsel) incurred by you and each Other Purchaser or holder of a Note in connection with such transactions and in connection with any amendments, waivers or consents under or in respect of this Agreement or the Notes (whether or not such amendment, waiver or consent becomes effective), including, without limitation: (a) the costs and expenses incurred in enforcing or defending (or determining whether or how to enforce or defend) any rights under this Agreement or the Notes or in responding to any subpoena or other legal process or informal investigative demand issued in connection with this Agreement or the Notes, or by reason of being a holder of any Note, and (b) the costs and expenses, including financial advisors' fees, incurred in connection with the insolvency or bankruptcy of the Company or any Subsidiary or in connection with any work-out or restructuring of the transactions contemplated hereby and by the Notes. The Company will pay, and will save you and each other holder of a Note harmless from, all claims in respect of any fees, costs or expenses if any, of brokers and finders (other than those retained by you). 15.2. SURVIVAL. The obligations of the Company under this Section 15 will survive the payment or transfer of any Note, the enforcement, amendment or waiver of any provision of this Agreement or the Notes, and the termination of this Agreement. 16. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ENTIRE AGREEMENT. All representations and warranties contained herein shall survive the execution and delivery of this Agreement and the Notes, the purchase or transfer by you of any Note or portion thereof or interest therein and the payment of any Note, and may be relied upon by any subsequent holder of a Note, regardless of any investigation made at any time by or on behalf of you or any other holder of a Note. All statements contained in any certificate or other instrument delivered by or on behalf of the Company pursuant to this Agreement shall be deemed representations and warranties of the Company - 32 - under this Agreement. Subject to the preceding sentence, this Agreement and the Notes embody the entire agreement and understanding between you and the Company and supersede all prior agreements and understandings relating to the subject matter hereof. 17. AMENDMENT AND WAIVER. 17.1. REQUIREMENTS. This Agreement and the Notes may be amended, and the observance of any term hereof or of the Notes may be waived (either retroactively or prospectively), with (and only with) the written consent of the Company and the Required Holders, except that (a) no amendment or waiver of any of the provisions of Section 1, 2, 3, 4, 5, 6 or 21 hereof, or any defined term (as it is used therein), will be effective as to you unless consented to by you in writing, and (b) no such amendment or waiver may, without the written consent of the holder of each Note at the time outstanding affected thereby, (i) subject to the provisions of Section 12 relating to acceleration or rescission, change the amount or time of any prepayment or payment of principal of, or reduce the rate or change the time of payment or method of computation of interest or of the Make-Whole Amount on, the Notes, (ii) change the percentage of the principal amount of the Notes the holders of which are required to consent to any such amendment or waiver, or (iii) amend any of Sections 8, 11(a), 11(b), 12, 17 or 20. 17.2. SOLICITATION OF HOLDERS OF NOTES. (A) Solicitation. The Company will provide each holder of the Notes (irrespective of the amount of Notes then owned by it) with sufficient information, sufficiently far in advance of the date a decision is required, to enable such holder to make an informed and considered decision with respect to any proposed amendment, waiver or consent in respect of any of the provisions hereof or of the Notes. The Company will deliver executed or true and correct copies of each amendment, waiver or consent effected pursuant to the provisions of this Section 17 to each holder of outstanding Notes promptly following the date on which it is executed and delivered by, or receives the consent or approval of, the requisite holders of Notes. (B) Payment. The Company will not directly or indirectly pay or cause to be paid any remuneration, whether by way of supplemental or additional interest, fee or otherwise, or grant any security, to any holder of Notes as consideration for or as an inducement to the entering into by any holder of Notes or any waiver or amendment of any of the terms and provisions hereof unless such remuneration is concurrently paid, or - 33 - security is concurrently granted, on the same terms, ratably to each holder of Notes then outstanding even if such holder did not consent to such waiver or amendment. 17.3. BINDING EFFECT, ETC. Any amendment or waiver consented to as provided in this Section 17 applies equally to all holders of Notes and is binding upon them and upon each future holder of any Note and upon the Company without regard to whether such Note has been marked to indicate such amendment or waiver. No such amendment or waiver will extend to or affect any obligation, covenant, agreement, Default or Event of Default not expressly amended or waived or impair any right consequent thereon. No course of dealing between the Company and the holder of any Note nor any delay in exercising any rights hereunder or under any Note shall operate as a waiver of any rights of any holder of such Note. As used herein, the term "THIS AGREEMENT" and references thereto shall mean this Agreement as it may from time to time be amended or supplemented. 17.4. NOTES HELD BY COMPANY, ETC. Solely for the purpose of determining whether the holders of the requisite percentage of the aggregate principal amount of Notes then outstanding approved or consented to any amendment, waiver or consent to be given under this Agreement or the Notes, or have directed the taking of any action provided herein or in the Notes to be taken upon the direction of the holders of a specified percentage of the aggregate principal amount of Notes then outstanding, Notes directly or indirectly owned by the Company or any of its Affiliates shall be deemed not to be outstanding. 18. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (i) if to you or your nominee, to you or it at the address specified for such communications in Schedule A, or at such other address as you or it shall have specified to the Company in writing, - 34 - (ii) if to any other holder of any Note, to such holder at such address as such other holder shall have specified to the Company in writing, or (iii) if to the Company, to the Company at its address set forth at the beginning hereof to the attention of Frank M. Howard, Vice President and Treasurer, or at such other address as the Company shall have specified to the holder of each Note in writing. Notices under this Section 18 will be deemed given only when actually received. 19. REPRODUCTION OF DOCUMENTS. This Agreement and all documents relating thereto, including, without limitation, (a) consents, waivers and modifications that may hereafter be executed, (b) documents received by you at the Closing (except the Notes themselves), and (c) financial statements, certificates and other information previously or hereafter furnished to you, may be reproduced by you by any photographic, photostatic, microfilm, microcard, miniature photographic or other similar process and you may destroy any original document so reproduced. The Company agrees and stipulates that, to the extent permitted by applicable law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by you in the regular course of business) and any enlargement, facsimile or further reproduction of such reproduction shall likewise be admissible in evidence. This Section 19 shall not prohibit the Company or any other holder of Notes from contesting any such reproduction to the same extent that it could contest the original, or from introducing evidence to demonstrate the inaccuracy of any such reproduction. 20. CONFIDENTIAL INFORMATION. For the purposes of this Section 20, "CONFIDENTIAL INFORMATION" means information delivered to you by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by or otherwise pursuant to this Agreement that is proprietary in nature and that was clearly marked or labeled or otherwise adequately identified when received by you as being confidential information of the Company or such Subsidiary, provided that such term does not include information that (a) was publicly known or otherwise known to you prior to the time of such disclosure, (b) subsequently becomes publicly known through no act or omission by you or any person acting on your behalf, (c) otherwise becomes known to you other than through disclosure by the Company or any Subsidiary or (d) constitutes financial statements delivered to you under Section 7.1 that are otherwise publicly - 35 - available. You will maintain the confidentiality of such Confidential Information in accordance with procedures adopted by you in good faith to protect confidential information of third parties delivered to you, provided that you may deliver or disclose Confidential Information to (i) your directors, officers, employees, agents, attorneys and affiliates, (to the extent such disclosure reasonably relates to the administration of the investment represented by your Notes), (ii) your financial advisors and other professional advisors who agree to hold confidential the Confidential Information substantially in accordance with the terms of this Section 20, (iii) any other holder of any Note, (iv) any Institutional Investor to which you sell or offer to sell such Note or any part thereof or any participation therein (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (v) any Person from which you offer to purchase any security of the Company (if such Person has agreed in writing prior to its receipt of such Confidential Information to be bound by the provisions of this Section 20), (vi) any federal or state regulatory authority having jurisdiction over you, (vii) the National Association of Insurance Commissioners or any similar organization, or any nationally recognized rating agency that requires access to information about your investment portfolio, or (viii) any other Person to which such delivery or disclosure may be necessary or appropriate (w) to effect compliance with any law, rule, regulation or order applicable to you, (x) in response to any subpoena or other legal process, (y) in connection with any litigation to which you are a party or (z) if an Event of Default has occurred and is continuing, to the extent you may reasonably determine such delivery and disclosure to be necessary or appropriate in the enforcement or for the protection of the rights and remedies under your Notes and this Agreement. Each holder of a Note, by its acceptance of a Note, will be deemed to have agreed to be bound by and to be entitled to the benefits of this Section 20 as though it were a party to this Agreement. On reasonable request by the Company in connection with the delivery to any holder of a Note of information required to be delivered to such holder under this Agreement or requested by such holder (other than a holder that is a party to this Agreement or its nominee), such holder will enter into an agreement with the Company embodying the provisions of this Section 20. 21. SUBSTITUTION OF PURCHASER. You shall have the right to substitute any one of your Affiliates as the purchaser of the Notes that you have agreed to purchase hereunder, by written notice to the Company, which notice shall be signed by both you and such Affiliate, shall contain such Affiliate's agreement to be bound by this Agreement and shall contain a confirmation by such Affiliate of the accuracy with respect to it of the representations set forth in Section 6. Upon receipt of such notice, wherever the word "you" is used in this Agreement (other than in this Section - 36 - 21), such word shall be deemed to refer to such Affiliate in lieu of you. In the event that such Affiliate is so substituted as a purchaser hereunder and such Affiliate thereafter transfers to you all of the Notes then held by such Affiliate, upon receipt by the Company of notice of such transfer, wherever the word "you" is used in this Agreement (other than in this Section 21), such word shall no longer be deemed to refer to such Affiliate, but shall refer to you, and you shall have all the rights of an original holder of the Notes under this Agreement. 22. MISCELLANEOUS. 22.1. SUCCESSORS AND ASSIGNS. All covenants and other agreements contained in this Agreement by or on behalf of any of the parties hereto bind and inure to the benefit of their respective successors and assigns (including, without limitation, any subsequent holder of a Note) whether so expressed or not. 22.2. PAYMENTS DUE ON NON-BUSINESS DAYS. Anything in this Agreement or the Notes to the contrary notwithstanding, any payment of principal of or Make-Whole Amount or interest on any Note that is due on a date other than a Business Day shall be made on the next succeeding Business Day without including the additional days elapsed in the computation of the interest payable on such next succeeding Business Day. 22.3. SEVERABILITY. Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall (to the full extent permitted by law) not invalidate or render unenforceable such provision in any other jurisdiction. 22.4. CONSTRUCTION; ACCOUNTING CONCEPTS. Each covenant contained herein shall be construed (absent express provision to the contrary) as being independent of each other covenant contained herein, so that compliance with any one covenant shall not (absent such an express contrary provision) be deemed to excuse compliance with any other covenant. Where any provision herein refers to action to be taken by any Person, or which such Person is prohibited from taking, such provision shall be applicable whether such action is taken directly or indirectly by such Person. For the avoidance of doubt, where the character or amount of any asset or - 37 - liability or item of income or expense, or any consolidation or other accounting computation is required to be made for any purpose hereunder, it shall be done in accordance with GAAP, provided, that if any term defined herein includes or excludes amounts, items or concepts that would not be included in or excluded from such term if such term were defined with reference solely to GAAP, such term will be deemed to include or exclude such amounts, items or concepts as set forth herein. 22.5. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be an original but all of which together shall constitute one instrument. Each counterpart may consist of a number of copies hereof, each signed by less than all, but together signed by all, of the parties hereto. 22.6. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. - 38 - SCHEDULE B DEFINED TERMS As used herein, the following terms have the respective meanings set forth below or set forth in the Section hereof following such term: "AFFILIATE" means, at any time, and with respect to any Person, any other Person that at such time directly or indirectly through one or more intermediaries Controls, or is Controlled by, or is under common Control with, such first Person. As used in this definition, "CONTROL" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise. Unless the context otherwise clearly requires, any reference to an "Affiliate" is a reference to an Affiliate of the Company. "ASSET SALE NOTICE" means a written notice from a Responsible Officer to each holder of Notes referring to Section 8.7 and (a) identifying the property that was the subject of a Significant Asset Sale Event, (b) setting forth, in reasonable detail, a calculation of the Excess Proceeds attributable thereto and (c) as contemplated by Section 8.7(a), specifying the application of such Excess Proceeds. "BUSINESS DAY" means (a) for the purposes of Section 8.6 only, any day other than a Saturday, a Sunday or a day on which commercial banks in New York City are required or authorized to be closed, and (b) for the purposes of any other provision of this Agreement, any day other than a Saturday, a Sunday or a day on which commercial banks in New York, New York or Atlanta, Georgia are required or authorized to be closed. "CAPITAL LEASE" means, at any time, a lease with respect to which the lessee is required concurrently to recognize the acquisition of an asset and the incurrence of a liability in accordance with GAAP. "CLOSING" is defined in Section 3. "CODE" means the Internal Revenue Code of 1986, as amended from time to time, and the rules and regulations promulgated thereunder from time to time. "COMPANY" is defined in the introductory sentence to this Agreement. "CONFIDENTIAL INFORMATION" is defined in Section 20. "CONSOLIDATED DEBT" means, as of the date of any determination, all Indebtedness of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET INCOME" means for any period the consolidated net income (or loss) of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED NET WORTH" means at any time the total amount of stockholders' equity of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TOTAL ASSETS" means, as of the date of any determination thereof, the total amount of all assets of the Company and its Subsidiaries, determined on a consolidated basis in accordance with GAAP. "CONSOLIDATED TOTAL CAPITALIZATION" means, as of the date of any determination thereof, the sum of (a) Consolidated Debt, plus (b) Consolidated Net Worth. "DEFAULT" means an event or condition the occurrence or existence of which would, with the lapse of time or the giving of notice or both, become an Event of Default. "DEFAULT RATE" means, with respect to any Series of Notes, that rate of interest that is the greater of (i) 2% per annum above the rate of interest stated in clause (a) of the first paragraph of such Note or (ii) 2% per annum over the rate of interest publicly announced by Bank of New York in New York, New York as its "base" or "prime" rate. "EBITDAR" means for any period the sum of (a) Consolidated Net Income, plus (b) income tax expense of the Company and its Subsidiaries for such period, determined in accordance with GAAP, plus (c) charges for depreciation, amortization of intangibles, extraordinary charges, non-recurring charges and restructuring charges but, in each case, only to the extent that such items are non-cash charges deducted from Consolidated Net Income during such period, minus (d) extraordinary gains, nonrecurring gains and restructuring gains but, in each case, only to the extent that such items are non-cash gains included in Consolidated Net Income for such period, plus (e) Interest Expense plus (f) Rental Expense. "ENVIRONMENTAL LAWS" means any and all Federal, state, local, and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, concessions, grants, franchises, licenses, agreements or governmental restrictions relating to pollution and the protection of the environment or the release of any materials into the environment, including but not limited to those related to hazardous substances or wastes, air emissions and discharges to waste or public systems. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the rules and regulations promulgated thereunder from time to time in effect. "ERISA AFFILIATE" means any trade or business (whether or not incorporated) that is treated as a single employer together with the Company under section 414 of the Code. "EVENT OF DEFAULT" is defined in Section 11. "EXCESS PROCEEDS" is defined in Section 8.7(f). "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. "EXCLUDED SALE AND LEASEBACK TRANSACTION" means any sale or transfer of property acquired by the Company or any Subsidiary after the date of this Agreement to any Person within 180 days following the acquisition or construction of such property by the Company or any Subsidiary if the Company or such Subsidiary shall concurrently with such sale or transfer, lease such property, as lessee. "FIXED CHARGES" means, with respect to any period, the sum of (a) Interest Expense for such period and (b) Rental Expense for such period. "GAAP" means generally accepted accounting principles as in effect from time to time in the United States of America. "GOVERNMENTAL AUTHORITY" means (a) the government of (i) the United States of America or any State or other political subdivision thereof, or (ii) any jurisdiction in which the Company or any Subsidiary conducts all or any part of its business, or which asserts jurisdiction over any properties of the Company or any Subsidiary, or (b) any entity exercising executive, legislative, judicial, regulatory or administrative functions of, or pertaining to, any such government. "GUARANTY" means, with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any indebtedness, dividend or other obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person: (a) to purchase such indebtedness or obligation or any property constituting security therefor; (b) to advance or supply funds (i) for the purchase or payment of such indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such indebtedness or obligation; (c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such indebtedness or obligation of the ability of any other Person to make payment of the indebtedness or obligation; or (d) otherwise to assure the owner of such indebtedness or obligation against loss in respect thereof. In any computation of the indebtedness or other liabilities of the obligor under any Guaranty, the indebtedness or other obligations that are the subject of such Guaranty shall be assumed to be direct obligations of such obligor. "HOLDER" means, with respect to any Note, the Person in whose name such Note is registered in the register maintained by the Company pursuant to Section 13.1. "INDEBTEDNESS" with respect to any Person means, at any time, without duplication, (a) its liabilities for borrowed money and its redemption obligations in respect of mandatorily redeemable Preferred Stock; (b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property); (c) all liabilities appearing on its balance sheet in accordance with GAAP in respect of Capital Leases; (d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities); (e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions (whether or not representing obligations for borrowed money); (f) Swaps of such Person; (g) the maximum commitment amount (as in effect from time to time) of all liquidity facilities to the extent required, pursuant to the documentation entered into in connection with any Securitization Transaction, to be dedicated to support such Securitization Transaction (whether or not the drawings under such liquidity facilities are outstanding); and (h) any Guaranty of such Person with respect to liabilities of a type described in any of clauses (a) through (g) hereof. For the avoidance of doubt, "Indebtedness" shall not include any obligation of the Company or its Subsidiaries in connection with a Securitization Transaction. "INSTITUTIONAL INVESTOR" means (a) any original purchaser of a Note, (b) any holder of a Note holding more than 5% of the aggregate principal amount of the Notes then outstanding, and (c) any bank, trust company, savings and loan association or other financial institution, any pension plan, any investment company, any insurance company, any broker or dealer, or any other similar financial institution or entity, regardless of legal form and (d) any Persons that are registered holders of Notes in a minimum principal amount of at least $5,000,000 for whom any original purchaser of Notes manages investments or accounts. "INTEREST EXPENSE" means, with respect to any period, all interest expense in respect of Indebtedness of the Company and its Subsidiaries (including, without limitation, imputed interest on Capital Leases) for such period, determined on a consolidated basis in accordance with GAAP. "LIEN" means, with respect to any Person, any mortgage, lien, pledge, charge, security interest or other encumbrance, or any interest or title of any vendor, lessor, lender or other secured party to or of such Person under any conditional sale or other title retention agreement or Capital Lease, upon or with respect to any property or asset of such Person (including in the case of stock, stockholder agreements, voting trust agreements and all similar arrangements). "MAKE-WHOLE AMOUNT" is defined in Section 8.6. "MATERIAL" means material in relation to the business, operations, affairs, financial condition, assets, or properties of the Company and its Subsidiaries taken as a whole. "MATERIAL ADVERSE EFFECT" means a material adverse effect on (a ) the business, operations, affairs, financial condition, assets or properties of the Company and its Subsidiaries taken as a whole, or (b) the ability of the Company to perform its obligations under this Agreement and the Notes, or (c) the validity or enforceability of this Agreement or the Notes. "MEMORANDUM" is defined in Section 5.3. "MULTIEMPLOYER PLAN" means any Plan that is a "multiemployer plan" (as such term is defined in section 4001(a)(3) of ERISA). "NET PROCEEDS" means, with respect to any sale, lease or other disposition of any property by any Person, an amount equal to the difference of: (a) the aggregate amount of the consideration (valued at the fair market value of such consideration at the time of the consummation of such sale, lease or other disposition but net of applicable taxes) received by such Person in respect of such disposition, minus (b) all reasonable out-of-pocket costs and expenses (including, without limitation, legal, accounting and investment banking fees, and sales commissions) paid by the Company or any Subsidiary in connection with such sale, lease or other disposition. "NOTES" is defined in Section 1. "OFFICER'S CERTIFICATE" means a certificate of a Senior Financial Officer or of any other officer of the Company whose responsibilities extend to the subject matter of such certificate. "OTHER AGREEMENTS" is defined in Section 2. "OTHER PURCHASERS" is defined in Section 2. "PBGC" means the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor thereto. "PERSON" means an individual, partnership, corporation, limited liability company, association, trust, unincorporated organization, or a government or agency or political subdivision thereof. "PLAN" means an "employee benefit plan" (as defined in section 3(3) of ERISA) that is or, within the preceding five years, has been established or maintained, or to which contributions are or, within the preceding five years, have been made or required to be made, by the Company or any ERISA Affiliate or with respect to which the Company or any ERISA Affiliate may have any liability. "PREFERRED STOCK" means any class of capital stock of a corporation that is preferred over any other class of capital stock of such corporation as to the payment of dividends or the payment of any amount upon liquidation or dissolution of such corporation. "PRIORITY DEBT" means (without duplication), as of the date of any determination thereof, (a) all unsecured Indebtedness of Subsidiaries of the Company (other than Indebtedness owing to the Company or other Subsidiaries), (b) all Indebtedness of the Company and its Subsidiaries (other than Indebtedness owing to the Company or other Subsidiaries) secured by Liens, and (c) the higher of the liquidation preference or the redemption amount of preferred stock of any Subsidiary (other than any such preferred stock issued to the Company). "PROPERTY" or "PROPERTIES" means, unless otherwise specifically limited, real or personal property of any kind, tangible or intangible, choate or inchoate. "PROPERTY REINVESTMENT APPLICATION" means, with respect to any Significant Asset Sale Event, the application of an amount equal to the Excess Proceeds with respect to such Significant Asset Sale Event to the acquisition by the Company or any of its Subsidiaries of productive assets used or useful in carrying on the business of the Company and its Subsidiaries and having a value at least equal to the value of such assets which were the subject of such Significant Asset Sale Event. "QPAM EXEMPTION" means Prohibited Transaction Class Exemption 84-14 issued by the United States Department of Labor. "RECEIVABLES" means those assets classified as (a) accounts or notes receivable under GAAP or (b) accounts or general intangibles within the meaning of the Uniform Commercial Code of any jurisdiction. "RENTAL EXPENSE" means, for any period, all rental expense of the Company and its Subsidiaries during such period, determined on a consolidated basis in accordance with GAAP, incurred under any rental agreements or leases of real or personal property, including space leases, ground leases and Synthetic Leases other than obligations in respect of any Capital Leases, net of (a) rental income derived from subleases of such property and (b) the performance based payments, if any, under any rental agreements or leases. "REQUIRED HOLDERS" means, at any time, the holders of a majority in principal amount of the Notes (without regard to Series) at the time outstanding (exclusive of Notes then owned by the Company or any of its Affiliates). "RESPONSIBLE OFFICER" means any Senior Financial Officer and any other officer of the Company with responsibility for the administration of the relevant portion of this agreement. "SECURITIES ACT" means the Securities Act of 1933, as amended from time to time. "SECURITIZATION TRANSACTION" means a securitization transaction in which Receivables are sold and such transaction is a true sale for bankruptcy purposes and is accounted for by the seller as a sale in accordance with GAAP. "SENIOR FINANCIAL OFFICER" means the chief financial officer, principal accounting officer, treasurer or comptroller of the Company. "SERIES" means any series of Notes issued hereunder. "SERIES A NOTES" is defined in Section 1(a). "SERIES B NOTES" is defined in Section 1(b). "SIGNIFICANT ASSET SALE EVENT" is defined in Section 8.7(f). "SIGNIFICANT SUBSIDIARY" means at any time any Subsidiary that would at such time constitute a "significant subsidiary" (as such term is defined in Regulation S-X of the Securities and Exchange Commission as in effect on the date of the Closing) of the Company. "SUBSIDIARY" means, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a "Subsidiary" is a reference to a Subsidiary of the Company. "SWAPS" means, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency. For the purposes of this Agreement, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined. "SYNTHETIC LEASES" means, collectively, all payment obligations of the Company or any of its Subsidiaries pursuant to so-called "synthetic" leases that are not treated as capital leases under GAAP, but that are treated as financings under the Code. Genuine Parts Company ("GPC") is a party to several shareholder agreements with respect certain majority owned subsidiaries of GPC. These shareholder agreements were entered into in connection with GPC's Progressive Ownership Program and provide shareholders the right, among other things, to purchase shares in the relevant subsidiary from GPC. EXHIBIT 1.1 [FORM OF SERIES A SENIOR NOTE] GENUINE PARTS COMPANY 5.86% SERIES A SENIOR NOTE DUE NOVEMBER 30, 2008 No. [_____] [Date] $[_______] PPN: 372460 A* 6 THIS NOTE WAS ORIGINALLY ISSUED ON NOVEMBER 30, 2001 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS OR PURSUANT TO EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, the undersigned GENUINE PARTS COMPANY (herein called the "COMPANY"), a corporation organized and existing under the laws of the State of Georgia, hereby promises to pay to [___________________________], or registered assigns, the principal sum of [___________________________] DOLLARS on November 30, 2008, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 5.86% per annum from the date hereof, payable semiannually, on the 30th day of May and November in each year, commencing with the May or November next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 7.86% or (ii) 2% over the rate of interest publicly announced by Bank of New York from time to time in New York, New York as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America to the registered holder hereof at the address shown in the register maintained by the Company for such purpose or at such other place as the Company shall have designated by written notice to the holder of this Note, in the manner provided in the Note Purchase Agreements referred to below. This Note is one of the Series A Senior Notes (herein called the "NOTES") issued pursuant to separate Note Purchase Agreements, dated as of November 30, 2001 (as from time to time amended, the "NOTE PURCHASE AGREEMENTS"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. GENUINE PARTS COMPANY By: ------------------------------------ [Title:] ---------------------------- EXHIBIT 1.2 [FORM OF SERIES B SENIOR NOTE] GENUINE PARTS COMPANY 6.23% SERIES B SENIOR NOTE DUE NOVEMBER 30, 2011 No. [_____] [Date] $[_______] PPN: 372460 A@ 4 THIS NOTE WAS ORIGINALLY ISSUED ON NOVEMBER 30, 2001 AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE TRANSFERRED WITHOUT REGISTRATION UNDER THE SECURITIES ACT AND SUCH STATE SECURITIES LAWS OR PURSUANT TO EXEMPTIONS THEREFROM. FOR VALUE RECEIVED, the undersigned GENUINE PARTS COMPANY (herein called the "COMPANY"), a corporation organized and existing under the laws of the State of Georgia, hereby promises to pay to [___________________________], or registered assigns, the principal sum of [___________________________] DOLLARS on November 30, 2011, with interest (computed on the basis of a 360-day year of twelve 30-day months) (a) on the unpaid balance thereof at the rate of 6.23% per annum from the date hereof, payable semiannually, on the 30th day of May and November in each year, commencing with the May or November next succeeding the date hereof, until the principal hereof shall have become due and payable, and (b) to the extent permitted by law on any overdue payment (including any overdue prepayment) of principal, any overdue payment of interest and any overdue payment of any Make-Whole Amount (as defined in the Note Purchase Agreements referred to below), payable semiannually as aforesaid (or, at the option of the registered holder hereof, on demand), at a rate per annum from time to time equal to the greater of (i) 8.23% or (ii) 2% over the rate of interest publicly announced by Bank of New York from time to time in New York, New York as its "base" or "prime" rate. Payments of principal of, interest on and any Make-Whole Amount with respect to this Note are to be made in lawful money of the United States of America to the registered holder hereof at the address shown in the register maintained by the Company for such purpose or at such other place as the Company shall have designated by written notice to the holder of this Note, in the manner provided in the Note Purchase Agreements referred to below. To each of the Purchasers Listed on the Attached Annex 1 November __, 2001 Page 2 This Note is one of the Series B Senior Notes (herein called the "NOTES") issued pursuant to separate Note Purchase Agreements, dated as of November 30, 2001 (as from time to time amended, the "NOTE PURCHASE AGREEMENTS"), between the Company and the respective Purchasers named therein and is entitled to the benefits thereof. Each holder of this Note will be deemed, by its acceptance hereof, (i) to have agreed to the confidentiality provisions set forth in Section 20 of the Note Purchase Agreements and (ii) to have made the representation set forth in Section 6 of the Note Purchase Agreements. This Note is a registered Note and, as provided in the Note Purchase Agreements, upon surrender of this Note for registration of transfer, duly endorsed, or accompanied by a written instrument of transfer duly executed, by the registered holder hereof or such holder's attorney duly authorized in writing, a new Note for a like principal amount will be issued to, and registered in the name of, the transferee. Prior to due presentment for registration of transfer, the Company may treat the person in whose name this Note is registered as the owner hereof for the purpose of receiving payment and for all other purposes, and the Company will not be affected by any notice to the contrary. This Note is subject to optional prepayment, in whole or from time to time in part, at the times and on the terms specified in the Note Purchase Agreements, but not otherwise. If an Event of Default, as defined in the Note Purchase Agreements, occurs and is continuing, the principal of this Note may be declared or otherwise become due and payable in the manner, at the price (including any applicable Make-Whole Amount) and with the effect provided in the Note Purchase Agreements. THIS NOTE AND THE NOTE PURCHASE AGREEMENT ARE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK EXCLUDING CHOICE-OF-LAW PRINCIPLES OF THE LAW OF SUCH STATE THAT WOULD REQUIRE THE APPLICATION OF THE LAWS OF A JURISDICTION OTHER THAN SUCH STATE. GENUINE PARTS COMPANY By: ---------------------------------- [Title:] --------------------------
EX-10.46 4 g74408ex10-46.txt AMENDMENT NO. 10 TO PENSION PLAN EXHIBIT 10.46 AMENDMENT NO. 10 TO THE GENUINE PARTS COMPANY PENSION PLAN This Amendment to the Genuine Parts Company Pension Plan is adopted by Genuine Parts Company (the "Company") through action of the Pension and Benefits Committee, effective as of the date set forth herein. WITNESSETH: WHEREAS, the Company maintains the Genuine Parts Company Pension Plan (the "Plan"), as amended and restated effective January 1, 1989, and such Plan is currently in effect; and WHEREAS, Section 8.06(c) of the Plan authorizes the Pension and Benefits Committee to amend the Plan; NOW, THEREFORE, BE IT RESOLVED that the Plan is hereby amended as follows: 1. Section 2.37 is hereby deleted and a new Section 2.37 is substituted therefore as follows: "2.37 Pension and Benefits Committee or Committee shall mean the Pension and Benefits Committee of the Company which is appointed by the Board or its designee to administer the Plan in accordance with the terms of Article VIII. The terms Pension Committee, Committee or Pension and Benefits Committee may be used interchangeably. 2. A new Section 4.11 shall be added to the Plan to read as follows: "4.11 Change in Control (a) Notwithstanding anything contained herein to the contrary, any Participant who (i) has a Termination Date during the five-year period beginning on the date on which a Change in Control occurs and (ii) at the time of such Termination Date had attained age 55 with 15 years of Credited Service may elect to receive a lump sum distribution of his Accrued Benefit. (b) Notwithstanding anything contained herein to the contrary, the value of a lump sum distribution under this Section will be determined based on the Applicable Mortality Table and the Applicable Interest Rate, which shall mean the following: (1) Applicable Mortality Table shall have that meaning as defined in Section 2.03 ("Actuarial Equivalent"). (2) Applicable Interest Rate shall mean the lesser of (i) The "Applicable Interest Rate" as defined in Section 2.03 ("Actuarial Equivalent") or (ii) The annual rate of interest on 10-year Treasury notes for the month of October that precedes the beginning of the Plan Year in which such distribution occurs. (c) Change in Control shall mean, (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of the combined voting power of the then outstanding voting securities of Genuine Parts entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who is on the date hereof the beneficial owner of 20% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from Genuine Parts, (iii) any acquisition by Genuine Parts, (iv) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by Genuine Parts or any corporation controlled by Genuine Parts, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Section 4.11(c)(3); or (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Genuine Parts' shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial - 2 - assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger, consolidation or share exchange or sale or other disposition of all or substantially all of the assets of Genuine Parts (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Genuine Parts or all or substantially all of Genuine Parts' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, and (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Genuine Parts or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) Approval by the shareholders of Genuine Parts of a complete liquidation or dissolution of Genuine Parts. 3. This Amendment shall be effective July 1, 2001. Except as amended herein, the Plan shall remain in full force and effect. - 3 - IN WITNESS WHEREOF, Genuine Parts Company, acting through the Pension and Benefits Committee has caused this Amendment to the Plan to be executed on the date shown below but effective as of the date indicated above. PENSION AND BENEFITS COMMITTEE By: /s/ George W. Kalafut -------------------------------------- Date: November 28, 2001 ------------------------------------ Attest: /s/ Frank M Howard -------------------------- - 4 - EX-10.47 5 g74408ex10-47.txt AMENDMENT NO. 3 TO TAX-DEFERRED SAVINGS PLAN EXHIBIT 10.47 AMENDMENT NUMBER THREE TO THE GENUINE PARTS COMPANY TAX-DEFERRED SAVINGS PLAN This Amendment to the Genuine Parts Company Tax-Deferred Savings Plan is adopted by Genuine Parts Company (the "Company"), effective as of the date set forth herein. WITNESSETH: WHEREAS, the Company maintains The Genuine Parts Company Tax-Deferred Savings Plan (the "Plan"), and such Plan is currently in effect; and WHEREAS, the Company desires to amend the Plan; NOW, THEREFORE, BE IT RESOLVED that the Plan is hereby amended as follows: 1. The definition of "Committee" set forth in Article 2 is hereby deleted and a new definition is substituted in lieu thereof as follows: "Committee. The Pension and Benefits Committee of Genuine Parts Company that will administer and interpret the terms of the Plan." 2. Section 8.01(a) is deleted in its entirety and a new Section 8.01(a) is substituted in lieu thereof to read as follows: "(a) Notwithstanding any other provision in this Plan, in the event there is a Change of Control of the Company as defined in subsection (c) of this Section 8.01, any Participant who terminates employment for any reason (e.g., resignation, involuntary termination, disability, death, etc.) during the five-year period beginning on the date on which the Change of Control occurs, shall receive an immediate lump sum payment of the Participant's Account balance." 3. Section 9.06 is deleted in its entirety and a new Section 9.06 is substituted in lieu thereof to read as follows: "Section 9.06 Cost of Collection; Interest. In any action taken in good faith relating to the enforcement of benefits under this Plan or any provision herein, the Participant (or Beneficiary) shall be entitled to be paid any and all costs and expenses incurred by him or her, in enforcing or establishing his or her rights under this Plan, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Participant (or Beneficiary) is successful on at least one material issue raised in the enforcement proceeding. In addition, the Employer shall pay to the Participant (or Beneficiary) interest on all or any part of the payments that are not paid when due at a rate equal to the Prime Rate as announced by Trust Company Bank or its successors from time to time." 4. The term "Executive Committee" found in Article 7 is hereby deleted and replaced with "Committee." 5. This Amendment shall be effective July 1, 2001. Except as amended herein, the Plan shall remain in full force and effect. IN WITNESS WHEREOF, the Pension and Benefits Committee has caused this Amendment to the Plan to be executed on the date shown below, but effective as of the date indicated above. PENSION AND BENEFITS COMMITTEE By: /s/ George W. Kalafut -------------------------------------- Date: November 28, 2001 ------------------ Attest: /s/ Frank M Howard - ----------------------- - 2 - EX-10.48 6 g74408ex10-48.txt AMENDMENT NO. 4 TO SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.48 AMENDMENT NUMBER FOUR TO THE GENUINE PARTS COMPANY SUPPLEMENTAL RETIREMENT PLAN This Amendment to The Genuine Parts Company Supplemental Retirement Plan is adopted by Genuine Parts Company (the "Company"), effective as of the date set forth herein. WITNESSETH: WHEREAS, the Company maintains The Genuine Parts Company Supplemental Retirement Plan (the "Plan"), and such Plan is currently in effect; and WHEREAS, the Company desires to amend the Plan; NOW, THEREFORE, BE IT RESOLVED that the Plan is hereby amended as follows: 1. The definition of "Committee" as set forth in Section 2.01 is hereby changed. In lieu of the Compensation and Stock Option Committee of the Board of Directors of Genuine Parts Company, the Committee shall be defined as the "Pension and Benefits Committee of Genuine Parts Company." 2. Sections 5.01(a) and 5.01(b) are deleted in their entirety, Section 5.01(c) is hereby renumbered as Section 5.01(d) and new Sections 5.01(a), 5.01(b) and 5.01(c) are substituted in lieu thereof to read as follows: "5.01 Change of Control. (a) In the event there is a Change of Control of Genuine Parts (as defined in Section 5.01(d)), a Participant described below shall receive an immediate lump sum payment of the Participant's Supplemental Retirement Income in lieu of the Supplemental Retirement Income otherwise provided under this Plan. (i) A Participant who terminates employment on account of the Change of Control (as defined below) must have attained age 55 with at least fifteen (15) years of Credited Service for vesting purposes under the Pension Plan on or prior to the Participant's termination of employment of account of the Change of Control. Such Participant's lump sum benefit shall be computed as described in Section 5.01(b) below. (ii) A Participant (or his or her Beneficiary or Contingent Annuitant if the Participant is not living) who does not satisfy the conditions of subparagraph (i) above but who terminated employment prior to the Change of Control and who is receiving or entitled to receive benefits under the Plan following the Change in Control shall receive a lump sum benefit computed as described in Section 5.01(c). (iii) For purposes of this Section 5.01(a), a Participant's employment shall be considered to have "terminated on account of such Change of Control" if the Participant's employment with the Employer is terminated for any reason (e.g., resignation, involuntary termination, disability, death, etc.) during the five-year period beginning on the date on which the Change in Control occurred. (b) The lump sum payment for a Participant described in Section 5.01(a)(i) shall be determined by computing the present value of the Participant's monthly Supplemental Retirement Income as of the date of the Participant's termination of employment (calculated pursuant to the formula set forth in Section 3.01(a)). The present value amount shall be determined using the Applicable Interest Rate and Applicable Mortality Table as defined in Section 4.11 of the Pension Plan (i.e., the interest rate used to compute a lump sum payout from the Pension Plan following a change in control). (c) The lump sum payment for a Participant described in Section 5.01(a)(ii) shall be determined by computing the present value of the remaining unpaid monthly Supplemental Retirement Income payments under this Plan using the Applicable Interest Rate and Applicable Mortality Table as defined in Section 4.11 of the Pension Plan (i.e., the interest rate used to compute a lump sum payout from the Pension Plan following a Change of Control) and by assuming such payments begin or continue (as the case may be) immediately following the Change of Control." 3. Section 6.03 is deleted in its entirety and a new Section 6.03 is substituted in lieu thereof to read as follows: "Section 6.03 Cost of Collection; Interest. - 2 - In any action taken in good faith relating to the enforcement of benefits under this Plan or any provision herein, the Participant (or the Beneficiary or Contingent Annuitant, as the case may be) shall be entitled to be paid any and all costs and expenses incurred by him or her in enforcing or establishing his or her rights under this Plan, including, without limitation, reasonable attorneys' fees, whether suit be brought or not, and whether or not incurred in trial, bankruptcy or appellate proceedings, but only if Participant (or Beneficiary or Contingent Annuitant) is successful on at least one material issue raised in the enforcement proceeding. In addition, the Employer shall pay to the Participant (or Beneficiary or Contingent Annuitant) interest on all or any part of the payments that are not paid when due at a rate equal to the Prime Rate as announced by Trust Company Bank or its successors from time to time." 4. This Amendment shall be effective July 1, 2001. Except as amended herein, the Plan shall remain in full force and effect. IN WITNESS WHEREOF, the Pension and Benefits Committee has caused this Amendment to the Plan to be executed on the date shown below, but effective as of the date indicated above. PENSION AND BENEFITS COMMITTEE By: /s/ George W Kalafut -------------------------------------- Date: November 28, 2001 ------------------------------------ Attest: /s/ Frank M Howard - --------------------------- - 3 - EX-10.49 7 g74408ex10-49.txt TRUST AGREEMENT WITH SUPPLEMENTAL RETIREMENT PLAN EXHIBIT 10.49 TRUST AGREEMENT EXECUTED IN CONJUNCTION WITH THE GENUINE PARTS COMPANY SUPPLEMENTAL RETIREMENT PLAN This Agreement and Declaration of Trust is made this 1st day of July, 2001, by and between Genuine Parts Company ("Company") and SunTrust Bank, Atlanta (formerly, Trust Company Bank of Georgia) (Trustee); WHEREAS, Company has adopted the Genuine Parts Company Supplemental Retirement Plan ("Plan"); and WHEREAS, Company has incurred or expects to incur liability under the terms of such Plan with respect to the individuals participating in such Plan; and WHEREAS, Company wishes to establish a trust (hereinafter called "Trust") and to contribute to the Trust assets that shall be held therein, subject to the claims of Company's creditors in the event of Company's Insolvency, as herein defined, until paid to Plan participants and their beneficiaries in such manner and at such times as specified in the Plan; and WHEREAS, it is the intention of the parties that this Trust shall constitute an unfunded arrangement and shall not affect the status of the Plan as an unfunded plan maintained for the purpose of providing deferred compensation for a select group of management or highly compensated employees for purposes of Title I of the Employee Retirement Income Security Act of 1974; and WHEREAS, it is the intention of Company to make contributions to the Trust to provide itself with a source of funds, to assist it in the meeting of its liabilities under the Plan; NOW, THEREFORE, the parties do hereby establish the Trust and agree that the Trust shall be comprised, held and disposed of as follows: Section 1. Establishment Of Trust. (a) Company hereby deposits with Trustee in trust Ten Dollars ($10.00), which shall become the principal of the Trust to be held, administered and disposed of by Trustee as provided in this Trust Agreement. The Company may also contribute additional assets including, but not limited to, insurance policies. (b) The Trust hereby established shall be irrevocable. (c) The Trust is intended to be a grantor trust, of which Company is the grantor, within the meaning of subpart E, part I, subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as amended, and shall be construed accordingly. (d) The principal of the Trust, and any earnings thereon shall be held separate and apart from other funds of Company and shall be used exclusively for the uses and purposes of Plan participants and general creditors as herein set forth. Plan participants and their beneficiaries shall have no preferred claim on, or any beneficial ownership interest in, any assets of the Trust. Any rights created under the Plan and this Trust Agreement shall be mere unsecured contractual rights of Plan participants and their beneficiaries against Company. Any assets held by the Trust will be subject to the claims of Company's general creditors under federal and state law in the event of Insolvency, as defined in Section 3(a) herein. (e) Upon a Change of Control, Company shall, as soon as possible, but in no event longer than 30 days following the Change of Control, as defined herein, make an irrevocable contribution to the trust in an amount that is sufficient to pay each Plan participant or beneficiary the benefits to which Plan participants or their beneficiaries would be entitled pursuant to the terms of the Plan as of the date on which the Change of Control occurred. Section 2. Payments to Plan Participants and Their Beneficiaries. (a) Company shall deliver to Trustee a schedule (the "Payment Schedule") that indicates the amounts payable in respect of each Plan participants (and his or her beneficiaries), that provides a formula or other instructions acceptable to Trustee for determining the amounts so payable, the form in which such amount is to be paid (as provided for or available under the Plan), and the time of commencement for payment of such amounts. Except as otherwise provided herein, Trustee shall make payments to the Plan participants and their beneficiaries in accordance with such Payment Schedule. The Trustee shall make provision for the reporting and withholding of any federal, state or local taxes that may be required to be withheld with respect to the payment of benefits pursuant to the terms of the Plan and shall pay amounts withheld to the appropriate taxing authorities or determine that such amounts have been reported, withheld and paid by Company. (b) The entitlement of a Plan participant or his or her beneficiaries to benefits under the Plan shall be determined by Company or such party as it shall designate under the Plan, and any claim for such benefits shall be considered and reviewed under the procedures set out in the Plan. (c) Company may make payment of benefits directly to Plan participants or their beneficiaries as they become due under the terms of the Plan. Company shall notify Trustee of its decision to make payment of benefits directly prior to the time amounts are payable to participants or their beneficiaries. In addition, if the principal of the Trust, and - 2 - any earnings thereon, are not sufficient to make payments of benefits in accordance with the terms of the Plan, Company shall make the balance of each such payment as it falls due. Trustee shall notify Company where principal and earnings are not sufficient. Section 3. Trustee Responsibility Regarding Payments to Trust Beneficiary When Company Is Insolvent. (a) Trustee shall cease payment of benefits to Plan participants and their beneficiaries if the Company is Insolvent. Company shall be considered "Insolvent" for purposes of this Trust Agreement if (i) Company is unable to pay its debts as they become due, or (ii) Company is subject to a pending proceeding as a debtor under the United States Bankruptcy Code. (b) At all times during the continuance of this Trust, as provided in Section 1(d) hereof, the principal and income of the Trust shall be subject to claims of general creditors of Company under federal and state law as set forth below. (1) The Board of Directors and the Chief Executive Officer of Company shall have the duty to inform Trustee in writing of Company's Insolvency. If a person claiming to be a creditor of Company alleges in writing to Trustee that Company has become Insolvent, Trustee shall determine whether Company is Insolvent and, pending such determination, Trustee shall discontinue payment of benefits to Plan participants or their beneficiaries. (2) Unless Trustee has actual knowledge of Company's Insolvency, or has received notice from Company or a person claiming to be a creditor alleging that Company is Insolvent, Trustee shall have no duty to inquire whether Company is Insolvent. Trustee may in all events rely on such evidence concerning Company's solvency as may be furnished to Trustee and that provides Trustee with a reasonable basis for making a determination concerning Company's solvency. (3) If at any time Trustee has determined that Company is Insolvent, Trustee shall discontinue payments to Plan participants or their beneficiaries and shall hold the assets of the Trust for the benefit of Company's general creditors. Nothing in this Trust Agreement shall in any way diminish any rights of Plan participants or their beneficiaries to pursue their rights as general creditors of Company with respect to benefits due under the Plan or otherwise. (4) Trustee shall resume the payment of benefits to Plan participants or their beneficiaries in accordance with Section 2 of this Trust Agreement only after Trustee has determined that Company is not Insolvent (or is no longer Insolvent). (c) Provided that there are sufficient assets, if Trustee discontinues the payment of benefits from the Trust pursuant to Section 3(b) hereof and subsequently resumes such payments, the first payment following such discontinuance shall include the - 3 - aggregate amount of all payments due to Plan participants or their beneficiaries under the terms of the Plan for the period of such discontinuance, less the aggregate amount of any payments made to Plan participants or their beneficiaries by Company in lieu of the payments provided for hereunder during any such period of discontinuance. Section 4. Payments to Company. Except as provided in Section 3 hereof, after the Trust has become irrevocable, Company shall have no right or power to direct Trustee to return to Company or to divert to others any of the Trust assets before all payment of benefits have been made to Plan participants and their beneficiaries pursuant to the terms of the Plan. Section 5. Investment Authority. (a) Trustee may invest in securities (including stock or rights to acquire stock) or obligations issued by Company. All rights associated with assets of the Trust shall be exercised by Trustee or the person designated by Trustee, and shall in no event be exercisable by or rest with Plan participants, except that voting rights with respect to Trust assets will be exercised by Company. (b) Company shall have the right, at anytime, and from time to time in its sole discretion, to substitute assets of equal fair market value for any asset held by the Trust. This right is exercisable by Company in a nonfiduciary capacity without the approval or consent of any person in a fiduciary capacity. (c) In addition to the investment powers set forth above in this Section 5, the following provisions shall apply: (i) Investment Guidelines and Directives. The Trustee shall manage, acquire, or dispose of the assets of the Trust in accordance with this Agreement and the directions of the Company or its designee. To the extent permitted by law, the Trustee shall not be liable for any investment made pursuant to the Company's or its designee's direction. (ii) Trustee Powers. The Trustee shall have the following powers, rights and duties subject to the Section 8 and the other provisions of this Trust Agreement: (A) To receive and hold all contributions paid to it by the Company; provided, however, that the Trustee shall have no duty to require any contributions to be made to it; (B) To effectuate the written investment instructions given by the Company or its designee without regard to any law now or hereafter in force limiting investments of fiduciaries; - 4 - (C) To retain in the trust for investment, any property deposited by the Trustee hereunder; (D) To have the authority to invest and reinvest assets of the Trust in shares of common or preferred stock, bonds, notes, debentures, short-term securities, mutual funds, common Trust funds, and other property, real or personal, of any kind; to purchase and sell "put" and "call" options on publicly traded securities; and to acquire, hold, manage, operate, sell, contract to sell, grant options with respect to, convey, exchange, transfer, abandon, lease, manage, and otherwise deal with respect to assets of the Trust; (E) To acquire, hold or dispose of insurance or annuity contracts as directed by the Company or its designee; (F) To borrow from anyone such amount or amounts of money necessary to carry out the purpose of this Trust and for that purpose to mortgage or pledge all or any part of the Trust; (G) To retain in the Trust for investment or pending distributions, any portion of the Trust in cash deemed appropriate by the Trustee; (H) To establish accounts in any commercial department of the Trustee and in such other banks and financial institutions as the Trustee deems appropriate to carry out the purposes of the Trust; (I) To deposit securities with a clearing corporation as defined in Article Eight of the Uniform Commercial Code; to hold the certificates representing securities, including those in bearer form, in bulk form with and to merge such certificates into certificates of the same class of the same issuer which constitutes assets of other accounts or owners, without certification as to the ownership attached; and to utilize a book-entry system for the transfer or pledge of securities held by the Trustee or by a clearing corporation, provided that the records of the Trustee shall indicate the actual ownership of the securities and other property of the Trust Fund. (J) To participate in and use the Federal book-entry Account system, a service provided by the Federal Reserve Bank for its member banks for deposit of Treasury securities. (K) To hold securities or property in the name of the Trustee or its nominee or nominees or in such other form as it determines best with or without disclosing the Trust relationship, providing the records of the Trust shall indicate the actual ownership of such securities or other property. - 5 - Section 6. Disposition of Income. (a) If requested by the Company or its designee during the term of this Trust, part of the income received by the Trust, net of expenses and taxes, shall be returned to Company in an amount sufficient to satisfy the Company's federal, state, local and any other jurisdiction's income tax liability, intangibles tax liability or any other tax liability applicable to such fiscal year and attributable to the income, deductions, tax credits or assets of the Trust. Section 7. Accounting by Trustee. Trustee shall keep accurate and detailed records of all investments, receipts, disbursements, and all other transactions required to be made, including such specific records as shall be agreed upon in writing between Company and Trustee. Within 60 days following the close of each calendar year and within 60 days after the removal or resignation of Trustee, Trustee shall deliver to Company a written account of its administration of the Trust during such year or during the period from the close of the last preceding year to the date of such removal or resignation, setting forth all investments, receipts, disbursements and other transactions effected by it, including a description of all securities and investments purchased and sold with the cost or net proceeds of such purchases or sales (accrued interest paid or receivable being shown separately), and showing all cash, securities and other property held in the Trust at the end of such year or as of the date of such removal or resignation, as the case may be. Section 8. Responsibility of Trustee. (a) Trustee shall act with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent person acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims, provided, however, that Trustee shall incur no liability (to the extent permitted by law) to any person for any action taken pursuant to a direction, request or approval given by Company or its designee which is contemplated by, and in conformity with, the terms of the Plan or this Trust and is given in writing by Company or its designee. In the event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to resolve the dispute. (b) If Trustee undertakes or defends any litigation arising in connection with this Trust, Company agrees to indemnify Trustee against Trustee's costs, expenses and liabilities (including, without limitation, attorneys' fees and expenses) relating thereto and to be primarily liable for such payments. If Company does not pay such costs, expenses and liabilities in a reasonably timely manner, Trustee may obtain payment from the Trust. Counsel for Trustee and other related costs must be approved by the Company in advance. Failure to obtain such approval shall relieve Company from its obligation to indemnify Trustee. - 6 - (c) Trustee may consult with legal counsel (who may also be counsel for Company generally) with respect to any of its duties or obligations hereunder. (d) Trustee may hire agents, accountants, actuaries, investment advisors, financial consultants or other professionals to assist it in performing any of its duties or obligations hereunder. (e) Trustee shall have, without exclusion, all powers conferred on Trustees by applicable law, unless expressly provided otherwise herein, provided, however, that if an insurance policy is held as an asset of the Trust, Trustee shall have no power to name a beneficiary of the policy other than the Trust, to assign the policy (as distinct from conversion of the policy to a different form) other than to a successor Trustee (f) However, notwithstanding the provisions of Section 8(e) above, Trustee may loan to Company the proceeds of any borrowing against an insurance policy held as an asset of the Trust. (g) Notwithstanding any powers granted to Trustee pursuant to this Trust Agreement or to applicable law, Trustee shall not have any power that could give this Trust the objective of carrying on a business and dividing the gains therefrom, within the meaning of section 301.7701-2 of the Procedure and Administrative Regulations promulgated pursuant to the Internal Revenue Code. Section 9. Compensation and Expenses of Trustee. Company shall pay all administrative and Trustee's fees and expenses. If not so paid, the fees and expenses shall be paid from the Trust. Section 10. Resignation and Removal of Trustee. (a) Trustee may resign at any time by written notice to Company, which shall be effective 60 days after receipt of such notice unless Company and Trustee agree otherwise. (b) Trustee may be removed by Company on 60 days notice or upon shorter notice accepted by Trustee. (c) Upon a Change of Control, as defined herein, Trustee may not be removed by Company for one year. (d) If Trustee resigns within one year of a Change of Control, as defined herein, Trustee shall select a successor Trustee in accordance with the provisions of Section 11(b) hereof prior to the effective date of Trustee's resignation. - 7 - (e) Upon resignation or removal of Trustee and appointment of a successor Trustee, all assets shall subsequently be transferred to the successor Trustee. The transfer shall be completed within 90 days after receipt of notice of resignation, removal or transfer, unless Company extends the time limit. (f) If Trustee resigns or is removed, a successor shall be appointed, in accordance with Section 11 hereof, by the effective date of resignation or removal under paragraphs (a) or (b) of this section. If no such appointment has been made, Trustee may apply to a court of competent jurisdiction for appointment of a successor or for instructions. All expenses of Trustee in connection with the proceeding shall be allowed as administrative expenses of the Trust. Section 11. Appointment of Successor. (a) If Trustee resigns in accordance with Section 10(a) or (b) hereof, Company may appoint any third party, such as a bank trust department or other party that may be granted corporate trustee powers under state law, as a successor to replace Trustee upon resignation or removal. The appointment shall be effective when accepted in writing by the new Trustee, who shall have all of the rights and powers of the former Trustee, including ownership rights in the Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by Company or the successor Trustee to evidence the transfer. (b) If Trustee resigns or is removed pursuant to the provisions of Section 10(d) hereof and selects a successor Trustee, Trustee may appoint any third party such as a bank trust department or other party that may be granted corporate trustee powers under state law. The appointment of a successor Trustee shall be effective when accepted in writing by the new Trustee. The new Trustee shall have all the rights and powers of the former Trustee, including ownership rights in Trust assets. The former Trustee shall execute any instrument necessary or reasonably requested by the successor Trustee to evidence the transfer. (c) The successor Trustee need not examine the records and acts of any prior Trustee and may retain or dispose of existing Trust assets, subject to Sections 7 and 8 hereof. The successor Trustee shall not be responsible for and Company shall indemnify and defend the successor Trustee from any claim or liability resulting from any action or inaction of any prior Trustee or from any other past event, or any condition existing at the time it becomes successor Trustee. Section 12. Amendment or Termination. (a) This Trust Agreement may be amended by a written instrument executed by Trustee and the Pension and Benefits Committee of Genuine Parts Company ("Benefits Committee"). Notwithstanding the foregoing, no such amendment shall - 8 - conflict with the terms of the Plan or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof. (b) The Trust shall not terminate until the date on which Plan participants and their beneficiaries are no longer entitled to benefits pursuant to the terms of the Plan. Upon termination of the Trust any assets remaining in the Trust shall be returned to Company. (c) Upon written approval of participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan, the Pension and Benefits Committee may terminate this Trust prior to the time all benefits payments under the Plan have been made. All assets in the Trust at termination shall be returned to Company. (d) Any action required to be taken by the Company under this Agreement may be taken by the Pension and Benefits Committee. Section 13. Miscellaneous. (a) Any provision of this Trust Agreement prohibited by law shall be ineffective to the extent of any such prohibition, without invalidating the remaining provisions hereof. (b) Benefits payable to Plan participants and their beneficiaries under this Trust Agreement may not be anticipated, assigned (either at law or in equity), alienated, pledged, encumbered or subjected to attachment, garnishment, levy, execution or other legal or equitable process. (c) This Trust Agreement shall be governed by and construed in accordance with the laws of Georgia. (d) Change in Control shall mean, (1) The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the 1934 Act) (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of 20% or more of the combined voting power of the then outstanding voting securities of Genuine Parts entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); provided, however, that for purposes of this subsection (1), the following acquisitions shall not constitute a Change of Control: (i) any acquisition by a Person who is on the date hereof the beneficial owner of 20% or more of the Outstanding Company Voting Securities, (ii) any acquisition directly from Genuine Parts, (iii) any acquisition by Genuine Parts, (iv) any acquisition by any employee - 9 - benefit plan (or related trust) sponsored or maintained by Genuine Parts or any corporation controlled by Genuine Parts, or (v) any acquisition by any corporation pursuant to a transaction which complies with clauses (i), (ii) and (iii) of Section 13(d)(3); or (2) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by Genuine Parts' shareholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or (3) Consummation of a reorganization, merger, consolidation or share exchange or sale or other disposition of all or substantially all of the assets of Genuine Parts (a "Business Combination"), in each case, unless, following such Business Combination, (i) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the corporation resulting from such Business Combination (including, without limitation, a corporation which as a result of such transaction owns Genuine Parts or all or substantially all of Genuine Parts' assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Voting Securities, and (ii) no Person (excluding any corporation resulting from such Business Combination or any employee benefit plan (or related trust) of Genuine Parts or such corporation resulting from such Business Combination) beneficially owns, directly or indirectly, 20% or more of the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Business Combination, and (iii) at least a majority of the members of the board of directors of the corporation resulting from such Business Combination were members of the Incumbent Board at the time of - 10 - the execution of the initial agreement, or of the action of the Board, providing for such Business Combination; or (4) Approval by the shareholders of Genuine Parts of a complete liquidation or dissolution of Genuine Parts. Section 14. Effective Date The effective date of this Trust Agreement shall be July 1, 2001. IN WITNESS WHEREOF, the parties have executed this Agreement and Declaration of Trust on the date first shown above, but effective as of the date indicated in Section 14. PENSION AND BENEFITS COMMITTEE By: /s/ George W Kalafut -------------------------------------- Title Chairman, Pension Committee ----------------------------------- Attest: /s/ Frank M Howard -------------------------- SUNTRUST BANK, ATLANTA By: /s/ Sandra D Warren -------------------------------------- Title: 1st Vice President ----------------------------------- Attest: /s/ Sabrina Lane -------------------------- - 11 - EX-10.50 8 g74408ex10-50.txt AMENDMENT NO. 1 TO THE TRUST AGREEMENT EXHIBIT 10.50 AMENDMENT NUMBER 1 TO THE TRUST AGREEMENT EXECUTED IN CONJUNCTION WITH THE GENUINE PARTS COMPANY NON-QUALIFIED DEFERRED COMPENSATION PLANS This Amendment to the Trust Agreement Executed In Conjunction With The Genuine Parts Company Non-Qualified Deferred Compensation Plans (the "Trust Agreement") is adopted by Genuine Parts Company (the "Company") and SunTrust Bank, Atlanta (the "Trustee"), effective as of the date set forth herein. WITNESSETH: WHEREAS, the Company and the Trustee entered into the Trust Agreement, and such Trust Agreement is currently in effect; and WHEREAS, the Company (through action of the Pension and Benefits Committee) and the Trustee may amend the Trust Agreement by a written instrument executed by both the Company (acting through the Pension and Benefits Committee) and the Trustee; and WHEREAS, Appendix A to the Trust Agreement lists the Company's Supplemental Retirement Plan as one of the Company's non-qualified deferred compensation plans covered by the Trust Agreement; and WHEREAS, the Company has now adopted a separate rabbi trust for the Company's Supplemental Retirement Plan; and WHEREAS, the Company now desires to remove the Supplemental Retirement Plan from the list of those plans on Appendix A that are covered by the Trust Agreement and to make other amendments; NOW, THEREFORE, BE IT RESOLVED that the Trust Agreement be amended as follows: 1. Appendix A is hereby deleted in its entirety and a new Appendix A is substituted in lieu thereof as follows: APPENDIX A LIST OF NONQUALIFIED DEFERRED COMPENSATION PLANS ADOPTED BY THE COMPANY AND COVERED BY THIS AGREEMENT AND DECLARATION OF TRUST 1. Genuine Parts Company Tax-Deferred Savings Plan 2. Genuine Parts Company Original Supplemental Retirement Plan 3. Genuine Parts Company Directors' Deferred Compensation Plan 2. Section 12(a) is hereby deleted and the following is substituted in lieu thereof as follows: "(a) This Trust Agreement may be amended by written instrument executed by Trustee and the Pension and Benefits Committee. Notwithstanding the foregoing, no such amendment shall conflict with the terms of the Plan(s) or shall make the Trust revocable after it has become irrevocable in accordance with Section 1(b) hereof." 3. Section 12(c) is hereby deleted and the following is substituted in lieu thereof as follows: "(c) Upon written approval of participants or beneficiaries entitled to payment of benefits pursuant to the terms of the Plan(s), the Benefits Committee may terminate this Trust prior to the time all benefit payments under the Plan(s) have been made. All assets in the Trust at termination shall be returned to the Company." 4. This Amendment shall be effective July 1, 2001. Except as amended herein, the Trust Agreement shall remain in full force and effect. - 2 - IN WITNESS WHEREOF, the Pension and Benefits Committee and Trustee have caused this Amendment to the Trust Agreement to be executed on the date shown below, but effective as of the date indicated above. PENSION AND BENEFITS COMMITTEE By:/s/ George W Kalafut ------------------------------------- Date: November 28, 2001 ---------------------------------- Attest: /s/ Frank M Howard - ----------------------------- SUNTRUST BANK, ATLANTA By:/s/ Sandra D Warren ------------------------------------- Date: December 5, 2001 ---------------------------------- Attest: /s/ Sabrina Lane - ----------------------------- - 3 - EX-10.51 9 g74408ex10-51.txt GROUP INSURANCE PLAN FOR EMPLOYEES JANUARY 1, 2000 EXHIBIT 10.51 GROUP INSURANCE PLAN FOR EMPLOYEES OF GENUINE PARTS COMPANY PLAN DOCUMENT AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 2000 TABLE OF CONTENTS ARTICLE I -- ADOPTION AND PURPOSE OF PLAN............................................................1 1.01 Adoption and Purpose of Plan.......................................................1 1.02 Cafeteria Plan Status..............................................................1 ARTICLE II -- DEFINITIONS............................................................................1 2.01 Affiliate..........................................................................1 2.02 After-Tax Benefits.................................................................2 2.03 Before-Tax Benefits................................................................2 2.04 Benefits...........................................................................2 2.05 Code...............................................................................2 2.06 Committee..........................................................................2 2.07 Compensation.......................................................................2 2.08 COBRA Continuation Coverage or Continuation Coverage...............................2 2.09 Company-Paid Benefits..............................................................2 2.10 Dependent..........................................................................2 2.11 Disablee...........................................................................3 2.12 Effective Date.....................................................................3 2.13 Eligible Employee..................................................................3 2.14 Employee...........................................................................3 2.15 Employer...........................................................................3 2.16 Employer Company...................................................................3 2.17 Enrolled Dependent.................................................................3 2.18 Enrolled Person(s).................................................................3 2.19 Enrollment Period..................................................................4 2.20 ERISA..............................................................................4 2.21 Leave of Absence...................................................................4 2.22 Non-125 Benefits...................................................................4 2.23 Participant........................................................................4 2.24 Payroll Adjustment Agreement.......................................................4 2.25 Plan Year..........................................................................5 2.26 Retiree............................................................................5 2.27 Survivor...........................................................................5 2.28 USERRA.............................................................................5 ARTICLE III -- ELIGIBILITY AND PARTICIPATION.........................................................5 3.01 Commencement of Participation......................................................5 3.02 Enrolled Dependent's Commencement of Participation.................................5 3.03 Reinstatement of Former Participant................................................5 3.04 Cessation of Participation.........................................................6
ARTICLE IV -- ELECTION PROCEDURES.....................................................................6 4.01 Election Procedures.................................................................6 4.02 Payroll Deductions..................................................................7 4.03 Revocation and Modification of Elections............................................7 4.04 Insignificant Change in Cost of Coverage............................................9 4.05 No Compensation Deferral and No Carryover of Unused Pre-Tax Benefits....................................................................9 4.06 Nondiscrimination Requirements......................................................9 ARTICLE V -- BENEFITS AND CLAIMS.....................................................................10 5.01 Benefits Available.................................................................10 5.02 Provision of Benefits..............................................................10 5.03 Insurance Contracts................................................................10 5.04 Benefit Costs......................................................................10 5.05 Cancellation of Benefits for Failure to Pay Required Contributions......................................................................10 5.06 Claims.............................................................................11 5.07 Claims Procedure and Appeal of Benefit Denials.....................................11 5.08 Coordination of Benefits with Other Plans..........................................11 5.09 Reimbursement Agreement, Subrogation...............................................11 ARTICLE VI -- COBRA CONTINUATION COVERAGE............................................................12 6.01 Continuation Coverage..............................................................12 6.02 Premium Requirements...............................................................13 6.03 Notice Requirements................................................................13 6.04 Election...........................................................................13 ARTICLE VII -- AMENDMENT AND TERMINATION OF PLAN.....................................................13 7.01 Amendment of Plan..................................................................13 7.02 Termination of Plan................................................................13 7.03 Inclusion of Additional Affiliates.................................................13 ARTICLE VIII -- ADMINISTRATIVE COMMITTEE.............................................................14 8.01 Administrative Committee...........................................................14 8.02 Authority to Appoint Advisors and Agents...........................................14 8.03 Compensation and Expenses of Committee.............................................14 8.04 Records............................................................................15 8.05 Indemnification of Committee.......................................................15 8.06 Fiduciary Responsibility Insurance, Bonding........................................15 ARTICLE IX -- MISCELLANEOUS PROVISIONS...............................................................15 9.01 Plan Is Not an Employment Contract.................................................15 9.02 Assignment.........................................................................15
ii 9.03 Fraud..............................................................................15 9.04 Funding Status of Plan.............................................................16 9.05 Construction.......................................................................16 9.06 Qualified Medical Child Support Orders.............................................16 9.07 Conclusiveness of Records..........................................................16 9.08 Right to Require Information and Reliance Thereon..................................16 9.09 Income and Employment Taxes........................................................17 9.10 Disaggregation for Certain Discrimination Testing..................................17 APPENDIX A - SUMMARY PLAN DESCRIPTION................................................................19 APPENDIX B - INDEX OF BENEFIT PLANS AND POLICIES.....................................................20
iii ARTICLE I ADOPTION AND PURPOSE OF PLAN 1.01 Adoption and Purpose of Plan. Prior to January 1, 2000, Genuine Parts Company (the "Employer") maintained the Group Insurance Plan for Employees of Genuine Parts Company and a separate plan providing long term disability benefits (the Genuine Parts Company Long-Term Disability Plan). Effective January 1, 2000, the Employer hereby amends and restates the Group Insurance Plan for Employees of Genuine Parts Company (the "Plan") as set forth herein to reflect benefit changes and merger of the Genuine Parts Company Long-Term Disability Plan. The purpose of the Plan is to provide certain Employees, Retirees, and Disablees of Employer Companies welfare benefits described in the Summary Plan Description (as amended, renamed, and/or replaced, also identified as Genuine Parts Company's The Book of Benefits), and any summaries of material modification ("SMMs") issued with respect thereto (collectively, the SPD and any subsequent SMMs shall be referred to herein as the "SPD"). The SPD is attached hereto as Appendix A and is hereby incorporated by reference with those portions describing Employee welfare benefits constituting a part of this Plan, except as set forth in a separate written plan document. The employee welfare benefits that are part of this Plan are identified at Appendix B of this Plan. Different versions of the SPD may apply to different classifications of Employees. In such case, the version(s) of the SPD applicable to such classification(s) of Eligible Employees shall control. 1.02 Cafeteria Plan Status. The Employer intends for the Plan to qualify as a "cafeteria plan" for Employee Participants under Code Section 125 and is to be interpreted in a manner consistent with the requirements of Code Section 125 and the regulations promulgated thereunder. Certain component Benefits, although they may be offered hereunder, are not part of the Code Section 125 cafeteria plan. Retirees, Disablees, and Survivors shall not be able to make pre-tax contributions hereunder, and therefore shall not participate in the Code Section 125 aspects of the Plan. ARTICLE II DEFINITIONS Many Plan terms are defined in the SPD, and as such, are incorporated herein. Except as otherwise provided in the SPD, the following terms shall have the following meanings: 2.01 "Affiliate" means (1) Employer; and (2) any corporation which is a member of a controlled group of corporations (as defined in Code Section 414(b)) which includes Employer; any trade or business which is under common control (as defined in Code Section 414(c)) with Employer; and any organization which is a member of an affiliated service group (as defined in Code Section 414(m)) which includes Employer. 1 2.02 "After-Tax Benefits" means the benefits listed as such in the SPD, as amended from time to time, which are by this reference made a part hereof, as may be provided and/or made available for purchase by Employees on an after-tax basis under this Plan. 2.03 "Before-Tax Benefits" means the benefits listed as such in the SPD, as amended from time to time, which are by this reference made a part hereof, as may be provided and/or made available for purchase by Employees on a before-tax basis under this Plan. 2.04 "Benefits" means the various welfare Benefits (as defined in ERISA) made available to Employees hereunder. Such Benefits may include After-Tax Benefits and/or Before-Tax Benefits. The component Benefits are described in more detail in the SPD, as amended from time to time, which are by this reference made a part hereof. The manner by which such Benefits are provided, e.g., insured, self-funded, etc., and the entity(ies) responsible for Benefit administration are set forth in the SPD. In the event of any conflict between the terms of this Plan document and the SPD, the SPD shall control. 2.05 "Code" means the Internal Revenue Code of 1986, as amended from time to time. 2.06 "Committee" means the Employer or the committee as may be appointed from time to time by the Employer to supervise the administration of the Plan, as more fully described in Article IX of the Plan. The terms "Plan Administrator" or "Administrator" are used interchangeably with Committee herein. 2.07 "Compensation" means the remuneration or wages paid to an Employee for the Plan Year, or portion thereof as the context requires, by reason of his or her employment by an Employer Company, including overtime pay, bonuses, commissions, and other earnings which would, but for the Participant's execution or deemed execution of a Payroll Adjustment Agreement, be reportable as taxable income on Form W-2 for the Plan Year. 2.08 "COBRA Continuation Coverage" or "Continuation Coverage" means the elective continuation of coverage pursuant to the provisions of Section 601 et seq. of ERISA, as amended, Section 4980B of the Code, and Article VII of this Plan. 2.09 "Company-Paid Benefits" means the Benefits (if any) listed in the SPD, as amended from time to time, attached hereto and by this reference made a part hereof as the Employer Company may provide to an Eligible Employee without regard to whether the Eligible Employee does or does not enroll in the Plan. 2.10 "Dependent" shall mean those eligible Dependents described in the SPD. The definition of eligible Dependent may vary for purposes of the component Benefits, and the definition contained in each Benefit description shall control with regard to such Benefit. 2 2.11 "Disablee" means a current or former Employee who has terminated employment with an Employer Company on account of disability and who is receiving benefits under an Employer Company sponsored long term disability plan. Benefit eligibility (if any) for Disablees shall be as set forth in the applicable provisions of the SPD. 2.12 "Effective Date" of this amended and restated Plan means January 1, 2000. 2.13 "Eligible Employee" except as otherwise described in the SPD, Eligible Employee means an Employee who is a full time employee or a part-time employee regularly scheduled to work at least 24 or more hours each week of the Employer or an Employer Company and who has met the eligibility requirements to participate in one or more of the Benefits, as described in the SPD. Eligible Employees shall not include individuals whose terms and conditions of employment are subject to collective bargaining unless the collective bargaining agreement specifically refers to coverage hereunder. The definition of Eligible Employee may vary under each Benefit, and the definition contained in the SPD providing for any component Benefit shall control for that Benefit. However, except as expressly provided in the SPD, the following Employees shall not be Eligible Employees: i) leased employees, as defined in Section 414(n) of the Code, ii) temporary employees, iii) individuals whose terms and conditions of employment are governed by a collective bargaining agreement, unless such collective bargaining agreement shall provide for participation in the Plan by employees in the bargaining unit, iv) individuals classified by an Employer Company as independent contractors or leased employees (including those who are at any time reclassified as employees by the Internal Revenue Service or a court of competent jurisdiction), v) individuals who have waived participation in the Plan through any means including individuals whose employment is governed by a written agreement with an Employer Company (including an offer letter setting forth the terms and conditions of employment) that provides that the individual is not eligible to participate in the Plan. 2.14 "Employee" means an individual who is considered an employee of the Employer or an Employer Company for the purposes of federal income tax withholding. 2.15 "Employer" means Genuine Parts Company ("GPC"). 2.16 "Employer Company" means the Employer and any Affiliate that has adopted this Plan as indicated in the SPD. As indicated in the SPD, an Affiliate may be an Employer Company with regard to certain Benefits, but not others, and different Employees may be eligible for different Benefit options. 2.17 "Enrolled Dependent" means each of the Dependents whom a Participant has elected to cover under the Plan as his or her Dependent. 2.18 "Enrolled Person(s)" means a Participant and/or his Enrolled Dependents, whichever is applicable. 3 2.19 "Enrollment Period" means the initial enrollment period and the enrollment period designated by the Administrator each Plan Year (as set forth in the annual enrollment materials) during which Employees make their Benefit elections for the succeeding Plan Year. 2.20 "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time. 2.21 "Leave of Absence" means one of the following: (a) Workers' Compensation Leave of Absence - a leave of absence for medical reasons arising from the Employee's on-the-job accident, injury or illness. (b) Medical Leave of Absence - a leave of absence, approved by the Employer Company, for medical reasons arising from the Employee's accident, illness or injury, other than a Workers' Compensation Leave of Absence. (c) Family Leave of Absence - a leave of absence in accordance with the provisions of The Family and Medical Leave Act of 1993 ("FMLA"), or similar state law which is not preempted by FMLA and requires the extension of a leave of absence. (d) Military Leave of Absence - An Employee's cessation of employment due to his or her service with the armed forces of the United States, which service gives rise to reemployment rights under USERRA or other applicable law. (e) Personal Leave of Absence - a leave of absence, approved by the Employer Company, for nonmedical or personal reasons, other than the types of absences described in subsections (a) - (d) above. 2.22 "Non-125 Benefits" means those component Benefits (such as long term care and universal life coverage) which, although described herein, are not made available under the Code Section 125 Cafeteria Plan feature of this Plan. Such Non-125 Benefits are funded exclusively by Employee after-tax payroll deduction. 2.23 "Participant" means an Eligible Employee, Retiree, Disablee, or Survivor who has completed (or is deemed to have completed) the election procedures set forth in the SPD. Benefit eligibility (if any) for Retirees, Disablees, and Survivors shall be as set forth in the applicable provisions of the SPD. 2.24 "Payroll Adjustment Agreement" means a voluntary agreement whereby an Employee agrees that the amount of his or her cash Compensation for the forthcoming Plan Year (or applicable portion thereof) shall be adjusted for the purpose of obtaining one or more Before-Tax or After-Tax Benefits offered by the Plan. To the extent that the Employee elects Before-Tax Benefits, the Payroll Adjustment Agreement shall constitute a compensation reduction agreement whereby the enrolled Employee's taxable Compensation for the aforementioned period shall be reduced in an amount equal to the Employee's cost of coverage for such Before-Tax Benefits. To 4 the extent that the Employee selects After-Tax Benefits, the Payroll Adjustment Agreement shall constitute a payroll reduction agreement whereby the Employee requests, and the Employer Company agrees, to make payments to this Plan on a payroll deduction basis in an amount equal to the Employee's cost of coverage for such After-Tax Benefits. A Payroll Adjustment Agreement shall be executed by the enrolled Employee when the Employee enrolls in the Plan during any enrollment eligibility period. 2.25 "Plan Year" means the 12-month calendar period beginning on each January 1 and ending each December 31. 2.26 "Retiree" means a former Employee who has retired from an Employer Company and is eligible for retirement benefits under the Employer's defined benefit pension plan. Benefit eligibility (if any) for Retirees shall be as set forth in the applicable provisions of the SPD. 2.27 "Survivor" means a spouse of a deceased Eligible Employee (who was a Participant) who has not remarried. Benefit eligibility (if any) for Survivors shall be as set forth in the applicable provisions of the SPD. 2.28 "USERRA" means the Uniformed Services Employment and Reemployment Rights Act of 1994, as amended from time to time. ARTICLE III ELIGIBILITY AND PARTICIPATION Except as otherwise provided in the SPD, the following provisions shall govern eligibility and participation: 3.01 Commencement of Participation. Each Eligible Employee of an Employer Company shall be eligible to participate in the Plan under the terms and conditions specified in the SPD. Each Eligible Employee who is actively employed by an Employer Company who completes, or is deemed to have completed, the enrollment and election procedures described in the SPD may become a Participant on the date specified therein. Eligibility and participation by Retirees, Disablees, and Survivors (and their Dependents where applicable) shall be as set forth in the applicable SPD. 3.02 Enrolled Dependent's Commencement of Participation. Except as otherwise provided in the SPD, coverage with respect to an Enrolled Dependent will begin on the same date that coverage begins for the Participant who elects such Dependent coverage. 3.03 Reinstatement of Former Employee Participant. If a former Employee returns to active employment as an eligible Employee, he or she will be reinstated as a Participant as provided in the SPD. Except as otherwise provided in the SPD, if participation is terminated and resumed within 30 days during the same Plan Year, participation shall be reinstated in 5 accordance with the individual's most recent election and Payroll Adjustment Agreement. If the individual is reinstated as an eligible Employee after more than 30 days or in a subsequent Plan Year, he or she shall be entitled to make a new election and execute a new Payroll Adjustment Agreement. 3.04 Cessation of Participation. An individual will cease to be an Enrolled Person, and all Benefit coverage with respect to such individual and his or her Enrolled Dependents will end, as of the earliest of (a) the date of the Plan's termination; (b) except as otherwise set forth in the SPD (with regard to certain Retirees, Disablees, and Survivors) the date of the Employee Participant's termination of employment with the Employer Company (participation ends when specified in the SPD); (c) the Enrolled Person's loss of eligibility to participate in the Plan (as set forth in the SPD); (d) the date on which the Enrolled Person's coverage is canceled by reason of his or her failure to make timely payment of his or her share of the cost of Benefit coverage or submission of fraudulent claims; (e) with respect to coverage of an Enrolled Dependent only, the date on which the Dependent loses eligibility because he or she no longer qualifies as an Enrolled Dependent under the Plan; (f) except as otherwise required by USERRA, the date of the Enrolled Person's commencement of military leave. ARTICLE IV ELECTION PROCEDURES Eligibility and participation by Retirees, Disablees, and Survivors (and their Dependents where applicable) shall be as set forth in the applicable SPD. Except as otherwise provided in the SPD, the following provisions shall govern Plan elections for Eligible Employees: 4.01 Election Procedures. (a) Eligible Employees shall be provided with sufficient information, including worksheets and election forms as appropriate, by which each Eligible Employee may enroll in the Plan, may enroll his or her eligible Dependents in the Plan and may elect Benefits for the upcoming Plan Year. Enrollment in the Plan for the Plan Year may be accomplished by either completion of designated written enrollment and election forms or utilization of a voice response unit or other comparable electronic communications 6 device, or other reasonable procedure as the Plan Administrator shall designate. If enrollment is accomplished by means of a voice response unit, the Enrolled Person shall receive written confirmation of his or her Benefit election. The Participant's enrollment and Benefit election shall be effective as of the first day of the upcoming Plan Year and must be completed on or before such date as the Administrator shall specify, which date shall not be later than the beginning of the first pay period of the Plan Year. Each election under this Section 4.01(a) may be modified by the Employer or the Administrator to the extent required to enable the Plan, and payments thereunder, to satisfy the requirements of Code Section 125. (b) Unless otherwise provided in the SPD, if an Employee becomes an Eligible Employee after the initial Enrollment Period and between annual Enrollment Periods, the Eligible Employee may enroll in the Plan as specified in the SPD. (c) Each Eligible Employee who enrolls in the Plan and elects one or more Before-Tax Benefits or After-Tax Benefits shall, by reason of such election, be deemed to have executed a Payroll Adjustment Agreement. Each Benefit election and Payroll Adjustment Agreement with respect to Before-Tax and/or After-Tax Benefits shall remain effective throughout the Plan Year unless revoked or suspended in accordance with Section 4.03 or 4.04 of this Plan or because the Participant ceased to be an Employee. The payroll deduction amount elected by the Participant in the Payroll Adjustment Agreement shall in no event exceed the Participant's costs of coverage with respect to the Before-Tax Benefits or After-Tax Benefits he or she has elected. (d) Any Eligible Employee who fails to make a timely election for his or her initial Plan Year will be provided only the Company-Paid Benefits for which no enrollment is mandated, as set forth in the SPD, as amended by the Employer from time to time, attached hereto and by this reference made a part hereof. (e) Any Participant who fails to make a timely election with respect to Benefits after his or her initial Plan Year shall be deemed to have elected the same Before-Tax and/or After-Tax Benefits which he or she had elected for the prior Plan Year. 4.02 Payroll Deductions. Any portion of the Participant's cost for Before-Tax and/or After-Tax Benefits shall, on the authority of his or her Payroll Adjustment Agreement, be deducted from his or her periodic paychecks, on a corresponding before or after-tax basis. Such deductions shall be made in approximately equal amounts from each periodic paycheck, determined by dividing the annual cost of said Benefits by the Participant's annual or remaining number of pay periods during the Plan Year, or by such other method as the Administrator may deem practicable. 4.03 Revocation and Modification of Elections. (a) Once a Participant has elected, or has been deemed to have elected, Benefits under the Plan, and the Plan Year has begun, he or she may not revoke his or her election 7 of Pre-Tax Benefits during the Plan Year except as otherwise provided in (b) or (c) below or under circumstances permitted by Code Section 125 and the regulations promulgated thereunder, as amended from time to time, if allowed by the Administrator. (b) A Participant may revoke an election in writing for the balance of the Plan Year and, if desired, file a new election (effective prospectively for the remainder of the Plan Year) if both the revocation and the new election are (1) made on account of and correspond with a change in status in accordance with Code Section 125 and the regulations promulgated thereunder, and (2) consistent with the terms of this Plan and any other terms established by the Employer. The terms of the SPD shall supersede any contrary language in this subsection 4.03(b) with respect to changes in status. (c) As set forth in the SPD, the Administrator may permit a Participant to revoke an election in writing for the balance of the Plan Year with respect to Benefit coverage if any of the following occur: (i) The Administrator determines that a Participant's Benefit coverage under this Plan is significantly curtailed or ceases. In such case, a Participant may revoke the election and prospectively elect coverage under another Benefit plan or policy option which provides similar coverage. Coverage under an accident or health plan is deemed "significantly curtailed" only if there is an overall reduction in coverage provided to Participants under the Plan so as to constitute reduced coverage to Participants in general. The Administrator (in its sole discretion) will decide, in accordance with prevailing IRS guidance, whether a curtailment is "significant", and whether a substitute Benefit plan or policy constitutes "similar coverage" based upon all the surrounding facts and circumstances. (ii) The Plan adds or eliminates a Benefit plan or policy. In such case, a Participant may elect a newly-added option or elect another Benefit plan or policy (where a Plan option has been eliminated), and may do so prospectively on a before-tax basis by making corresponding election changes with respect to coverage under another Benefit plan or policy which provides similar coverage. The Administrator (in its sole discretion) will decide, in accordance with prevailing IRS guidance, whether a substitute Benefit plan or policy constitutes "similar coverage" based upon all the surrounding facts and circumstances. (iii) The Participant's spouse or Dependent makes a change in coverage under their employer's plan. In such case, a Participant may make a prospective election change that is on account of and corresponds with a change made under the plan of the spouse's, 8 former spouse's, or Dependent's employer, so long as: (a) the cafeteria plan or qualified benefits plan of the spouse's, former spouse's, or Dependent's employer permits its participants to make an election change that would be permitted under the proposed or final IRS regulations; or (b) the Plan permits Participants to make an election for a Plan Year period of coverage which is different from the plan year period of coverage under the cafeteria plan or qualified benefits plan of the spouse's, former spouse's, or Dependent's employer. The Administrator (in its sole discretion) will decide, based on prevailing IRS guidance, whether a requested change is on account of and corresponds with a change made under the plan of the spouse's, former spouse's, or Dependent's employer. (d) The Administrator may establish procedures by which a Participant may revoke or modify After-Tax Benefit elections. (e) Any revocation and new election under this Section 4.03 shall be accompanied by the Participant's execution of a revised Payroll Adjustment Agreement and shall be effective at such time as the Administrator shall prescribe, but shall not be effective earlier than the first pay period beginning after the revocation and new election. 4.04 Insignificant Change in Cost of Coverage. If the cost of coverage with respect to Benefit coverage insignificantly increases or decreases during a Plan Year, a corresponding change shall be made in Compensation reductions of all Participants receiving such coverage in an amount to be determined by the Administrator. The Administrator (in its sole discretion) will decide, in accordance with prevailing IRS guidance, whether increases or decreases in cost are "insignificant" based upon all the surrounding facts and circumstances, including, but not limited to, the dollar amount or percentage of the cost change. 4.05 No Compensation Deferral and No Carryover of Unused Pre-Tax Benefits. No Benefit under the Plan shall be paid in any manner that defers the receipt of Compensation beyond the last day of the Plan Year. No Participant shall be entitled to carry over any unused Before-Tax Benefits to the succeeding Plan Year or to reallocate the unused portion to any other Benefit. No Enrolled Person shall be entitled to receive any unused Before-Tax Benefits in the form of cash. 4.06 Nondiscrimination Requirements. If the Administrator determines, before or during any Plan Year, that the Plan may fail to satisfy for such Plan Year any nondiscrimination requirement imposed by the Code, the Administrator shall take such action as it deems appropriate, under rules uniformly applicable to similarly situated participants to assure compliance with such requirement or limitation. Such action may include, without limitation, a modification of elections by "highly compensated employees" or "key employees" without their consent. 9 ARTICLE V BENEFITS AND CLAIMS Except as otherwise provided in the SPD, the following provisions shall govern Plan Benefits: 5.01 Benefits Available. (a) Each Participant may choose, by means of an election and Payroll Adjustment Agreement made in accordance with Article IV, to reduce the amount of his or her Compensation for any Plan Year, and to have such amount applied by the Employer Company toward the cost of providing one or more Before-Tax, or After-Tax Benefits as selected by the Participant. (b) The Before-Tax and/or After-Tax Benefits which a Participant may elect shall be subject to any additional limitations or restrictions set forth in the coverage documents for each such Benefit as described in the SPD. 5.02 Provision of Benefits. The Employer Company shall provide the Benefits the Participant has elected under the Plan, in accordance with the terms of such Benefits as described in the SPD, in any other applicable program, contract or document, and in accordance with any conditions or restrictions imposed by an insurance company providing any Benefit. 5.03 Insurance Contracts. Some or all of the Benefits provided under the Plan may, at the discretion of the Employer, be provided by the purchase of insurance contracts, as described in the SPD. Any dividends, retroactive rebates, or other refunds or credits which may become payable under any insurance or health care service contracts or benefit programs shall be the property of and retained by the appropriate Employer Company. To the extent there is any conflict between the terms of this Plan or the SPD and the insurance documents, the insurance documents shall govern. 5.04 Benefit Costs. The cost to Participants of each Benefit shall be determined by the Employer in a uniform manner. Such costs shall be disclosed in connection with annual enrollment and are subject to change at the discretion of the Employer. 5.05 Cancellation of Benefits for Failure to Pay Required Contributions. Upon an Enrolled Person's failure to pay his or her share of the cost of Before-Tax, or After-Tax Benefits selected, through payroll adjustment or otherwise, such coverage shall be canceled. The Enrolled Person shall not be entitled to reimbursement of any Before-Tax or After-Tax Benefit claims which are incurred after the effective date of such cancellation for nonpayment. 10 5.06 Claims. Except as otherwise provided in the SPD: (a) Claims payments with respect to Benefits under this Plan shall be made only with respect to claims or expenses incurred on or after the date an individual first becomes an Enrolled Person hereunder, and before the date the Enrolled Person ceases to be eligible for Benefits. A claim or expense with respect to a Benefit shall be deemed to be incurred when the Enrolled Person is provided with the service which gives rise to the expense, not when the Enrolled Person is billed or charged for the service. (b) All claims for benefits under the Plan shall be made, processed and paid in accordance with the terms and conditions of the SPD and applicable program, insurance contract or other document that sets forth the terms of such Benefit. With respect to any self-funded Benefits provided under this Plan, an Enrolled Person's failure to cash a Benefit check within twelve (12) months of issuance of such payment shall result in a forfeiture of such payment to the Plan. (c) An Enrolled Person or other claimant shall be entitled to reimbursement or payment only if he (or his estate) applies for such reimbursement or payment on or before the date which is twelve months following the date the claim with respect to such Benefit was incurred. 5.07 Claims Procedure and Appeal of Benefit Denials. The process by which a claim for benefits shall be handled by the Administrator and the process by which a Participant may appeal the denial of a claim for benefits are set forth in the SPD and incorporated herein by reference. As set forth in the SPD, insurance carriers (and other entities) may serve as the claims fiduciary with regard to certain Benefits. 5.08 Coordination of Benefits with Other Plans. As set forth in the SPD, in the event that an Enrolled Person is entitled to any benefits from another plan or policy, Benefits under this Plan may be reduced to an amount, which together with all other amounts paid under any other plan or policy, will not exceed the Benefits that would in fact be eligible for reimbursement under this Plan. 5.09 Reimbursement Agreement, Subrogation. (a) As described in the SPD, if an Enrolled Person receives or becomes eligible to receive any Medical Benefit ('Reimbursable Benefit') arising from an accident, injury or illness for which the Enrolled Person has, may have, or has asserted any claim or rights to recovery against a third party or parties, then any payments by this Plan with respect to such Reimbursable Benefit shall be made on the condition that this Plan will be reimbursed by the Enrolled Person, to the extent of any amount or amounts received or receivable from or with respect to the third party or parties, whether by way of suit, judgment, settlement, compromise or otherwise and without regard to how the amount received from the third party or parties is characterized. 11 (b) The "make whole doctrine" arising under federal common law and under state law does not apply to the Plan's reimbursement or subrogation rights. The Plan retains its reimbursement and subrogation rights described herein regardless of whether the Enrolled Person's receipt of payment from other sources fully reimburses the Enrolled Person or whether the Enrolled Person has been "made whole." (c) To the extent set forth in the SPD, the Enrolled Person may be obligated to sign a reimbursement agreement, as prescribed by the Administrator, before any Reimbursable Benefits are paid from this Plan. If Reimbursable Benefits are to be paid with respect to an Enrolled Dependent who is a minor, the Administrator may require the Participant to execute a reimbursement agreement on the minor's behalf. All Enrolled Persons shall be obligated to cooperate with this Plan in its efforts to enforce its reimbursement rights and to refrain from any actions which interfere with those rights. The Plan shall have the right to take all appropriate actions necessary to enforce its reimbursement rights in the event that an Enrolled Person refuses to sign a reimbursement agreement, refuses to reimburse this Plan in accordance with the Plan's reimbursement rights, or takes any other action inconsistent with the Plan's reimbursement rights. In such situations, the Plan's options shall include, without limitation, the right in appropriate cases to deny Benefits to an individual who refuses to sign a reimbursement agreement; to institute legal actions to recover sums wrongfully withheld or to obtain other relief, and/or to offset wrongfully withheld sums against future Benefit payments otherwise owed the Enrolled Person. The Plan may pay legal fees and such other fees as may be necessary in the sole judgment of the Administrator in order to protect the Plan's reimbursement interests. (d) The Plan shall be subrogated to all claims, demands, actions and rights of recovery of the Enrolled Person against a third party or parties to the extent of any and all payments made by the Plan with respect to Reimbursable Benefits, and the reimbursement agreement shall so provide. ARTICLE VI COBRA CONTINUATION COVERAGE The following provisions shall be applicable to the medical benefits plan, and any other group health plan (as defined by Code ss.ss. 4980B and 5000(b)(1) and the regulations promulgated thereunder) subject to COBRA that does not otherwise contain COBRA provisions. The intent of this Article is to extend continuation rights required by COBRA. To the extent greater rights are provided for hereunder, this Article shall be void. 6.01 Continuation Coverage. Each Enrolled Person who is a "qualified beneficiary" and who would lose any coverage which is required by law to be continued as COBRA Continuation Coverage as a result of a "qualifying event" shall be entitled to elect, within the "election period," "continuation coverage" under the Plan. For purposes of this Article VII, the terms "qualified beneficiary," "qualifying event," "election period" and "continuation coverage" 12 shall have the same meanings as those provided under Code Section 4980B and Title 1, Subtitle B, Part 6 of ERISA, as amended from time to time. 6.02 Premium Requirements. In lieu of employee contributions, the Plan shall require payment of a premium during the period of continuation coverage up to the maximum premium amount permitted under Code Section 4980B(f) and Title 1, Subtitle B, Part 6 of ERISA for such Continuation Coverage. Such premium shall be periodically determined by the Administrator and communicated to the "qualified beneficiary." 6.03 Notice Requirements. The Plan, the Administrator and the Employer Company shall provide notice regarding Continuation Coverage as they may be required to provide under Code Section 4980B and Title 1, Subtitle B, Part 6 of ERISA, as amended from time to time. 6.04 Election. Except as otherwise specified in an election, an election to receive Continuation Coverage by an Enrolled Person who is the Employee or the Employee's spouse shall be deemed to include an election for continuation coverage on behalf of any other "qualified beneficiary" who would lose coverage under the Plan by reason of the "qualifying event" giving rise to the election. ARTICLE VII AMENDMENT AND TERMINATION OF PLAN 7.01 Amendment of Plan. The Employer reserves the right to amend the provisions of the Plan to any extent and in any manner it desires by execution of a written document executed by the Board or the Committee describing the intended amendment(s). The SPD attached hereto may be amended at any time by preparation and publication of a revised SPD (or SMM) by the Employer. 7.02 Termination of Plan. The Employer or the Employer Company shall have no obligation whatsoever to maintain the Plan or any Benefit under the Plan for any given length of time. The Employer reserves the right to terminate the Plan or any Benefit option under the Plan at any time by written document executed by the Board or Committee. Upon termination or discontinuance of the Plan, all elections and Payroll Adjustment Agreements with respect to the Plan shall terminate, and payments with respect to Benefits shall be made only with respect to claims incurred on or prior to the date of the Plan's termination. 7.03 Inclusion of Additional Affiliates. Additional Affiliates (or groups of Employees of an Affiliate) may be included as Employer Companies for participation in the Plan by written action of the Committee. 13 ARTICLE VIII ADMINISTRATIVE COMMITTEE 8.01 Administrative Committee. (a) The Committee shall be responsible for the general administration of the Plan. As such, the Committee is the "named fiduciary" and the "Plan Administrator" of the Plan (as those terms are used in ERISA), and is the agent for the service of process with respect to the Plan. In the absence of the appointment of a Committee, the functions and powers of the Committee shall reside with the Employer. The Committee and the members thereof, in the exercise of their authority, shall discharge their duties with respect to the Plan in accordance with ERISA and corresponding regulations, as amended from time to time. (b) The Committee shall act by a majority of the Committee members currently in office. Such action may be taken either by a vote at a meeting or in writing without a meeting. The Board of Directors reserves the right to remove any Committee member, with or without cause, at any time and to fill such vacancy thereafter. Committee members may resign at any time, such resignation to be effective when accepted by the Board of Directors. (c) The Committee shall establish regulations for the day to day administration of the Plan. The Committee and its designated agents shall have the exclusive right and discretion to interpret the terms and conditions of the Plan and to decide all matters arising with respect to the Plan's administration and operation (including factual issues). Any interpretations or decisions so made shall be conclusive and binding on all persons, subject to the claims procedures set forth in each respective coverage document. Such interpretations shall be applied in a uniform manner to all similarly situated Enrolled Persons. The Committee or its designee may pay the expenses of administering the Plan or may reimburse the Employer or other person performing administrative services with respect to the Plan if the Employer or such other person directly pays such expenses at the request of the Committee. 8.02 Authority to Appoint Advisors and Agents. The Committee may appoint and employ such persons as it may deem advisable and as it may require in carrying out the provisions of the Plan. To the extent permitted by law, the Committee shall be fully protected by any action taken in reliance upon advice given by such persons and in reliance on tables, valuations, certificates, determinations, opinions and reports which are furnished by any accountant, counsel, claims administrator or other expert who is employed or engaged by the Committee. 8.03 Compensation and Expenses of Committee. The members of the Committee shall receive no compensation for their duties hereunder, but the Committee shall be reimbursed for all reasonable and necessary expenses which it incurs in the performance of its duties, including counsel fees and expenses. Such expenses of the Committee, including the compensation of administrators, actuaries, counsel, agents or others that the Committee may employ, shall be paid out of the assets of any trust established in connection with this Plan to the extent not paid by the Employer Company. 14 8.04 Records. The Committee shall keep or cause to be kept accurate and complete books and records with respect to the operations and administration of this Plan. 8.05 Indemnification of Committee. The Employer agrees to indemnify and to defend to the fullest extent permitted by law any employee serving as a member of the Committee or as its delegate against all liabilities, damages, costs and expenses, including attorneys' fees and amounts paid in settlement of any claims approved by the Employer, occasioned by any act or failure to act in connection with the Plan, unless such act or omission arises out of such employee's gross negligence, willful neglect or willful misconduct. 8.06 Fiduciary Responsibility Insurance, Bonding. If the Employer Company has not done so, the Committee may purchase appropriate insurance on behalf of the Plan and the Plan's fiduciaries, including the members of the Committee, to cover liability or losses occurring by reason of the acts or omissions of a fiduciary; provided, however, that such insurance to the extent purchased by the Plan must permit recourse by the insurer against the fiduciary in the case of a breach of a fiduciary duty or obligation by such fiduciary. The cost of such insurance shall be paid out of the assets of the trust, if any, unless the insurance is provided and paid for by the Employer Company. The Committee shall also obtain a bond covering all of the Plan's fiduciaries, to be paid from the assets of the trust fund. ARTICLE IX MISCELLANEOUS PROVISIONS 9.01 Plan Is Not an Employment Contract. This Plan is not a contract of employment, and neither the Plan nor the payment of any Benefits will be construed as giving to any person any legal or equitable right to employment by any Employer Company. Nothing herein shall be construed to interfere with the right of the Employer or any Employer Company to discharge, with or without cause, any Employee at any time. 9.02 Assignment. If applicable, an Enrolled Person may authorize the Plan to directly pay the service provider or hospital that provided the Enrolled Person's covered care and treatment. Except as provided in the foregoing sentence, and subject to Section 9.06 of this Plan relating to Qualified Medical Child Support Orders, an Enrolled Person may not assign or alienate any payment with respect to any Benefit which an Enrolled Person is entitled to receive from the Plan, and further, except as may be prescribed by law, no Benefits shall be subject to attachment or garnishment of or for an Enrolled Person's debts or contracts, except for recovery of overpayments made on an Enrolled Person's behalf by this Plan. 9.03 Fraud. No payments with respect to Benefits under this Plan will be paid if the Enrolled Person or the provider of service attempts to perpetrate a fraud upon the Plan with respect to any such claim. The Administrator shall have the right to make the final determination of whether a fraud has been attempted or committed upon the Plan or if a misrepresentation of fact has been made, and its decision shall be final, conclusive and binding upon all persons. The 15 Plan shall have the right to fully recover any amounts, with interest, improperly paid by the Plan by reason of fraud, attempted fraud or misrepresentation of fact by an Enrolled Person or service provider and to pursue all other legal or equitable remedies. 9.04 Funding Status of Plan. Except as may otherwise be required by law, any amount by which a Participant's Compensation is reduced by reason of an election made under this Plan will remain part of the general assets of the Employer Company. Except as specifically provided in the SPD, the Benefits provided hereunder will be paid solely from the general assets of the applicable Employer Company, and nothing herein will be construed to require any Employer Company or the Administrator to maintain any fund or segregate any amount for the benefit of any Enrolled Person. No Enrolled Person or other person shall have any claim against, right to, or security or other interest in, any fund, account or asset of the Employer Company from which any payment under the Plan may be made. Notwithstanding the foregoing, the Employer may establish one or more voluntary employees beneficiary association (VEBA) Trusts within the meaning of Code Section 501(c)(9) for the purpose of funding Benefits to be provided under this Plan. 9.05 Construction. This Plan shall be construed, administered and enforced according to the laws of the State of Georgia, except to the extent preempted by federal law. The headings and subheadings are set forth for convenient reference only and have no substantive effect whatsoever. All pronouns and all variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person, persons or entity may require. 9.06 Qualified Medical Child Support Orders. The Administrator shall comply with any "qualified medical child support order" as defined in ERISA Section 609(a)(2)(A) and shall establish and follow procedures for (i) notifying Employees and "alternate recipients" (as defined in ERISA Section 609(a)(2)(C)) who have or may have an interest in Benefits which are the subject of medical child support orders, (ii) determining whether such medical child support orders are qualified medical child support orders under ERISA, and (iii) administering the provision of benefits under such qualified medical child support orders. 9.07 Conclusiveness of Records. The records of the Employer Companies with respect to age, employment history, compensation, absences, illnesses and all other relevant matters shall be conclusive for purposes of the administration of, and the resolution of claims arising under, the Plan. 9.08 Right to Require Information and Reliance Thereon. Each Employer Company, Plan Administrator, and Claims Administrator shall have the right to require any Employee to provide it and its agents with such information, in writing, and in such form as it may deem necessary to the administration of the Plan and may rely on that information in carrying out its duties hereunder. Any payment to an Employee in accordance with the provisions of the Plan in good faith reliance upon any written information provided by the Employee shall be in full satisfaction of all claims by the Employee. 16 9.09 Income and Employment Taxes. In the event an Employee is to receive a cash benefit payment under the Plan, the Employee shall bear the expense of any income tax required to be withheld from and any employment tax imposed on the Employee with respect to the cash payment. In the Plan Administrator's discretion, the amount of any applicable tax may be deducted from the cash payment, or paid by the Eligible Employee in any other manner permitted by the Plan Administrator. 9.10 Disaggregation for Certain Discrimination Testing. To the extent that the Plan provides different Benefits (or levels of Benefits) to part-time and full-time Employees (or imposes different Employee contribution rates) or different classifications of Employees (as described in the various SPD), then solely for purposes of Code Section 105(h) and pursuant to the authority of Treasury Regulation Section 1.105-11(c)(4), the Plan shall be designated as separate Plans, one for part-time Employees and one for full-time Employees and one for each separate classification of Employees described in Appendix A. 17 IN WITNESS WHEREOF, Genuine Parts Company based on action by the Board of Directors, has executed this Plan this 29th day of December, 1999. GENUINE PARTS COMPANY ATTEST: BY:/s/ Edward J Van Stedum ------------------------------------- /s/ Carol Yancey, Vice Pres & Corp Sec TITLE:Senior Vice Pres, Human Resources - -------------------------------------- ---------------------------------- (CORPORATE SEAL) 18
EX-13 10 g74408ex13.txt SECTIONS AND PAGES OF THE ANNUAL REPORT FOR 2001 EXHIBIT 13 SELECTED FINANCIAL DATA
Year ended December 31, (in thousands, except per share data) 2001 2000 1999 1998 1997 - ---------------------------------------------------------------------------------------------------------------------- Net sales $8,220,668 $8,369,857 $7,950,822 $6,587,576 $5,981,224 Cost of goods sold(*) 5,699,174 5,764,360 5,436,056 4,468,568 4,049,104 Selling, administrative and other expenses(*) 1,951,559 1,958,747 1,886,699 1,529,891 1,366,520 Facility consolidation and impairment charges(*) 73,922 -- -- -- -- Income before income taxes 496,013 646,750 628,067 589,117 565,600 Income taxes 198,866 261,427 250,445 233,323 223,203 Net income $ 297,147 $ 385,323 $ 377,622 $ 355,794 $ 342,397 Average common shares outstanding during year - assuming dilution 173,633 175,327 179,238 180,081 180,165 Per common share: Diluted net income, excluding unusual charges $ 2.08 $ 2.20 $ 2.11 $ 1.98 $ 1.90 Diluted net income 1.71 2.20 2.11 1.98 1.90 Dividends declared 1.14 1.10 1.04 1.00 .96 December 31 closing stock price 36.70 26.19 24.81 33.44 33.94 Long-term debt, less current maturities 835,580 770,581 702,417 588,640 209,490 Shareholders' equity 2,345,123 2,260,806 2,177,517 2,053,332 1,859,468 Total assets $4,206,646 $4,142,114 $3,929,672 $3,600,380 $2,754,363 - ----------------------------------------------------------------------------------------------------------------------
(*) Unusual charges totaled $107.8 million pre-tax in 2001 and $64.4 million after tax. The pre-tax charges include $17.4 million classified in cost of goods sold and $16.4 million classified in selling, administrative and other expenses. MARKET AND DIVIDEND INFORMATION High and Low Sales Price and Dividends per Share of Common Shares Traded on the New York Stock Exchange
Sales Price of Common Shares Quarter 2001 2000 - --------------------------------------------------------------------------- High Low High Low First $ 28.45 $ 23.91 $ 25.56 $19.94 Second 31.50 25.28 26.69 20.00 Third 34.56 26.93 22.19 18.25 Fourth 37.94 31.85 26.44 18.63
Dividends Declared Per Share 2001 2000 First $.285 $.275 Second .285 .275 Third .285 .275 Fourth .285 .275
Number of Record Holders of Common Stock: 7,930 16 SEGMENT DATA
Year ended December 31, (dollars in thousands) 2001 2000 1999 1998 1997 - ------------------------------------------------------------------------------------------------------------------------------ Net Sales: Automotive $ 4,252,913 $ 4,163,814 $ 4,084,775 $ 3,262,406 $ 3,071,153 Industrial 2,234,241 2,342,686 2,156,134 2,008,789 1,853,270 Office products 1,379,859 1,336,500 1,218,367 1,122,420 1,080,822 Electrical/electronic materials 387,771 557,866 522,411 220,417 -- Other (34,116) (31,009) (30,865) (26,456) (24,021) - ------------------------------------------------------------------------------------------------------------------------------ Total net sales $ 8,220,668 $ 8,369,857 $ 7,950,822 $ 6,587,576 $ 5,981,224 ============================================================================================================================== Operating profit: Automotive $ 378,162 $ 381,250 $ 383,830 $ 330,988 $ 315,303 Industrial 172,208 206,193 186,203 176,456 166,367 Office products 141,762 134,343 118,345 113,821 110,793 Electrical/electronic materials 3,229 28,010 23,343 12,030 -- - ------------------------------------------------------------------------------------------------------------------------------ Total operating profit 695,361 749,796 711,721 633,295 592,463 Interest expense (59,416) (63,496) (41,487) (20,096) (13,365) Corporate expense (27,670) (23,277) (22,283) (19,545) (17,058) Equity in (loss) income from investees -- -- (3,675) 3,329 6,730 Goodwill and other amortization (14,333) (13,843) (12,708) (5,157) (1,624) Minority interests (3,077) (2,430) (3,501) (2,709) (1,546) Unusual Charges (94,852) -- -- -- -- - ------------------------------------------------------------------------------------------------------------------------------ Income before income taxes $ 496,013 $ 646,750 $ 628,067 $ 589,117 $ 565,600 ============================================================================================================================== Assets: Automotive $ 2,219,503 $ 2,099,610 $ 2,034,417 $ 1,966,774 $ 1,623,644 Industrial 867,716 840,585 758,206 671,454 584,356 Office products 538,468 542,406 503,904 442,220 380,804 Electrical/electronic materials 121,721 190,635 174,258 147,074 -- Corporate 17,160 17,443 18,588 18,385 18,611 Goodwill and equity investments 442,078 451,435 440,299 354,473 146,948 - ------------------------------------------------------------------------------------------------------------------------------ Total assets $ 4,206,646 $ 4,142,114 $ 3,929,672 $ 3,600,380 $ 2,754,363 ============================================================================================================================== Depreciation and amortization: Automotive $ 45,094 $ 51,546 $ 51,563 $ 43,637 $ 40,675 Industrial 11,992 11,617 10,926 8,619 6,688 Office products 9,345 9,598 8,814 8,391 7,865 Electrical/electronic materials 4,009 4,391 4,173 1,508 -- Corporate 1,020 1,308 1,783 1,993 2,015 Goodwill and other 14,333 13,843 12,708 5,157 1,624 - ------------------------------------------------------------------------------------------------------------------------------ Total depreciation and amortization $ 85,793 $ 92,303 $ 89,967 $ 69,305 $ 58,867 ============================================================================================================================== Capital expenditures: Automotive $ 26,766 $ 35,031 $ 57,710 $ 69,154 $ 68,305 Industrial 6,388 20,054 11,275 6,972 13,451 Office products 5,941 9,116 16,085 6,901 6,069 Electrical/electronic materials 2,466 3,183 3,113 4,688 -- Corporate 383 3,745 100 546 2,600 - ------------------------------------------------------------------------------------------------------------------------------ Total capital expenditures $ 41,944 $ 71,129 $ 88,283 $ 88,261 $ 90,425 ============================================================================================================================== Net sales: United States $ 7,526,631 $ 7,665,498 $ 7,345,707 $ 6,535,020 $ 5,977,012 Canada 629,330 633,715 585,504 79,012 28,233 Mexico 98,823 101,653 50,476 -- -- Other (34,116) (31,009) (30,865) (26,456) (24,021) - ------------------------------------------------------------------------------------------------------------------------------ Total net sales $ 8,220,668 $ 8,369,857 $ 7,950,822 $ 6,587,576 $ 5,981,224 ============================================================================================================================== Net long-lived assets: United States $ 579,635 $ 618,818 $ 620,837 $ 545,452 $ 412,344 Canada 182,041 201,895 207,672 187,951 6,495 Mexico 25,534 25,982 25,333 15,338 15,767 - ------------------------------------------------------------------------------------------------------------------------------ Total net long-lived assets $ 787,210 $ 846,695 $ 853,842 $ 748,741 $ 434,606 ==============================================================================================================================
17 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS December 31, 2001 Results of Operations: Years ended December 31, 2001 and 2000 Net sales in 2001 were $8.2 billion, a decline of 2% as compared to 2000. The Automotive Parts Group ("Automotive") and Office Products Group ("Office") increased sales by 2% and 3%, respectively. Price increases for Automotive were 2% in 2001 and 1% in 2000 and, for Office, 2% in 2001 and 1.7% in 2000. The Industrial Parts Group ("Industrial") and EIS, the Electrical/Electronic Group ("Electrical"), reported sales decreases of 5% and 30%, respectively, resulting from the economic slowdown in the industrial manufacturing and telecommunication sectors of the economy. Although Industrial and Electrical each had price increases of 1% in 2001 and 2% and 1%, respectively, in 2000, the effect of such increases was more than offset by volume declines. In the fourth quarter of 2001, the Company's management approved a plan to close and consolidate certain Company-operated facilities, terminate certain employees, and exit certain other activities. The Company also determined that certain assets were impaired. The income statement effects of the foregoing Company actions are hereafter collectively referred to as "Unusual Charges." Following is a summary of the Unusual Charges ($107.8 million pre-tax; $64.4 million, net of tax) and accruals related to continuing liabilities associated with the Unusual Charges (in thousands):
Remaining Paid in Liability at Unusual Charges Total Non-cash 2001 Dec. 31, 2001 - ---------------------------------------------------------------------------------------------- Impairment charges $ 49,400 $ (49,400) $ -- $ -- Facility consolidation expenses 17,900 (6,900) (300) 10,700 Severance expenses 6,700 -- (100) 6,600 - ---------------------------------------------------------------------------------------------- Facility consolidation and impairment charges 74,000 (56,300) (400) 17,300 Inventory-related exit costs--cost of good sold 17,400 (17,400) -- -- Other--selling, administrative and other expenses 16,400 (15,800) -- 600 - ---------------------------------------------------------------------------------------------- $ 107,800 $ (89,500) $ (400) $ 17,900 ==============================================================================================
Impairment charges are primarily comprised of two separate technology projects: (1) an abandoned software system implementation in the Office Products Group totaling approximately $30 million, and (2) an impaired technology-related venture in the Automotive Group totaling approximately $15 million for which the Company projects the undiscounted cash flows to be less than the carrying amount of the related investment. Facility consolidation expenses relate to facility consolidations in each of the Company's business segments. The Company has identified certain distribution, branch and retail facilities, which will be consolidated with related facilities prior to December 31, 2002. The Company has appropriately accrued the estimated lease obligation from the planned exit date through the end of the contractual lease term, net of estimated sublease income. Severance expenses include charges for employees which have been or will be involuntarily terminated in connection with the Company's facility consolidation and management termination plans. All employee terminations will be completed prior to December 31, 2002. Inventory-related exit costs totaling approximately $17.4 million relate to inventory considered by the Company to be impaired as a result of the facility consolidations described above and related inventory rationalization and optimization programs. All inventory-related exit costs have been classified as cost of sales in the statement of income. Other Unusual Charges have been classified as a component of selling, administrative, and other expenses. The Company's management does not believe the facility consolidations will result in any material decline in net sales, as all such facilities in the process of closure will be served by other Company-operated facilities. Cost of goods sold was 69.3% of net sales in 2001 as compared to 68.9% in 2000. The slight increase in cost of goods sold as a percentage of net sales is primarily attributable to continued pricing pressures resulting from the recessionary economic conditions coupled with inventory-related exit costs discussed above totaling approximately $17.4 million. Selling, administrative and other expenses of $1.9 billion were flat from 2001 to 2000. At 23.7% of net sales in 2001, these expenses increased slightly from 23.4% in 2000. Excluding the effect of the Unusual Charges, selling, administrative, and other expenses declined by just over 1%, generally consistent with the sales decrease. Operating profit as a percentage of sales was 8.5% in 2001 as compared to 9.0% in 2000. These results are reflective of the overall economic conditions in 2001 and the fixed costs inherent in distribution. Automotive operating margins decreased slightly from 9.2% in 2000 to 8.9% in 2001. Office operating margins showed slight improvement from 10.1% in 2000 to 10.3% in 2001. The current economic conditions continued to place the most pressure on the Industrial and Electrical segment. Industrial margins declined to 7.7% in 2001 from 8.8% in 2000. EIS, with a sales decrease in 2001 of 30%, had an operating margin of 1% in 2001 and 5% in 2000. The margin decline at EIS is because the operating expenses associated with EIS' business could not be reduced to the extent of the sales decline. 18 The effective income tax rate was 40.1% in 2001 as compared to 40.4% in 2000. Net income in 2001 was $297 million, reflecting a 23% decrease over 2000 net income. Net income as a percent of net sales was 3.6% in 2001 as compared to 4.6% in 2000. Excluding the effect of Unusual Charges, net income was down 6% from 2000 and was 4.4% of sales. This decrease in net income is primarily attributable to the sales decline. In 2001, diluted earnings per share were $1.71, a 22% decrease from $2.20 reported in 2000. Excluding Unusual Charges, diluted earnings per share were $2.08, a 5% decrease from 2000. Years ended December 31, 2000 and 1999 Net sales increased 5% in 2000, and 21% in 1999. Excluding the effect of acquisitions, sales would have increased approximately 7% in 1999. Cost of goods sold was 68.9% of net sales in 2000 compared to 68.4% in 1999. Selling, administrative and other expenses increased 4% in 2000 and decreased to 23.4% of net sales in 2000 as compared to 23.7% in 1999 due primarily to improved operating efficiencies. The effective income tax rate was 40.4% in 2000 as compared to 39.9% in 1999. The increase in the tax rate in 2000 primarily related to increased non-deductible goodwill amortization and the effect of international operations. Net income as a percent of net sales was 4.6% in 2000 and 4.7% in 1999. Net income of $385.3 million in 2000 increased 2% over 1999 net income of $377.6 million. Diluted earnings per share were $2.20 in 2000 compared to $2.11 in 1999, an increase of 4%. Sales for Automotive increased 2% in 2000 and 25% in 1999 (5% excluding acquisitions). Price increases were 1% in 2000. Automotive's operating profit decreased 1% in 2000 as compared to 1999. Industrial's operating profits increased 11% in 2000 as compared to 1999, consistent with a sales increase of 9% in 2000. Industrial price increases were 2% in 2000. The sales increases for Industrial were primarily volume related, reflective of geographic expansion and increased market share due to expanded product offerings and new markets. The Office segment reported sales increases of 10% in 2000 over 1999 and operating profit increases of 13.5% in the same period. Price increases were 1.7% in 2000. The sales and profit increases in the Office segment resulted from additional market share, increased merchandising and marketing efforts and new product offerings. EIS increased sales by 7% in 2000 and operating profits by 20%, reflecting new product programs and expanded customer bases. Price increases at EIS were 1% in 2000. Liquidity and Capital Resources: The ratio of current assets to current liabilities was 3.4 to 1 at the close of 2001 with current assets amounting to 75% of total assets. Trade accounts receivable decreased 2% and inventories increased 1%, while working capital increased 9.6%. The increase in working capital is primarily attributable to the reduction in the current portion of long-term debt as a result of new financing arrangements in 2001. On November 30, 2001, the Company completed a $500 million financing arrangement with a consortium of financial institutions and insurance companies. At December 31, 2001, the Company had unsecured Senior Notes outstanding under this financing arrangement as follows: $250 million, Series A, 5.86% fixed, due 2008; and $250 million, Series B, 6.23% fixed, due 2011. In addition, at December 31, 2001, the Company had $7 million outstanding on a $200 million unsecured revolving line of credit, LIBOR plus .55%, due 2003, and the following unsecured term notes: $50 million, LIBOR plus .25%, due 2005; $50 million, LIBOR plus .25%, due 2008; and $231 million, LIBOR plus .55%, due 2003; and $27 million in other borrowings. In addition, the Company had the following Canadian dollar denominated borrowings translated into U.S. dollars at December 31, 2001: line of credit secured by accounts receivable, $19 million outstanding, banker's acceptance rate plus .27%; and $8 million in other borrowings. Certain borrowings contain covenants related to a maximum debt-to-equity ratio, a minimum fixed-charge coverage ratio, and certain limitations on additional borrowings. At December 31, 2001, the Company was in compliance with all such covenants. The weighted average interest rate on the Company's outstanding borrowings was approximately 5.3% and 6.7% at December 31, 2001 and 2000, respectively. Total interest expense for all borrowings was $59.4 million and $63.5 million in 2001 and 2000, respectively. The Company also has an $85 million construction and lease facility. Properties acquired by the lessor are constructed and then leased to the Company under operating lease agreements. The total amount advanced and outstanding under this facility at December 31, 2001 was approximately $62 million. Since the resulting leases are operating leases, no debt obligation is recorded on the Company's balance sheet. This construction and lease facility expires in 2008. Lease payments fluctuate based upon current interest rates and are generally based upon LIBOR plus .55%. The lease facility contains residual value guarantee provisions and guarantees under events of default. Although management 19 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued) believes the likelihood of funding to be remote, the maximum guarantee obligation under the construction and lease facility is approximately $62 million at December 31, 2001. In addition, the Company guaranteed borrowings of affiliates totaling approximately $59.7 million and $49.7 million at December 31, 2001 and 2000, respectively. In August 1999, the Company completed the repurchase of 15 million shares authorized by the Board of Directors in 1994. The Board authorized the repurchase of an additional 15 million shares on April 19, 1999. Through December 31, 2001, approximately 7.4 million shares have been repurchased under this new authorization. Existing credit facilities, current financial resources and anticipated funds from operations are expected to meet requirements for working capital in 2002. Capital expenditures in 2001 were $42 million, $71 million in 2000 and $88 million in 1999. The reduction represents management's coordinated efforts to control capital expenditures. The Company manages its exposure to changes in short-term interest rates, particularly to reduce the impact on its floating-rate term notes, by entering into interest rate swap agreements. The counterparties to these contracts are high credit, quality commercial banks. Consequently, credit risk, which is inherent in all swaps, has been minimized to a large extent. Interest expense is adjusted for the differential to be paid or received as interest rates change. Substantially all floating rate debt has been effectively fixed by interest rate swap agreements at December 31, 2001. Accordingly, a 1% adverse change in interest rates would not have a material adverse impact on future earnings and cash flows of the Company. The fair value of interest rate swap agreements was approximately $31.6 million as of December 31, 2001. This amount is included in other accrued expenses in the Company's consolidated balance sheet. Other than interest rate swaps, the Company does not have any other derivative instruments. The Company does not enter into derivatives for speculative or trading purposes. Critical Accounting Policies Inventories-- Provisions for Slow Moving and Obsolescence The Company identifies slow moving or obsolete inventories and estimates appropriate loss provisions related thereto. Historically, these loss provisions have not been significant as the vast majority of the Company's inventories are eligible for return under various vendor return programs. While the Company has no reason to believe its inventory return privileges will be discontinued in the future, its risk of loss associated with obsolete or slow moving inventories would increase if such were to occur. Allowance for Doubtful Accounts -- Methodology The Company evaluates the collectibility of accounts receivable based on a combination of factors. Initially, the Company estimates an allowance for doubtful accounts as a percentage of net sales based on historical bad debt experience. This initial estimate is periodically adjusted when the Company becomes aware of a specific customer's inability to meet its financial obligations (e.g., bankruptcy filing) or as a result of changes in the overall aging of accounts receivable. While the Company has a large customer base that is geographically dispersed, a general economic downturn in any of the industry segments in which the Company operates could result in higher than expected defaults, and, therefore, the need to revise estimates for bad debts. For the years ended December 31, 2001, 2000 and 1999, the Company recorded provisions for bad debts of $26.5 million, $13.9 million and $14.4 million, respectively. Evaluation of the Recoverability of Goodwill The Company has recorded goodwill from prior business combinations amounting to approximately $442 million at December 31, 2001. Goodwill is presently being amortized using a straight-line method over 40 years. For the years ended December 31, 2001, 2000, and 1999, the amount of goodwill amortization included in the Company's consolidated statements of income was $14.3 million, $13.8 million, and $12.7 million, respectively. The Company's current accounting policy for evaluating the recoverability of goodwill is based upon management's estimates of the future undiscounted cash flows attributable to the acquired business as compared to the carrying value of the corresponding goodwill and other long-lived assets. Management's estimates of the undiscounted cash flows are based upon factors such as projected future sales, price increases, and other uncertain elements requiring significant judgments. In connection with performing this impairment evaluation at December 31, 2001, the Company did not identify any significant amounts of goodwill considered to be impaired. Effective January 1, 2002, the Company will adopt Statement of Financial Accounting Standard No. 142, "Goodwill and Intangible Assets" ("Statement 142"). Statement 142 requires companies to discontinue the 20 amortization of goodwill and to apply an impairment only approach. This new approach requires the use of valuation techniques and methodologies significantly different than the present undiscounted cash flow policy being followed by the Company. In connection with the adoption of Statement 142, the Company's conclusions about the valuation and recoverability of goodwill may change. The impairment only approach may result in impairment charges and reductions in the carrying amount of goodwill on the balance sheet upon adoption. Subsequent to the initial adoption of Statement 142, the impairment only approach may also have the effect of increasing the volatility of the Company's earnings if additional goodwill impairment occurs at a future date. Consideration Received from Vendors The Company enters into agreements at the beginning of each year with many of its vendors providing for inventory purchase rebates and advertising allowances. Generally, the Company earns inventory purchase rebates upon achieving specified volume purchasing levels and advertising allowances upon fulfilling its obligations related to cooperative advertising programs. The Company accrues for the receipt of inventory purchase rebates as part of its inventory cost based on cumulative purchases of inventory to date and projected inventory purchases through the end of the year, and, in the case of advertising allowances, upon completion of the Company's obligations related thereto. While management believes the Company will continue to receive such amounts in 2002 and beyond, there can be no assurance that vendors will continue to provide comparable amounts of rebates and allowances in the future. Forward-Looking Statements: Statements in this report constitute forward-looking statements that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company cautions that its forward-looking statements involve risks and uncertainties. The Company undertakes no duty to update its forward-looking statements, which reflect the Company's beliefs, expectations, and plans as of the present. Actual results or events may differ materially from those indicated as a result of various important factors. Such factors include, but are not limited to, changes in general economic conditions, the growth rate of the market for the Company's products and services, the ability to maintain favorable supplier arrangements and relationships, competitive product and pricing pressures, the effectiveness of the Company's promotional, marketing and advertising programs, changes in laws and regulations, including changes in accounting and taxation guidance, the uncertainties of litigation, as well as other risks and uncertainties discussed from time to time in the Company's filings with the Securities and Exchange Commission. Quarterly Results of Operations: The preparation of interim financial statements requires management to make estimates and assumptions for the amounts reported in the condensed consolidated financial statements. Specifically, the Company makes certain estimates in its interim financial statements for the accrual of bad debts, inventory adjustments, and volume rebates earned. Bad debts are accrued based on a percentage of sales and volume rebates are estimated based upon cumulative and projected purchasing levels. Inventory adjustments are accrued on an interim basis and adjusted in the fourth quarter based on the annual October 31 book-to-physical inventory adjustment. The methodology and practices used in deriving estimates for interim reporting typically result in adjustments upon accurate determination at year-end. The Unusual Charges discussed above resulted in a decrease in net income in the fourth quarter of 2001 of $.37 per share. Without the Unusual Charges, diluted income per share would have been $.51 per share in the quarter ended December 31, 2001. For the quarters ended December 31, 2001 and 2000, year-end adjustments resulted in increasing net income during the fourth quarter by approximately $13.5 million and $32.0 million ($.08 per share and $.18 per share), respectively. The following is a summary of the quarterly results of operations for the years ended December 31, 2001 and 2000.
Three Months Ended ---------------------------------------------------------- March 31, June 30, Sept. 30, Dec. 31, ---------------------------------------------------------- 2001 (in thousands except for per share data) Net Sales $2,054,972 $2,118,976 $2,099,191 $1,947,529 Gross Profit 623,159 642,977 630,312 625,046 Net Income 89,273 94,688 88,216 24,970 Basic and Diluted Net Income per Common Share .52 .55 .51 .14 2000 Net Sales $2,070,992 $2,129,377 $2,150,572 $2,018,916 Gross Profit 620,052 649,671 655,797 679,977 Net Income 91,729 96,593 91,729 105,272 Basic and Diluted Net Income per Common Share .52 .55 .53 .61
21 REPORT OF INDEPENDENT AUDITORS Board of Directors Genuine Parts Company We have audited the accompanying consolidated balance sheets of Genuine Parts Company and subsidiaries as of December 31, 2001 and 2000, and the related consolidated statements of income, shareholders' equity, and cash flows for each of the three years in the period ended December 31,2001. 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 financial statements referred to above present fairly, in all material respects, the consolidated financial position of Genuine Parts Company and subsidiaries at December 31, 2001 and 2000, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2001, in conformity with accounting principles generally accepted in the United States. /s/ ERNST & YOUNG LLP February 4, 2002 Atlanta, Georgia 22 CONSOLIDATED BALANCE SHEETS
December 31, (dollars in thousands) 2001 2000 - ---------------------------------------------------------------------------------------------------------------- ASSETS Current Assets: Cash and cash equivalents $ 85,770 $ 27,738 Trade accounts receivable 1,010,728 1,031,662 Merchandise inventories 1,890,037 1,864,334 Prepaid expenses and other assets 159,677 95,747 - ---------------------------------------------------------------------------------------------------------------- Total Current Assets 3,146,212 3,019,481 Goodwill, less accumulated amortization (2001--$51,134; 2000--$37,680) 442,078 451,435 Other Assets 273,224 275,938 Property, Plant and Equipment: Land 37,465 40,790 Buildings, less allowance for depreciation (2001--$101,914; 2000--$96,714) 127,639 136,416 Machinery and equipment, less allowance for depreciation (2001--$341,933; 2000--$340,228) 180,028 218,054 - ---------------------------------------------------------------------------------------------------------------- Net Property, Plant and Equipment 345,132 395,260 - ---------------------------------------------------------------------------------------------------------------- $ 4,206,646 $ 4,142,114 ================================================================================================================ LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Trade accounts payable $ 644,084 $ 635,499 Current portion of long-term debt and other borrowings 57,190 151,452 Accrued compensation 62,395 58,661 Other accrued expenses 106,099 58,164 Dividends payable 49,413 47,494 Income taxes payable -- 37,043 - ---------------------------------------------------------------------------------------------------------------- Total Current Liabilities 919,181 988,313 Long-Term Debt 835,580 770,581 Deferred Income Taxes 60,985 77,814 Minority Interests in Subsidiaries 45,777 44,600 Shareholders' Equity: Preferred Stock, par value $1 per share--authorized 10,000,000 shares; none issued -- -- Common Stock, par value $1 per share--authorized 450,000,000 shares; issued 173,473,944 shares in 2001 and 172,389,688 shares in 2000 173,474 172,390 Accumulated other comprehensive income (46,094) (13,041) Additional paid-in capital 16,080 -- Retained earnings 2,201,663 2,101,457 - ---------------------------------------------------------------------------------------------------------------- Total Shareholders' Equity 2,345,123 2,260,806 - ---------------------------------------------------------------------------------------------------------------- $ 4,206,646 $ 4,142,114 ================================================================================================================
See accompanying notes. 23 CONSOLIDATED STATEMENTS OF INCOME
Year ended December 31, (in thousands, except per share data) 2001 2000 1999 - ----------------------------------------------------------------------------------------------------------------------- Net sales $8,220,668 $8,369,857 $7,950,822 Cost of goods sold 5,699,174 5,764,360 5,436,056 - ----------------------------------------------------------------------------------------------------------------------- 2,521,494 2,605,497 2,514,766 Selling, administrative and other expenses 1,951,559 1,958,747 1,886,699 Facility consolidation and impairment charges 73,922 -- -- - ----------------------------------------------------------------------------------------------------------------------- Income before income taxes 496,013 646,750 628,067 Income taxes 198,866 261,427 250,445 - ----------------------------------------------------------------------------------------------------------------------- Net Income $ 297,147 $ 385,323 $ 377,622 ======================================================================================================================= Basic net income per common share $ 1.72 $ 2.20 $ 2.11 ======================================================================================================================= Diluted net income per common share $ 1.71 $ 2.20 $ 2.11 ======================================================================================================================= Average common shares outstanding 172,765 175,009 178,746 Dilutive effect of stock options and non-vested restricted stock awards 868 318 492 - ----------------------------------------------------------------------------------------------------------------------- Average common shares outstanding--assuming dilution 173,633 175,327 179,238 =======================================================================================================================
See accompanying notes. 24 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Accumulated Common Stock Additional Other Total ---------------------- Paid-In Comprehensive Retained Shareholders' dollars in thousands Shares Amount Capital Income (Loss) Earnings Equity - ------------------------------------------------------------------------------------------------------------------------------- Balance at January 1, 1999 179,505,151 $ 179,505 $ 19,989 $ (3,110) $ 1,856,948 $ 2,053,332 Net income -- -- -- -- 377,622 377,622 Foreign currency translation adjustment, net of income taxes of $2,498 -- -- -- (3,747) -- (3,747) ----------- Comprehensive income 373,875 ----------- Cash dividends declared, $1.04 per share -- -- -- -- (185,870) (185,870) Stock options exercised, including tax benefit 322,003 322 6,168 -- -- 6,490 Purchase of stock (3,863,353) (3,863) (65,663) -- (41,602) (111,128) Stock issued in connection with acquisitions 1,311,801 1,312 37,772 -- -- 39,084 Other -- -- 1,734 -- -- 1,734 - ------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 1999 177,275,602 177,276 -- (6,857) 2,007,098 2,177,517 Net income -- -- -- -- 385,323 385,323 Foreign currency translation adjustment, net of income taxes of $4,123 -- -- -- (6,184) -- (6,184) ----------- Comprehensive income 379,139 ----------- Cash dividends declared, $1.10 per share -- -- -- -- (192,455) (192,455) Stock options exercised, including tax benefit 386 -- 8 -- -- 8 Purchase of stock (5,466,029) (5,466) (13,840) -- (98,509) (117,815) Stock issued in connection with acquisitions 579,729 580 13,832 -- -- 14,412 - ------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2000 172,389,688 172,390 -- (13,041) 2,101,457 2,260,806 Net income -- -- -- -- 297,147 297,147 Foreign currency translation adjustment, net of income taxes of $8,168 -- -- -- (12,252) -- (12,252) Changes in fair value of derivative instruments, net of income taxes of $13,867 -- -- -- (20,801) -- (20,801) ----------- Comprehensive income 264,094 ----------- Cash dividends declared, $1.14 per share -- -- -- -- (196,941) (196,941) Stock options exercised, including tax benefit 936,978 937 13,464 -- -- 14,401 Purchase of stock (496,025) (496) (12,162) -- -- (12,658) Stock issued in connection with acquisitions 643,303 643 14,778 -- -- 15,421 - ------------------------------------------------------------------------------------------------------------------------------- Balance at December 31, 2001 173,473,944 $ 173,474 $ 16,080 $(46,094) $ 2,201,663 $ 2,345,123 ==============================================================================================================================
See accompanying notes. 25 CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended December 31, (dollars in thousands) 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ OPERATING ACTIVITIES Net income $ 297,147 $ 385,323 $ 377,622 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 85,793 92,303 89,967 Gain on sale of property, plant and equipment (1,626) (5,674) (4,595) Deferred income taxes (21,704) (6,714) 12,347 Unusual charges 89,500 -- -- Income applicable to minority interests 3,077 2,430 3,501 Changes in operating assets and liabilities: Trade accounts receivable 6,974 (14,298) (42,846) Merchandise inventories (45,063) (84,508) (28,671) Trade accounts payable 7,354 50,899 12,104 Other, net (88,300) (105,336) (51,662) - ------------------------------------------------------------------------------------------------------------------------------ 36,005 (70,898) (9,855) - ------------------------------------------------------------------------------------------------------------------------------ Net Cash Provided by Operating Activities 333,152 314,425 367,767 INVESTING ACTIVITIES Purchases of property, plant and equipment (41,944) (71,129) (88,283) Proceeds from sale of property, plant and equipment 5,261 10,605 10,254 Acquisition of businesses and other investments, net of cash acquired (16,358) (46,226) (89,272) - ------------------------------------------------------------------------------------------------------------------------------ Net Cash Used in Investing Activities (53,041) (106,750) (167,301) - ------------------------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Proceeds from credit facilities 3,223,466 2,813,820 2,579,675 Payments on credit facilities (3,251,769) (2,731,601) (2,530,429) Stock options exercised 14,401 8 6,490 Dividends paid (195,022) (189,995) (184,247) Purchase of stock (12,658) (117,815) (111,128) - ------------------------------------------------------------------------------------------------------------------------------ Net cash used in financing activities (221,582) (225,583) (239,639) Effect of exchange rate changes on cash (497) (89) (64) - ------------------------------------------------------------------------------------------------------------------------------ Net increase (decrease) in cash and cash equivalents 58,032 (17,997) (39,237) Cash and cash equivalents at beginning of year 27,738 45,735 84,972 - ------------------------------------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of year $ 85,770 $ 27,738 $ 45,735 ============================================================================================================================== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Income taxes $ 257,280 $ 252,416 $ 244,250 ============================================================================================================================== Interest $ 60,461 $ 61,750 $ 39,888 ==============================================================================================================================
See accompanying notes. 26 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 2001 1. Summary of Significant Accounting Policies Business Genuine Parts Company and all of its majority-owned subsidiaries ("the Company") is a distributor of automotive replacement parts, industrial replacement parts, office products and electrical/electronic materials. The Company serves a diverse customer base through more than 1,800 locations in North America and, therefore, has limited exposure from credit losses to any particular customer or industry segment. The Company performs periodic credit evaluations of its customers' financial condition and generally does not require collateral. Principles of Consolidation The consolidated financial statements include all of the accounts of the Company. Income applicable to minority interests is included in other expenses. Significant intercompany accounts and transactions have been eliminated in consolidation. Revenue Recognition The Company recognizes revenues from product sales upon shipment to its customers. Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results may differ from those estimates and the differences could be material. Foreign Currency Translation The balance sheets and statements of income of the Company's foreign subsidiaries have been translated into U.S. dollars at the current and average exchange rates, respectively. The foreign currency translation adjustment is included as a component of accumulated other comprehensive income, net of income taxes. Cash Equivalents The Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents. Merchandise Inventories Merchandise inventories are valued at the lower of cost or market. Cost is determined by the last-in, first-out (LIFO) method for a majority of automotive parts, electrical/electronic materials, and industrial parts, and by the first-in, first-out (FIFO) method for office products and certain other inventories. If the FIFO method had been used for all inventories, cost would have been $173,488,000 and $155,831,000 higher than reported at December 31, 2001 and December 31, 2000, respectively. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist primarily of prepaid expenses, amounts due from vendors, income taxes receivable, and deferred income taxes. Goodwill Goodwill represents the excess of the purchase price paid over the fair value of the net assets acquired in connection with business acquisitions and is amortized over a period of 40 years (See Recently Issued Accounting Pronouncements). Other Assets Other assets consist primarily of a prepaid pension asset, an investment accounted for under the cost method, and certain internal-use information systems in progress. Property, Plant and Equipment Property, plant and equipment are stated at cost. Depreciation is determined principally on a straight-line basis over the following estimated useful life of each asset: buildings and improvements, 10 to 40 years; machinery and equipment, 5 to 15 years. Long-Lived Assets Long-lived assets, including goodwill, are periodically reviewed for impairment based on an assessment of future operations. The Company records impairment losses on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amount. Fair Value of Financial Instruments The carrying amount reflected in the consolidated balance sheets for cash, cash equivalents, accounts receivable and accounts payable approximate their respective fair values based on the short-term nature of these instruments. The fair value of interest rate swap agreements, included in other accrued expenses in the consolidated balance sheet, was approximately $31,570,000 at December 31, 2001. At December 31, 2001 and 2000, the carrying amount for variable rate long-term debt approximates fair market value since the interest rates on these instruments are reset periodically to current market rates. At December 31, 2001, the fair market value of fixed rate long-term debt was approximately $500,000,000 based primarily on quoted prices for these or similar instruments. 27 Derivative Instruments and Hedging Activities From time to time, the Company uses interest rate swap agreements to synthetically manage the interest rate characteristics of a portion of its outstanding debt and to limit the Company's exposure to rising interest rates. The Company designates at inception that interest rate swap agreements hedge risks associated with future variable interest payments and monitors each swap agreement to determine if it remains an effective hedge. The effectiveness of the derivative as a hedge is based on a high correlation between changes in the value of the underlying hedged item. Ineffectiveness related to the Company's derivative transactions is not material. The Company records amounts to be received or paid as a result of interest swap agreements as an adjustment to interest expense. All of the Company's interest rate swaps are designated as cash flow hedges. Gains or losses on terminations or redesignation of interest rate swap agreements are deferred and amortized as an adjustment to interest expense of the related debt instrument over the remaining term of the original contract life of the agreements. The Company does not enter into derivatives for speculative or trading purposes. Shipping and Handling Costs Shipping and handling costs are classified as selling, administrative and other expenses in the accompanying consolidated statements of income and totaled approximately $198,000,000, $200,000,000 and $180,000,000 in the years ended December 31, 2001, 2000, and 1999, respectively. Net Income Per Common Share Basic net income per common share is computed by dividing net income by the weighted average number of common shares outstanding during the year. The computation of diluted net income per common share includes the dilutive effect of stock options and non-vested restricted stock awards. Options to purchase 3,485,000, 4,325,000 and 4,265,000, shares of common stock at prices ranging from $23 to $35 per share were outstanding at December 31, 2001, 2000 and 1999 respectively, but were not included in the computation of diluted net income per common share because the options' exercise price was greater than the average market price of the common shares. The dilutive effect of options to purchase 748,312 shares of common stock at an average exercise price of approximately $7 per share issued in connection with a 1998 acquisition have been included in the computation of diluted net income per common share since the date of the acquisition. Recently Issued Accounting Pronouncements On January 1, 2001, the Company adopted Statements of Financial Accounting Standards Nos. 133, 137, and 138 (collectively "SFAS 133"), pertaining to the accounting for derivative instruments and hedging activities. SFAS 133 requires the Company to recognize all derivative instruments in the balance sheet at fair value. Upon adoption of SFAS 133, the Company recorded a charge to other comprehensive income of $6,226,000, net of income taxes, resulting from a cumulative effect of a change in accounting principle. Any subsequent gains or losses arising from these swaps have also been deferred in stockholders' equity (as a component of accumulated other comprehensive income (loss)). These deferred gains and losses are recognized in the Company's Consolidated Statements of Income in the period in which the related interest payments being hedged are recognized in expense. No significant amounts were reclassified from accumulated other comprehensive income (loss) to earnings during 2001. In June 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations." This statement eliminates the pooling of interests method of accounting for all business combinations initiated after June 30, 2001, and addresses the initial recognition and measurement of goodwill and other intangible assets acquired in a business combination. The Company had no significant business combinations after June 30, 2001. In June 2001, the FASB issued Statement of Financial Accounting Standards No. 142, "Goodwill and Other Intangible Assets." This statement changes the accounting for goodwill from an amortization method to an impairment only approach. Application of the non-amortization provisions of this statement is expected to result in an increase in net income of approximately $12,300,000 ($0.07 per share) in 2002. During fiscal 2002, the Company will perform impairment tests for goodwill as required by this Statement. If the results of these tests indicate any impairment of goodwill, the Company will record such amount as a cumulative effect of a change in accounting principle as of January 1, 2002. In August 2001, the FASB issued Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets". This statement supercedes Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of." The Company will adopt SFAS 144 as of January 1, 2002, but does not believe the statement will have a material effect on its consolidated financial statements. 28 2. Facility Consolidation, Impairment, and Other Charges Prior to December 31, 2001, the Company's management approved a plan to close and consolidate certain facilities, terminate certain employees, and exit certain other activities. The Company also determined certain assets were impaired. The income statement effects of the foregoing Company actions are hereafter collectively referred to as the "Unusual Charges." Following is a summary of the Unusual Charges and the related accruals for continuing liabilities associated with the Unusual Charges (in thousands):
Paid in Remaining Unusual Charges Total Non-cash 2001 Liability - ------------------------------------------------------------------------------------------------ Impairment charges $ 49,400 $(49,400) $ -- $ -- Facility consolidation expenses 17,900 (6,900) (300) 10,700 Severance expenses 6,700 -- (100) 6,600 Inventory-related exit costs 17,400 (17,400) -- -- Other 16,400 (15,800) -- 600 - ------------------------------------------------------------------------------------------------ $ 107,800 $(89,500) $ (400) $17,900 ================================================================================================
Impairment charges are primarily comprised of two separate technology projects: (1) an abandoned software system implementation of the Company's office products segment totaling approximately $30,000,000, and (2) an impaired technology-related venture of the Company's automotive segment totaling approximately $15,000,000 for which the Company projects the undiscounted cash flows to be less than the carrying amount of the related investment. Facility consolidation expenses relate to facility consolidations in each of the Company's business segments. The Company has identified certain distribution, branch and retail facilities to be closed prior to December 31, 2002. The Company has appropriately accrued the estimated lease obligation from the planned exit date through the end of the contractual lease term, net of any estimated sublease income. The Company's management does not believe the facility consolidations will result in any material decline in net sales as all such facilities in the process of closure will be served by other Company-operated facilities. Severance expenses include charges associated with payments owed to employees who have been or will be involuntarily terminated in connection with the Company's facility consolidation. All terminations will occur prior to December 31, 2002. Inventory-related exit costs relate to inventory considered by the Company to be impaired as a result of the facility consolidations described above and related inventory rationalization and optimization programs. All inventory-related exit costs have been classified as cost of goods sold in the accompanying consolidated statement of income. Other Unusual Charges have been classified as a component of selling, administrative and other expenses. 3. Credit Facilities Amounts outstanding under the Company's credit facilities consist of the following:
December 31 (In Thousands) 2001 2000 - -------------------------------------------------------------------------------- U.S. dollar denominated borrowings: Unsecured revolving line of credit, $200,000,000, Libor plus .55%, due December 2003 $ 7,000 $175,000 Unsecured 364 day line of credit, $200,000,000, Libor plus .55% -- 119,000 Unsecured revolving line of credit, $100,000,000, Banker's Acceptance rate, due February 2001 -- 98,249 Unsecured term notes: November 30, 2001, Series A Senior Notes, $250,000,000, 5.86% fixed, due November 30, 2008 250,000 -- November 30, 2001 Series B Senior Notes, $250,000,000, 6.23% fixed, due November 30, 2011 250,000 -- December 27, 1996, Libor plus .25%, due December 2001 -- 50,000 October 31, 1997, 5.98% fixed until October 2001, then the higher of 5.98% or Libor plus .25% -- 50,000 July 1, 1998, Libor plus .25%, due July 2005 50,000 50,000 October 1, 1998, Libor plus .25%, due October 2008 50,000 50,000 December 1, 1998, Libor plus .55%, due December 2003 231,367 231,367 Other borrowings 27,375 43,742 Canadian dollar denominated borrowings translated into U.S. dollars: Unsecured revolving lines of credit, CND$25,000,000, Banker's Acceptance rate plus .55%, due October 2002 8,041 8,540 Unsecured revolving lines of credit, CND$100,000,000, Banker's Acceptance rate plus .55%, due January 2004 141 6,770 Line of credit, CND$65,000,000, secured by accounts receivable, Banker's Acceptance rate plus .27%, cancelable on 30 days notice or due March 2003 18,846 39,365 - -------------------------------------------------------------------------------- 892,770 922,033 Current portion of long-term debt and other borrowings 57,190 151,452 - -------------------------------------------------------------------------------- $835,580 $770,581 ================================================================================
The principal amount of the Company's borrowings subject to variable rates before interest rate swap agreements totaled approximately $378,892,000 and $758,463,000 at December 31, 2001 and 2000, respectively. The weighted average interest rate on the Company's outstanding borrowings was approximately 5.30% and 6.70% at December 31, 2001 and 2000, respectively. 29 On November 30, 2001, the Company completed a $500,000,000 financing with a consortium of financial institutions and insurance companies ("the Notes"). The proceeds of the Notes were primarily used to repay certain variable rate borrowings. Certain borrowings contain covenants related to a maximum debt-to-equity ratio, a minimum fixed-charge coverage ratio, and certain limitations on additional borrowings. At December 31, 2001, the Company was in compliance with all such covenants. The Company guaranteed borrowings of affiliates totaling approximately $59,743,000 and $49,738,000 at December 31, 2001 and 2000, respectively. Total interest expense for all borrowings was $59,416,000 in 2001, $63,496,000 in 2000 and $41,487,000 in 1999. Approximate maturities under the Company's credit facilities are as follows (in thousands): 2002 $ 57,190 2003 231,973 2004 238 2005 53,055 2006 -- Subsequent to 2006 550,314 ------------------------------------------ $892,770 ==========================================
4. Shareholders' Equity The Company has a Shareholder Protection Rights Agreement which includes the distribution of rights to common shareholders under certain defined circumstances. The rights entitle the holder, upon occurrence of certain events, to purchase additional stock of the Company. The rights will be exercisable only if a person, group or company acquires 20% or more of the Company's common stock or commences a tender offer that would result in ownership of 20% or more of the common stock. The Company is entitled to redeem each right for one cent. 5. Leased Properties The Company leases land, buildings and equipment. Certain land and building leases have renewal options generally for periods ranging from two to ten years. In addition, certain properties occupied under operating leases contain normal purchase options. The Company also has an $85,000,000 construction and lease facility. Properties acquired by the lessor are constructed and then leased to the Company under operating lease agreements. The total amount advanced and outstanding under this facility at December 31, 2001 was approximately $62,000,000. Since the resulting leases are operating leases, no debt obligation is recorded on the Company's balance sheet. Future minimum payments, by year and in the aggregate, under the non-cancellable operating leases with initial or remaining terms of one year or more consisted of the following at December 31, 2001 (in thousands): 2002 $ 95,208 2003 71,908 2004 51,873 2005 37,356 2006 25,230 Subsequent to 2006 85,636 ------------------------------------------ $367,211 ==========================================
Rental expense for operating leases was $112,470,000 in 2001, $106,689,000 in 2000 and $100,546,000 in 1999. Certain operating leases expiring in 2008 contain residual value guarantee provisions and other guarantees in the event of a default. At December 31, 2001, the maximum amount the Company may be liable for under such guarantees is approximately $62,000,000. 6. Stock Options and Restricted Stock Awards The Company has elected to follow Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), and related Interpretations in accounting for its employee stock options because, as discussed below, the alternative fair value accounting provided for under FASB Statement No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"), requires use of option valuation models that were not developed for use in valuing employee stock options. Under APB 25, no compensation expense is recognized if the exercise price of the Company's employee stock options equals the market price of the underlying stock on the date of grant. In 1999, the Company authorized the grant of options of up to 9,000,000 shares of common stock. In accordance with stock option plans approved by shareholders, options are granted to key personnel for the purchase of the Company's stock at prices not less than the fair market value of the shares on the dates of grant. Most options may be exercised not earlier than twelve months nor later than ten years from the date of grant. Pro forma information regarding net income and earnings per share is required by SFAS 123 determined as if the Company had accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 2001, 2000 and 1999, respectively: risk-free interest rates of 5.0%, 5.9% and 5.5%; dividend yield of 3.8%, 5.0% and 3.5%; volatility factor of the expected market price of the Company's common stock of .05, .06 and .07, and an expected life of the option of 5 years, 6 years and 7 years. 30 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 the expected stock price volatility. Because the Company's employee 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 estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options. For purposes of pro forma disclosures, the estimated fair value of the options is amortized to expense over the options' vesting period. The Company's pro forma information follows (in thousands except per share amounts):
2001 2000 1999 - ---------------------------------------------------------------- Pro forma net income $296,376 $384,015 $374,801 Pro forma basic net income per common share $ 1.72 $ 2.19 $ 2.10 Pro forma diluted net income per common share $ 1.71 $ 2.19 $ 2.09
A summary of the Company's stock option activity and related information are as follows:
2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------- Weighted Weighted Weighted Average Average Average Shares Exercise Shares Exercise Shares Exercise (000's) Price (000's) Price (000's) Price - ------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of year 7,513 $ 26 5,388 $28 3,827 $26 Granted 30 33 2,412 21 2,046 32 Exercised (1,049) 14 (8) 22 (430) 23 Forfeited 338 32 (279) 27 (55) 33 ------- ------ ------ Outstanding at end of year 6,156 $ 28 7,513 $26 5,388 $28 ======= ====== ====== Exercisable at end of year 4,477 $ 29 3,760 $28 2,715 $27 ======= ====== ====== Weighted-average fair value of options granted during the year $ 2.04 $ 1.36 $ 3.78 ======= ====== ====== Shares available for future grants 6,910 6,602 8,735 ======= ====== ======
Exercise prices for options outstanding as of December 31, 2001 ranged from approximately $21 to $35, except for 198,936 options granted in connection with a 1998 acquisition for which the exercise price is approximately $18. The weighted-average remaining contractual life of those options is approximately 6 years. In 1999, the Company entered into restricted stock agreements with two officers which provide for the award of up to 150,000 and 75,000 shares, respectively, during the period 1999 through 2003 based on the Company achieving certain increases in net income per common share and stock price levels. Through December 31, 2001, the two officers have earned 15,000 and 7,500 shares, respectively. The Company recognizes compensation expense equal to the fair market value of the stock on the award date over the remaining vesting period which expires in 2009. 7. Income Taxes Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities are as follows:
(In Thousands) 2001 2000 - ---------------------------------------------------------------------- Deferred tax assets related to: Expenses not yet deducted for tax purposes $ 117,745 $ 69,271 Deferred tax liabilities related to: Employee and retiree benefits 89,937 80,989 Inventory 33,591 37,144 Property and equipment 22,077 28,480 Other 6,848 10,179 - ---------------------------------------------------------------------- 152,453 156,792 Net deferred tax liability 34,708 87,521 Current portion of deferred tax (asset) liability (26,277) 9,707 - ---------------------------------------------------------------------- Non-current deferred tax liability $ 60,985 $ 77,814 ======================================================================
31 The components of income tax expense are as follows:
(In Thousands) 2001 2000 1999 - ------------------------------------------------------------- Current: Federal $ 188,040 $ 223,452 $200,188 State 32,530 44,689 37,910 Deferred (21,704) (6,714) 12,347 - ------------------------------------------------------------- $ 198,866 $ 261,427 $250,445 =============================================================
The reasons for the difference between total tax expense and the amount computed by applying the statutory Federal income tax rate to income before income taxes are as follows:
(In Thousands) 2001 2000 1999 - ---------------------------------------------------------------------- Statutory rate applied to pre-tax income $173,605 $226,363 $219,824 Plus state income taxes, net of Federal tax benefit 19,064 28,322 24,641 Other 6,197 6,742 5,980 - ---------------------------------------------------------------------- $198,866 $261,427 $250,445 ======================================================================
8. Employee Benefit Plans The Company's noncontributory defined benefit pension plan covers substantially all of its employees. The benefits are based on an average of the employees' compensation during five of their last ten years of credited service. The Company's funding policy is to contribute amounts deductible for income tax purposes. Contributions are intended to provide not only for benefits attributed for service to date but also for those expected to be earned in the future. Pension benefits also include amounts related to a supplemental retirement plan.
Pension Benefits Other Postretirement Benefits (In Thousands) 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------- CHANGES IN BENEFIT OBLIGATION Net benefit obligation at beginning of year $ 573,170 $ 574,496 $ 10,537 $ 420 Service cost 19,935 18,859 177 88 Interest cost 44,525 41,363 816 672 Plan participants' contributions -- -- 2,395 1,793 Plan amendments 1,756 427 -- 7,134 Actuarial loss (gain) 44,242 (42,865) 1,588 3,940 Acquisitions/divestitures -- -- -- 22 Gross benefits paid (21,096) (19,110) (4,744) (3,532) - ----------------------------------------------------------------------------------------------------------------------------- Net benefit obligation at end of year $ 662,532 $ 573,170 $ 10,769 $ 10,537 ============================================================================================================================= CHANGES IN PLAN ASSETS Fair value of plan assets at beginning of year $ 702,282 $ 672,699 $ -- $ -- Actual return on plan assets 25,332 39,189 -- -- Employer contributions 640 9,504 2,349 1,739 Plan participants' contribution -- -- 2,395 1,793 Gross benefits paid (21,096) (19,110) (4,744) (3,532) - ----------------------------------------------------------------------------------------------------------------------------- Fair value of plan assets at end of year $ 707,158 $ 702,282 $ -- $ -- =============================================================================================================================
The following table sets forth the funded status of the plans and the amount recognized in the consolidated balance sheets at December 31.
Pension Benefits Other Postretirement Benefits (In Thousands) 2001 2000 2001 2000 - ----------------------------------------------------------------------------------------------------------------------------- Funded status at end of year $ 44,626 $ 129,112 $(10,769) $(10,537) Unrecognized net actuarial loss 148,128 57,582 2,839 1,326 Unrecognized prior service (income) cost (6,702) (11,328) 5,980 6,568 Unrecognized net transition obligation -- 260 -- -- - ----------------------------------------------------------------------------------------------------------------------------- Net amount recognized at end of year $ 186,052 $ 175,626 $ (1,950) $ (2,643) =============================================================================================================================
Net periodic pension (income) cost included the following components:
Pension Benefits Other Postretirement Benefits (In Thousands) 2001 2000 1999 2001 2000 1999 - ------------------------------------------------------------------------------------------------------------------------------ Service cost $ 19,935 $ 18,859 $ 21,564 $ 177 $ 88 $(118) Interest cost 44,525 41,363 40,332 816 672 11 Expected return on plan assets (72,167) (69,154) (64,146) -- -- -- Amortization of unrecognized transition obligation 260 260 260 -- -- -- Amortization of prior service (cost) income (2,871) (2,911) (2,840) 588 588 -- Amortization of actuarial loss (gain) 531 50 499 74 -- (237) - ------------------------------------------------------------------------------------------------------------------------------ Net periodic pension (income) cost $ (9,787) $(11,533) $ (4,331) $1,655 $1,348 $(344) ==============================================================================================================================
32 The assumptions used in accounting for the defined benefit plans and postretirement plan are as follows:
Pension Benefits Other Postretirement Benefits (In Thousands) 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------ Weighted-average discount rate 7.35% 7.63% 7.35% 7.63% Rate of increase in future compensation levels 4.15% 4.15% -- -- Expected long-term rate of return on assets 9.85% 10.00% -- -- Health care cost trend on covered charges -- -- 7.00% 7.50%
The expected long-term rate of return on assets for measuring the pension expense or income for the year ending December 31, 2002 will be approximately 9.45%. The effect of a one percentage point change in the 2001 assumed health care cost trend is as follows:
(In Thousands) Decrease Increase - ------------------------------------------------------------------------- Total service and interest cost components on net periodic postretirement health care benefit cost $(2,015) $3,072 Accumulated postretirement benefit obligation for health care benefits (202) 328
At December 31, 2001, the Company-sponsored pension plan held approximately 1,606,920 shares of common stock of the Company with a market value of approximately $58,974,000. Dividend payments received by the plan on Company stock totaled approximately $1,780,000 and $1,498,000 in 2001 and 2000, respectively. Fees paid during the year for services rendered by parties-in-interest were based on customary and reasonable rates for such services. The Company has a defined contribution plan which covers substantially all of its domestic employees. The Company's contributions are determined based on 20% of the first 6% of the covered employee's salary. Total plan expense was approximately $6,529,000 in 2001, $5,751,000 in 2000 and $5,165,000 in 1999. 9. Segment Data The segment data for the past five years presented on page 17 is an integral part of these financial statements. The Company's automotive segment distributes replacement parts (other than body parts) for substantially all makes and models of automobiles, trucks and buses. The Company's industrial segment distributes a wide variety of industrial bearings, mechanical and fluid power transmission equipment, including hydraulic and pneumatic products, material handling components, and related parts and supplies. The Company's office products segment distributes a wide variety of office products, computer supplies, office furniture and business electronics. The Company's electrical/electronic materials segment distributes a wide variety of electrical/electronic materials, including insulating and conductive materials for use in electronic and electrical apparatus. Inter-segment sales are not significant. Operating profit for each industry segment is calculated as net sales less operating expenses excluding general corporate expenses, interest expense, equity in income from investees, goodwill and other amortization and minority interests. Net property, plant and equipment by country relate directly to the Company's operations in the respective country. Corporate assets are principally cash, cash equivalents and headquarters' facilities and equipment. For the year ended December 31, 2001, Unusual Charges discussed in Note 2 totaling approximately $12,900,000 have been classified as a reduction to operating profit of the office products segment for management reporting purposes. In connection with a 2000 management reporting change, certain corporate expenses were reclassified to the automotive segment for all years presented. Additionally, for management purposes, net sales by segment excludes the effect of certain discounts, incentives and freight billed to customers. The line item "other" represents the net effect of the discounts, incentives and freight billed to customers which are reported as a component of net sales in the Company's consolidated statements of income. 33
EX-21 11 g74408ex21.txt SUBSIDIARIES OF THE COMPANY EXHIBIT 21 SUBSIDIARIES OF THE COMPANY
JURISDICTION OF NAME % OWNED INCORPORATION - ------------------------------------------------------------------------------------------------------------- BALKAMP 89.6% INDIANA EIS, INC. 100.0% GEORGIA L.O.C.O.A. LAMINATING COMPANY OF AMERICA 100.0% CALIFORNIA SCOTTSDALE TOOL & SUPPLY de MEXICO, S.A. de C.V. 100.0% GUADALAJARA, JALISCO - MX GENUINE PARTS HOLDINGS, LTD 100.0% ALBERTA, CANADA GENUINE PARTS COMPANY, LTD 100.0% ALBERTA, CANADA GENUINE PARTS FINANCE COMPANY 100.0% DELAWARE GPC MEXICO, S.A. de C.V. 100.0% PUEBLA, MEXICO GPC TRADING CORPORATION 100.0% VIRGIN ISLANDS JOHNSON INDUSTRIES 100.0% ATLANTA, GA MOTION INDUSTRIES 100.0% DELAWARE MOTION INDUSTRIES (CANADA), INC. 100.0% OTTAWA, ONTARIO S.P. RICHARDS 100.0% GEORGIA HORIZON USA DATA SUPPLY, INC. 100.0% NEVADA NORWESTRA SALES (1992), INC. 100.0% BRITISH COLUMBIA/CANADA UAP INC. 100.0% QUEBEC, CANADA GARANAT INC. 100.0% FEDERAL, CANADA UAPRO INC. 100.0% FEDERAL, CANADA UNITED AUTO PARTS (EASTERN) LTD. 100.0% ONTARIO, CANADA SERVICES FINANCIERS UAP INC. 100.0% QUEBEC, CANADA AUTOMOTEUR TERREBONNE LTEE 100.0% QUEBEC, CANADA CENTRE DI CULASSES DU QUEBEC INC. 100.0% QUEBEC, CANADA REUSINAGE KNIGHT INC. 100.0% FEDERAL, CANADA MANCO TRUCKING 100.0% ILLINOIS THE FLOWERS COMPANY 49.0% NORTH CAROLINA SULTAN PARTS HOUSE 51.0% GEORGIA 1ST CHOICE AUTO PARTS, INC. 51.0% GEORGIA SUMNER AUTO & TRUCK, INC. 51.0% GEORGIA AUTO PARTS OF DAYTONA, INC. 51.0% GEORGIA LODI AUTOMOTIVE SUPPLY, INC. 51.0% GEORGIA LAUDERDALE COUNTY SUPPLY, INC. 51.0% GEORGIA MARION AUTO SUPPLY, INC. 51.0% GEORGIA BAD AXE AUTO SUPPLY, INC. 51.0% GEORGIA RIO VERDE AUTO PARTS, INC. 51.0% GEORGIA AUTO PARTS OF JUPITER, INC. 51.0% GEORGIA EAST TENN AUTOMOTIVE SUPPLY, INC. 51.0% GEORGIA GAINESVILLE AUTO SUPPLY, INC. 51.0% GEORGIA SOUTHERN INDIANA PARTS, INC. 51.0% GEORGIA AUTO PARTS OF PALMDALE, INC. 51.0% GEORGIA FIRST CLASS AUTO PARTS, INC. 70.0% GEORGIA POLYCO CORPORATION 70.0% GEORGIA N. V. AUTOMOTIVE SUPPLY, INC. 51.0% GEORGIA PARTS OF HILLSVILLE, INC. 70.0% GEORGIA
SMITHFIELD AUTO PARTS, INC. 70.0% GEORGIA PRAIRIE HILLS CORP. 51.0% GEORGIA THE WILBUR GROUP, INC. 51.0% GEORGIA WEST VOLUSIA AUTO SUPPLY, INC. 51.0% GEORGIA AUTO & TRUCK PARTS OF SANTA FE, INC. 51.0% GEORGIA CEREAL CITY AUTO PARTS, INC. 51.0% GEORGIA AUTO PARTS OF CHANUTE INCORPORATED 51.0% GEORGIA SUGAR RIVER AUTO PARTS, INC. 51.0% GEORGIA THE PARTS HOUSE, INC. 51.0% GEORGIA CAROLINA PIEDMONT CORPORATION 51.0% GEORGIA PUEBLO AUTOMOTIVE, INC. 51.0% GEORGIA CRESWELL AUTO & TRUCK SUPPLY, INC. 51.0% GEORGIA CLINTON COUNTY AUTO SUPPLY, INC. 51.0% GEORGIA PARTS CONNECTION, INC. 70.0% GEORGIA OVERTON COUNTY PARTS CENTER, INC. 51.0% GEORGIA GRIMM MANAGEMENT RESOURCES, INC. 51.0% GEORGIA PARTS OF COLUMBUS, INC. 51.0% GEORGIA POTAMAC CREEK AUTO SUPPLY, INC 51.0% GEORGIA CASS CITY AUTO & TRUCK, INC. 70.0% GEORGIA WHITE COUNTY AUTO SUPPLY, INC. 51.0% GEORGIA KENT-KANGLEY AUTO PARTS, INC. 51.0% GEORGIA CAROLINA LOWCOUNTRY, INC. 70.0% GEORGIA LOUISVILLE AUTO SUPPLY, INC. 51.0% GEORGIA SUN VALLEY AUTO PARTS, INC. 51.0% GEORGIA TRI-MOUNT, INC. 70.0% GEORGIA SANILAC AUTO AND TRUCK PARTS, INC. 51.0% GEORGIA MIDLAND AUTO AND TRUCK SUPPLY, INC. 70.0% GEORGIA ROSEBURG AUTO & TRUCK SUPPLY, INC. 51.0% GEORGIA WEST MARION COUNTY AUTO PARTS AND ACCESSORIES, INC. 70.0% GEORGIA STANDARD PARTS COMPANY OF SOUTH MONROE 51.0% GEORGIA HERTFORD COUNTY AUTO PARTS, INC. 51.0% GEORGIA SERVICE FIRST AUTO, INC. 51.0% GEORGIA CASCADE AUTO & TRUCK SUPPLY, INC. 51.0% GEORGIA PARADISE AUTO PARTS, INC. 51.0% GEORGIA MIDDLETON AUTO & TRUCK PARTS, INC. 51.0% GEORGIA RHINELANDER AUTO PARTS, INC. 51.0% GEORGIA PRO CHOICE AUTOMOTIVE, INC. 51.0% GEORGIA FIRST PARTS OF MOUNT AIRY, INC. 70.0% GEORGIA
EX-23 12 g74408ex23.txt CONSENT OF INDEPENDENT AUDITORS Exhibit 23 -- Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of Genuine Parts Company of our report dated February 4, 2002, included in the 2001 Annual Report to Shareholders of Genuine Parts Company. Our audits included the financial statement schedule of Genuine Parts Company listed in Item 14(d). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statements of Genuine Parts Company listed below of our report dated February 4, 2002, with respect to the consolidated financial statements and schedule of Genuine Parts Company incorporated by reference or included in the Annual Report (Form 10-K) for the year ended December 31, 2001. - Registration Statement No. 33-62512 on Form S-8 pertaining to the 1992 Stock Option and Incentive Plan - Registration Statement No. 333-21969 on Form S-8 pertaining to the Directors' Deferred Compensation Plan - Registration Statement No. 333-61611 on Form S-8 pertaining to the Assumed Stock Options Under the Electrical Insulation Suppliers, Inc. 1993 Incentive Plan - Registration Statement No. 333-76639 on Form S-8 pertaining to the Genuine Parts Company 1999 Long-Term Incentive Plan /s/ Ernst and Young LLP Atlanta, Georgia March 6, 2002 -----END PRIVACY-ENHANCED MESSAGE-----