DELCO REMY INTERNATIONAL INC
SEPARATION AGREEMENT
<DOCUMENT>
<TYPE>EX-10.34
<SEQUENCE>4
<FILENAME>dex1034.txt
<DESCRIPTION>SEPARATION AGREEMENT
<TEXT>
<PAGE>

                                                                   Exhibit 10.34

                        SEPARATION AGREEMENT AND RELEASE
                        --------------------------------

     In recognition of the importance and value to Delco Remy International,
Inc. (the "Company") of your services, you and the Company agree as follows:

     If you are employed by the Company, and your employment is terminated
either (i) by the Company for any reason other than Cause (as defined herein) or
(ii) by you for Good Reason (as defined herein):

     1.   (A) On the date of termination, the Company shall pay Employee: (i)
          his accrued salary to the date of termination; (ii) a lump sum payment
          equal to six months' salary; (iii) and continue to pay Employee's
          salary for an additional twelve (12) months. In addition, Employee
          will be paid for the pro rata share of any unused vacation for that
          calendar year computed based upon the date of termination.

     (B) Company shall guarantee payment of the following bonuses:

          (i)  Pro-rata bonus for the current fiscal year, computed upon the
               date of termination, plus

          (ii) Employee's target bonus for a further period of eighteen (18)
               months, such target bonus being computed at 60% of his salary for
               eighteen (18) months on the date of termination. Six (6) months
               of this bonus will be paid in a lump sum payment on the date of
               termination, and the remaining bonus amount shall be equally
               divided and paid with the Employee's salary as set forth in
               paragraph 1 (A) above.

     Payments made pursuant to paragraph 1 (A) and (B) above will include
deductions for all local, state, and federal taxes, including FICA, which are
required by law to be withheld.

     (C) Company also agrees it shall provide to Employee the same group health
insurance coverage (if any and as such plan may be amended from time to time) as
is provided to other employees of Company holding the same or similar level
position as that last held by Employee for eighteen (18) months after
termination date or until new employment is secured, whichever is sooner. It is
understood and agreed that an eighteen (18) month period of time during which
health insurance is provided to Employee pursuant to this paragraph shall be
considered the continuation coverage period. Employee is entitled to an
additional eighteen (18) months coverage pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1986, as amended ("COBRA") at 102% of monthly
premium at the Employee's expense.

     (D) Company shall reimburse employee for executive relocation expenses to
Michigan, per existing relocation program.

     (E) Company will provide for executive outplacement services in Michigan
with Right Associates for a period of twelve (12) months from date of
termination.

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     (F) Options granted at date of hire will vest. The exercise period of such
options will be until the earlier of the sale of the Company or IPO, per Change
of Control Agreement.

     It is understood and agreed that the payments and benefits which will be
provided to Employee by Company pursuant to paragraph 1 are consideration
provided to Employee in addition to anything of value to which he is already
entitled. Except as provided above, Employee shall receive no other payments,
benefits or remuneration of any kind after date of termination. It is further
understood in this agreement that the Company has no right of "set off" of
payments owed to Employee, except for any monies owed to the Company by Employee
on the date of termination.

     As used herein, the following shall have the meanings set forth below:

"Cause" shall mean the occurrence or existence of any of the following with
respect to you, as determined in good faith by the Board of Directors of the
Company:

         (i)   conviction of a felony or conviction of any crime or offense
               lesser than a felony involving the property of the Company or an
               Affiliate of the Company, whether such conviction occurs before
               or after your termination of employment;

         (ii)  engaging in conduct that has caused demonstrable and material
               injury to the Company or an Affiliate of the Company, monetary or
               otherwise; however, an act or failure to act on employee's part
               shall not be considered "willful" if done, or omitted to be done
               by employee, in good faith and with reasonable belief that his
               actions or omission was in the best interest of the Company.

         (iii) gross dereliction of duties or other gross misconduct and the
               failure to cure such situation within thirty (30) days after
               receipt of notice thereof from the compensation committee of the
               Company, the Board of Directors of the Company, the Company or an
               Affiliate of the Company; or

         (iv)  the disclosure or use of confidential information other than in
               the normal and ordinary performance of services for the Company
               or any Affiliate of the Company.

"Good Reason" shall mean the occurrence or existence of any of the following
with respect to you:

         (i)   your base salary plus bonus at target is reduced from that
               currently in effect, or your other employee benefits are in the
               aggregate materially reduced from those currently in effect prior
               to the Change of Control (unless such reduction of employee
               benefits applies to employees of the Company generally); or

         (ii)  the assignment to you of any duties or responsibilities which are
               fundamentally inconsistent with your officer position with the
               Company which is not cured within thirty (30) days of receipt by
               the Company of written notice from you of such assignment of
               inconsistent duties or responsibilities.

         (iii) the Company fails to require a successor in interest to assume
               and to adopt this severance agreement.

<PAGE>


     2.   In consideration of Company's agreement to the provisions and payment
          of the amounts and other consideration set forth in paragraph 1 above,
          Employee (for himself and his personal representatives, heirs and
          assigns) RELEASES AND FOREVER DISCHARGES Company, DRI and their
          predecessors, successors, parent companies, subsidiaries, affiliates,
          release companies, principals and insurers (and their current or
          former officers, directors, employees, agents, shareholders,
          successors and assigns), and any and all employee benefit plans (and
          any fiduciary of such plans) sponsored by any of them, and all other
          persons, firms or corporations who might be claimed to be liable by
          Employee (collectively "Released Parties"), from any and all claims
          (including, but not limited to, claims for attorneys' fees), demands,
          losses, damages, agreements, actions promises or causes of action
          (known or unknown) which he now has or may later discover or which may
          hereafter exist against them, or any of them, connection with or
          arising directly or indirectly out of or in any way related to any and
          all matters, transactions, events or other things occurring prior to
          the date hereof, including all those arising out of or in connection
          with his former employment with Company or the cessation of his
          employment, or which occurred during the course of Employee's
          employment with Company or incidental thereto, or arising out of any
          other matter or claim of any kind whatsoever and whether pursuant to
          common law, statute, ordinance, regulation or otherwise and including
          claims of fraud or misrepresentation in the making, negotiation or
          execution of this Agreement. Claims or actions released herein
          include, but are not limited to, those based on allegations of
          wrongful discharge and/or breach of contract; those arising under the
          National Labor Relations Act; those alleging discrimination on the
          basis of race, color, sex, religion, national origin, age, disability
          or handicap under Title VII of the Civil Rights Act of 1964, the Age
          Discrimination in Employment Act of 1967, the Rehabilitation Act of
          1973, the Equal Pay Act of 1963, the Americans with Disabilities Act
          of 1990, the Civil Rights Act of 1991, the Family and Medical Leave
          Act, the Indiana Civil Rights Law (all as amended) or any other
          federal, state or local law, ordinance, rule or regulation; and those
          arising under the Employee Retirement Income Security Act of 1974, as
          amended. Employee agrees and understands that any claims he may have
          under the aforementioned statutes or any other federal, state or local
          law, ordinance, rule or regulation; and those arising under the
          Employee Retirement Income Security Act of 1974, as amended. Employee
          agrees and understands that any claims he may have under the
          aforementioned statutes or any other federal, state or local law,
          ordinance, rule or regulation are effectively waived by this
          Agreement. No rights or claims arising after the execution of this
          Agreement are waived hereby.

     3.   In consideration of the promises and covenants contained herein from
          Employee to DRA/DRI, DRA/DRI, for itself, its predecessors,
          successors, parent companies, subsidiaries, and affiliates (and their
          current or former offices, directors, employees, agents, shareholders,
          successors, and assigns) hereby RELEASES AND FOREVER DISCHARGES
          Employee from any and all any and all claims (including, but not
          limited to, claims for attorneys' fees), demands, losses, damages,
          agreements, actions, promises or causes of action (known or unknown)
          arising out of any acts actually disclosed by Employee to DRA/DRI
          prior to the effective date of this Agreement. The Parties understand
          and agree that no rights or claims arising after the execution of this
          Agreement are waived hereby. Employee agrees to take any action
          necessary to carry out the purpose and intent of this Agreement.
          Employee further agrees that he will be solely


<PAGE>


          and individually responsible for compensating any attorney(s) for the
          services they have rendered to or for him in connection with this
          settlement or any other matter whatsoever.

     4.   In further consideration of Company's agreement to the provisions and
          payment of the amounts and other consideration set forth in paragraph
          1 above, Employee agrees that he (i) will never assert a legal or
          equitable action in any state or federal court against Company, DRI,
          and/or any of their subsidiaries, affiliates, parent companies,
          officers, directors, shareholders or any other person named as
          Released Parties, including successors and assigns, with respect to
          the matters herein resolved and settled; and (ii) hereby waives all
          future rights to consideration for employment with Company, DRI and
          any of their subsidiaries, affiliates, parent companies or other
          released entities. Employee further agrees that if he hereafter
          institutes an action against any of the released entities or persons
          concerning any of the claims he has released in this Agreement, except
          for claims arising under ADEA, he will repay to Company the amounts
          and value of benefits described in paragraph 1 above, with legal
          interest, and will pay the persons or entities for all costs and
          expenses, including attorneys' fees, incurred by them in defending
          against such claims.

     5.   Employee agrees that he shall not disclose to any third party any
          "trade secrets" or other confidential information relative to the
          business of Company, DRI or any of their respective subsidiaries or
          affiliates. The term "trade secrets," as used herein, means
          information, including, without limitation, a formula, pattern,
          compilation, strategic planning, program, device, method, technique or
          process, that derives independent economic value, actual or potential,
          from not being generally known, and not being readily ascertainable by
          proper means, by other persons who can obtain economic value from its
          disclosure or use. This paragraph shall not prevent Employee from
          using his general knowledge and expertise in any and all future
          employment or other business activities. Employee affirms that, on or
          before the date of this Agreement, he will surrender to Company any
          and all documents, records, and/or property in his possession or
          control that belong to Company, DRI or any of their respective
          subsidiaries or affiliates.

          Employee agrees that if he fails to keep confidential "trade secrets"
          or other confidential information as specified above, Company, DRI
          and/or their respective affiliates shall have the right and remedy to
          have such provisions specifically enforced by any court having equity
          jurisdiction and that any breach will cause injury to Company, DRI and
          their respective affiliates, among other legal and equitable remedies,
          which will upon judgment entitle Company, DRI and their respective
          affiliates to recover any monies paid hereunder after such breach has
          occurred. Further, Employee's agreements herein will be independent of
          each other and will be severally enforceable by Company, DRI or any of
          their respective affiliates. If any provision of this paragraph 5 is
          determined to be unenforceable by reach of the breadth of scope or
          otherwise, it is Employee's, DRI's and Company's intention that such
          determination will not bar in any way or affect Company's, DRI's or
          their respective affiliates' rights to relief concerning any other
          provision or in any other jurisdiction.

     6.   It is understood and agreed that Company and DRI have denied and
          continue to deny that they are liable to Employee on any theory, and
          that nothing in this Agreement, including,


<PAGE>

          but not limited to, the payment of the amounts set forth in paragraph
          1 hereof by Company, constitutes an admission by Company or DRI of any
          fact, damage or liability to Employee on any theory. It is expressly
          understood and agreed that this Agreement was entered into by the
          parties solely to avoid the burden and expense of litigation.

     7.   Employee agrees that neither he nor any attorney, agent or
          representative of his will discuss or in any fashion disclose to any
          person, other than his spouse, attorney and accountant who will each
          be informed of and must agree to be bound by this confidentiality
          clause, any of the terms of this Agreement or the circumstances
          surrounding its making, unless required to do so by law. Employee
          agrees that in the event that he, his spouse or any attorney,
          accountant, agent or representative, acting on his behalf, discloses
          any information to anyone in breach or violation of this paragraph, he
          will repay to Company, with legal interest, the amounts and value of
          benefits paid by it pursuant to paragraph 1 of this Agreement.
          Notwithstanding anything to the contrary herein, Employee agrees to
          immediately cease all communication with customers of DRI, Company
          and/or any other respective affiliates or subsidiaries (collectively,
          the "DRI Entities"), in each case regarding such DRI Entities and/or
          their businesses or business relationships with or affecting such
          customers; however, Delco approves communication for future employment
          purposes.

     Employee also agrees that he shall not take any action or make any public
statement in degradation of the good name or business interest of Company, DRI
or their respective subsidiaries and affiliates. The Company agrees it will not
authorize any public statement of degradation of employee's good name.

     8.   Employee represents and warrants that in the making, negotiation and
          execution of this Agreement, he is not relying upon any
          representation, statement or assertion of fact or opinion made by any
          agent, attorney, employee or representative of the persons, parties or
          corporations being released herein, and he hereby waives any rights to
          rely upon all prior agreements and/or oral representations made by any
          agent, attorney, employee or representative of such persons, parties
          or corporations.

     9.   The parties stipulate and agree that all clauses and provisions of
          this Agreement are distinct and severable, and Employee understands,
          and it is his intent, that in the event this Agreement is ever held to
          be invalid or unenforceable (in whole or in part) as to any particular
          type of claim or as to any particular circumstances, it shall remain
          fully valid and enforceable as to all other claims and circumstances.
          As to any actions or claims that would not be released because of the
          invalidity or unenforceability of this Agreement, Employee understands
          that if he asserts or brings any such actions or claims against
          Company, DRI or any of the other entities or persons released herein
          he must repay to Company the amounts paid to him and the value of the
          benefits provided to him pursuant to paragraph 1 above, with legal
          interest, and that the return to Company of the amounts paid to him
          and the value of the benefits provided to him pursuant to paragraph 1
          above, with legal interest, is a prerequisite to asserting or bringing
          any such actions or claims.

     10.  This Agreement contains the entire agreement of the parties and
          supersedes all previous negotiations, whether written or oral. This
          Agreement may be changed only by an instrument in writing signed by
          the parties.

<PAGE>

     11.  This Agreement shall inure to the benefit of, may be enforced by, and
          shall be binding on the parties and their heirs, executors,
          administrators, personal representatives, assigns and successors in
          interest.

     12.  In the event of any dispute about this Agreement, the laws of the
          State of Indiana shall govern the validity, performance, enforcement,
          and all other aspects of this Agreement without regard to any
          conflicts of laws provisions. Any suit or other proceeding shall be
          brought only in Madison or Marion Counties, Indiana and each party
          agrees to submit to personal jurisdiction in the State of Indiana.

     13.  Employee represents that he has read this Agreement; fully understands
          each and every provision of this Agreement; and has voluntarily, on
          his own accord, executed this Agreement. Employee acknowledges that in
          entering into this Agreement in return for Company's payments and
          other consideration set forth in paragraph 1 above, he is giving up
          possible future administrative and/or legal claims. EMPLOYEE ALSO
          ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY COMPANY AND DRI TO CONSULT AN
          ATTORNEY BEFORE HE EXECUTES THIS AGREEMENT.

     IN WITNESS WHEREOF, the parties have duly executed this Agreement on the
date set forth below.


                              Employee:  /s/ Rajesh K. Shah
                                         ---------------------------------------

                              Date:    3/18/2002
                                       -----------------------------------------

                              Delco Remy International, Inc.

                              By:      /s/ Roderick English
                                       -----------------------------------------

                              Title:   Senior Vice President Human Resources

                              Date:    3/18/2002
                                       -----------------------------------------




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</DOCUMENT>
