<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended June 30, 1999.
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Transition Period From __________ to ________.
Commission file number 333-50239
ACCURIDE CORPORATION
--------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 61-1109077
- -------- ----------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2315 ADAMS LANE
HENDERSON, KY 42420
- --------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (270) 826-5000
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
----- -----
There were 24,884 common shares outstanding as of June 30, 1999.
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ACCURIDE CORPORATION
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1999
(unaudited) and December 31, 1998 3
Consolidated Statements of Income for Six Months
Ended June 30, 1999 and 1998 (Unaudited) 4
Consolidated Statement of Stockholders' Equity (Deficiency)
for the Six Months Ended June 30, 1999 (Unaudited) 5
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 (Unaudited) 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 21
Item 2. Changes in Securities 21
Item 3. Defaults Upon Senior Securities 21
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 23
</TABLE>
2
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ITEM I. FINANCIAL STATEMENTS
ACCURIDE CORPORATION
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
ASSETS 1999 1998
(UNAUDITED)
------------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 22,601 $ 3,471
Customer receivables, net of allowance for doubtful accounts of $496 and $1,008 69,867 52,287
Other receivables 12,567 8,372
Inventories, net 44,562 36,980
Supplies 7,898 7,187
Prepaid expenses 791 139
Income taxes receivable 104 458
Deferred income taxes 793 611
--------- ---------
Total current assets 159,183 109,505
PROPERTY, PLANT AND EQUIPMENT, NET 200,088 159,826
OTHER ASSETS:
Goodwill, net of accumulated amortization of $32,880 and $30,942 135,103 83,317
Investment in affiliates 2,763 25,855
Deferred financing costs, net of accumulated amortization of $2,538 and $1,634 12,397 12,609
Deferred income taxes 3,287
Other 11,435 10,526
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TOTAL $ 520,969 $ 404,925
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
CURRENT LIABILITIES:
Accounts payable $ 41,640 $ 27,008
Current portion of long-term debt 2,350 1,350
Short term notes payable 7,500 3,911
Accrued payroll and compensation 8,552 8,149
Accrued interest payable 11,533 9,807
Accrued and other liabilities 10,168 6,606
--------- ---------
Total current liabilities 81,743 56,831
LONG-TERM DEBT, less current portion 455,355 387,939
DEFERRED INCOME TAXES 3,179
OTHER LIABILITIES 16,986 12,021
MINORITY INTEREST 6,321 6,230
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.01 par value; 5,000 shares authorized and unissued Common
stock and additional paid in capital, $.01 par value; 45,000 shares
authorized, 24,884 and 24,768 shares issued and outstanding in 1999 and 1998 24,738 24,158
Stock subscriptions receivable (1,624) (1,644)
Retained earnings (deficit) (65,729) (80,610)
--------- ---------
Total stockholders' equity (deficiency) (42,615) (58,096)
--------- ---------
TOTAL $ 520,969 $ 404,925
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
3
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ACCURIDE CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
-------------------------- --------------------------
1999 1998 1999 1998
<S> <C> <C> <C>
NET SALES $ 136,052 $ 97,675 $ 247,585 $ 191,583
COST OF GOODS SOLD 104,826 74,447 190,267 148,199
--------- --------- --------- ---------
GROSS PROFIT 31,226 23,228 57,318 43,384
OPERATING:
Selling, general and administrative 7,695 5,799 14,174 11,153
Start-up costs - 1,665 - 2,811
Management retention bonuses - 870 - 1,680
Recapitalization professional fees - - - 2,240
--------- --------- --------- ---------
INCOME FROM OPERATIONS 23,531 14,894 43,144 25,500
OTHER INCOME (EXPENSE):
Interest income 165 203 230 343
Interest (expense) (10,005) (8,672) (18,961) (15,375)
Equity in earnings (losses) of affiliates 11 2,155 2,326 (545)
Other (expense), net (556) 180 (924) (421)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES AND MINORITY INTEREST 13,146 8,760 25,815 9,502
INCOME TAX PROVISION 5,522 3,482 10,843 3,829
MINORITY INTEREST 67 481 91 395
--------- --------- --------- ---------
NET INCOME $ 7,557 $ 4,797 $ 14,881 $ 5,278
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
4
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ACCURIDE CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIENCY)
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON
STOCK AND
ADDITIONAL STOCK RETAINED
PAID IN SUBSCRIPTIONS EARNINGS
CAPITAL RECEIVABLE (DEFICIT) TOTAL
-----------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1998 $ 24,158 $ (1,644) $ (80,610) $ (58,096)
Net income (Unaudited) 14,881 14,881
Issuance of shares (Unaudited) 580 (580) -
Proceeds from stock subscriptions receviable (Unaudited) - 600 - 600
-------- -------- --------- ---------
BALANCE AT June 30, 1999 (Unaudited) $ 24,738 $ (1,624) $ (65,729) $ (42,615)
-------- -------- --------- ---------
-------- -------- --------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
5
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ACCURIDE CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30
------------------------------
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 14,881 $ 5,278
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation 11,120 9,947
Amortization 3,016 2,217
Bonuses payable by a principal stockholder - 1,680
Deferred income taxes 6,284 (901)
Equity in (earnings) losses of affiliates (2,326) 545
Minority interest 91 395
Changesin certain assets and liabilities (Net of effects from Purchase of
AKW L.P.):
Receivables (766) (10,184)
Inventories and supplies (937) (1,681)
Prepaid expenses and other assets (997) (3,028)
Accounts payable 8,576 3,966
Accrued and other liabilities 37 7,736
--------- ---------
Net cash provided by operating activities 38,979 15,970
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (21,364) (21,675)
Capitalized interest - (146)
Payment for purchase of AKW L.P. (70,591)
Net cash distribution from AKW L.P. 265 407
Other (18) -
--------- ---------
Net cash used in investing activities (91,708) (21,414)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of short term notes payable 4,589 3,000
Principal payments on short-term notes payable (1,340)
Net increase(decrease) in revolving line of credit (32,638) 27,750
Proceeds from issuance of long-term debt 100,000 333,918
Deferred financing costs (692) (13,898)
Issuance of shares - 108,000
Proceeds from stock subscriptions receivable 600 1,009
Redemption of shares - (454,315)
--------- ---------
Net cash provided by financing activities 71,859 4,124
Increase(decrease) in cash and cash equivalents 19,130 (1,320)
Cash and cash equivalents, beginning of period 3,471 7,418
--------- ---------
Cash and cash equivalents, end of period $ 22,601 $ 6,098
--------- ---------
--------- ---------
</TABLE>
See notes to unaudited consolidated financial statements.
6
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ACCURIDE CORPORATION
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT SHARE DATA)
AS OF JUNE 30, 1999 AND FOR THE SIX MONTHS ENDED JUNE 30, 1999 AND 1998
- -------------------------------------------------------------------------------
Note 1 - BASIS OF PRESENTATION - The accompanying unaudited consolidated
financial statements have been prepared in accordance with generally accepted
accounting principles, except that the unaudited consolidated financial
statements do not include all of the information and footnotes required by
generally accepted accounting principles for complete financial statements.
However, in the opinion of Accuride Corporation (the "Company"), all
adjustments (consisting of normal recurring accruals) considered necessary to
present fairly the consolidated financial statements have been included.
The results of operations for the six months ended June 30, 1999 are not
necessarily indicative of the results to be expected for the year ending
December 31, 1999. The unaudited consolidated financial statements and notes
thereto should be read in conjunction with the audited financial statements
and notes thereto disclosed in the Company's Annual Report on Form 10-K for
the year ended December 31, 1998.
Note 2- AKW ACQUISITION - On April 1, 1999, the Company acquired Kaiser's 50%
interest in AKW, pursuant to the terms of a Purchase Agreement by and among
the Company, Kaiser and Accuride Ventures, Inc., a wholly owned subsidiary of
Accuride. In connection with the acquisition, AKW and Kaiser amended and
restated an existing lease agreement pursuant to which AKW leases certain
property from Kaiser. AKW was formed in 1997 as a 50-50 joint venture between
Kaiser and Accuride to design, manufacture, and sell heavy-duty aluminum
wheels. The acquisition gives the Company, through its wholly owned
subsidiary, 100% control of AKW. Total consideration paid to Kaiser for the
50% interest was approximately $70 million.
The acquisition has been accounted for by the purchase method of accounting.
Under purchase accounting, the total purchase price has been allocated to the
tangible and intangible assets and liabilities of AKW based upon their
respective fair values as of the date of the acquisition based upon
valuations and other studies. A preliminary allocation of the purchase price
has been made to major categories of assets and liabilities based on
available information. The actual allocation of purchase price and the
resulting effect on income from operations may differ significantly from the
amounts recorded by the Company. Goodwill recorded by the Company in
connection with the acquisition is being amortized on the straight-line
method over 40 years.
The following unaudited pro forma financial data illustrates the estimated
effects as if the acquisition had been completed as of the beginning of the
periods presented, after including the impact of certain adjustments, such as
goodwill amortization, depreciation, interest expense, the elimination of
equity in earnings of affiliates arising from the Company's 50% interest in
AKW owned prior to the acquisition, and the related income tax effects.
<TABLE>
<CAPTION>
JUNE 30,
-----------------------------
1999 1998
---- ----
<S> <C> <C>
Net Sales $ 271,531 $ 233,688
Net Income $ 15,182 $ 3,336
</TABLE>
Excluding the $6,800 AKW Product Recall, the unaudited pro forma net income
for the six months ended June 30, 1998 would have been $7,008. The pro forma
results are not necessarily indicative of the actual results if the
transactions had been in effect for the entire period presented. In addition,
they are not intended
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to be a projection of future results and do not reflect, among other things,
any synergies that might have been achieved from combined operations.
Note 3 - INVENTORIES - Inventories were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1999 1998
---------- ------------
<S> <C> <C>
Raw materials $ 7,982 $ 8,920
Work in process 8,834 7,757
Finished manufactured goods 26,800 20,060
LIFO adjustment 2,177 1,122
Other (1,231) (879)
-------- --------
Inventories, net $ 44,562 $ 36,980
-------- --------
-------- --------
</TABLE>
Note 4 - LABOR RELATIONS -The Company's prior contract with the UAW covering
employees at the Henderson Facility expired in February 1998 and the Company
was not able to negotiate a mutually acceptable agreement with the UAW.
Therefore, a strike occurred at the Henderson Facility on February 20, 1998.
On March 31, 1998, the Company began an indefinite lock-out. The members of
the UAW have rejected all of the Company's offers for a new contract. The
Company is continuing to operate with its salaried employees and contractors.
Currently, there is, and the Company believes that there will be, no supply
disruption to the Company's customer base; however, there can be no assurance
to that effect.
Note 5 - SUPPLEMENTAL CASH FLOW DISCLOSURE - During the six months ended June
30, 1999 and 1998, the Company paid $16,331 and $4,566 for interest and
$4,205 and $6,312 for income taxes, respectively. Non-cash transactions
resulting from the issuance of common stock and the related stock
subscriptions receivable of $1,539 and $2,511 occurred during the six months
ended June 30, 1999 and 1998, respectively. Effective January 21, 1998 the
Company entered into a stock subscription and redemption agreement (the
"Redemption") with Phelps Dodge Corporation and Hubcap Acquisition L.L.C.
("Hubcap Acquisition"), wherein Hubcab Acquisition acquired 90% of the common
shares of the Company. Non-cash transactions that resulted from the
Redemption in 1998 included the increase in stockholders' equity and the net
deferred tax asset in the amount of $18,480 from the increase in the tax
basis of assets.
Note 6 - NEW ACCOUNTING PRONOUNCEMENT - Statement of Financial Standards No.
133 ("SFAS 133"), "ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND HEDGING
ACTIVITIES," was issued in June 1998 and was amended by Statement of
Financial Standards No. 137 ("SFAS 137"), "ACCOUNTING FOR DERIVATIVE
INSTRUMENTS AND HEDGING ACTIVITIES-DEFERRAL OF THE EFFECTIVE DATE OF SFAS
133." SFAS 133, as amended by SFAS 137, is effective for all fiscal quarters
of all fiscal years beginning after June 15, 2000. This statement establishes
accounting and reporting standards for derivative instruments and for hedging
activities. It requires that an entity recognize all derivatives as either
assets or liabilities in the statement of financial condition and measure
those instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as a fair value hedge, a cash flow hedge, or a
hedge of a foreign currency exposure. The accounting for changes in the fair
value of a derivative (that is, gains and losses) depends on the intended use
of the derivative and the resulting designation. Management has not yet fully
evaluated the effect of the new standard on the financial statements.
Note 7 - FOREIGN CURRENCY - As of January 1, 1999, the Mexican economy was
determined not to be highly inflationary. Accordingly, management has
reviewed the primary economic environment in which Accuride de Mexico, S.A.
de C.V. ("AdM") operates and determined AdM's functional currency to be the
U.S. dollar.
8
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Note 8- SEGMENT REPORTING - The Company operates in one business segment -
the design, manufacture and distribution of wheels and rims for trucks,
trailers, and other vehicles.
GEOGRAPHIC SEGMENTS - The Company has foreign operations in the United
States, Canada, and Mexico, for the three and six months ended June 30, 1999
and 1998, respectively, which are summarized below. Sales between geographic
areas are made at negotiated selling prices.
<TABLE>
<CAPTION>
United
THREE MONTHS ENDED JUNE 30, 1999 States Canada Mexico Eliminations Combined
<S> <C> <C> <C> <C> <C>
Net Sales:
Sales to unaffiliated customers-Domestic $ 123,061 $ 4,319 $ 5,806 $ - $ 133,186
Sales to unaffiliated customers-Export 811 - 2,055 - 2,866
Sales among geographic segments 9,180 35,546 2,505 (47,231) -
--------------------------------------------------------------------
Total $ 133,052 $ 39,865 $ 10,366 $ (47,231) $ 136,052
--------------------------------------------------------------------
--------------------------------------------------------------------
Income from operations: $ 20,102 $ 2,399 $ 1,030 $ - $ 23,531
THREE MONTHS ENDED JUNE 30, 1998
Net Sales:
Sales to unaffiliated customers-Domestic $ 83,096 $ 4,434 $ 7,964 $ - $ 95,494
Sales to unaffiliated customers-Export 593 - 1,588 2,181
Sales among geographic segments 2,033 35,682 443 (38,158) -
--------------------------------------------------------------------
Total $ 85,722 $ 40,116 $ 9,995 $ (38,158) $ 97,675
--------------------------------------------------------------------
--------------------------------------------------------------------
Income from operations: $ 9,531 $ 4,080 $ 1,283 $ - $ 14,894
SIX MONTHS ENDED JUNE 30, 1999
Net Sales:
Sales to unaffiliated customers-Domestic $ 224,184 $ 8,219 $ 10,325 $ - $ 242,728
Sales to unaffiliated customers-Export 1,201 30 3,626 - 4,857
Sales among geographic segments 17,342 71,145 5,011 (93,498) -
--------------------------------------------------------------------
Total $ 242,727 $ 79,394 $ 18,962 $ (93,498) $ 247,585
--------------------------------------------------------------------
--------------------------------------------------------------------
Income from operations: $ 36,378 $ 4,640 $ 2,126 $ - $ 43,144
Assets:
Identifiable assets $ 366,622 $ 112,845 $ 52,776 $ (14,037) $ 518,206
Investments in affiliates 2,763 - - 2,763
--------------------------------------------------------------------
Total $ 369,385 $ 112,845 $ 52,776 $ (14,037) $ 520,969
--------------------------------------------------------------------
--------------------------------------------------------------------
SIX MONTHS ENDED JUNE 30, 1998
Net Sales:
Sales to unaffiliated customers-Domestic $ 156,073 $ 16,341 $ 14,583 $ - $ 186,997
Sales to unaffiliated customers-Export 1,009 175 3,402 - 4,586
Sales among geographic segments 4,324 65,740 944 (71,008) -
--------------------------------------------------------------------
Total $ 161,406 $ 82,256 $ 18,929 $ (71,008) $ 191,583
--------------------------------------------------------------------
--------------------------------------------------------------------
Income from operations: $ 15,124 $ 8,558 $ 1,818 $ - $ 25,500
Assets:
Identifiable assets $ 239,503 $ 111,895 $ 35,723 $ (14,037) $ 373,084
Investments in affiliates 23,813 23,813
--------------------------------------------------------------------
Total $ 263,316 $ 111,895 $ 35,723 $ (14,037) $ 396,897
--------------------------------------------------------------------
--------------------------------------------------------------------
</TABLE>
9
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Sales to three customers exceeded 10% of total net sales for the three
months and six months ended June 30, as follows:
<TABLE>
<CAPTION>
Three months ended June 30,
1999 % of 1998 % of
Amount Sales Amount Sales
<S> <C> <C> <C> <C>
Customer one $ 23,045 16.9 % $ 16,771 17.2 %
Customer two 23,780 17.5 % 10,494 10.7 %
Customer three 18,432 13.5 % 12,561 12.9 %
-------- ------ -------- ------
$ 65,257 47.9 % $ 39,826 40.8 %
-------- ------ -------- ------
-------- ------ -------- ------
Six months ended June 30,
Customer one $ 50,839 20.5 % $ 29,087 15.2 %
Customer two 36,706 14.8 % 18,830 9.8 %
Customer three 30,142 12.2 % 24,731 12.9 %
-------- ------ -------- ------
$117,687 47.5 % $ 72,648 37.9 %
-------- ------ -------- ------
-------- ------ -------- ------
</TABLE>
Each geographic segment made sales to all three major customers in the three
and six months ended June 30, 1999 and 1998.
Note 9 - SUBSEQUENT EVENTS - On July 16, 1999, the Company acquired from
Industria Automotriz S.A. de C.V. ("IaSa") the remaining 49% minority
interest of AdM, pursuant to the terms of a Purchase Agreement by and among
the Company and the other parties listed thereto. The purchase price of the
acquisition was $7,300.
10
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS. The following discussion should be read in conjunction
with the consolidated financial statements and notes included in Item 1 of
Part I of this form. Except for the historical information contained herein,
this report on Form 10-Q contains forward-looking statements that involve
risks and uncertainties. The Company's actual results may differ materially
from those indicated by such forward-looking statements.
AKW ACQUISITION
On April 1, 1999, the Company acquired Kaiser Aluminum & Chemical
Corporation's ("Kaiser") 50% interest in AKW L.P., a Delaware limited
partnership ("AKW"), pursuant to the terms of a Purchase Agreement by and
among the Company, Kaiser and Accuride Ventures, Inc., a wholly owned
subsidiary of Accuride. In connection with the acquisition, AKW and Kaiser
amended and restated an existing lease agreement pursuant to which AKW leases
certain property from Kaiser. AKW was formed in 1997 as a 50-50 joint venture
between Accuride and Kaiser to design, manufacture, and sell heavy-duty
aluminum wheels. The acquisition gives the Company 100% ownership of AKW.
Total consideration paid to Kaiser for the 50% interest was approximately $70
million. The Company initially financed the acquisition through the Company's
$140 million senior secured revolving credit facility, which was subsequently
replaced by permanent financing through the Amended and Restated Credit
Facility described below in "Capital Resources and Liquidity." The
acquisition has been accounted for by the purchase method of accounting.
Goodwill recorded by the Company in connection with the acquisition is being
amortized on the straight-line method over 40 years.
RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1999 COMPARED TO THE THREE MONTHS ENDED JUNE 30,
1998.
NET SALES. Net sales increased by $38.4 million, or 39.3%, for the three
months ended June 30, 1999 to $136.1 million, compared to $97.7 million for
the three months ended June 30, 1998. The increase in net sales is primarily
due to (i) including total sales from AKW with consolidated sales effective
April 1, 1999, the date of the acquisition, (ii) new products sold at the
Columbia, Tennessee facility and (iii) an increase in industry volumes. Sales
from AKW for the second quarter 1999 were $24.5 million compared to $0 for
the second quarter 1998 as AKW was previously accounted for on the equity
method as "equity in earnings of affiliates" and was not consolidated prior
to the acquisition. Sales of products from the new Columbia, Tennessee
facility, which started operations in the third quarter of 1998, were $6.4
million during the second quarter of 1999. Excluding the $24.5 million in
sales at AKW and $6.4 million sales from the Columbia, Tennessee facility,
net sales would have increased by $7.5 million, or 7.7%, for the three months
ended June 30, 1999 to $105.2 million, compared to $97.7 million for the
three months ended June 30, 1998.
GROSS PROFIT. Gross profit increased by $8.0 million, or 34.5% to $31.2
million for the three months ended June 30, 1999 from $23.2 million for the
three months ended June 30, 1998. The $8.0 million increase in gross profit
was primarily due to $6.3 million gross profit at AKW, which has been
accounted for on a consolidated basis effective with the acquisition on April
1, 1999, and an increase in gross profit at the Henderson, Kentucky facility
as a result of increased volumes and reducing the costs associated with the
labor strike. Partially offsetting this increase were lower gross profits at
AdM and the Columbia, Tennessee facility. Gross profit as a percentage of net
sales decreased to 23.0% for the three months ended June 30, 1999 from 23.8%
for the three months ended June 30, 1998. The decrease in gross profit as a
percentage of sales is due to lower margins at AdM and the Columbia,
Tennessee facility. Excluding the sales and gross profit from AKW of $6.3
million and the gross loss at the Columbia facility of $0.4 million, gross
profit
11
<PAGE>
would have increased by $2.1 million, or 9.1% to $25.3 million for the three
months ended June 30, 1999 from $23.2 million for the three months ended June
30, 1998.
OPERATING EXPENSES. Operating expenses decreased by $0.6 million, or 7.2%, to
$7.7 million for the three months ended June 30, 1999 from $8.3 million for
the three months ended June 30, 1998. This decrease was primarily due to one
time operating expenses incurred during the second quarter of 1998 for
start-up costs of $1.7 million relating to the new Columbia, Tennessee
facility, and the management retention bonuses of $0.9 million paid by Phelps
Dodge Corporation, a previous principal stockholder ("Phelps Dodge") in
conjunction with the Company's recapitalization. Excluding the expenses
recorded for the three months ended June 30, 1998 start-up costs and
management retention bonuses, operating expenses increased by $1.9 million to
$7.7 million for the three months ended June 30, 1999 from $5.8 million for
the three months ended June 30, 1998. As a percentage of net sales, operating
expenses, excluding the expenses for start-up costs and management retention
bonuses, for the three months ended June 30, 1999 were 5.7% as compared to
5.9% for the three months ended June 30, 1998.
OTHER INCOME (EXPENSE). Interest expense increased to $10.0 million for the
three months ended June 30, 1999 compared to $8.7 million for the three
months ended June 30, 1998, due primarily to the debt incurred for the
acquisition of Kaiser's 50% share of AKW on April 1, 1999. Equity in earnings
(losses) of affiliates decreased by $2.2 million for the three months ended
June 30, 1999 from $2.2 million for the three months ended June 30, 1998. The
decrease was due to ownership change of AKW, from 50% to 100% and the
resultant change in accounting to begin consolidating the results of AKW
effective April 1, 1999.
ADJUSTED EBITDA. Adjusted EBITDA increased by $5.7 million, or 22.7%, to
$30.8 million for the three months ended June 30, 1999 from $25.1 million for
the three months ended June 30, 1998 due to higher steel product sales volume
and the inclusion of 100% of AKW earnings. In determining Adjusted EBITDA for
the three months ended June 30, 1999, income from operations has been
adjusted by (i) depreciation and amortization (except for amortization of
deferred financing costs) and (ii) equity in earnings of affiliates. In
determining Adjusted EBITDA for the three months ended June 30, 1998, income
from operations has been adjusted by (i) depreciation and amortization
(except for amortization of deferred financing costs), (ii) equity in
earnings (losses) of affiliates, (iii) $0.9 million of management retention
bonuses paid by Phelps Dodge, and (iv) an estimated cost of $0.5 million
incurred in connection with the labor strike at the Company's facility in
Henderson, Kentucky.
NET INCOME. Net income increased by $2.8 million to $7.6 million for the
three months ended June 30, 1999 from $4.8 million for the three months ended
June 30, 1998 due to higher pretax earnings, as described above.
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO THE SIX MONTHS ENDED JUNE 30, 1998.
NET SALES. Net sales increased by $56.0 million, or 29.2%, for the six months
ended June 30, 1999 to $247.6 million, compared to $191.6 million for the six
months ended June 30, 1998. The increase in net sales is primarily due to
increased industry volume, including $24.5 million of aluminum sales from AKW
since April 1, 1999 (previously accounted for under the equity method prior
to the acquisition date) and $18.8 million of new products sales from the new
Columbia, Tennessee facility which started operations in the third quarter of
1998. Excluding $24.5 million of AKW sales and the Columbia, Tennessee
facility sales of $18.8 million, net sales would have increased $12.7 million
or 6.6% to $204.3 million for the six months ended June 30, 1999 from $191.6
for the six months ended June 30, 1998.
GROSS PROFIT. Gross profit increased by $13.9 million, or 32.0% to $57.3
million for the six months ended June 30, 1999 from $43.4 million for the six
months ended June 30, 1998. The gross profit increase was due
12
<PAGE>
to an overall increase in industry sales volume and due to including $6.3
million of gross profit from AKW, which has been accounted for on a
consolidated basis effective with the acquisition on April 1, 1999. Gross
profit as a percentage of net sales increased to 23.2% for the six months
ended June 30, 1999 from 22.6% for the six months ended June 30, 1998. The
increase in gross profit as a percentage of sales is due to an overall
increase in volume and improved margins at the Henderson, Kentucky facility.
The improvements at Henderson, Kentucky were achieved by effectively
controlling the costs associated with the labor strike. Increased industry
volumes also favorably impacted gross profit. Excluding gross profit from AKW
of $6.3 million and the gross loss at the Columbia facility of $0.2 million,
gross profit would have increased by $7.8 million, or 18.0% to $51.2 million
for the six months ended June 30, 1999 from $43.4 million for the six months
ended June 30, 1998.
OPERATING EXPENSES. Operating expenses decreased by $3.7 million, or 20.7%,
to $14.2 million for the six months ended June 30, 1999 from $17.9 million
for the six months ended June 30, 1998. This decrease was primarily due to
one time operating expenses incurred in the first six months of 1998 for
professional fees of $2.2 million related to the Company's recapitalization,
for start-up costs of $2.8 million relating to the Columbia, Tennessee
facility, and the management retention bonuses of $1.7 million paid by Phelps
Dodge in conjunction with the Company's recapitalization. Excluding the
expenses recorded for the six months ended June 30, 1998 for professional
fees, start-up costs, and management retention bonuses, operating expenses
increased by $3.0 million to $14.2 million for the six months ended June 30,
1999 from $11.2 million for the six months ended June 30, 1998. As a
percentage of net sales, operating expenses, excluding the expenses for
professional fees, start-up costs, and management retention bonuses, for the
six months ended June 30, 1999 were 5.7% as compared to 5.8% for the six
months ended June 30, 1998.
OTHER INCOME (EXPENSE). Interest expense increased to $19.0 million for the
six months ended June 30, 1999 compared to $15.4 million for the six months
ended June 30, 1998, due to the debt incurred in the recapitalization of the
Company on January 21, 1998, being outstanding for the first six months of
1999 compared to an outstanding amount from January 21, 1998 to June 30,
1998. Interest expense also increased due to the debt incurred for the
acquisition of Kaiser's 50% share of AKW on April 1, 1999. Equity in earnings
(losses) of affiliates increased by approximately $2.8 million to $2.3
million for the six months ended June 30, 1999 from a loss of $0.5 million
for the six months ended June 30, 1998. The increase was due to the increased
equity earnings from the AKW joint venture which contributed $2.3 million of
earnings in the first half of 1999 as compared to a loss of $0.5 million in
the first half of 1998 which was due to the $3.4 million effect of a product
recall campaign implemented at AKW in the first quarter of 1998. Beginning
April 1, 1999, when the Company acquired the remaining 50% ownership of AKW,
earnings from AKW were reported on a consolidated basis and were not recorded
as equity earnings.
ADJUSTED EBITDA. Adjusted EBITDA increased by $11.2 million, or 23.6%, to
$58.6 million for the six months ended June 30, 1999 from $47.4 million for
the six months ended June 30, 1998. The Adjusted EBITDA increase was due to
higher steel product sales volume and the addition of all AKW income on a
consolidated basis as of April 1, 1999. In determining Adjusted EBITDA for
the six months ended June 30, 1999, income from operations has been adjusted
by (i) depreciation and amortization (except for amortization of deferred
financing costs) and (ii) equity in earnings of affiliates. In determining
Adjusted EBITDA for the six months ended June 30, 1998, income from
operations has been adjusted by (i) depreciation and amortization (except for
amortization of deferred financing costs), (ii) equity in earnings (losses)
of affiliates, (iii) $2.2 million of professional fees related to the
Company's recapitalization, (iv) $3.4 million relating to the AKW product
recall, (v) $1.7 million of management retention bonuses paid by Phelps
Dodge, and (vi) $3.0 million incurred in connection with the labor strike at
the Company's facility in Henderson, Kentucky.
13
<PAGE>
NET INCOME. Net income increased by $9.6 million to $14.9 million for the six
months ended June 30, 1999 from $5.3 million for the six months ended June
30, 1998 due primarily to higher pretax earnings, as described above.
CHANGES IN FINANCIAL CONDITION
At June 30, 1999, the Company's total assets amounted to $521.0 million, as
compared to $404.9 million at December 31, 1998. The $116.1 million or 28.7%
increase in total assets during the six months ended June 30, 1999 was
primarily the result of a $19.1 million increase in cash, an increase in net
property, plant and equipment of $40.3 million, a $17.6 million increase in
customer receivables, a $4.2 million increase in other receivables, a $7.6
million increase in net inventories, a $0.7 million increase in supplies, a
$0.7 million increase in prepaid expenses, a $0.9 million increase in other
assets and a $51.8 million increase in net goodwill, offset by a decrease of
$23.1 in investment of affiliates, a decrease of $3.3 million in deferred
income taxes and a $0.4 million decrease in income taxes receivable. The
increase in net property, plant and equipment is primarily due to $30.0
million worth of equipment acquired at AKW on April 1, 1999 and a $9.0
million investment in AdM's new facility. The increase in customer
receivables resulted from increased sales volume from U.S. customers and the
acquisition of aluminum wheel receivables from AKW. The other receivables
increase was primarily due to inclusion of AKW's other receivables, an
increase in a receivable from IaSa and an increase in an unrealized gain
associated with the foreign currency forward contracts entered into by the
Company. The increase in net inventories is primarily due to the addition of
AKW's aluminum inventory. The $51.8 million increase in net goodwill is
attributable to the purchase of AKW, as is the decrease in investment of
affiliates.
At June 30, 1999, the Company's total liabilities amounted to $557.3 million,
as compared to $456.8 million at December 31, 1998. The $100.5 million or
22.0% increase in total liabilities was primarily due to a $67.5 million
increase in long-term debt, a $14.6 million increase in accounts payable, a
$3.6 million increase in short term notes payable at AdM, a $1.7 million
increase in accrued interest, a $3.6 million increase in accrued and other
current liabilities, a $5.0 million increase in other non-current liabilities
and an increase in deferred income taxes of $3.2 million. The $67.5 million
increase in long-term debt was due to a $100.0 million increase in the
Company's term loan through the Amended and Restated Credit Facility
described below in "Capital Resources and Liquidity," partially offset by a
$32.5 million repayment of the Revolver. The increase in accounts payable was
due to increased production volumes and acquiring $9.2 million of AKW's
payables. The increase in accrued interest payable resulted from the
additional debt acquired. The increase in other non-current liabilities was
mostly due to acquiring approximately $3.8 million of AKW's pension
liabilities.
CAPITAL RESOURCES AND LIQUIDITY
The Company's primary sources of liquidity are cash flow from operations and
borrowings under the Revolver. The Company's primary uses of cash are funding
working capital, capital expenditures under the Company's expansion plans and
debt service.
As of June 30, 1999, the Company had cash and short-term investments of $22.6
million compared to $3.5 million at the beginning of the year. The Company's
operating activities provided $39.0 million and the financing activities
provided $71.9 million which was used to fund the Company's investing
activities of $91.7 million and to increase its cash and short-term
investments $19.1 million in order to fund the purchase of AKW.
14
<PAGE>
Investing activities during the six months ended June 30, 1999 were $91.7
million compared to $21.4 million for the six months ended June 30, 1998.
Cash flow from financing activities during the six months ended June 30, 1999
were $71.9 million compared to $4.1 million for the six months ended June 30,
1998.
The Company incurred capital expenditures in 1998 (excluding capital
expenditures by AdM) of $29.9 million. The Company expects its capital
expenditures (excluding capital expenditures by AdM) to decrease to
approximately $20.0 million in 1999. It is anticipated that these
expenditures will fund (i) approximately $4.1 million of technology
advancement projects; (ii) investments in productivity improvements in 1999
to the Company's steel wheel business of approximately $7.1 million and (iii)
maintenance of business expenditures of approximately $8.8 million. Future
investments in productivity improvements are expected to be focused on
additional automation, shop floor and engineering systems and improved
coating capabilities.
The Company anticipates that AdM will require additional capital expenditures
of approximately $3.5 million for the remainder of 1999 to finalize
construction and equip the Monterrey, Mexico facility. The Monterrey, Mexico
facility is expected to be operational in late-1999 at an approximate cost
for land and building of $9.2 million. Total project cost through 1999 is
expected to be approximately $29.4 million, of which approximately $25.9
million was spent as of June 30, 1999. The Company finalized a $32.5 million
credit facility for AdM on July 9, 1998. This is comprised of a term loan of
$25.0 million and a working capital facility of $7.5 million. As of June 30,
1999 the $32.5 million credit facility was fully drawn.
AMENDED AND RESTATED CREDIT FACILITY. On April 16, 1999 the Company entered
into an amended and restated credit facility (the "Amended Credit Facility")
with a syndicate of banks and other financial institutions (the "Lenders")
led by Citicorp USA, Inc., as administrative agent (the "administrative
agent"), Salomon Smith Barney, Inc., as arranger, Bankers Trust Company, as
syndication agent, and Wells Fargo Bank N.A. as documentation agent. The
Amended Credit Facility provides for an additional $100.0 million term loan
("Tranche C") to be added to the previous term loans of (i) $60.0 million
that matures on January 21, 2005 ("Tranche A") and (ii) $75.0 million that
matures on January 21, 2006 ("Tranche B"). The Company's Canadian subsidiary
is the borrower under Tranche A, and the Company has guaranteed the repayment
of such borrowing under Tranche A and all other obligations of such Canadian
subsidiary under the Amended Credit Facility. The Company also has a $140.0
million revolver, which declines to $100.0 million on January 21, 2003 and
matures on January 21, 2004. As of June 30, 1999, no amounts were outstanding
under the Revolver. The Tranche A and B term loans provide for 1% annual
amortization prior to maturity and the Tranche C term loan provides for 1%
annual amortization through January 21, 2005, with the final two years each
providing for 47% amortization. The loans are secured by, among other things,
the shares of stock, partnership interests and limited liability company
ownership interests of the Company's subsidiaries.
DESCRIPTION OF THE NOTES. In January 1998 the Company issued $200 million of
notes (the "Notes") pursuant to an indenture (the "Indenture") between the
Company and U.S. Trust Company, N. A., as trustee (the "Trustee"). The
Indenture is limited in aggregate principal amount to $300.0 million, of
which $200.0 million were issued as Private Notes and subsequently exchanged
for Exchange Notes, which exchange has been registered under the Securities
Act of 1933, as amended. Additional notes may be issued in one or more series
from time to time, subject to the limitations set forth under the Indenture.
The Indenture provides certain restrictions on the payment of dividends by
the Company. The Indenture is subject to and governed by the Trust Indenture
Act of 1939, as amended. The Notes are general unsecured obligations of the
Company and are subordinated in right of payment to all existing and future
Senior Indebtedness (as defined
15
<PAGE>
in the Indenture) of the Company. The Notes mature on February 1, 2008.
Interest on the Notes accrues at the rate of 9.25% per annum and is due and
payable semi-annually in arrears on February 1 and August 1, commencing on
August 1, 1998, to holders of record of the Notes on the immediately
preceding January 15 and July 15.
Management believes that cash flow from operations and availability under the
Revolver will provide adequate funds for the Company's foreseeable working
capital needs for 1999, planned capital expenditures and debt service
obligations. Any future acquisitions, joint ventures or other similar
transactions will likely require additional capital, and there can be no
assurance that any such capital will be available to the Company on
acceptable terms or at all. The Company's ability to fund its working capital
needs, planned capital expenditures and scheduled debt payments, to implement
its expansion plans, to refinance indebtedness and to comply with all of the
financial covenants under its debt agreements, depends on its future
operating performance and cash flow, which in turn, are subject to prevailing
economic conditions and to financial, business and other factors, some of
which are beyond the Company's control.
YEAR 2000 COMPLIANCE
In 1997, a comprehensive project plan to address the Year 2000 issue as it
relates to the Company's operation was developed and implemented. The scope
of the plan includes seven phases including Awareness, Identification, Impact
Analysis, Risk Evaluation, Remediation, Testing and Contingency Planning. A
project team that consists of key members of the technology staff,
representatives of functional business units and senior management was
developed.
An assessment of the impact of the Year 2000 issue on the Company's computer
systems was completed in the fourth quarter of 1997. From the assessment, the
Company identified and prioritized those systems deemed to be mission
critical or those that have a significant impact on normal operations.
The Company relies on third party vendors and service providers for certain
data processing capabilities. Formal communications with these providers were
initiated in 1997 to assess the Year 2000 readiness of their products and
services. Responses indicate that the significant providers currently have
compliant versions available or are well into the renovation and testing
phases. However, the Company can give no guarantee that the systems of these
service providers and vendors on which the Company's systems rely will be
timely Year 2000 compliant.
Additionally, the Company has implemented a plan to manage the potential risk
posed by the impact of the Year 2000 issue on its major customers and
suppliers. Formal communications are continuing and the assessment is moving
forward on schedule.
CURRENT STATUS. The project team estimates that the Company's Year 2000
readiness project is approximately 95% complete. The following table provides
a summary of the current status of the seven phases involved and a projected
timetable for completion.
16
<PAGE>
<TABLE>
<CAPTION>
PROJECT PHASE % COMPLETED COMPLETION COMMENTS
<S> <C> <C> <C>
Awareness 100% Completed
Identification 100% Completed
Impact Analysis 100% Completed
Risk Evaluation 100% Completed
Remediation 95% Oct. 31, 1999 All critical systems are completed.
Testing 90% Sept. 30, 1999 Involves ongoing testing of critical systems.
Contingency Plan 90% Aug. 31, 1999
</TABLE>
COSTS. The Company has thus far primarily used and expects to continue to use
internal resources to implement its readiness plan and to upgrade or replace
and test systems affected by the Year 2000 issue. During 1998, the Company
incurred approximately $1.3 million of direct and indirect costs for
company-owned systems and applications related to Year 2000 remediation. A
majority of these costs are currently believed to be incremental expenses
that will not recur in the Year 2000 or thereafter. Year 2000 remediation
costs were approximately $1.4 million in 1997. The Company estimates that its
additional costs for Year 2000 remediation and testing of its computer
systems through the end of 1999 will not exceed $1.1 million.
The costs and the timetable in which the Company plans to complete the Year
2000 readiness activities are based on management's estimates, which were
derived using numerous assumptions of future events including the continued
availability of certain resources, third party readiness plans and other
factors. The Company can make no guarantee that these estimates will be
achieved, and actual results could differ from such plans.
RISK ASSESSMENT. Given information known at this time about the Company's
systems that are non-compliant, coupled with the Company's ongoing, normal
course of business efforts to upgrade or replace critical systems, as
necessary, management does not expect Year 2000 compliance costs to have a
material adverse impact on the Company. Although the Company believes that
internal Year 2000 compliance will be achieved by December 31, 1999, there
can be no assurance that the Year 2000 problem affecting the Company, its
customers and suppliers will not have a material adverse effect on the
Company's business, financial condition and results of operations. In light
of the many adverse conditions that could happen to the Company associated
with Year 2000 compliance, along with the speculation that some or many of
them may not happen, it is difficult to hypothesize a most reasonably likely
worst case Year 2000 scenario with any degree of certainty. With that in
mind, the Company currently believes the most reasonably likely worst case
scenario would be the failure of certain key production capabilities or
similar failures occurring within the Company's supply chain. These types of
catastrophic failures, although unlikely, would result in the inability of
the Company to supply products to customers for a period of time.
CONTINGENCY PLAN. Realizing that some disruption may occur despite its
efforts, the Company is in the process of developing contingency plans for
each critical system in the event that one or more of those systems fail.
Although not yet complete, the Company is considering the following items,
among others, as key pieces of the contingency plans: the creation of special
"rapid response" technology teams; scheduling availability of key personnel,
additional testing and simulation activities, establishment of rapid decision
processes, development of support critical customer functions in the event
information systems or mechanized processes experience Year 2000 disruptions,
determination of alternative suppliers and implementation of data retention
and recovery procedures for customers and critical business data with on-
17
<PAGE>
site (primary) as well as off-site (secondary) data copies. While this is an
ongoing process, the Company expects to have the contingency plan
substantially completed by August 31, 1999.
SUBSEQUENT EVENTS
On July 16, 1999, the Company acquired Industria Automotriz S.A. de C.V.'s
("IaSa") pursuant to the terms of a Purchase Agreement by and among the
Company and the other parties listed thereto. The acquisition gives Accuride
100 % ownership of AdM. The purchase price of the acquisition was $7.3
million.
FACTORS AFFECTING FUTURE RESULTS
The factors discussed below, among others, could cause actual results to
differ materially from those contained in forward-looking statements made in
this report, including, without limitation, in "Management's Discussion and
Analysis of Financial Condition and Results of Operations," in the Company's
related press release and in oral statements made by authorized officers of
the Company. When used in this report, any press release or oral statements,
the words "estimate," "project," "anticipate," "expect," "intend," "believe"
and similar expressions are intended to identify forward-looking statements.
All of these forward-looking statements are based on estimates and
assumptions made by management of the Company, which, although believed to be
reasonable, are inherently uncertain. Therefore, undue reliance should not be
placed upon such estimates and statements. No assurance can be given that any
of such statements or estimates will be realized and actual results will
differ from those contemplated by such forward-looking statements.
Accordingly, the Company hereby identifies the following important factors
which could cause the Company's financial results to differ materially from
any such results which might be projected, forecast, estimated or budgeted by
the Company in forward-looking statements:
- - significant indebtedness of the Company may have important consequences,
including, but not limited to, impairment of the Company's ability to
obtain additional financing, reduction of funds available for operations
and business opportunities or limitation on the Company's ability to
dispose of assets;
- - the Company's ability to service its indebtedness is dependent upon
operating cash flow of its subsidiaries;
- - loss of a major customer could have material adverse effect on the
Company's business;
- - original equipment manufacturers' demands for price reduction may
adversely affect profitability;
- - cyclical nature of industry could cause fluctuations in demand for
Company's products;
- - labor strike may disrupt the Company's supply to its customer base;
- - interruption in supply of steel or aluminum could reduce Company's
ability to obtain favorable sourcing of such raw materials;
- - Company's competitors could reduce the market share of the Company's
product;
- - potential liability of the Company for environmental matters and the
costs of compliance with certain governmental regulations could have a
material adverse effect on the Company's financial condition and may
adversely affect the Company's ability to sell or rent such property or
to borrow using such property as collateral;
- - Company may have difficulty in achieving growth strategies and there is
no assurance that such strategies will be successful or will improve
operating results;
- - continued service of key management personnel is not guaranteed;
- - interests of the principal stockholder of the Company may conflict with
the interests of the holders of securities of the Company; and
- - no assurance that the Company's computer software and operating systems,
or those of its customers or suppliers, will be Year 2000 compliant.
18
<PAGE>
The foregoing review of the factors should not be construed as exhaustive or
as any admission regarding the adequacy of disclosures made by the Company
prior to this filing. For further information, refer to the "Risk Factors"
section included in the Company's Annual Report on Form 10-K for the Fiscal
Year ended December 31, 1998 filed with the Securities and Exchange
Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company, in the normal course of doing business, is exposed to the risks
associated with changes in foreign exchange rates, interest rates and raw
material prices. The Company selectively uses derivative financial
instruments to manage these risks. The Company uses foreign exchange
contracts to hedge foreign currency commitments. Specifically, these foreign
exchange contracts offset foreign currency denominated purchase commitments
to suppliers, accounts receivable from and future committed sales to
customers, and operating expenses. Management believes the use of foreign
currency financial instruments reduces the risks that arise from doing
business in international markets. At June 30, 1999, the Company had open
foreign exchange forward contracts and options with a notional amount of
$119.8 million. Foreign exchange forward contract maturities were from one to
eleven months, and option contract maturites were from eight to seventeen
months.
The Company's hedging activities provide only limited protection against
currency risks. Factors that could impact the effectiveness of the Company's
hedging programs include accuracy of sales estimates, volatility of currency
markets and the cost and availability of hedging instruments. The
counterparties to the foreign exchange contracts are financial institutions
with investment grade credit ratings. The Company monitors its foreign
currency cash flow transactions and executes contracts to hedge its foreign
exchange exposures. The use of forward contracts and options protects the
Company's cash flows against unfavorable movements in exchange rates, to the
extent of the amount under contract. A 10% adverse change in currency
exchange rates for the Company's foreign currency derivatives held at June
30, 1999, would have an impact of approximately $10.0 million on the fair
value of such instruments. This quantification of exposure to the market risk
associated with foreign exchange financial instruments does not take into
account the offsetting impact of changes in the fair value of the Company's
foreign denominated assets, liabilities and firm commitments.
The Company uses long-term debt as a primary source of capital in its
business. The following table presents the principal cash repayments and
related weighted average interest rates by maturity date for its long-term
fixed-rate debt and other types of long-term debt at June 30, 1999:
<TABLE>
<CAPTION>
(Dollars in
thousands) 1999 2000 2001 2002 2003 Thereafter Total Fair Value
---- ---- ---- ---- ---- ---------- ----- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Long-Term Debt:
Fixed $200,000 $200,000 $197,500
Avg. Rate 9.25% 9.25%
Variable $0 $2,350 $11,725 $14,850 $5,475 $224,250 $258,650 $258,650
Avg. Rate 7.32% 8.31% 8.36% 8.03% 7.32% 7.44%
</TABLE>
The Company has used an interest rate swap to alter interest rate exposures
between fixed and floating rates on a portion of the Company's long-term
debt. As of June 30, 1999, $100.0 million notional amount of interest rate
swap was outstanding. On average during the six month period ended June 30,
1999, the Company paid 5.75% as a fixed rate and received 5.0083% on the
interest rate swap. Under the terms of the
19
<PAGE>
interest rate swap, the Company agrees with the counterparty to exchange, at
specified intervals, the difference between the fixed rate and floating rate
interest amounts calculated by reference to the agreed notional principal
amount. The interest rate swap matures in January, 2001. The Company also
used an interest rate cap to set a ceiling on the maximum floating interest
rate the Company would incur on a portion of the Company's long term debt. As
of June 30, 1999, $35.0 million notional amount of interest rate cap was
outstanding. Under the terms of the interest rate cap, the Company is
entitled to receive from the counterparty on a quarterly basis the amount, if
any, by which the three-month Eurodollar interest rate exceeds 7.5%. The
interest rate cap matures in January, 2001. The Company is exposed to credit
related losses in the event of nonperformance by the counterparties to the
interest rate swap and interest rate cap, although no such losses are
expected as the counterparties are financial institutions having an
investment grade credit rating.
The Company relies upon the supply of certain raw materials in its production
processes and has entered into firm purchase commitments for steel and
aluminum. The exposures associated with these commitments are primarily
managed through the terms of its supply and procurement contracts.
Additionally, the Company uses commodity price swaps and options to hedge
against changes in certain commodity prices. At June 30, 1999, the Company
had open commodity price swaps and option contracts with a notional amount of
$13.0 million. These commodity price swaps and option contracts had
maturities from one to fifteen months. A 10% adverse change in commodity
prices would have an impact of approximately $1.1 million on the fair value
of these contracts. The Company is exposed to credit related losses in the
event of nonperformance by the counterparties to the commodity price swaps
and option contracts, although no such losses are expected as the
counterparties are financial institutions having an investment grade credit
rating.
20
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company does not believe that there are any pending or threatened
legal proceedings other than non-material legal proceedings incidental
to the Company's business.
Item 2. Changes in Securities
During the thirteen weeks ended June 30, 1999, the Company issued 116
shares of the Company's common stock, par value $.01 per share ("Common
Stock") to certain members of management for aggregate consideration in
cash and secured promissory notes of approximately $580,000. During
such period, the Company also issued options to purchase 221 shares of
Common Stock to such members of management. The exercise price of such
options was $5,000 per share. None of these securities were registered
under the Securities Act of 1933, as amended.
Such issuances of Common Stock and options to purchase Common Stock
were made pursuant to the 1998 Stock Purchase and Option Plan for
Employees of Accuride Corporation and Subsidiaries. In each of the
above instances, exemption from registration under the Securities Act
was based upon the grounds that the issuance of such securities did not
involve a public offering within the meaning of Section 4(2) of the
Securities Act.
Item 3. Defaults Upon Senior Securities
Not applicable.
Item 4. Submissions of Matters to a Vote of Security Holders
Not applicable.
Item 5. Other Information
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
<TABLE>
<CAPTION>
Exhibit No Description
- ---------- -----------
<S> <C>
10.1 Purchase Agreement date July 16, 1999 between the Company and
IaSa regarding the purchase of 49% interest in AdM.
10.2 Amended and Restated Completion Guarantee Agreement dated
July 16, 1999 between the Company, AdM, and Citibank Mexico, S.A.,
Grupo Financiero
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
Citibank
27.1 Financial Data Schedule
</TABLE>
(b) Form 8-K
The following 8-K reports were filed during the quarter ended
June 30, 1999.
Form 8-K filed April 12, 1999 regarding the acquisition of 50%
interest of AKW, LP from Kaiser
Form 8-K/A filed June 10, 1999 regarding the financial
information related to the acquisition of 50% of AKW, LP
from Kaiser.
22
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
ACCURIDE CORPORATION
/s/ WILLIAM P. GREUBEL Dated: August 13, 1999
- -------------------------------
William P. Greubel
President and Chief Executive Officer
/s/ JOHN R. MURPHY Dated: August 13, 1999
- -------------------------------
John R. Murphy
Vice President - Finance and Chief Financial Officer
Principal Accounting Officer
23
<PAGE>
EXHIBIT 10.1
PURCHASE AGREEMENT
dated July 16, 1999
by and among
ACCURIDE CORPORATION ("ACCURIDE"),
SERVICIOS AISA, S.A. DE C.V. ("SERVICIOS AISA"),
ACCURIDE DE MEXICO, S.A. DE C.V. (the "COMPANY"),
INDUSTRIA AUTOMOTRIZ, S.A. DE C.V. ("IASA")
and
GRUPO INDUSTRIAL RAMIREZ, S.A. ("GIR")
<PAGE>
PURCHASE AGREEMENT
THIS PURCHASE AGREEMENT (the "AGREEMENT") is entered into as of July
16, 1999, by and among Accuride Corporation, a Delaware corporation
("ACCURIDE"), Servicios AISA, S.A. de C.V., a Mexican corporation ("SERVICIOS
AISA" and, together with Accuride, the "PURCHASERS"), Accuride de Mexico, S.A.
de C.V., a Mexican corporation (the "COMPANY"), and Grupo Industrial Ramirez,
S.A., a Mexican corporation ("GIR") and Industria Automotriz, S.A. de C.V., a
Mexican corporation ("IASA" and, together with GIR, the "SELLERS").
RECITALS
A. Pursuant to a Joint Venture Agreement dated as of November 5,
1997 among Accuride, IASA, GIR and the Company (the "JV AGREEMENT"), Accuride
and IASA created a joint venture and incorporated the Company as a variable
capital corporation under the laws of the United Mexican States to produce,
market and sell all kinds of steel wheels, rims, side rings, lock rings, adapter
rings, spacer bands, mounting bands and related components, replacements and
products ("WHEELS").
B. The parties entered into a Wheel Requirements Agreement (the
"WHEEL REQUIREMENTS AGREEMENT") and a Bailment Agreement (the "BAILMENT
AGREEMENT") whereby (i) the Company has installed its equipment at IASA's
manufacturing facility in San Nicolas de los Garza, Nuevo Leon, Mexico (the
"IASA FACILITY"), (ii) the Company supplies IASA with raw materials, (iii) IASA
then manufactures Wheels using the Company's equipment and sells the Wheels back
to the Company at cost plus 3.25% of the gross sales revenues (but excluding the
applicable VAT (as defined in the JV Agreement)) that the Company actually
invoices for sales of finished Wheels to its customers.
C. The total authorized capital stock of the Company consists of
the fixed portion represented by 50,000 registered no par value common shares
and the variable portion represented by 75,000,000 registered no par value
common shares.
D. Accuride owns 100,147 shares, or 51%, of the fixed capital
stock of the Company and 39,936,831 shares, or 51%, of the variable capital
stock of the Company.
E. IASA owns 96,219 shares, or 49%, of the fixed capital stock of
the Company and 38,370,680 shares, or 49%, of the variable capital stock of the
Company (such shares being collectively referred to herein as the "IASA
SHARES").
F. In reliance on and subject to the terms, conditions,
representations, warranties, covenants and agreements herein contained,
Purchasers desire to acquire the IASA Shares from the Sellers and the Sellers
desire to sell the IASA Shares to Purchasers.
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AGREEMENT
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual covenants herein contained, and other good and valuable consideration,
the receipt and sufficiency of which the parties hereby acknowledge, the parties
hereby agree as follows:
ARTICLE I.
PURCHASE AND SALE
Section 1.01 AGREEMENT TO PURCHASE AND SELL IASA SHARES. Subject to
the terms and conditions of this Agreement, the Sellers agree to sell to the
Purchasers, and the Purchasers agree to purchase from the Sellers, at Closing
(as defined below), the IASA Shares, to be allocated 96,218 shares of the fixed
capital stock and 38,370,680 shares of the variable capital stock to Accuride
and 1 share of the fixed capital stock to Servicios AISA.
Section 1.02 ACQUISITION OF THE IASA SHARES. Subject to the
adjustments provided in the Escrow Agreement (as defined below), in exchange for
the IASA Shares, at the Closing, Purchasers shall pay, or shall cause to be
paid, a total of $7,300,000 which represents the amount of $.18973409 U.S.
Dollars per share to be distributed as indicated in Section 1.01 above, (the
"PURCHASE PRICE"), comprised of the following:
(i) $2,750,000 in immediately available funds to the
account or accounts specified in writing by the Sellers.
(ii) $4,550,000 (the "ESCROW AMOUNT") in immediately
available funds, pursuant to the Escrow Agreement, in substantially the form
attached hereto as Exhibit A (the "ESCROW AGREEMENT"), to an escrow account (the
"ESCROW ACCOUNT") established in accordance with the Escrow Agreement. The
Escrow Amount shall be governed by this Sections 1.02 and 1.03 and the
provisions of the Escrow Agreement. The Escrow Amount shall be allocated as
follows in three separate accounts: (i) $300,000 (the "MAINTENANCE FUNDS"),
(ii) $250,000 (the "RAW MATERIALS FUNDS") and (iii) $4,000,000 (the "TAX LIEN
FUNDS").
Section 1.03 ESCROW AMOUNT.
(a) The Maintenance Funds shall be administered by a committee of
four individuals (the "MAINTENANCE COMMITTEE"), of which two shall be elected by
Accuride (which initially shall be Robert J. Fagerlin and Raul Gonzalez Valdes)
and two shall be elected by the Sellers (which initially shall be Gregorio
Ramirez Jauregui and Pedro Sanchez). All decisions of the Maintenance Committee
shall be made by the majority vote of the Maintenance Committee; provided,
however, that in the event that the Maintenance Committee is unable to concur on
a decision, Robert J. Fagerlin or his successor shall make the final decision on
behalf of the Maintenance Committee in his sole discretion. The Maintenance
Committee shall determine a
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schedule (the "MAINTENANCE SCHEDULE") establishing certain maintenance costs at
the IASA Facility that are not considered to be incurred in the ordinary course
of business (the "EXTRAORDINARY MAINTENANCE COSTS"). The Maintenance Committee
shall deliver a notice to the Escrow Agent (as defined in the Escrow Agreement),
providing instructions to deliver from the Maintenance Funds an amount equal to
such Extraordinary Maintenance Costs to the appropriate party as set forth in
the Maintenance Schedule. The term of the Maintenance Fund shall be for a
period of thirty days after the Closing Date (the "MAINTENANCE FUNDS EXPIRATION
DATE"). If the total sum of all Extraordinary Maintenance Costs set forth in
the Maintenance Schedule is less than the Maintenance Funds, the Maintenance
Committee shall deliver a notice to the Escrow Agent, instructing the Escrow
Agent to deliver to IASA any amount remaining in the Maintenance Funds as of the
Maintenance Funds Expiration Date.
(b) The Raw Materials Funds shall be subject to the following:
(i) Pursuant to the terms of the Wheel Requirements
Agreement, the Company has been selling raw materials (the "Raw Materials") to
IASA for IASA to manufacture Wheels for sale to the Company. IASA and the
Company have agreed to amend the terms of the Wheel Requirements Agreement
whereby the Company will continue providing Raw Materials to IASA, but retaining
title thereto, for IASA to provide the corresponding Wheel manufacturing
services to the Company, pursuant to the Wheel Requirements Agreement, as
amended by Amendment No. 1 to the Wheel Requirements Agreement executed on the
date hereof, a copy of which is attached hereto as Exhibit B. Therefore, IASA
hereby agrees to sell, and as of the Closing Date shall sell, and transfer and
assign to the Company title to the existing inventory of Raw Materials, pursuant
to an invoice in substantially the form attached hereto as Exhibit C.
(ii) The parties agree that as of the Closing Date, there
should be a fixed amount of Raw Materials as determined on the books and records
of the Company (the "ESTIMATED RAW MATERIALS") at the IASA Facility. As soon as
practicable after the Closing (but no later than 10 days thereafter), the
Company and IASA shall perform an audit (the "Audit Date") of the actual Raw
Materials (the "ACTUAL RAW MATERIALS") at the IASA Facility (and reconcile such
amount taking into consideration the Raw Material provided from the Closing Date
to the Audit Date). If the Actual Raw Materials is less than the Estimated Raw
Materials and such difference is not reasonably resolved (i.e., allowance for
steel and steel section scraps) subject to the Purchasers' satisfaction, such
difference shall be distributed to the Company from the Raw Materials Funds, and
any remaining amounts in the Raw Materials Funds shall be distributed to IASA;
within five days of the final determination of the Actual Raw Materials, the
Seller Representative and the Purchaser Representative shall deliver to the
Escrow Agent a notice providing instructions for such distributions.
(c) The Tax Lien Funds shall be governed by Section 4(c) of the
Escrow Agreement.
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Section 1.04 CLOSING. The closing of the transactions contemplated
in this Agreement (the "CLOSING") shall take place at the offices of the Company
no later than three days after the conditions set forth in Article IV have been
satisfied or otherwise waived by the applicable party or such other date or
place as shall be mutually acceptable to the parties (the "CLOSING DATE").
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF IASA AND GIR
As an inducement to Purchasers to enter into this Agreement, IASA and
GIR, jointly and severally, hereby represent and warrant to Purchasers, which
representations and warranties are, as of the date hereof, true and correct:
Section 2.01 DISCLOSURE SCHEDULE. IASA and GIR have heretofore
delivered to Purchasers a schedule (the "DISCLOSURE SCHEDULE") containing
certain information regarding GIR, IASA and the Company as indicated at various
places in this Agreement. All information set forth in the Disclosure Schedule
is true, correct and complete as of the date of this Agreement, and shall be
true, correct and complete on and as of the Closing Date, and shall be deemed
for all purposes of this Agreement to constitute an integral part of this
Agreement and of the representations and warranties of GIR and IASA contained
herein.
Section 2.02 INCORPORATION AND QUALIFICATION OF THE SELLERS AND
THEIR SUBSIDIARIES.
(a) Each of GIR and IASA is a corporation duly incorporated and
validly existing under the laws of the Untied Mexican States.
(b) Each of GIR and IASA has all necessary corporate power and
authority and has taken all corporate actions necessary or appropriate to enter
into this Agreement and the Escrow Agreement, to carry out its obligations
hereunder and thereunder, to consummate the transactions contemplated hereby and
thereby and to perform its obligations hereunder and thereunder. Each of GIR and
IASA has taken all actions necessary to secure all approvals required in
connection herewith and therewith. The execution and delivery of each of the
Agreement and the Escrow Agreement and the consummation of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action of each of GIR and IASA. Each of IASA and GIR further
represents and warrants, jointly and severally, that none of the following
documents has been amended or revoked, but each remains in full force and
effect: (i) the Power of Attorney granted to Gregorio Ramirez Jauregui by IASA
and formalized by means of public deed 2151 dated September 18, 1998 before Ms.
Maria Atala Martinez, Notary Public 127 in Monterrey, N.L.; and (ii) the Power
of Attorney granted to Gregorio Ramirez Jauregui by GIR and formalized by means
of public deed 2183 dated October 19, 1998 before Ms. Maria Atala Martinez,
Notary Public 127 in Monterrey, N.L. Upon execution and delivery (assuming due
execution and delivery by the other parties hereto), each of
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the Agreement and the Escrow Agreement will be the valid and legally binding
agreement of each of GIR and IASA, enforceable against GIR and IASA in
accordance with its terms and conditions. Without limiting the generality of the
foregoing, GIR further represents and warrants that it does not need to obtain
approval of its stockholders to enter into this Agreement and the Escrow
Agreement, to consummate the transactions contemplated hereby and thereby and to
perform its obligations hereunder and thereunder.
(c) GIR is the legal beneficial owner of at least 90% of the
outstanding voting capital stock of Trailers de Monterrey, S.A. de C.V, a
Mexican corporation ("TRAILERS"), free and clear of any and all Liens (as
defined below). Trailers is a corporation duly organized and validly existing
under the laws of the United Mexican States.
(d) GIR is the legal beneficial owner of at least 90% of the
outstanding voting capital stock of Distribuidora Automotriz Ramirez, S.A. de
C.V, a Mexican corporation ("DIARSA"), free and clear of any and all Liens.
DIARSA is a corporation duly organized and validly existing under the laws of
the Untied Mexican States.
Section 2.03 CONSENTS; NO CONFLICT. Except as set forth in Section
2.03 of the Disclosure Schedule, no consents, approvals, assignments, releases,
termination statements, filings, notifications or other similar authorizations
or filings ("CONSENTS") to the transactions contemplated by this Agreement or
the Escrow Agreement are required from or with any person or entity, whether an
individual, trustee, corporation, partnership, limited partnership, limited
liability company, trust, unincorporated organization, business association,
firm, joint venture or Governmental Authority (as defined below) (collectively,
a "PERSON"). Without limiting the generality of the foregoing, the Consents of
the IASA stockholders and the holders of the Obligaciones con Garantia
Fiduciaria (IASASA) 1992 formalized by means of the acta de emision (Indenture)
contained in public deed 14,956 dated September 2, 1992, granted before Mr.
Gilberto Allen, Notary Public 33 in Monterrey, N.L., (as amended from time to
time "Debentures"), to the transactions contemplated by this Agreement and the
Escrow Agreement are not required to consummate the transactions contemplated by
this Agreement and the Escrow Agreement. Assuming all Consents and other
actions described in Section 2.03 of the Disclosure Schedule have been obtained
and all filings and notifications listed in Section 2.03 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement and the Escrow Agreement by the Sellers, and the consummation of the
transactions contemplated hereby and thereby, do not and will not:
(a) violate or conflict with the respective ESCRITURA CONSTITUTIVA
or Bylaws (or other similar applicable charter document) of the Sellers;
(b) conflict with or violate any law, statute, ordinance, rule,
regulation, order, writ, judgment, injunction, decree, ruling, stipulation,
determination or award (collectively, a "GOVERNMENTAL ORDER") entered by or with
any federal, state or local governmental authority,
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regulatory or administrative agency, or governmental commission, court, tribunal
or arbitral body (collectively, the "GOVERNMENTAL AUTHORITY") applicable to
either of the Sellers;
(c) conflict with, result in any breach of, or constitute a Default
(as defined below) under any material Contracts (as defined below) relating to
the business or assets of either of the Sellers or to or by which either of the
Sellers is a party or is otherwise bound or affected, or result in the creation
of any claim, security interest, lien, option, subscription, call, or
encumbrance of any kind ("LIEN") on either of the Sellers, or any of their
respective assets;
(d) require either of the Sellers to notify or obtain any License
(as defined below) or Consent from any Person; or
(e) result in any other event that would, or is reasonably likely
to, affect the ability of either Seller to consummate the transactions
contemplated by this Agreement or the Escrow Agreement, except for such
violations, conflicts, Defaults, Licenses, Consents or other events which, in
the aggregate would not materially affect the ability of either Seller to
consummate the transactions contemplated hereby or thereby.
"DEFAULT" shall mean (a) any actual breach or default, (b) the
occurrence of an event that with the passage of time or the giving of notice or
both would constitute a breach or default or (c) the occurrence of an event that
with or without the passage of time or the giving of notice or both would give
rise to a right of termination, renegotiation or acceleration.
"CONTRACTS" shall mean any agreement, contract, note, loan, evidence
of indebtedness, purchase order, letter of credit, indenture, security or pledge
agreement, franchise agreement, undertaking, practice, covenant not to compete,
employment agreement, severance agreement, license, instrument, obligation or
commitment to which a Person is a party or is bound and which relates to the
Person's business or assets, whether oral or written.
"LICENSE" shall mean all licenses, authorizations, permits and
certificates.
Section 2.04 TITLE
IASA is the legal and beneficial owner of, and has the complete and
unrestricted power and the unqualified right to transfer, and is transferring,
the IASA Shares, free and clear of all Liens. With respect to the IASA Shares,
"LIENS" shall include any agreement limiting or restricting Sellers' right to
vote, transfer or otherwise dispose of the IASA Shares. Upon the delivery of
and payment of the amount indicated in Paragraph (a) of Section 1.02 herein, the
Purchasers will acquire good and valid title to the IASA Shares, free and clear
of all Liens.
Section 2.05 LITIGATION. There are no pending or, to the Sellers'
knowledge, threatened or anticipated judicial or administrative claims, actions,
suits, criminal prosecutions, governmental audits or investigations,
administrative proceedings, arbitrations, mediations or
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proceedings ("LITIGATION") which (i) would reasonably be expected, individually
or in the aggregate, to have a material adverse effect on the ability of the
Sellers to consummate the transactions contemplated by this Agreement or the
Escrow Agreement or (ii) question the validity of this Agreement, the Escrow
Agreement or any action taken or to be taken by the Sellers in connection
herewith or therewith.
Section 2.06 NO MATERIAL ADVERSE EFFECT. Since December 31, 1998,
to the Sellers' knowledge, there has not been any Company Material Adverse
Effect nor has there been any material failure by the Company to operate its
business in the ordinary course.
"COMPANY MATERIAL ADVERSE EFFECT" means any event, fact, effect or
change which, individually or in the aggregate, has, or is reasonably likely to
have, a material adverse effect on the condition (financial or other), business,
prospects, results of operations, assets, liabilities or operations of the
Company.
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Section 2.07 NO UNDISCLOSED LIABILITIES. To Sellers' knowledge, the
Company does not have any debts, liabilities or obligations of any nature
(whether accrued, absolute, contingent or otherwise) that would be required to
be reflected on, or disclosed or reserved against in, a balance sheet of the
Company or in the notes thereto, prepared in accordance with generally accepted
United States accounting principles consistently applied, except for (a) debts,
liabilities and obligations that were so reserved on, or disclosed or reflected
in, the balance sheet of the Company as of December 31, 1998 and the notes
thereto and (b) debts, liabilities or obligations arising in the ordinary course
of business since December 31, 1998.
Section 2.08 CERTAIN PAYMENTS. Each of the Sellers or each of the
directors, officers or agents of such Seller has not, directly or indirectly,
(a) made any contribution, gift, bribe, rebate, payoff, influence payment,
kickback or other payment to any Person, private or public, regardless of form,
whether in money, property or services (i) to obtain favorable treatment in
securing business, (ii) to pay for favorable treatment for business secured,
(iii) to obtain special concessions or for special concessions already obtained,
for or in respect of the Company or any Affiliate (as defined below) of the
Company or (iv) in violation of any Governmental Order or (b) established or
maintained any fund or asset that has not been recorded in the books and records
of the Company. "AFFILIATE" of a Person means any other Person that directly or
indirectly controls, or is controlled by, or under common control with, the
first Person.
Section 2.09 AGREEMENTS. Section 2.09 of the Disclosure Schedule
sets forth all agreements, contracts, leases, purchase orders, undertakings,
understandings, covenants not to compete, confidentiality agreements, licenses,
obligations or other commitments, whether oral or written, between each of the
Sellers or any of its Affiliates, on one hand, and each of the Purchasers or any
of its Affiliates, on the other hand.
Section 2.10 JOINT VENTURE AGREEMENTS. Each of the Sellers is in
compliance in all material respects under each of the agreements contemplated by
and entered into pursuant to the JV Agreement (together with the JV Agreement,
the "ADM AGREEMENTS").
Section 2.11 SELLERS' PROPRIETARY RIGHTS. Except as contributed or
licensed to the Company pursuant to Section 4.1(a) of the JV Agreement, the
Company does not use any of Sellers' Proprietary Rights (as defined below) in
the conduct of the Company's business as presently conducted and as presently
contemplated to be conducted. The Company has no obligation to compensate any
Person, including without limitation, the Sellers, for the use of any of the
Sellers' Proprietary Rights. "PROPRIETARY RIGHTS" mean all (a) U.S. and foreign
patents, patent applications, patent disclosures and improvements thereto,
including petty patents and utility models and applications therefor, (b) U.S.
and foreign trademarks, service marks, trade dress, logos, trade names and
corporate names and the goodwill associated therewith and registrations and
applications for registration thereof, (c) U.S. and foreign copyrights and
registrations and applications for registration thereof, (d) U.S. and foreign
mask work rights and registrations and applications for registration thereof,
(e) trade secrets and confidential business
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information (including ideas, formulas, compositions, inventions (whether
patentable or unpatentable and whether or not reduced to practice), know-how,
manufacturing and production processes and techniques, research and development
information, drawings, specifications, designs, plans, proposals, technical
data, copyrightable works, financial, marketing and business data, pricing and
cost information, business and marketing plans and customer and supplier lists
and information), (f) other proprietary rights, (g) copies and tangible
embodiments thereof (in whatever form or medium) and (h) licenses granting any
rights with respect to any of the foregoing.
Section 2.12 CLAIMS. Section 2.12 of the Disclosure Schedule sets
forth all actions, suits or other claims of the Sellers against any of the
Purchasers or any of their respective Affiliates.
Section 2.13 [INTENTIONALLY LEFT BLANK].
Section 2.14 BROKERS' FEES. All negotiations relating to this
Agreement and the Escrow Agreement have been carried out without the
intervention of any Person acting on behalf of the Sellers in such manner as to
give rise to any valid claim against the Purchasers for any brokerage or
finder's commission, fee or similar compensation.
Section 2.15 SUFFICIENCY OF THE TAX LIEN FUNDS. The amount
allocated to the Tax Lien Funds is sufficient to pay for any amounts due under
and cancellation of the embargo (attachment) in favor of the Secretariat of
Finance and Public Credit for non-payment of taxes, which was recorded in the
Public Registry of Property and Commerce in Monterrey on October 15, 1998, under
entry 1206, volume 150, Book 13, Section II (the "Embargo").
Section 2.16 MATERIAL MISSTATEMENTS OR OMISSIONS. No
representations or warranties by GIR or IASA in this Agreement, nor any
document, exhibit, statement, certificate or schedule furnished to Purchasers
pursuant hereto, including, without limitation, the Disclosure Schedule,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF PURCHASERS
As an inducement to GIR and IASA to enter into this Agreement,
Purchasers, jointly and severally, hereby represent and warrant to GIR and IASA,
which representations and warranties are, as of the date hereof, true and
correct:
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Section 3.01 INCORPORATION AND AUTHORITY OF PURCHASERS
(a) Accuride is a corporation duly formed and validly existing
under the laws of the State of Delaware and has all necessary power and
authority to enter into this Agreement and the Escrow Agreement, to carry out
its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby.
(b) Servicios AISA is a corporation duly formed and validly
existing under the laws of the United Mexican States and has all necessary power
and authority to enter into this Agreement and the Escrow Agreement, to carry
out its obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby pursuant to public deed 50,510 dated April 15,
1998, granted before Mr. Carlos Montano Pedraza, Notary Public 130 in Monterrey,
Mexico and recorded in the Public Registry of Property and Commerce in
Monterrey, N.L. on April 20, 1998 under entry 2232, volume 207-45, Book 4,
Commerce Section.
(c) Each of the Purchasers has taken all actions necessary to
secure all approvals required in connection herewith and therewith. The
execution and delivery of each of the Agreement and the Escrow Agreement and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action of each of the Purchasers
(including, without limitation, the resolutions of the Board of Directors of
Accuride dated as of May 18, 1999), and upon execution and delivery (assuming
due execution and delivery by the other parties hereto), each of the Agreement
and the Escrow Agreement will be the valid and legally binding agreement of each
of the Purchasers, enforceable against each of the Purchasers in accordance with
its terms and conditions.
Section 3.02 NO CONFLICT; CONSENTS
Except as set forth in Section 3.02 of the Disclosure Schedule, no
Consents to the transactions contemplated by this Agreement or the Escrow
Agreement are required from or with any Person. Assuming all Consents and other
actions described in Section 3.02 of the Disclosure Schedule have been obtained
and all filings and notifications listed in Section 3.02 of the Disclosure
Schedule have been made, the execution, delivery and performance of this
Agreement and the Escrow Agreement by Purchasers and the consummation of the
transactions contemplated hereby and thereby do not and will not:
(a) violate or conflict with the respective charter documents of
each of the Purchasers;
(b) conflict with or violate any Governmental Order applicable to
either of the Purchasers;
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(c) conflict with, result in any breach of, or constitute a Default
under, any material Contract relating to the business or assets of either of the
Purchasers or to or by which either of the Purchasers is a party or is otherwise
bound or affected, or result in the creation of any Lien on either of the
Purchasers or any of their respective assets;
(d) require either of the Purchasers to notify or obtain any
License or Consent from any Person; or
(e) result in any other event that would, or is reasonably likely
to, affect the ability of either of the Purchasers to consummate the
transactions contemplated by the Agreement or the Escrow Agreement, except for
such violations, conflicts, Defaults, Licenses, Consents or other events which,
in the aggregate, would not materially affect its ability to consummate the
transactions contemplated hereby or thereby.
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Section 3.03 AGREEMENTS. Section 3.03 of the Disclosure Schedule
sets forth all agreements, contracts, leases, purchase orders, undertakings,
understandings, covenants not to compete, confidentiality agreements, licenses,
obligations or other commitments, whether oral or written, between each of the
Sellers or any of its Affiliates, on one hand, and each of the Purchasers or any
of its Affiliates, on the other hand.
Section 3.04 CLAIMS. Section 3.04 CLAIMS. Section 3.04 of the
Disclosure Schedule sets forth all actions, suits or other claims of the
Purchasers against any of the Sellers or any of their respective Affiliates.
Section 3.05 CERTAIN PAYMENTS. Each of the Purchasers or each of
the directors, officers or agents of such Purchasers has not, directly or
indirectly, (a) made any contribution, gift, bribe, rebate, payoff, influence
payment, kickback or other payment to any Person, private or public, regardless
of form, whether in money, property or services (i) to obtain favorable
treatment in securing business, (ii) to pay for favorable treatment for business
secured, (iii) to obtain special concessions or for special concessions already
obtained, for or in respect of the Company or any Affiliate of the Company or
(iv) in violation of any Governmental Order or (b) established or maintained any
fund or asset that has not been recorded in the books and records of the
Company.
Section 3.06 JOINT VENTURE AGREEMENTS. Each of the Purchasers is in
compliance in all material respects under each of the AdM Agreements.
Section 3.07 BROKERS' FEES. All negotiations relating to this
Agreement and the Escrow Agreement have been carried out without the
intervention of any Person acting on behalf of the Purchasers in such manner as
to give rise to any valid claim against the Sellers for any brokerage or
finder's commission, fee or similar compensation.
Section 3.08 MATERIAL MISSTATEMENTS OR OMISSIONS. No
representations or warranties by the Purchasers in this Agreement, nor any
document, exhibit, statement, certificate or schedule furnished to the Sellers
pursuant hereto, including, without limitation, the Disclosure Schedule,
contains or will contain any untrue statement of a material fact, or omits or
will omit to state any material fact necessary to make the statements or facts
contained therein not misleading.
ARTICLE IV.
CONDITIONS
Section 4.01 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASERS. The
obligations of the Purchasers to consummate the transactions provided for hereby
are subject, in the reasonable discretion of the Purchasers, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by the Purchasers:
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(a) the representations and warranties in Article II shall be true
and correct in all material respects when made and at and as of the Closing Date
as if such representations and warranties were made at such time (except that
those representations and warranties which are made as of a specific date shall
be true and correct only as of such date);
(b) GIR and IASA shall have performed and satisfied in all material
respects all agreements and covenants required hereby to be performed or
satisfied by them prior to or at the Closing Date;
(c) no Governmental Authority shall have enacted, issued,
promulgated, enforced or entered any Governmental Order which is in effect as of
the Closing and which results in (i) a restraint, prohibition or other
interference with the ownership or operation by the Purchasers or any of their
Affiliates of all or any material portion of the business of the Company, (ii)
the imposition or confirmation of any material limitations on the ability of the
Purchasers effectively to exercise full rights of ownership of the IASA Shares,
including, without limitation, the right to vote the IASA Shares on any matters
properly presented to the stockholders, (iii) a requirement that the Purchasers
or any of their Affiliates divest any securities of the Company or any material
part of the Company's business, (iv) of making the transactions contemplated by
this Agreement illegal or otherwise prohibiting consummation of the such
transactions or (v) is reasonably likely to result in a Company Material Adverse
Effect (each of (i) through (v), a "SUBSTANTIAL DETRIMENT");
(d) all material Licenses or Consents from any Person, and all
filings, registrations and notifications necessary to permit GIR and IASA to
consummate the transactions contemplated by this Agreement shall have been
obtained or made. All such Licenses and Consents which have been obtained shall
be on terms that are not reasonably likely, directly or indirectly, to result in
a Substantial Detriment;
(e) no Person who or which is not a party to this Agreement shall
have commenced or threatened to commence any Litigation seeking to restrain or
prohibit, or to obtain damages in connection with, the transactions contemplated
by this Agreement;
(f) from the date of this Agreement, there shall not have occurred
any event, change or condition that, individually or in the aggregate, has had
or could reasonably be expected to have a Company Material Adverse Effect;
(g) the Company shall have received a written consent as well as
any other necessary documents from Citibank Mexico, S.A. to the consummation of
the transactions contemplated by this Agreement and the Escrow Agreement; and
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(h) GIR and IASA shall have delivered the documents required to be
delivered by them pursuant to Section 5.02 in form and content reasonably
satisfactory to Purchasers.
Section 4.02 CONDITIONS PRECEDENT TO OBLIGATIONS OF GIR AND IASA. The
obligations of GIR and IASA to consummate the transactions provided for hereby
are subject, in the reasonable discretion of GIR and IASA, to the satisfaction,
on or prior to the Closing Date, of each of the following conditions, any of
which may be waived by GIR or IASA:
(a) the representations and warranties in Article III shall be true
and correct in all material respects when made and at and as of the Closing Date
as if such representations and warranties were made at such time (except that
those representations and warranties which are made as of a specific date shall
be true and correct only as of such date);
(b) Purchasers shall have performed and satisfied in all material
respects all agreements and covenants required hereby to be performed or
satisfied by it prior to or at the Closing Date;
(c) the Company shall have received a written consent as well as
any other necessary documents from Citibank Mexico, S.A. to the consummation of
the transactions contemplated by this Agreement and the Escrow Agreement;
(d) IASA shall have received a release of its liability with
respect to the Completion Guaranty Agreement and the Credit Agreement with
Citibank de Mexico, S.A.;
(e) no Governmental Order, action or proceeding shall have been
instituted or threatened which makes the transactions contemplated by this
Agreement illegal or otherwise prohibited;
(f) no Person who or which is not a party to this Agreement shall
have commenced or threatened to commence any Litigation seeking to restrain or
prohibit, or to obtain damages in connection with the transactions contemplated
by this Agreement; and
(g) Purchasers shall have delivered the documents required to be
delivered by it pursuant to Section 5.01 in form and content reasonably
satisfactory to GIR and IASA.
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ARTICLE V.
DELIVERIES AT CLOSING
Section 5.01 DELIVERIES BY PURCHASERS AT CLOSING. Purchasers shall
deliver the following items at the Closing:
(a) $2,750,000 in immediately available funds to the account or
accounts specified in writing by the Sellers;
(b) $4,550,000 in immediately available funds to the Escrow
Account;
(c) a certificate, dated the Closing Date and signed by the
authorized officers of each of the Purchasers as to the fulfillment of the
conditions set forth in Section 4.02 (a) and (b);
(d) Escrow Agreement;
(e) the Long-term Purchase Agreement (as defined below); and
(f) such other documents and items as GIR and IASA may reasonably
request.
Section 5.02 DELIVERIES BY GIR AND IASA AT CLOSING. IASA and GIR (as
indicated) shall deliver or cause to be delivered the following items to
Purchasers at the Closing:
(a) Escrow Agreement executed by IASA;
(b) a certificate, dated the Closing Date and signed by the
authorized officers of each of GIR and IASA as to the fulfillment of the
conditions set forth in Section 4.01(a) and (b);
(c) a legal opinion from Daniel Sierra, counsel of IASA and GIR, in
substantially the form of Exhibit D hereto;
(d) certificates representing the IASA Shares, endorsed for
transfer to the Purchasers, free and clear of any and all Liens;
(e) copies of the Powers of Attorney described in Section 2.02(b);
(f) the Long-term Purchase Agreement executed by DIARSA and
Trailers; and
(g) such other documents and items as Purchasers may reasonably
request.
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Section 5.03 FURTHER DELIVERIES. At any time on or after the date
of this Agreement, each party will execute and deliver any further assignments,
conveyances and other assurances, documents and instruments of transfer
reasonably requested by another party to consummate the transactions
contemplated hereby.
ARTICLE VI.
ADDITIONAL AGREEMENTS
Section 6.01 FURTHER ASSURANCES. Upon the terms and subject to the
conditions contained herein, the parties agree, after the execution of this
Agreement, (i) to use all reasonable efforts to take, or cause to be taken, all
actions and to do, or cause to be done, all things necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement, (ii) to execute any documents, assignments, assurances, instruments
or conveyances of any kind which may be reasonably necessary or advisable to
carry out any of the transactions contemplated hereunder, and (iii) to cooperate
with each other in connection with the foregoing. Without limiting the
foregoing, the parties agree to use their respective reasonable efforts (i) to
obtain all necessary Consents from any Person; PROVIDED, HOWEVER that Purchasers
and the Sellers shall not be required to make any payments, commence litigation
or agree to modifications of the terms thereof in order to obtain any such
Consents, (ii) to give all notices to and make all registrations and filings
with any Person and (iii) to fulfill all conditions to this Agreement.
Section 6.02 NO SHOP. From the date hereof through the Closing or
the earlier termination of this Agreement, each of the Sellers shall not, and
shall cause its Affiliates and their respective employees, agents or advisors
(including without limitation investment bankers, attorneys and accountants),
not to, directly or indirectly, solicit, initiate or continue any discussions or
negotiations with, or encourage or respond to any inquiries or proposals by, or
participate in any negotiations with, or provide any information to, or
otherwise cooperate in any other way with, any corporation, partnership, person
or other entity or group, other than the Purchasers concerning any sale of all
or a portion of the IASA Shares (a "PROPOSED ACQUISITION TRANSACTION"). From
the date hereof through the Closing or the earlier termination of this
Agreement, the Sellers shall not, directly or indirectly, through any officer,
director, partner, member, shareholder, consultant, advisor, accountant,
employee, agent or other representative ("REPRESENTATIVE") otherwise, solicit,
initiate or encourage the submission of any proposal or offer from any person
relating to any Proposed Acquisition Transaction or participate in any
negotiations regarding, or furnish to any other person any information with
respect to the Company or otherwise cooperate in any way with, or assist or
participate in, facilitate or encourage, any effort or attempt by any other
person to seek or effect a Proposed Acquisition Transaction.
Section 6.03 NO SOLICITATION.
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(a) Attached hereto as Exhibit E is a list of employees that are
considered initial employees of the Company, Servicios AISA, or Rims y Ruedas
AdM, S.A. de C.V. ("RIMS AdM") (the "INITIAL EMPLOYEES"), which list may include
employees who are currently employees of the Sellers or Ruedas AISA, S.A. de
C.V. or other Affiliates of the Sellers. For a period of five years following
the Closing Date, each of the Sellers shall not, and shall cause its Affiliates
not to, directly or indirectly, hire or retain, or offer to hire or retain any
of the Initial Employees or any employees subsequently hired by the Company,
Servicios AISA Rims AdM or their future Affiliates, regardless of whether such
employee is paid a wage, commission, fee or otherwise, except for those
employees who have been terminated by, or who have resigned from, the Company,
Servicios AISA, Rims AdM or their future Affiliates prior to commencement of
employment discussions with the Sellers or their Affiliates. Notwithstanding the
foregoing, the Sellers may not, and the Sellers shall cause their Affiliates not
to, hire those employees who have resigned from the Company, Servicios AISA,
Rims AdM or their future Affiliates until the expiration of three months from
such employee's effective date of resignation, which provision shall not apply
if such provision violates Mexican laws. In case the Sellers or their Affiliates
fail to comply with this provision, Sellers, jointly and severally, shall pay to
Purchasers, per employee hired, an amount equal to two times the annual
remuneration that such employee was receiving upon termination of his or her
relationship with the Company, Servicios AISA, Rims AdM or their future
Affiliates.
(b) For a period of five years following the Closing Date, each of
the Purchasers and the Company shall not, and shall cause its Affiliates not to,
directly or indirectly, hire or retain, or offer to hire or retain any employee
of GIR, IASA or their Affiliates, regardless of whether paid a wage, commission,
fee or otherwise, except for the Initial Employees and employees who have been
terminated by, or who have resigned from, GIR, IASA or their Affiliates prior to
commencement of employment discussions with the Purchasers or their Affiliates.
Notwithstanding the foregoing, the Purchasers may not, and the Purchasers shall
cause their Affiliates not to, hire those employees who have resigned from GIR,
IASA or their Affiliates until the expiration of three months from such
employee's effective date of resignation, which provision shall not apply if
such provision violates Mexican laws. In case the Purchasers or their Affiliates
fail to comply with this provision, Purchasers shall pay to Sellers, per
employee hired, an amount equal to two times the annual remuneration that such
employee was receiving upon termination of his or her relationship with GIR,
IASA or their Affiliates.
Section 6.04 NOTIFICATION OF CERTAIN MATTERS. From the date hereof
through the Closing, each of the parties hereto shall give prompt notice to the
other party of (a) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement or in any exhibit or schedule hereto to be untrue or
inaccurate in any material respect and (b) any failure of such party or its
respective Affiliates or Representatives, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it under
this Agreement or any exhibit or schedule hereto; PROVIDED, HOWEVER, that such
disclosure shall not be deemed to cure any breach of a
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representation, warranty, covenant or agreement or to satisfy any condition. GIR
and IASA shall promptly notify Purchasers of any Default, the threat or
commencement of any Litigation, or any development that occurs before the
Closing that could in any way materially affect the Company or its business.
Section 6.05 CONTINUATION OF RIGHTS AND OBLIGATIONS. Except as
otherwise specifically set forth in this Agreement, the rights and obligations
of the parties hereto under each of the AdM Agreements, including, without
limitation, the indemnification provisions set forth in the JV Agreement, shall
continue in full force and effect in accordance with the terms, conditions and
limitations set forth therein. The parties hereto agree that the representations
and warranties set forth in this Agreement shall not amend, limit or otherwise
modify in any manner any of the respective parties' rights and obligations under
any of the AdM Agreements. It being further understood by the parties that the
foregoing shall not preclude a claim under this Agreement by any party hereto
based upon the breach of any such representation or warranty.
Section 6.06 [INTENTIONALLY LEFT BLANK]
Section 6.07 CONTINUATION OF SERVICES. Except as modified in this
Agreement, the Sellers hereby agree to continue to provide all services provided
under the Technical Services Agreement (as defined below), the Wheel
Requirements Agreement and the Bailment Agreement in accordance with such
agreements until the proper termination of such agreements, in accordance
therewith or as provided in this Agreement.
Section 6.08 CONFIDENTIAL INFORMATION
(a) PROTECTION OF CONFIDENTIAL AND PROPRIETARY INFORMATION. The
parties acknowledge and agree that the prospects for the present and future
success of the Company depend upon the protection by the Company and the
Purchasers of the confidential and proprietary business information, trade
secrets, technology and know-how ("CONFIDENTIAL INFORMATION") of the Company,
irrespective of the manner in which the Company may obtain it (e.g., whether
developed independently by the Company, obtained from Accuride, IASA or GIR or
otherwise); and each of the parties acknowledges and agrees that irreparable
harm to the Company will result if any Confidential Information of the Company
is disclosed to any Person that is neither a party to this Agreement nor a duly
authorized Representative of any Person that is a party hereto, or if any of the
parties uses Confidential Information anywhere for any purpose or in any context
other than in connection with and for the purpose of advancing the legitimate
interests of the Company.
(b) CERTAIN COVENANTS REGARDING THE TREATMENT OF CONFIDENTIAL
INFORMATION GENERALLY. For the reasons stated in Section 6.08(a), the Sellers
hereby covenant and agree that they and each and every one of their
Representatives and Affiliates, including any future
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Affiliates and any Affiliates that cease to be such, during the period
commencing as of the Closing Date and continuing for ten years, shall:
(i) not disclose any Confidential Information of the
Company or of any other party to the JV Agreement or this Agreement to any
Person who is not a party to the JV Agreement or this Agreement or a duly
authorized Representative of any party hereto; and
(ii) maintain and protect, and cause each and every
Representative and other Person under its control to maintain and protect, the
confidentiality, secrecy, integrity and quality of the Confidential Information
at issue.
The Sellers shall be liable for any failure of strict compliance with
this Section 6.08 either by the Sellers or by any of their Representatives;
notwithstanding the foregoing, however, the Sellers shall not be held liable for
any unauthorized disclosure of or failure to protect Confidential Information
under this Section 6.08 in cases where: (1) at the time of disclosure, such
Confidential Information was available to the general public in a manner not
involving any breach of the JV Agreement or this Agreement or of any other
Agreement between the parties, thus rendering such information no longer
confidential; or (2) the information was made available to the disclosing party
by a Person not bound by any covenant of confidentiality with any of the parties
hereto with respect thereto; or (3) disclosure was compelled by applicable law
or the order of any court of competent jurisdiction.
(c) CERTAIN ACTIVITIES DEEMED UNAUTHORIZED USE OF CONFIDENTIAL
INFORMATION TO THE DETRIMENT OF THE COMPANY AND THE PURCHASERS. Each of the IASA
and GIR covenants and agrees that, during the period beginning the Closing Date
and ending ten years thereafter, if it or any of its respective Affiliates
engages within the territory of the United Mexican States, directly or
indirectly, in any activity or operation involving or relating in any manner
whatsoever to compete with the Company's business as conducted as of the date of
this Agreement will, compete with the business of the Company as currently being
conducted or otherwise, whether by ownership interest (the "PROHIBITED OWNERSHIP
INTEREST") or otherwise, then such activity or operation shall be deemed
automatically to constitute: (1) an unauthorized use of Confidential Information
of the Company, and therefore a breach of this Agreement; and (2) an injury to
the Company in which the amount of damages cannot be assessed and which injury
may be compensated only upon assessment and payment of the damages described in
Section 6.08(d). For purposes of this Agreement, business of the Company shall
include the tire and wheel assembling and sequencing for sales to original
equipment manufacturers. Notwithstanding the foregoing, the parties hereto agree
that (i) DIARSA may operate in accordance with the terms of Section 5.6 of the
JV Agreement; provided, however, that DIARSA may sell Wheels to vehicle
manufacturers or Wheel distributors in an amount not to exceed $250,000 per year
(the "CAP"); provided, further, however, that the Cap shall be increased
annually by 10%, (ii) Prohibited Ownership Interest shall not apply to or as a
result of fundamental corporate transactions,
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including mergers, spin-offs and sales of substantially all of the capital stock
or assets of the Sellers or its Affiliates (provided, that any such successor or
acquirer agrees in writing to be bound by the terms of this Section 6.08(c)),
except that the Sellers and their Affiliates shall not acquire any businesses
which have more than 25% of their revenues derived from businesses which compete
with the Company in the business currently conducted by the Company, and with
respect to businesses which derive less than 25% of their revenue from
businesses which compete with the Company in the business currently conducted by
the Company, the Sellers or their Affiliates will dispose of any competing
businesses acquired within 12 months of such acquisition and (iii) tire and
wheel assembling and sequencing in connection with sales of trailers, trucks,
tractors, buses and chassis by GIR or its Affiliates shall not be prohibited
under this Section 6.08(c).
(d) Damages for Breach of Covenant to Refrain from Activities
Constituting Unauthorized Use of Confidential Information to the Detriment of
the Company and the Purchasers. Any breach of the covenants in Section 6.08(c)
shall empower the Company to claim and obtain damages from the Sellers in the
amount of ten million dollars (U.S. $10,000,000).
Section 6.09 EQUIPMENT MAINTENANCE. Notwithstanding anything to the
contrary in the Wheel Requirements Agreement and the Bailment Agreement, (i) the
Company shall instruct IASA, and IASA shall comply with the Company's reasonable
instructions as indicated, regarding all maintenance work to all Wheel
manufacturing equipment to keep them in good working order in accordance with
the terms of the Wheel Requirements Agreement and the Bailment Agreement until
such time as the Company has completed its relocation of such equipment to New
Facility (as defined below), and (ii) the maintenance costs relating to the
materials shall not be included as Conversion Costs (as defined in the Wheel
Requirements Agreement) for purposes of the Wheel Requirements Agreement. "NEW
FACILITY" means the new manufacturing facility the Company is completing in
Cienega de Flores, Mexico as provided in the Transfer Schedule to be determined
in good faith by the parties hereto (the "TRANSFER SCHEDULE"), which the parties
shall use their respective reasonable efforts to effect. IASA shall provide full
access to any personnel, employees and contractors of the Company during normal
working days and hours at IASA Facility, in order to verify proper maintenance
of all Wheel manufacturing equipment. If the relocation to the New Facility is
not completed by December 31, 1999 as contemplated in the Transfer Schedule, the
parties shall revise the Transfer Schedule in good faith and use their
respective reasonable efforts to effect such revised Transfer Schedule.
Section 6.10 INFORMATION TECHNOLOGY SERVICES. IASA and the Company
hereby agree to extend the duration of the Technical Services Agreement
(contrato de prestacion de servicios tecnicos) (the "TECHNICAL SERVICES
AGREEMENT") dated as of November 5, 1997 between IASA and the Company, to
provide information technology services, including computer hardware support and
software support, until the earlier of March 31, 2000 or the date that the
Company provides written notice to IASA terminating the Technical Services
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Agreement. After the Closing, the Company shall pay IASA for services rendered
the applicable hourly rate set forth in the Technical Services Agreement. The
Technical Services Agreement shall continue in full force and effect in
accordance with the terms and conditions agreed to therein, except as modified
herein.
Section 6.11 LONG-TERM PURCHASE AGREEMENTS. GIR and IASA will cause
each of Trailers and DIARSA to enter into a Long-term Purchase Agreement (the
"LONG-TERM PURCHASE AGREEMENT") in substantially the form attached hereto as
Exhibit E.
Section 6.12 LEASE AGREEMENTS.
(a) IASA, the Company and Servicios AISA hereby extend the term of
the lease agreements (contratos de arrendamiento) executed on November 5, 1997
(the "LEASES"), for the use of 837 square meters of office space located at
Avenida Universidad 1011 Norte, San Nicolas de los Garza, Nuevo Leon (the
"MONTERREY OFFICE") through December 31, 1999, unless sooner terminated by
written notice from the Company or Servicios AISA to IASA; PROVIDED, HOWEVER,
that the Company or Servicios AISA may at its option extend the term of the
Leases for an additional period not to exceed 45 days; PROVIDED, FURTHER,
HOWEVER, that the Company or Servicios AISA may reduce the area under the Leases
based on the actual needs of the Company or Servicios AISA by providing written
notice of such reduction to IASA; PROVIDED, FURTHER; HOWEVER, that upon such
reduction, there shall be a corresponding reduction in the rent payable under
the Leases. The Leases shall continue in full force and effect subject to the
terms and conditions agreed to therein, except as modified herein.
(b) The rights and obligations of the parties hereto under the
lease agreement (contrato de arrendamiento) executed on November 5, 1997 for the
use of 120 square meters of office space located at Homero 1425, Suite 402,
Colonia Polanco in Mexico City, Federal District shall continue in full force
and effect until termination of such lease, which shall occur 30 days after the
Closing Date; PROVIDED, that the Company shall have the option to extend this
period for an additional 30 days by providing written notice to IASA.
Section 6.13 LABOR MATTERS. The parties hereto agree to the matters
set forth in the Addendum Regarding Labor Matters attached hereto as Addendum 1.
Section 6.14 TAXES. The Sellers shall be responsible for all income
taxes relating to the sale, transfer and assignment of the IASA Shares.
Section 6.15 EMPLOYEE PARKING. Sellers agree that the employees of
the Company shall have the right to continue to use IASA's parking lot as
currently being used by them for a period of 90 days following the Closing;
PROVIDED, that the Company shall have the option to extend this period for an
additional 30 days, and further provided that any Company
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employees who continue to work at the Monterrey Office shall have the right to
continue to use IASA's parking lot as currently being used by them until the
proper termination of the Leases.
Section 6.16 TERMINATION OF WHEEL REQUIREMENTS AGREEMENT. The
parties agree that the Wheel Requirements Agreement will terminate at such time,
as the Company has completed its relocation to the New Facility as provided in
the Transfer Schedule, which the parties shall use their respective reasonable
efforts to effect.
Section 6.17 ALLOCATION OF WRITTEN OFF EQUIPMENT AND REMOVAL OF
EQUIPMENT.
(a) The parties agree that the assets which have been previously
retired and written off by the Company shall be allocated between the Company
and IASA as provided in EXHIBIT F.
(b) Prior to the time the Company has completed its relocation to
the New Facility as provided in the Transfer Schedule, which the parties shall
use their respective reasonable efforts to effect, the Company, at its sole
expense, shall have removed or caused the removal of its remaining Wheel-related
equipment and inventory currently located at the IASA Facility. Absent a
written agreement to the contrary between the Company and IASA, IASA may remove
any equipment or inventory remaining after such relocation, and the Company will
reimburse IASA for reasonable expenses associated with the removal and storage
of such equipment and inventory.
Section 6.18 MANAGEMENT OF THE IASA FACILITY; MONTHLY MEETINGS.
Notwithstanding the provisions of the Wheel Requirements Agreement, after the
Closing and until the Company has completed its relocation to the New Facility
as provided in the Transfer Schedule, the Company shall have the temporary right
to supervise the management of the Wheel-production operations of the IASA
Facility. After the Closing, the parties hereto shall attend monthly meetings to
discuss matters related to the Wheel-production operation of the IASA Facility
and the completion of the relocation to the New Facility. Except as otherwise
set forth in Addendum 1, all labor obligations and liabilities regarding all
personnel of the Wheel-production operations at the IASA Facility shall remain
IASA's sole responsibility, regardless of the provisions in this Section 6.18.
Section 6.19 CANCELLATION OF THE EMBARGO. If for any reason the Tax
Lien Funds are insufficient for cancellation of the Embargo, the Sellers,
jointly and severally, agree to reimburse the Purchasers for any amount in
excess of the Tax Lien Funds necessary to cancel the Embargo, as well as any
costs and expenses, including, without limitation, attorneys' fees, incurred by
the Purchasers in connection with such cancellation. Anything in this Agreement
to the contrary notwithstanding, the Purchasers shall be entitled to withhold
and set off against any amount due to the Sellers under any agreement between
either of the Sellers, on the one hand,
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and either of the Purchasers, on the other hand, any amount as to which the
Sellers are obligated to pay pursuant to this Section 6.19.
ARTICLE VII.
INDEMNIFICATION
Section 7.01 INDEMNIFICATION.
(a) Sellers, jointly and severally, shall indemnify, defend and
save and hold harmless the Purchasers, the Company and their respective
officers, directors, employees and other agents (collectively, the "PURCHASERS
INDEMNIFIED PARTIES"), jointly and severally, from and against any and all
losses, liabilities, adverse claims, causes of action, damages, demands,
contingencies, settlement, fines, assessments, penalties, charges, costs,
obligations and expenses of every kind and description whatsoever (including,
without limitation, attorneys' fees and litigation, arbitration and other
dispute resolution costs), whether known or unknown, foreseen or unforeseen, or
foreseeable or unforeseeable (a "LOSS"), arising directly or indirectly from,
attributable to, as a result of or otherwise in connection with (a) any breach
by the Sellers of any of their covenants or obligations contained in this
Agreement or in any of the other documents delivered hereunder to be performed
by the Sellers, (b) any breach by the Sellers of, or any inaccuracy in, any
representation or warranty made by the Sellers in this Agreement or any other
documents delivered hereunder by the Sellers, or (c) the Sellers' past, current
or future operations at the IASA Plant (as defined in the JV Agreement) in
connection with the Wheel business, including, without limitation, all Losses
relating to or arising in any manner out of any matter involving contamination
or pollution of any land, site, surface water, ground water, air or soil, or of
equipment or machinery, or of buildings and other structures of any kind,
located at the IASA Plant or in the vicinity thereof. The indemnity obligations
under this Section 7.01(a) shall be construed and applied in the broadest manner
permitted under applicable law and shall survive any termination of this
Agreement for so long as it remains possible that any Purchasers Indemnified
Party indemnified under this Section 7.01(a) may incur any Loss or Losses of the
kind described or referred to herein.
(b) Purchasers, jointly and severally, shall indemnify, defend and
save and hold harmless the Sellers and their respective officers, directors,
employees and other agents (collectively, the "SELLERS INDEMNIFIED PARTIES"),
jointly and severally, from and against any and all Losses arising directly or
indirectly from, attributable to, as a result of or otherwise in connection with
(a) any breach by the Purchasers of any of its covenants or obligations
contained in this Agreement or in any of the other documents delivered hereunder
to be performed by the Purchasers or (b) any breach by the Purchasers of, or any
inaccuracy in, any representation or warranty made by the Purchasers in this
Agreement or any other documents delivered hereunder by the Purchasers. The
indemnity obligations under this Section 7.01(b) shall be construed and applied
in the broadest manner permitted under applicable law and shall survive any
termination of this Agreement for so long as it remains possible that any
Sellers Indemnified Party
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indemnified under this Section 7.01(b) may incur any Loss or Losses of the kind
described or referred to herein.
Section 7.02 INDEMNIFICATION PROCEDURES.
For purposes of this Section 7.02, the party seeking indemnification
shall be known as the "INDEMNIFIED PARTY" and the party from whom
indemnification is sought shall be known as the "INDEMNIFYING PARTY." As soon as
reasonably practicable after receipt by an Indemnified Party of notice of any
Loss in respect of which an Indemnifying Party may be liable under this Article
VII, the Indemnified Party shall give notice thereof to the Indemnifying Party,
setting forth in reasonable detail the facts and circumstances pertaining
thereto, but the failure to give such notice shall not relieve the Indemnifying
Party of its obligations under this Article VII unless and to the extent that
the Indemnifying Party is prejudiced by such failure. In the event that the Loss
arises out of or results from a claim by any third party, the Indemnified Party
shall permit the Indemnifying Party, at its option and expense, to assume the
defense of, and subject to the consent of the Indemnified Party, which shall not
be unreasonably withheld, in each case settle or otherwise dispose of such claim
by counsel reasonably satisfactory to the Indemnified Party, provided that the
Indemnified Party may participate in such defense by counsel of its own choice,
but the fees, expenses and other charges of such counsel will be solely for the
account of the Indemnified Party, unless: (a) the employment of counsel by the
Indemnified Party has been authorized in writing by the Indemnifying Party, (b)
there is a conflict or potential conflict (based on advice of counsel to the
Indemnified Party reasonably acceptable to the Indemnifying Party) between the
Indemnified Party and the Indemnifying Party, or (c) the Indemnifying Party has
not in fact employed counsel to assume the defense of such action within a
reasonable time after receiving notice of the commencement of the action, and
provided, further, that the Indemnified Party shall be entitled to control such
defense jointly with the Indemnifying Party in the case of any litigation
referred to in clause (b) of the immediately preceding proviso to this sentence.
Notwithstanding anything to the contrary in this Section 7.02, without the prior
written consent of each Indemnified Party (or of each Indemnifying Party if the
Indemnified Party is defending such third party claim), which consent shall not
be unreasonably withheld, the Indemnifying Party (or Indemnified Party, as the
case may be) shall not consent to the entry of any judgment or enter into any
settlement that does not include an unconditional release of each Indemnified
Party (or Indemnifying Party) from all liabilities in respect of such Losses.
The Indemnifying Party shall pay for any Loss promptly in cash once its
responsibility has been established.
Section 7.03 SPECIFIC PERFORMANCE.
Each of the parties acknowledges and agrees that the other parties
would be irreparably damaged in the event the provisions of this Agreement are
not performed in accordance with its specific terms or otherwise are breached.
Therefore, notwithstanding anything to the contrary in this Agreement, each of
the parties agrees that the other parties shall be entitled to enforce
specifically the performance by such first party under this Agreement. The
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Accuride Servicios AISA IASA GIR Company
24
<PAGE>
remedies described in this Section 7.03 shall be in addition to, and not in lieu
of, any other remedies that the parties hereto may elect to pursue.
ARTICLE VIII.
GENERAL PROVISIONS
Section 8.01 TERMINATION
(a) This Agreement and the transactions contemplated hereby may be
terminated or abandoned at any time prior to the Closing Date:
(i) by the mutual written agreement of the parties hereto;
(ii) by the written notice from the Purchasers to the
Sellers if the conditions set forth in Section 4.01 have not been satisfied on
or prior to July 31, 1999;
(iii) by the written notice from the Sellers to the
Purchasers if the conditions set forth in Section 4.02 have not been satisfied
on or prior to July 31, 1999; or
(iv) by any party if a final nonappealable judgment has been
entered against such party or any of its Affiliates restraining, prohibiting, or
declaring illegal the consummation of this Agreement or the transactions
contemplated hereby or which imposes or awards damages which would have a
material adverse effect on the economic benefits contemplated hereby.
Notwithstanding the above, a party shall not be allowed to exercise
any right of termination pursuant to this Section 8.01(a) if the event giving
rise to the termination right shall be due to the failure of such party to
perform or observe in any material respect any of the covenants or agreements to
be performed or observed by such party.
(b) In the event this Agreement is terminated in accordance with
Section 8.01(a), no party shall have any further liability hereunder, except for
willful breach of this Agreement.
Section 8.02 EXPENSES. Except as otherwise specified in this
Agreement, each party hereto shall pay its own legal, accounting, out-of-pocket
and other expenses incident to this Agreement and to any action taken by such
party in preparation for carrying this Agreement into effect.
Section 8.03 NOTICES. All notices and other communications given or
made pursuant hereto shall be in writing, with all postage and other delivery
charges prepaid, and shall be deemed to have been duly given or made (i) as of
the date delivered, if delivered personally, (ii) as of the day after being
deposited with a recognized overnight courier, or (iii) when
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<PAGE>
transmitted if transmitted by facsimile with electronic confirmation; provided
that all such notices and other communications must be addressed to the parties
at the following addresses (or at such other address for a party as shall be
specified by like notice).
(a) if to IASA or GIR:
Industria Automotriz, S.A. de C.V.
Avenida Universidad 1011 Norte, Planta Baja
San Nicolas de los Garza, Nuevo Leon
C.P. 66450 Mexico
Attention: Chairman
Fax: 52-8-376-9098
With a copy to:
Grupo Industrial Ramirez, S.A.
Avenida Universidad 1004 Norte
San Nicolas de los Garza, Nuevo Leon
C.P. 66450 Mexico
Attention: Chairman
Fax: 52-8-376-5949
(b) if to Purchasers or the Company:
Accuride Corporation
2315 Adams Lane
P.O. Box 40
Henderson, Kentucky 42420
Attention: David K. Armstrong
Fax: (502) 827-7601
With a copy to:
Latham & Watkins
135 Commonwealth Drive
Menlo Park, California 94025
Attention: Peter F. Kerman, Esq.
Fax: 650-463-2600
and
Santamarina y Steta, S.C.
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26
<PAGE>
Torre Comercial America
Batallon de San Patricio 111-1102
Garza Garcia, N.L. 66269
Attention: Jorge Barrero Stahl
Fax: 528.368.0111
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<PAGE>
Section 8.04 PUBLIC ANNOUNCEMENTS. No party to this Agreement shall
make any public announcements in respect of this Agreement or otherwise
communicate with any news media without prior notification to the other party,
and the parties shall cooperate as to the timing and contents of any such
announcement, subject to the requirements of Mexican laws with respect to a
public company's disclosure requirements.
Section 8.05 HEADINGS. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 8.06 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that the transactions contemplated hereby are fulfilled to the greatest extent
possible.
Section 8.07 ENTIRE AGREEMENT. This Agreement (including the
Exhibits hereto), the Disclosure Schedule and the Escrow Agreement constitute
the entire agreement among the parties and supersede all prior agreements and
undertakings with respect to the subject matter hereof.
Section 8.08 ASSIGNMENT. Neither this Agreement nor any of the
rights or obligations hereunder may be assigned by a party without the prior
written consent of the other parties hereto, except that the parties may assign
their rights hereunder (either before or after the Closing Date), to an
Affiliate of such party with the prior written consent of the other party, which
consent shall not be unreasonably withheld. Subject to the foregoing, this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns.
Section 8.09 DISPUTE RESOLUTION.
(a) PRE-ARBITRATION EFFORTS TO RESOLVE DISPUTES. Each of the
parties hereto agrees to attempt in good faith to resolve any dispute,
controversy or claim that may arise in any manner whatsoever with respect to
this Agreement, the Escrow Agreement and the transactions contemplated hereby
and thereby (collectively, the "DISPUTE") and each party hereby designates its
chief executive officer as the individual who has primary authority and
responsibility therefor. Each such designated officer of a party involved in any
Dispute shall attempt in good faith to resolve such Dispute within 30 days after
becoming aware of the Dispute.
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<PAGE>
(b) REQUIREMENTS OF BINDING ARBITRATION; SCOPE. Each and every
Dispute shall be solely and finally settled by binding, non-appealable
arbitration at Dallas, Texas, U.S.A. not later than six months following the
initial notice of arbitration (which notice shall be given in writing to the
party against whom the claim is being made, and to the arbitration
administrator, by the party initiating the arbitration) in accordance with the
International Arbitration Rules of the American Arbitration Association ("AAA"),
as modified by the provisions of this Section 8.09.
(c) SELECTION OF ARBITRATORS. Each and every arbitration hereunder
shall be conducted by a panel of three arbitrators. The Purchasers shall select
one arbitrator, and the Sellers shall select one arbitrator, not later than 10
days after the initial notice of arbitration. The AAA shall have power to select
either or both such arbitrators if they have not been selected by the parties as
required within the time specified. Not later than 20 days after the selection
and appointment of the two arbitrators, the two appointees shall choose a third
arbitrator to serve as the chairperson of the arbitration panel. If the two
party-appointees cannot agree regarding the selection of the third arbitrator
within such 20 day period, then the AAA shall have the power to select the third
arbitrator. Each arbitrator appointed to hear any Dispute shall have no
relationship or connection with any party to this Agreement or with any of their
respective Affiliates or with legal counsel to any such party or Affiliate. In
the event of the death or disability of an arbitrator, a new arbitrator shall be
selected in the same manner as, and by the same party that selected, the
previous arbitrator.
(d) GOVERNING LAW AND ARBITRATION RULES. The provisions of this
Section 8.09, the International Arbitration Rules of the AAA, and the contract
and other substantive laws of the United Mexican States, as modified by the
terms of this Section 8.09, shall govern the arbitration of any and all
Disputes, and in the event of any conflict between the laws of Mexico and the
Federal Arbitration Act, 9 U.S.C. ss.ss.1 et. seq. (1990) (tHE "ARBITRATION
Act"), in connection with any arbitration of any Dispute hereunder, it is the
express intent of the parties that the substantive laws of Mexico, as modified
by this Section 8.09, shall govern to the maximum extent permitted by law.
(e) BINDING ARBITRATION. The award rendered in connection with any
arbitration conducted in accordance with this Section 8.09 shall be final and
binding upon the parties, and any judgment upon such award may be entered and
enforced by any court of competent jurisdiction in any country without any
further proceedings on the merits of the case. The parties agree that the award
of the arbitral tribunal shall be the sole and exclusive remedy between them
with respect to the Dispute. The parties hereby waive all jurisdictional
defenses in connection with any arbitration instituted under this Section 8.09
and the enforcement of any award or judgment rendered pursuant thereto.
(f) EXPLANATION OF AWARD. Promptly following the rendering of an
order or award in the arbitration of any Dispute, the arbitrators shall issue to
the interested parties
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<PAGE>
hereunder a written explanation in the English language, with a certified
translation thereof in the Spanish language, of the reasons for such order or
award and a full statement of the facts found and the rules of law applied in
reaching the decision.
(g) ENFORCEMENT OF AWARD. With respect to any award issued by the
arbitrators pursuant to this Agreement, the parties expressly agree: (1) to the
prosecution of an action by one or more parties against any other party or
parties in any court of the United States of America, or in any court of the
State of Nuevo Leon or of the United Mexican States located in Monterrey, Nuevo
Leon, to confirm and enforce such arbitration award; (2) that any such
arbitration award shall constitute conclusive proof of the validity of the
determinations of the arbitrators underlying such award; and (3) that any court
of the United States of America, or any court of the State of Nuevo Leon or of
the United Mexican States, may enter judgment upon and enforce such award,
whether pursuant to the Inter-American Convention on International Commercial
Arbitration (9 U.S.C. Sections 301-307), the Arbitration Act, the other laws of
the United States of America or of the United Mexican States or of the State of
Nuevo Leon, respectively, or otherwise, without any further proceedings on the
merits of the case.
(h) LANGUAGE OF ARBITRATION. All proceedings in any arbitration
conducted hereunder shall be conducted in the English language, and all
documents, exhibits and other evidence submitted in Spanish by any party shall
be accompanied by a certified English translation thereof; PROVIDED, HOWEVER,
that upon request by any party to the arbitration all such proceedings, hearings
and evidence shall be translated simultaneously into the Spanish language for
the convenience of such party.
(i) DISCOVERY; PRESENTATION OF CASE. Not later than 60 days
following the delivery of the notice of arbitration, each side shall produce and
deliver to the arbitrators and to the other parties copies of all documents and
witness testimony upon which it plans to rely, as well as a list identifying
such documents and witnesses, which list shall contain all information necessary
for a full understanding of the legitimate issues raised in the arbitration,
including, without limitation, the following: (1) a written statement of the
factual basis of the claim or defense and the legal theories upon which each
claim or defense is based; (2) the names and addresses of all individuals,
including witnesses whom the disclosing party expects to call to present
testimony or other evidence during the arbitration proceeding and other
individuals whom the party believes may have knowledge or information relevant
to the arbitration, description of the nature of the knowledge or information
that each such individual is believed to possess, and a summary of each such
witness' expected testimony; (3) the names and addresses of all individuals who
have given statements, along with copies of those statements; (4) a written
computation of the measure of damages alleged by the disclosing party and the
documents or summary of the testimony upon which such computation or measure is
based; and (5) the existence, location, custodian and general description of any
relevant documents or other tangible evidence that the disclosing party plans to
use at the arbitration hearing. Each side shall be permitted five hours of
witness depositions, to be allocated as that side sees fit. No
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Accuride Servicios AISA IASA GIR Company
30
<PAGE>
interrogatories or requests for admission shall be permitted. The arbitration
hearing shall take place no later than 90 days following the initial notice of
arbitration. Each side shall have no more than 10 hours to make its arguments
and present its evidence to the arbitration panel. The parties also may submit
pre- and post-hearing memoranda, each not to exceed 20 double-spaced pages.
(j) CONFIDENTIALITY. All papers, documents and other evidence,
whether written or oral, filed with or presented to the arbitrators, shall be
deemed by the parties and the arbitrators to be confidential information. No
party, witness or arbitrator shall disclose in whole or in part to any other
Person any confidential information submitted in connection with arbitration
proceedings hereunder, except to the extent: (1) required by applicable law or
regulation; (2) reasonably necessary to assist counsel in or preparation for
arbitration of the dispute; or (3) that such "confidential" information was
previously known or subsequently became known to the disclosing party without
restrictions on disclosure, that it was developed independently by such
disclosing party, or that it became publicly known through no fault of the
disclosing party.
(k) ARBITRATION EXPENSES. The non-prevailing party in the
arbitration shall bear the fees and expenses of the arbitrators, the reasonable
costs of the arbitration, the expense of any award rendered therein and of its
enforcement, and the reasonable attorneys' fees and expenses of the prevailing
party; and the non-prevailing party shall reimburse the prevailing party for all
such fees, costs and expenses incurred by the prevailing party prior to the date
of the award. All expenses, fees, costs and charges, and any award, shall be
expressed in U.S. dollars.
(l) INTEGRATED ARBITRATION CLAUSE. To the extent, if any, that this
Section 8.09 may be deemed a separate contract, independent from this Agreement,
Sections 8.03 and 8.10 (concerning notices and governing law, respectively)
shall be deemed incorporated into this Section 8.09 by this reference.
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31
<PAGE>
Section 8.10 GOVERNING LAW. This Agreement shall be construed in
accordance with, and governed by the substantive laws of, the United Mexican
States and the state of Nuevo Leon, without reference to principles governing
choice or conflicts of laws. All Exhibits hereto shall be governed by and
construed in accordance with the laws of jurisdiction specified therein.
Section 8.11 NO THIRD-PARTY BENEFICIARIES. This Agreement is for
the sole benefit of the parties hereto and nothing herein expressed or implied
shall give, or be construed to give, to any Person, other than the parties
hereto and such assigns, any legal or equitable rights hereunder.
Section 8.12 AMENDMENT. This Agreement may not be amended or
modified except by an instrument in writing signed by the Company, the
Purchasers and IASA and GIR.
Section 8.13 COUNTERPARTS. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
Section 8.14 SURVIVAL. The representations and warranties in this
Agreement and in any of the document executed and delivered in connection with
the transactions contemplated herein shall survive the Closing and remain in
full force and effect for the longer of the following periods: (a) as long as
it is possible that any party to this Agreement could suffer any Loss or Losses
of the kind referred to in Section 7.01(a) or (b) five years after the Closing
Date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Purchase
Agreement to be executed as of the date first written above.
ACCURIDE CORPORATION
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
ACCURIDE DE MEXICO, S.A. DE C.V.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
SERVICIOS AISA, S.A. DE C.V.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
INDUSTRIA AUTOMOTRIZ, S.A. DE C.V.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
GRUPO INDUSTRIAL RAMIREZ, S.A.
By:
-------------------------------------
Name:
-----------------------------------
Title:
----------------------------------
<PAGE>
EXHIBIT 10.2
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED COMPLETION GUARANTY AGREEMENT
BY AND AMONG
ACCURIDE CORPORATION,
ACCURIDE DE MEXICO, S.A. DE C.V.
and
CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK,
as Lender
Dated as of July 16, 1999
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
SECTION PAGE
<S> <C>
PARTIES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I COMPLETION
SECTION 1.01 COMPLETION . . . . . . . . . . . . . . . . . . . . . . . . 2
SECTION 1.02 COMPLETION CERTIFICATES. . . . . . . . . . . . . . . . . . 2
SECTION 1.03 COMPLETION UNDERTAKING . . . . . . . . . . . . . . . . . . 2
SECTION 1.04 WAIVER OF COMPLETION CONDITIONS. . . . . . . . . . . . . . 2
SECTION 1.05 COMPLETION OF NON-CONFORMING PLANT . . . . . . . . . . . . 3
ARTICLE II FUNDS TO COMPLETE
SECTION 2.01 FUNDS TO COMPLETE. . . . . . . . . . . . . . . . . . . . . 3
SECTION 2.02 NOTICE OF DEFAULT. . . . . . . . . . . . . . . . . . . . . 4
SECTION 2.03 OBLIGATIONS ABSOLUTE . . . . . . . . . . . . . . . . . . . 4
SECTION 2.04 WAIVERS AND ACKNOWLEDGMENTS. . . . . . . . . . . . . . . . 5
SECTION 2.05 SEPARATE UNDERTAKING . . . . . . . . . . . . . . . . . . . 6
SECTION 2.06 RELEASE UPON PREPAYMENT OF ADVANCES. . . . . . . . . . . . 6
SECTION 2.07. COMPLETION GUARANTY NOT APPLICABLE TO OBLIGATIONS UNDER THE
CREDIT AGREEMENT OR THE NOTES . . . . . . . . . . . . . . . 6
ARTICLE III TERMINATION OF OBLIGATIONS
SECTION 3.01 TERMINATION UPON COMPLETION. . . . . . . . . . . . . . . . 7
SECTION 3.02 TERMINATION PRIOR TO COMPLETION. . . . . . . . . . . . . . 7
SECTION 3.03 EFFECT OF TERMINATION. . . . . . . . . . . . . . . . . . . 7
ARTICLE IV REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. . . . . 7
ARTICLE V COVENANTS
SECTION 5.01 COVENANTS OF THE SHAREHOLDER . . . . . . . . . . . . . . . 9
ARTICLE VI COMPLETION DEFAULTS
SECTION 6.01 COMPLETION DEFAULTS. . . . . . . . . . . . . . . . . . . .11
<PAGE>
3
SECTION 6.02 COMPLETION DEFAULT REMEDIES. . . . . . . . . . . . . . . .12
ARTICLE VII MISCELLANEOUS
SECTION 7.01 AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . .12
SECTION 7.02 NOTICES, ETC.. . . . . . . . . . . . . . . . . . . . . . .12
SECTION 7.03 NO WAIVER; REMEDIES. . . . . . . . . . . . . . . . . . . .13
SECTION 7.04 BINDING EFFECT . . . . . . . . . . . . . . . . . . . . . .13
SECTION 7.05 EXECUTION IN COUNTERPARTS. . . . . . . . . . . . . . . . .13
SECTION 7.06 [Intentionally omitted] . . . . . . . . . . . . . . . . . .13
SECTION 7.07 JURISDICTION, ETC. . . . . . . . . . . . . . . . . . . . .13
SECTION 7.08 JUDGMENT . . . . . . . . . . . . . . . . . . . . . . . . .14
SECTION 7.09 GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . .15
SECTION 7.10 THIRD PARTY BENEFICIARIES. . . . . . . . . . . . . . . . .15
SECTION 7.11 ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . .15
SECTION 7.12 WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . . . .15
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16
</TABLE>
<PAGE>
4
AMENDED AND RESTATED COMPLETION GUARANTY AGREEMENT
This Amended and Restated Completion Guaranty Agreement (this
"AGREEMENT"), dated as of July 16, 1999, is made by and among ACCURIDE
CORPORATION, a Delaware corporation ("ACCURIDE", or the "SHAREHOLDER"), ACCURIDE
DE MEXICO, S.A. DE C.V., a corporation organized and existing under the laws of
the United Mexican States (the "BORROWER"), and CITIBANK MEXICO, S.A., GRUPO
FINANCIERO CITIBANK, as Lender (the "LENDER") party to the Credit Agreement (as
defined below).
PRELIMINARY STATEMENTS:
(1) The Borrower and the Lender have entered into that certain
Credit Agreement dated as of July 9, 1998 (such Credit Agreement, as it
hereafter may be amended, supplemented or otherwise modified from time to time,
being referred to herein as the "CREDIT AGREEMENT"; capitalized terms defined in
the Credit Agreement and not otherwise defined herein will be used herein as
defined in the Credit Agreement.
(2) The Borrower, Accuride, a 51% owner of the Borrower, and
Industria Automotriz, S.A. de C.V., a corporation organized and existing under
the laws of the United Mexican States and a 49% owner of the Borrower ("IASA"),
entered into the Completion Guaranty Agreement dated as of July 9, 1998 (the
"ORIGINAL COMPLETION GUARANTY") in favor of the Lender.
(3) Accuride has proposed to purchase IASA's ownership interests in
the Borrower, and the Borrower, Accuride and IASA have requested that the Lender
consent to release IASA from its obligations under the Original Completion
Guaranty by executing a Consent dated as of the date hereof (the "Consent")
among the Borrower, Accuride, IASA and the Lender.
(4) It is a condition precedent to the effectiveness of the Consent
by the Lender to the release of IASA from its obligations under the Original
Completion Guaranty that Accuride, as the sole Shareholder, and the Borrower
shall have executed and delivered this Agreement.
NOW, THEREFORE, in consideration of the premises, the Shareholder, the
Borrower and the Lender hereby agree as follows:
<PAGE>
5
ARTICLE I
COMPLETION
SECTION 1.01 COMPLETION. Subject to Section 1.05 hereof, completion
of the Plant (the "COMPLETION") shall occur on the first date (the "COMPLETION
DATE") on which the Lender receives from the Borrower all of the certificates
contemplated by Section 1.02 hereof. The Completion Certificates required by
Section 1.02 may be delivered together or separately in any order and at any
time and from time to time on or prior to the Completion Date, PROVIDED THAT the
Legal Conditions Certificate referred to in clause (c) of Section 1.02 and the
Insurance Certificate referred to in clause (d) of Section 1.02 shall be dated
as of a date not earlier than the latest of the dates of the Physical Facilities
Certificate referred to in clause (a) of Section 1.02 and the Operations
Certificate referred to in clause (b) of Section 1.02.
SECTION 1.02 COMPLETION CERTIFICATES. Completion shall occur on the
first date on which the Lender receives from the Borrower all of the following
certificates:
(a) PHYSICAL FACILITIES CERTIFICATE. A certificate of the
Borrower, executed by a Senior Officer and acknowledged by the Independent
Engineer, substantially in the form set forth in Appendix A-1.
(b) OPERATIONS CERTIFICATE. A certificate of the Borrower,
executed by a Senior Officer and acknowledged by the Independent Engineer,
substantially in the form set forth in Appendix A-2.
(c) LEGAL CONDITIONS CERTIFICATE. A certificate of the Borrower,
executed by a Senior Officer, substantially in the form set forth in
Appendix A-3.
(d) INSURANCE CERTIFICATE. A certificate of the Borrower, executed
by a Senior Officer and acknowledged by the Insurance Consultant,
substantially in the form set forth in Appendix A-4.
SECTION 1.03 COMPLETION UNDERTAKING. The Shareholder undertakes to
use its best efforts to cause the Completion Date to occur by March 31, 2000.
SECTION 1.04 WAIVER OF COMPLETION CONDITIONS. Completion shall be
deemed to have occurred, even if the conditions set forth in Section 1.01 have
not been
<PAGE>
6
satisfied, if the Lender delivers a notice to the Borrower and the Shareholder
stating that Completion has occurred.
SECTION 1.05 COMPLETION OF NON-CONFORMING PLANT. If the Lender shall
receive from the Borrower all the certificates required in Section 1.02 hereof
other than the certificate required by Section 1.02(b), Completion shall
nonetheless be deemed to have occurred if the following conditions are met:
(a) The Lender shall have received a certificate of the Borrower,
executed by a Senior Officer and acknowledged by the Independent Engineer,
substantially in the form set forth in Appendix A-2 except that the "90%"
in paragraph (e) thereof shall be replaced by such other percentage as
shall apply (such other percentage being the "ACTUAL CAPACITY").
(b) The Commitments under the Credit Agreement shall have been
reduced ratably by an aggregate amount equal to the following formula:
AMOUNT = Cx 90-P(100) x1.25
---------
100
where AMOUNT is the aggregate amount by which the Commitments should be
ratably reduced, C is the aggregate amount of the Commitments immediately
prior to such reduction and P is the Actual Capacity expressed as a
fraction (E.G., 80% would be "0.80").
(c) If, in giving effect to the reduction of the Commitments
pursuant to subsection (b) above, the aggregate principal amount of the
outstanding Term Advances exceeds the reduced Term Commitment or the
aggregate principal amount of the outstanding Working Capital Advances
exceed the Working Capital Commitment, then the Shareholder shall have made
a prepayment of the Term Advances and/or the Working Capital Advances, as
the case may be, in an amount of principal equal to such excess, together
with accrued and unpaid interest thereon and all other amounts due and
payable under the Credit Agreement with respect to such amount of
principal.
ARTICLE II
<PAGE>
7
FUNDS TO COMPLETE
SECTION 2.01 FUNDS TO COMPLETE. (a) Prior to Completion, the
Shareholder shall provide (or cause to be provided) Shareholder funding, at such
times and in such amounts as may be necessary (taking into account all Advances
made and those to be made to the Borrower under the Credit Agreement in
accordance with the terms thereof) in order to pay when required or due all
costs and expenses incurred by or on behalf of the Borrower in connection with
the construction, development, design, engineering, acquisition, financing,
outfitting, testing, start-up and completion of the Plant, including the cost of
Plant equipment and each of the following (such funding being the "FUNDS TO
COMPLETE"): (i) all amounts payable by the Borrower to its contractors,
suppliers and subcontractors pursuant to the Construction Documents; (ii) the
costs and expenses of all engineering, legal, accounting and other professional
advisers properly incurred by the Borrower in connection with and attributable
to the Plant; (iii) costs of Required Insurance; (iv) administration and
maintenance costs incurred during the construction period; and (vi) value-added
tax, other taxes and customs charges payable in respect of any of the above.
(b) The Funds To Complete shall be paid by the Shareholder in the
form of either (i) the subscription to additional shares of common stock of the
Borrower or other additional contributions to the owners' equity of the Borrower
or (ii) the lending of such funds to the Borrower, PROVIDED that (A) on the date
of such lending no event shall have occurred and shall be continuing, or would
result from such lending, that constitutes a Default and (B) the obligation of
the Borrower to repay such funds (and interest thereon) is duly subordinated in
right of payment, in writing and upon terms (including, without limitation,
terms regarding maturity) satisfactory to the Lender, to the obligations of the
Borrower under the Credit Agreement and the Notes.
(c) The Shareholder agrees punctually to pay all Funds To Complete.
SECTION 2.02 NOTICE OF DEFAULT. The Borrower or the Shareholder, as
the case may be, shall notify the Lender, promptly, but in any event within
three Business Days, of the failure of the Shareholder to make a timely payment
in respect of Funds To Complete which the Shareholder is obligated to pay, and
of the subsequent payment thereof.
SECTION 2.03 OBLIGATIONS ABSOLUTE. The Shareholder will perform its
obligations under this Agreement regardless of any law, regulation or order now
or hereafter in effect in any jurisdiction affecting any of the terms of the
Loan Documents or
<PAGE>
8
Construction Documents or any other document related thereto or the rights of
the Lender with respect thereto. The obligations of the Shareholder under this
Agreement are independent of the Loan Documents and Construction Documents, and
a separate action or actions may be brought and prosecuted against the
Shareholder to enforce this Agreement, irrespective of whether any action is
brought against the Borrower or whether the Borrower is joined in any such
action or actions. The obligations of the Shareholder under this Agreement
shall be absolute and unconditional irrespective of:
(ERROR! UNKNOWN SWITCH ARGUMENT.) any lack of validity or
enforceability of any Loan Document, any Construction Document or any other
agreement or instrument relating thereto or any collateral therefor;
(ERROR! UNKNOWN SWITCH ARGUMENT.) any change in the time, manner or
place of payment of, or in any other term of, all or any of the Obligations
of any Loan Party under the Loan Documents or Construction Documents, or
any other amendment or waiver of or any consent to departure from the Loan
Documents or Construction Documents, including, without limitation, any
increase in the Notes or the obligations of the Borrower under the Credit
Agreement resulting from the extension of additional credit to the Borrower
or any of its subsidiaries or otherwise;
(ERROR! UNKNOWN SWITCH ARGUMENT.) any taking, exchange, release or
non-perfection of any collateral, or any taking, release or amendment or
waiver of or consent to departure from any guaranty, whether for payment,
collection or performance, for the Loan Documents or Construction
Documents;
(ERROR! UNKNOWN SWITCH ARGUMENT.) any manner of application of
collateral, or proceeds thereof, to all or any of the obligations evidenced
by the Loan Documents or Construction Documents, or any manner of sale or
other disposition of any collateral for all or any of the obligations
evidenced by the Loan Documents or Construction Documents or any other
assets of the Borrower or any of its subsidiaries;
(ERROR! UNKNOWN SWITCH ARGUMENT.) any change, restructuring or
termination of the corporate structure or existence of the Borrower or any
of its subsidiaries; or
(ERROR! UNKNOWN SWITCH ARGUMENT.) any other circumstance (including,
without limitation, any statute of limitations) which might otherwise
constitute a defense available to, or a discharge of, the Borrower or a
surety.
<PAGE>
9
This Agreement shall continue to be effective or be reinstated, as the case may
be, if at any time any payment of any of the Obligations of the Borrower under
the Loan Documents or Construction Documents is rescinded or must otherwise be
returned by the Lender or any other Person upon the insolvency, bankruptcy or
reorganization of the Borrower or any other Loan Party or otherwise, all as
though such payment had not been made.
SECTION 2.04 WAIVERS AND ACKNOWLEDGMENTS. (a) The Shareholder hereby
waives promptness, diligence, notice of acceptance and any other notice with
respect to the Loan Documents or Construction Documents and any requirement that
the Lender protect, secure, perfect or insure any Lien or any property subject
thereto or exhaust any right to take any action against the Borrower or any
other Person or any collateral.
(b) The Shareholder hereby waives any right to revoke this
Agreement, and acknowledges that this Agreement is continuing in nature and
relates to all Obligations under the Loan Documents and Construction Documents,
whether existing now or in the future.
(c) The Shareholder acknowledges that it will receive substantial
direct and indirect benefits from the financing arrangements contemplated by the
Loan Documents and that the waivers set forth in this Section 2.04 are knowingly
made in contemplation of such benefits.
SECTION 2.05 SEPARATE UNDERTAKING. Without limiting the generality
of any of the foregoing provisions of this Agreement, the Shareholder
irrevocably waives, to the full extent permitted by applicable law and for the
benefit of, and as a separate undertaking with, the Lender, any defense to the
performance of this Agreement which may be available to the Shareholder as a
consequence of this Agreement being rejected or otherwise not assumed by the
Borrower or any trustee or other similar official for the Borrower or for any
substantial part of the property of the Borrower, or as a consequence of this
Agreement being otherwise terminated or modified, in any proceeding seeking to
adjudicate the Borrower a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief or composition
of the Borrower or the debts of the Borrower under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, whether such
rejection, non-assumption, termination or modification be by reason of this
Agreement being held to be an executory contract or by reason of any other
circumstance. If the Shareholder is prevented from performing its Obligations
under this Agreement to or for the benefit of the Borrower
<PAGE>
10
because this Agreement shall be so rejected or otherwise not assumed, or so
terminated or modified, the Shareholder agrees for the benefit of, and as a
separate undertaking with, the Lender that it will be unconditionally liable to
pay to the Lender an amount equal to each payment which would otherwise be
payable by the Shareholder under or in connection with this Agreement if this
Agreement were not so rejected or otherwise not assumed or were otherwise not so
terminated or modified.
SECTION 2.06 RELEASE UPON PREPAYMENT OF ADVANCES. Notwithstanding
anything to the contrary herein, the Shareholder shall be released of its
obligations under Section 2.01 hereof upon (a) payment or prepayment in full of
all Advances then outstanding under the Credit Agreement, together with all
accrued and unpaid interest thereon and all other amounts due and payable under
the Credit Agreement and (b) termination of all the Lender's obligations under
the Credit Agreement, including without limitation the Lender's obligation to
make Advances thereunder.
SECTION 2.07. COMPLETION GUARANTY NOT APPLICABLE TO OBLIGATIONS UNDER
THE CREDIT AGREEMENT OR THE NOTES. The Shareholder (whether as guarantor or
otherwise) shall not be required pursuant to this Agreement to pay or otherwise
discharge any Obligation of the Borrower arising under the Credit Agreement or
any of the Notes, and no provision in this Agreement shall be interpreted as
imposing any such requirement on the Shareholder.
ARTICLE III
TERMINATION OF OBLIGATIONS
SECTION 3.01 TERMINATION UPON COMPLETION. This Agreement shall
terminate upon Completion. Promptly, but in any case within three Business Days
after such termination, the Lender shall notify the Shareholder and the Borrower
of such termination; provided, however, that no failure on the part of the
Lender to so notify the Shareholder and the Borrower will extend or otherwise
delay the date of such termination.
SECTION 3.02 TERMINATION PRIOR TO COMPLETION. The Borrower may
arrange at any time for insurance, a guaranty or another comparable arrangement
in form and substance, and from a Person or Persons, acceptable to the Lender as
a replacement for the Obligations of the Shareholder under this Agreement. This
Agreement shall terminate upon acceptance in writing by the Lender of any such
replacement arrangement.
<PAGE>
11
SECTION 3.03 EFFECT OF TERMINATION Upon any termination of this
Agreement, all Obligations of the Borrower and of the Shareholder under this
Agreement shall terminate.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01 REPRESENTATIONS AND WARRANTIES OF THE SHAREHOLDER. The
Shareholder hereby represents and warrants as follows:
(a) The Shareholder (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and (ii) has all requisite corporate power and authority
(including, without limitation, all material governmental licenses, permits
and other approvals) to own its shares of stock of the Borrower and to
enter into this Agreement.
(b) The execution, delivery and performance of this Agreement and
each Related Document to which the Shareholder is or is to be a party have
been duly authorized by all necessary corporate action on the part of the
Shareholder, and do not (i) contravene its charter or bylaws, (ii) violate
any applicable provision of any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award applicable to it,
(iii) result in the breach of, or constitute a default under, any loan
agreement, indenture, mortgage, deed of trust or other financial
instrument, or any other material contract or agreement, binding on or
affecting it or any of its properties or (iv) except for the Liens created
under the Loan Documents, result in or require the creation or imposition
of any Lien upon or with respect to any of its properties.
(c) Other than those that have already been obtained and as set
forth in Schedule 4.01(c) and are in full force and effect, no
authorization or approval or other action by, and no notice to or filing
with, any governmental authority or regulatory body or any other third
party is required for the due execution, delivery or performance by the
Shareholder of this Agreement or any Related Document to which it is or is
to be a party.
(d) Each of this Agreement and the Related Documents to which the
Shareholder is a party has been duly executed and delivered by the
Shareholder
<PAGE>
12
and is the legal, valid and binding obligation of the Shareholder,
enforceable against the Shareholder in accordance with its terms, except as
may be limited by bankruptcy, insolvency, reorganization, moratorium or
similar law affecting creditor's rights generally or by general principles
of equity.
(e) The Consolidated balance sheet of each of Accuride and its
respective Subsidiaries as at December 31, 1998, and the related
Consolidated statements of income and cash flow of Accuride and its
Subsidiaries for the fiscal year then ended, accompanied by an opinion of
Deloitte & Touche LLP, independent public accountants, copies of which have
been furnished to the Lender, fairly present in all material respects the
Consolidated financial condition of Accuride and its respective
Subsidiaries as at such date and the Consolidated results of the operations
of Accuride and its Subsidiaries for the fiscal year ended on such date,
all in accordance with generally accepted accounting principles applied on
a consistent basis (unless otherwise expressly noted therein), and since
December 31, 1998, there has been no Material Adverse Change.
(f) No information, exhibit or report furnished by the Shareholder
to the Lender in writing in connection with the negotiation of this
Agreement or the other Loan Documents or pursuant to the terms of this
Agreement contained any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements made herein and
therein, taken as a whole, not misleading at such time in light of the
circumstances in which the same were made, it being understood that for
purposes of this Section 4.01(f), such factual information does not include
projections and pro forma financial information.
(g) There is no action, suit, investigation, litigation or
proceeding affecting the Shareholder pending or, to the knowledge of the
Shareholder, threatened before any court, governmental agency or arbitrator
that (i) could reasonably be expected to have a Material Adverse Effect or
(ii) purports to affect the legality, validity or enforceability of this
Agreement, any other Loan Document or any Related Document or the
consummation of the transactions contemplated hereby.
(h) There are no conditions precedent to the effectiveness of this
Agreement that have not been satisfied or waived.
(i) The Shareholder has, independently and without reliance upon
the Lender and based on documents and information as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement.
<PAGE>
13
ARTICLE V
COVENANTS
SECTION 5.01 COVENANTS OF THE SHAREHOLDER. So long as any Advance
shall remain unpaid or the Lender shall have any Commitment, the Shareholder
will:
(a) PRESERVATION OF CORPORATE EXISTENCE, ETC. Preserve and
maintain its existence, legal structure, legal name, rights (charter and
statutory), permits, licenses, approvals, privileges and franchises, except
to the extent that failure to do so could not reasonably be expected to
have a Material Adverse Effect; PROVIDED, HOWEVER, that the Shareholder
shall not be required to preserve any right, permit, license, approval,
privilege or franchise if the Board of Directors of the Shareholder shall
determine that the preservation thereof is no longer desirable in the
conduct of the business of the Shareholder and that the loss thereof is not
disadvantageous in any material respect to the Shareholder or the Lender.
(b) CONDUCT OF BUSINESS. Engage primarily in the vehicle component
business and any activity or business incidental, directly related or
similar thereto, and any other lines of business carried on by the
Shareholder on the date hereof or utilizing the Shareholder's manufacturing
capabilities on the date hereof, and/or such other businesses or activities
that constitute a reasonable extension, development or expansion thereof or
that are ancillary or reasonably related thereto.
(c) VISITATION RIGHTS. At any reasonable time and from time to
time, upon reasonable notice and during normal business hours, permit any
authorized representatives designated by the Lender to examine and make
abstracts from the records and books of account of, and visit the
properties of, the Shareholder and to discuss the affairs, finances and
accounts of the Shareholder with any of its officers or directors and with
their independent certified public accountants, PROVIDED that the
Shareholder may, if it so chooses, be present at or participate in any such
discussion.
(d) KEEPING OF BOOKS. Keep proper books of record and account, in
which full and correct entries shall be made of all financial transactions
and the assets and business of the Shareholder in accordance with GAAP.
<PAGE>
14
(e) REPORTING REQUIREMENTS. Furnish to the Lender:
(i) DEFAULT OR LITIGATION NOTICE. Promptly upon any Senior
Officer of the Shareholder obtaining knowledge thereof, notice of (i)
the occurrence of any event that constitutes a Completion Default,
which notice shall specify the nature thereof, the period of existence
thereof and what action the Shareholder proposes to take with respect
thereto, and (ii) any litigation or governmental proceeding pending
against the Shareholder that could reasonably be expected to result in
a Material Adverse Effect.
(ii) QUARTERLY FINANCIALS. As soon as available and in any
event within 60 days after the end of each of the first three fiscal
quarters of each fiscal year of the Shareholder, a Consolidated
balance sheet of Accuride and its Subsidiaries as of the end of such
fiscal quarter and the related Consolidated statements of income and
cash flow for the period commencing at the end of the previous fiscal
quarter and ending with the end of such fiscal quarter and for the
period commencing at the end of the previous fiscal year and ending
with the end of such fiscal quarter, setting forth in each case in
comparative form the corresponding figures for the corresponding
period of the preceding fiscal year of the Shareholder, all in
reasonable detail and duly certified (subject to year-end audit
adjustments) by the chief financial officer of Accuride as having been
prepared in accordance with GAAP, and a certificate of an officer of
the Shareholder stating that no Completion Default has occurred and is
continuing or, if a Completion Default has occurred and is continuing,
a statement as to the nature thereof and the action that the
Shareholder has taken and proposes to take with respect thereto.
(iii) ANNUAL FINANCIALS. As soon as available and in any
event within 120 days after the end of each fiscal year of the
Shareholder, a Consolidated balance sheet of the Shareholder and its
Subsidiaries as of the end of such fiscal year and the related
Consolidated statements of income and cash flow for such fiscal year
setting forth in each case in comparative form the corresponding
figures for the previous fiscal year of the Shareholder, accompanied
by an opinion which shall be unqualified as to the scope of the audit
and as to the going concern status of the Shareholder and its
Subsidiaries taken as a whole, of independent public accountants of
recognized standing, together with a certificate of such accounting
firm to the Lender stating that in the course of the regular audit of
the business of the Shareholder and its Subsidiaries, which audit was
conducted by such
<PAGE>
15
accounting firm in accordance with applicable generally accepted
auditing standards, such accounting firm has obtained no knowledge
that a Completion Default has occurred and is continuing, or if, in
the opinion of such accounting firm, a Completion Default has occurred
and is continuing, a statement as to the nature thereof.
(iv) Promptly after the sending or filing thereof, copies of
all proxy statements, financial statements and reports that the
Shareholder sends to its stockholders, and copies of all regular,
periodic and special reports, and all registration statements, that
the Shareholder files with the Securities and Exchange Commission or
any governmental authority that may be substituted therefor or any
equivalent governmental authority in Mexico, or with any national
securities exchange in the United States or Mexico (in each case to
the extent not theretofore delivered to the Lender pursuant to this
Agreement), and with reasonable promptness such other information
(financial or otherwise) as the Lender may reasonably request in
writing from time to time.
(f) Within 30 days after the date hereof, provide to the Lender a
Spanish translation of this Agreement, duly executed and delivered by the
Shareholder and in form and substance satisfactory to the Lender.
ARTICLE VI
COMPLETION DEFAULTS
SECTION 6.01 COMPLETION DEFAULTS. Each of the following events shall
be a default of the Shareholder (each a "COMPLETION DEFAULT"):
(a) PAYMENT DEFAULT. The Shareholder fails to pay or cause to be
paid, or to have paid on its behalf, on the date on which the same is due
and payable, any amount due pursuant to this Agreement and such default is
not remedied within 30 days.
(b) BREACH OF REPRESENTATION OR WARRANTY UNDER THIS AGREEMENT. A
representation or warranty made by the Shareholder in this Agreement proves
to have been false in any material respect as and when made and the
condition causing such falsity has a material adverse effect on the ability
of the Shareholder to meet its obligations under this Agreement.
<PAGE>
16
(c) BREACH OF COVENANT, ETC. The Shareholder fails to perform or
observe in any material respect any other term, covenant or agreement
contained herein to be performed or observed by it and such failure
continues unremedied for 30 days after notice thereof is given by the
Lender to the Shareholder.
(d) BANKRUPTCY EVENT. The Bankruptcy of the Shareholder.
(e) AGREEMENT UNENFORCEABLE. This Agreement is declared in a
final, non-appealable judgment of a court of competent jurisdiction to be
unenforceable against the Shareholder or the Shareholder shall have
repudiated its obligations hereunder. For this purpose a statement or a
dispute regarding the scope or nature of the parties' rights and
obligations under this Agreement or a failure to perform any particular
obligation as a result of such statement or dispute shall not by itself be
deemed to be a repudiation thereof other than a failure that would
otherwise constitute a Completion Default.
SECTION 6.02 COMPLETION DEFAULT REMEDIES. Upon the occurrence and
during the continuance of a Completion Default, the Lender shall be entitled to
the remedies afforded to it as set forth in the Credit Agreement.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01 AMENDMENTS. This Agreement may be amended only by an
agreement in writing signed by each party hereto.
SECTION 7.02 NOTICES, ETC. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy or
telex communication) in the English language (or accompanied by an accurate
English language translation upon which any recipient shall have the right to
rely for all purposes) and mailed, telegraphed, telecopied, telexed or
delivered, if to a party hereto, at its address indicated on the signature pages
hereto, or at such other address as shall be designated by such party in a
written notice to the other parties. All such notices and communications shall,
when mailed, telegraphed, telecopied or telexed, be effective when deposited in
the mails, delivered to the telegraph company, transmitted by telecopier or
confirmed by telex answerback, respectively. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or of any
<PAGE>
17
Exhibit hereto to be executed and delivered hereunder shall be effective as
delivery of a manually executed counterpart thereof.
SECTION 7.03 NO WAIVER; REMEDIES. No failure on the part of the
Lender to exercise, and no delay in exercising, any right hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
such right preclude any other or further exercise thereof or the exercise of any
other right. The remedies herein provided are cumulative and not exclusive of
any remedies provided by law.
SECTION 7.04 BINDING EFFECT. This Agreement shall become effective
when executed and delivered by the parties hereto and shall thereafter be
binding upon and inure to the benefit of the parties hereto and their respective
successors and assigns.
SECTION 7.05 EXECUTION IN COUNTERPARTS. This Agreement may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 7.06 [Intentionally omitted].
SECTION 7.07 JURISDICTION, ETC. (a) Each of the parties hereto
irrevocably agrees that any legal action, suit or proceeding arising out of or
relating to this Agreement may be brought in the courts of the State of New
York. Final judgment against the Borrower or the Shareholder in any such
action, suit or proceeding shall be conclusive and may be enforced in any other
jurisdiction, including Mexico, by suit on the judgment, a certified or
exemplified copy of which shall be conclusive evidence of the judgment, or in
any other manner provided by law.
(b) By the execution and delivery of this Agreement, the each of
the parties irrevocably submits to the non-exclusive jurisdiction of the courts
of the State of New York and of the United States of America located in the
Southern District of New York in any such action, suit or proceeding and
designates, appoints and empowers CT Corporation Systems, at 1633 Broadway, New
York, NY 10019 as its authorized agent to receive for and on its behalf service
of any summons, complaint or other legal process in any such action, suit or
proceeding in the State of New York for so long as any obligation of the
Borrower or the Shareholder shall remain outstanding hereunder. The Borrower
and the Shareholder shall grant an irrevocable power of attorney to CT
Corporation Systems in respect of such appointment and shall maintain such power
of attorney in full
<PAGE>
18
force and effect for so long as any obligation of the Borrower or the
Shareholder shall remain outstanding hereunder.
(c) Nothing in this Agreement shall affect the right of the Lender
to commence legal proceedings or otherwise sue the Borrower in Mexico or any
other appropriate jurisdiction, or to serve process, pleadings and other legal
papers upon the Borrower or the Shareholder in any manner authorized by the laws
of any such jurisdiction.
(d) As long as this Agreement remains in force, the Borrower and
the Shareholder shall maintain a duly appointed agent for the service of
summons, complaint and other legal process in New York, New York, United States,
for purposes of any legal action, suit or proceeding the Lender may bring in
respect of this Agreement. The Borrower shall keep the Lender advised of the
identity and location of such agent.
(e) The Borrower and the Shareholder also irrevocably consent, if
for any reason its authorized agent for service of process of summons, complaint
and other legal process in any such action, suit or proceeding is not present in
New York, New York, service of such papers may be made out of those courts by
mailing copies of the papers by registered United States air mail, postage
prepaid, to the Borrower and the Shareholder at its address specified on the
signature pages hereto. In such a case, the Lender shall also send by telex or
facsimile, or have sent by telex or facsimile, a copy of the papers to the
Borrower and the Shareholder.
(f) Service in the manner provided in subsection (e) above in any
such action, suit or proceeding will be deemed personal service, will be
accepted by the Borrower and the Shareholder as such and will be valid and
binding upon the Borrower and the Shareholder for all purposes of any such
action, suit or proceeding.
(g) The Borrower and the Shareholder hereby irrevocably waive: (i)
any objection which it may have now or in the future to the laying of the venue
of any such action, suit or proceedings in any court referred to in this
Section; and (ii) any claim that any such action, suit or proceedings has been
brought in an inconvenient forum.
SECTION 7.08 JUDGMENT. (a) If for the purposes of obtaining
judgment in any court it is necessary to convert a sum due hereunder in Dollars
into another currency, the parties hereto agree, to the fullest extent that they
may effectively do so, that the rate of exchange used shall be that at which in
accordance with normal banking procedures the Lender could purchase Dollars with
such other currency at Citibank in New York, New York on the Business Day
preceding that on which final judgment is given.
<PAGE>
19
(b) The obligations of the Borrower and the Shareholder in respect
of any sum due from it to the Lender hereunder held by the Lender shall,
notwithstanding any judgment in a currency other than Dollars be discharged only
to the extent that on the Business Day of receipt by the Lender of any sum
adjudged to be so due in such other currency the Lender may in accordance with
normal banking procedures purchase Dollars with such other currency; if the
Dollars so purchased are less than the sum originally due by the Borrower or the
Shareholder to the Lender in Dollars, the Borrower and the Shareholder agree, as
a separate obligation and notwithstanding any such judgment, to indemnify the
Lender against such loss, and if the Dollars so purchased exceed the sum
originally due by the Borrower or the Shareholder to the Lender in Dollars, the
Lender agrees to remit to the relevant party such excess.
SECTION 7.09 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York, United States
of America.
SECTION 7.10 THIRD PARTY BENEFICIARIES. This Agreement is for the
benefit of the parties hereto and their successors and permitted assigns and
nothing herein expressed or implied shall give or be construed to give any
person or entity, other than the parties hereto and such successors and assigns,
any legal or equitable rights hereunder, except that the parties hereto agree
that each Participant is a third party beneficiary to this Agreement, entitled
to all the rights accruing thereto.
SECTION 7.11 ENTIRE AGREEMENT. This Agreement and the Exhibits and
Schedules hereto amend and restate in its entirety the Original Completion
Guaranty, constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior and contemporaneous
agreements, understandings, negotiations, correspondence, undertakings and
communications, both oral and written, between the parties with respect to the
subject matter hereof, including, without limitation, those provisions of the
Accuride de Mexico, S.A. de C.V. Summary of Terms and Conditions (finally
negotiated by the parties in May 1998) that deal with the subject of a
"Completion Guaranty". There are no restrictions, promises, representations,
warranties, covenants or undertakings by or between the parties with respect to
the subject matter hereof other than those expressly set forth or referred to
herein.
SECTION 7.12 WAIVER OF JURY TRIAL. The Borrower, the Shareholder and
the Lender irrevocably waive all right to trial by jury in any action,
proceeding or counterclaim (whether based on contract, tort or otherwise)
arising out of or relating to
<PAGE>
20
this Agreement or the actions of the Lender in the negotiation, administration,
performance or enforcement thereof.
<PAGE>
21
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the date first above written.
ACCURIDE CORPORATION
By:
----------------------------------------
Name:
Title:
Address: 2315 Adams Lane
P.O. Box 40
Henderson, KY 42420
United States of America
Attn: William Geubel
with a copy to:
Kohlberg Kravis Roberts & Co., L.P.
2800 Sand Hill Road, Suite 200
Menlo Park, CA 94205
Attn: Todd Fisher
CITIBANK MEXICO, S.A.,
GRUPO FINANCIERO CITIBANK
By:
----------------------------------------
Name:
Title:
Address: Reforma 390
Mexico City, D.F. 06696
Mexico
Accepted and agreed to as of the
<PAGE>
22
date first written above:
ACCURIDE DE MEXICO, S.A. DE C.V.
By:
--------------------------
Name:
Title:
Address: Avenida Universidad 1011 Norte,
Planta Baja
San Nicolas de los Garza
Nuevo Leon
C.P. 66450 Mexico
<PAGE>
23
Appendix A-1
to Completion Guaranty
FORM OF PHYSICAL FACILITIES CERTIFICATE
CITIBANK MEXICO, S.A.,
GRUPO FINANCIERO CITIBANK, as Lender
Grupo Financiero Citibank
Reforma 390,
Mexico City, Mexico, D.F. 06695
Attention: Doug Schmidt
Re: ACCURIDE DE MEXICO, S.A. DE C.V.
Ladies and Gentlemen:
This is the certificate referred to in clause (a) of Section 1.02 of
the Amended and Restated Completion Guaranty Agreement, dated as of May __, 1999
among the Borrower, ACCURIDE CORPORATION, a Delaware corporation, and CITIBANK,
S.A., GRUPO FINANCIERO CITIBANK, as the same may be amended, supplemented or
otherwise modified from time to time (the "COMPLETION GUARANTY"). Capitalized
terms herein and in the appendices hereto, except as otherwise defined herein,
shall have the meanings assigned to them in the Completion Guaranty.
I, [Name of Senior Officer], as [_______________________] of the
Borrower, hereby certify after due inquiry that:
(a) As of the date hereof, the physical facilities and utilities of
the Plant as described in Appendix A-1-A (the "PHYSICAL FACILITIES") have been
installed substantially in accordance with the design documents, as amended in
accordance with the provisions of Appendix A-1-A, are substantially complete and
have become operational.
(b) As of the date hereof, each of the Physical Facilities has been
substantially completed, and each has been accepted by the Borrower from the
<PAGE>
A-1-24
contractors or sub-contractors in accordance with the contracts or sub-contracts
for the construction or installation of each such facility.
(c) Attached to this Physical Facilities Certificate is a true and
complete copy of the Acknowledgment of the Independent Engineer in connection
with this Physical Facilities Certificate.
The Borrower hereby certifies, after due inquiry, that the facts
stated by the Borrower in this Certificate are true and complete.
IN WITNESS WHEREOF, I, [name of Senior Officer], have caused this
certificate to be duly executed.
Dated:
ACCURIDE DE MEXICO, S.A. DE C.V.
By:
-----------------------------------
Name:
Title: [Senior Officer]
<PAGE>
ACKNOWLEDGMENT
This Acknowledgment is being delivered by the undersigned, [Name of
Independent Engineer], a [________________] duly organized and validly existing
under the laws of the [State] of [_______________], in connection with the
Amended and Restated Completion Guaranty Agreement, dated as of May __, 1999,
among the Borrower, ACCURIDE CORPORATION, a Delaware corporation, and CITIBANK
MEXICO, S.A., GRUPO FINANCIERO CITIBANK, as the same may be amended,
supplemented or otherwise modified from time to time.
[Name of Independent Engineer] hereby certifies that it has reviewed
the Physical Facilities Certificate dated ______________ and has performed such
inspections which we have, in our reasonable judgment, deemed necessary for
purposes of this acknowledgment. Such inspections, including the names of our
employees or agents who performed them, are described in Appendix A-1-B to this
acknowledgment. Based on such inspections, we hereby certify that, to the best
of our knowledge, each of the certifications of the Borrower set forth in the
Physical Facilities Certificates is true and correct in all material respects as
of the date hereof.
IN WITNESS WHEREOF, [Name of Independent Engineer] has caused this
acknowledgment to be duly executed.
Dated:
[Name of Independent Engineer]
By:
------------------------------
Name:
Title:
<PAGE>
Appendix A-1-A
to Completion Guaranty
PLANT PHYSICAL FACILITIES
The Plant's physical facilities shall comprise at a minimum those
facilities described hereafter. Physical facilities shall include facilities
installed by the Plant to connect to third parties. Design modifications and
improvements, as may be approved by the Borrower from time to time, will be
accommodated within this appendix provided that these amendments are documented,
transmitted to the Independent Engineer, approved by the Independent Engineer,
if required, and a final complete listing of these changes is provided to the
Independent Engineer prior to Completion.
Approval of the Independent Engineer is required for:
(i) Modifications to the physical facilities including but not
limited to changes in:
- Manufacturing equipment
- Environmental facilities
- Product lines
provided that only such modifications which individually or in
the aggregate materially impair the Plant's performance shall
require the Independent Engineer's approval.
(ii) Those modifications which could materially impair the expected
operating or maintenance costs or expected ongoing capital
expenditures.
(iii) Modifications which could impair environmental compliance or
any permit or license (in place or required).
(iv) Modifications or contractor change orders which are estimated
to cost in aggregate more than $500,000 for changes to the
facilities or which could affect schedule sequencing by more
than 20 days.
REQUIRED PHYSICAL FACILITIES
<PAGE>
1. New Spinner #1
2. New Truing Machine
3. Line A-8
4. Washer
5. Waste Water Treatment Facility
6. E-Coat System
7. Line 427
8. Line 468 or equivalent
9. Raw Material Crane
10. Emergency Electrical Plant to Protect E-Coat System
11. 600 T Press or equivalent
12. Decoiler
13. New Spinner #2
14. New Spinner #3
15. SARA Line with Decoiler
16. Light Disc Press Line (L-4)
17. Line A-11 with New Truing Machine and Washer
<PAGE>
Appendix A-2
to Completion Guaranty
FORM OF OPERATIONS CERTIFICATE
CITIBANK MEXICO, S.A.,
GRUPO FINANCIERO CITIBANK, as Lender
Grupo Financiero Citibank
Reforma 390,
Mexico City, Mexico, D.F. 06695
Attention: Doug Schmidt
Re: ACCURIDE DE MEXICO, S.A. DE C.V.
Ladies and Gentlemen:
This is the certificate referred to in clause (b) of Section 1.02 of
the Amended and Restated Completion Guaranty Agreement, dated as of May __,
1999, among the Borrower, ACCURIDE CORPORATION, a Delaware corporation, and
CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK, as the same may be amended,
supplemented or otherwise modified from time to time (the "COMPLETION
GUARANTY"). Capitalized terms herein and in the appendices hereto, except as
otherwise defined herein, shall have the meanings assigned to them in the
Completion Guaranty.
I, [Name of Senior Officer], as [________________] of the Borrower,
hereby certify after due inquiry that:
(a) Attached to this certificate as Appendix B-2-A are copies of
operating records, test results, inspection reports and other documentation
relating to production by the Plant during the periods referred to in clause (c)
below. Such documentation accurately reflects, in all material respects, the
production of the Plant during the period to which it relates.
(b) All sampling procedures relevant to the matters covered by this
certificate were conducted by Borrower in accordance with Prudent Industry
Practices.
<PAGE>
(c) For purposes of this Operations Certificate, the first test
period (the "FIRST TEST PERIOD") began on [date] and ended on [date] and was
comprised of 5 consecutive Business Days [or such shorter period reasonably
acceptable to the Independent Engineer, to the extent reasonably justified based
upon the Borrower's current sales volume and other relevant factors], each of
which days was a scheduled operating day, and the second test period (the"SECOND
TEST PERIOD", and together with the First Test Period, the "TEST PERIODS") began
on [date] and ended on [date] and was comprised of 5 consecutive Business Days
[or such shorter period reasonably acceptable to the Independent Engineer, to
the extent reasonably justified based upon the Borrower's current sales volume
and other relevant factors], each of which days was a scheduled operating day.
Approximately one month elapsed between the first day of the First Test Period
and the last day of the Second Test Period.
(d) All product units manufactured during the Test Periods
completed required qualification testing, and processes were verified to insure
that parts met dimensional requirements.
(e) Hourly production rates during the Test Periods were determined
by the total number of good parts that were completed on the specific lines for
the hours scheduled for the production run during the Test Period. Total hours
included set-up and required maintenance completed during the Test Period
("TOTAL HOURS"). The average hourly rates of production, expressed in units
produced per hour, for the Total Hours, for each of the lines or operations
listed below, were each within 90% of the hourly rate listed after such line or
operation:
Line/Operation Hour Rate (Units)
-------------- -----------------
Line 427 150
Spinners 52 light discs (each Spinner)
E-Coat 570 (Wheels and Rims)
[Line A-8 138]
SARA 225
All the foregoing tests, except as specifically otherwise provided
herein, in this Section (e) have been performed during each of the Test Periods.
(f) During the First Test Period the actual quantities were:
<TABLE>
<CAPTION>
Scheduled Scheduled Actual Production
Quantities Actual Quantities Production Hours Hours
---------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
</TABLE>
<PAGE>
(g) During the Second Test Period the actual quantities were:
<TABLE>
<CAPTION>
Scheduled Scheduled Actual Production
Quantities Actual Quantities Production Hours Hours
---------- ----------------- ---------------- -----------------
<S> <C> <C> <C>
</TABLE>
(h) Attached to this Operations Certificate is a true and complete
copy of an Acknowledgment of the Independent Engineer in connection with this
Operations Certificate.
(i) The Plant is being operated by the Borrower in accordance with
Prudent Industry Practices.
The Borrower hereby certifies, after due inquiry, that the facts
stated by the Borrower in this Certificate are true and complete.
IN WITNESS WHEREOF, I, [name of Senior Officer], have caused this
certificate to be duly executed.
Dated:
ACCURIDE DE MEXICO, S.A. DE C.V.
By:
---------------------------
Name:
Title: [Senior Officer]
<PAGE>
ACKNOWLEDGMENT
This Acknowledgment is being delivered by the undersigned, [Name of
Independent Engineer], a [________________] duly organized and validly existing
under the laws of the [State] of [_______________], in connection with the
Amended and Restated Completion Guaranty Agreement, dated as of May __, 1999,
among the Borrower, ACCURIDE CORPORATION, a Delaware corporation, and CITIBANK
MEXICO, S.A., GRUPO FINANCIERO CITIBANK, as the same may be amended,
supplemented or otherwise modified from time to time.
[Name of Independent Engineer] hereby certifies that it has reviewed
the Operations Certificate dated [___________] and has performed such
inspections, observations, analyses and other procedures which we have, in our
reasonable judgment, deemed necessary for purposes of this acknowledgment. Such
procedures, including the names of our employees or agents who performed them,
are described in Appending B-2-B to this acknowledgment. Based on such
procedures described above, we hereby certify that, to the best of our
knowledge, each of the certifications of the Borrower set forth in the
Operations Certificate is true and correct in all material respects as of the
date hereof.
IN WITNESS WHEREOF, [name of Independent Engineer] has caused this
acknowledgment to be duly executed.
Dated:
[Name of Independent Engineer]
By:
---------------------------
Name:
Title:
<PAGE>
Appendix A-3
to Completion Guaranty
FORM OF LEGAL CONDITIONS CERTIFICATE
CITIBANK MEXICO, S.A.
GRUPO FINANCIERO CITIBANK, as Lender
Grupo Financiero Citibank
Reforma 390,
Mexico City, Mexico, D.F. 06695
Attention: Doug Schmidt
Re: ACCURIDE DE MEXICO, S.A. DE C.V.
Ladies and Gentlemen:
This is the certificate referred to in clause (c) of Section 1.02 of
the Amended and Restated Completion Guaranty Agreement, dated as of May __,
1999, among the Borrower, ACCURIDE CORPORATION, a Delaware corporation, and
CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK, as the same may be amended,
supplemented or otherwise modified from time to time (the "COMPLETION
GUARANTY"). Capitalized terms herein and in the appendices hereto, except as
otherwise defined herein, shall have the meanings assigned to them in the
Completion Guaranty.
I, [Name], as _________________________ of the Borrower, hereby
certify after due inquiry that, to the best of my knowledge, as of the date
hereof:
(a) Each of the Construction Documents remains in full force and
effect.
(b) The authorizations, approvals and consents from governmental
authorities in the United Mexican States listed in Schedule 4.01(d)(ii) to the
Credit Agreement that are still required as of the date hereof, any others that
as of the date hereof have become required for, and in each case are material
to, operation of the Plant substantially as it was operated during the Test
Period referred to in the Operations Certificate, and those which are necessary
for the current stage of development of the Plant are in full force and effect
and not subject to appeal.
<PAGE>
A-3-33
(c) The security interests required to be created by or pursuant to
the Collateral Documents are in full force and effect.
(d) No Default has occurred and is continuing.
(e) There are no contractors' liens (other than Permitted Liens as
such term is defined in the Credit Agreement) under Mexican law or under any
Construction Documents on any of the Physical Facilities of the Borrower.
The Borrower hereby certifies, after due inquiry, that the facts
stated by the Borrower in this Certificate are true and complete.
IN WITNESS WHEREOF, I, [name] have caused this certificate to be duly
executed.
Dated:
ACCURIDE DE MEXICO, S.A. DE C.V.
By:
---------------------------
Name:
Title:
<PAGE>
A-3-34
Appendix A-4
to Completion Guaranty
FORM OF INSURANCE CERTIFICATE
CITIBANK MEXICO, S.A.
GRUPO FINANCIERO CITIBANK, as Lender
Grupo Financiero Citibank
Reforma 390,
Mexico City, Mexico, D.F. 06695
Attention: Doug Schmidt
Re: ACCURIDE DE MEXICO, S.A. DE C.V.
Ladies and Gentlemen:
This is the certificate referred to in clause (d) of Section 1.02 of
the Amended and Restated Completion Guaranty Agreement, dated as of May __,
1999, among the Borrower, ACCURIDE CORPORATION, a Delaware corporation, and
CITIBANK MEXICO, S.A., GRUPO FINANCIERO CITIBANK, as the same may be amended,
supplemented or otherwise modified from time to time (the "COMPLETION
GUARANTY"). Capitalized terms herein and in the appendices hereto, except as
otherwise defined herein, shall have the meanings assigned to them in the
Completion Guaranty.
I, [Name], as _________________________ of the Borrower, hereby
certify after due inquiry that, as of the date hereof all minimum insurance
coverage required to be now in effect pursuant to Section 5.01(d) of the Credit
Agreement is in full force and effect.
Attached to this Insurance Certificate is a true and complete copy of
the Acknowledgment of the Insurance Consultant in connection with this Insurance
Certificate.
The Borrower hereby certifies, after due inquiry, that the facts
stated by the Borrower in this Certificate are true and complete.
<PAGE>
A-4-35
IN WITNESS WHEREOF, I, [name] have caused this certificate to be duly
executed.
Dated:
ACCURIDE DE MEXICO, S.A. DE C.V.
By:
---------------------------
Name:
Title:
<PAGE>
ACKNOWLEDGMENT
This Acknowledgment is being delivered by the undersigned, [Name of
Insurance Consultant], a [________________] duly organized and validly existing
under the laws of the [State] of [_______________], in connection with the
Amended and Restated Completion Guaranty Agreement, dated as of May __, 1999
among the Borrower, ACCURIDE CORPORATION, a Delaware corporation, and CITIBANK
MEXICO, S.A., GRUPO FINANCIERO CITIBANK, as the same may be amended,
supplemented or otherwise modified from time to time.
[Name of Insurance Consultant], hereby certifies that it has reviewed
the Insurance Certificate dated [___________] and has performed such reviews and
other procedures which we have, in our reasonable judgment, deemed necessary for
purposes of this acknowledgment. Such procedures, including the names of our
employees or agents who performed them, are described in Appendix A-4-A to this
acknowledgment. Based on such procedures, we hereby certify that, to the best
of our knowledge, each of the certifications of the Borrower set forth in the
Insurance Certificate is true and correct in all material respects as of the
date hereof.
IN WITNESS WHEREOF, [name of Insurance Consultant] has caused this
acknowledgment to be duly executed.
Dated:
[Name of Insurance Consultant]
By:
---------------------------
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
The schedule contains summary financial information extracted from the
consolidated financial statements of Accuride Corporation and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 22,601
<SECURITIES> 0
<RECEIVABLES> 70,363
<ALLOWANCES> 496
<INVENTORY> 44,562
<CURRENT-ASSETS> 159,183
<PP&E> 370,754
<DEPRECIATION> 170,666
<TOTAL-ASSETS> 520,969
<CURRENT-LIABILITIES> 81,743
<BONDS> 455,355
0
0
<COMMON> 24,738
<OTHER-SE> (67,353)
<TOTAL-LIABILITY-AND-EQUITY> 520,969
<SALES> 247,585
<TOTAL-REVENUES> 247,585
<CGS> 190,267
<TOTAL-COSTS> 14,174
<OTHER-EXPENSES> 924
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 18,961
<INCOME-PRETAX> 25,815
<INCOME-TAX> 10,843
<INCOME-CONTINUING> 14,881
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,881
<EPS-BASIC> 598
<EPS-DILUTED> 598
</TABLE>
