Joint Venture Agreementdtd.11/5/97

Exhibit 10.16


JOINT VENTURE AGREEMENT


THIS JOINT VENTURE AGREEMENT ("Agreement") is made as of the 5th day of November, 1997 ("Effective Date"), by and among ACCURIDE CORPORATION, a Delaware corporation ("Accuride"), INDUSTRIA AUTOMOTRIZ, S.A. DE C.V., a Mexican corporation ("IASA"), GRUPO INDUSTRIAL RAMIREZ, S.A., a Mexican corporation ("GIR"), and ACCURIDE DE MEXICO, S.A. DE C.V., a Mexican corporation ("Company").


R E C I T A L S


WHEREAS, Accuride manufactures metal wheels for the automotive industry, at production facilities located in Henderson, Kentucky, U.S.A. and, through a subsidiary, in London, Ontario, Canada;


WHEREAS, IASA designs, manufactures, markets and sells metal wheels through its wheel division ("Wheel Division") at IASA's production facilities located in San Nicolas de los Garza, Nuevo Leon, Mexico (the "IASA Plant");


WHEREAS, Accuride and IASA desire to create and realize synergies and efficiencies, and to develop new technological capabilities, in the production, marketing and sale of all kinds of steel wheels, rims, side rings, lock rings, adaptor rings, spacer bands, mounting bands and related components, replacements and products ("Wheels");


WHEREAS, Accuride and IASA desire to create a joint venture ("Joint Venture") through which to pursue emerging opportunities in the Wheel market in Mexico and elsewhere in Latin America, in the United States of America and in Canada, and in other countries where sufficient demand exists;


WHEREAS, in consideration of the foregoing, Accuride and IASA have incorporated the Joint Venture as a variable capital corporation under the laws of the United Mexican States, under the name "Accuride de Mexico, S.A. de C.V.," to produce, market and sell Wheels; and


WHEREAS, each of Accuride, IASA, GIR and the Company desires to make certain covenants, representations, warranties and other agreements, and to prescribe various conditions, regarding the formation, further capitalization and operation of the Company.


NOW, THEREFORE, in consideration of the recitals, representations, warranties, covenants, conditions and agreements contained in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:


ARTICLE I


Definitions; Incorporation of Recitals


SECTION 1.1 Defined Terms. As used herein, the following terms shall have the definitions set out in Exhibit A attached hereto, and as set out in the main body of the Agreement, provided, however, that in the event of any conflict between the definitions in Exhibit A and those set out in the main body of this Agreement, Exhibit A shall govern.


AAA Accuride Accuride/Company Technical Services Agreement Accuride Tradename and Trademark License Affiliate Agreement Alternate Annual Business Plan Arbitration Act Asset Assignment, Purchase and Sale Agreement Asset List Automotive Decree Bank Board Bylaws Closing Closing Date Company Company Bank Instructions Company Facility Company/IASA Equipment Bailment Agreement Confidential Information Day DIARSA Director Director General Distribution Agreements Effective Date Escritura Constitutiva Examiner Exclusive Mexico/Latin America Commercial Mediator Agreement Exclusive United States/Canada Commercial Mediator Agreement Exhibit Extraordinary Shareholders' Meeting Fiscal Year FMVAT FMVLA FMVNAT General Law of Business Organizations GIR IASA IASA Bank Instructions IASA/Company Technical Services Agreement IASA Tradename and Trademark License IASA Plant Indemnified Party Indemnifying Party Initial Business Plan Inventory Joint Venture Labor Plan Loan Loan Documents Loss Maximum Contingent Labor Liability Assumed Mexico, D.F. Office Lease Note 1 Note 2 Note 3 Notice Notice of Intent to Terminate Option Ordinary Shareholders' Meeting Percentage Interest Person Phase-Out Services Representative Response Notice Ruedas AISA San Nicolas Office Leases


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Security Interest Security Interest Releases Servicios AISA Shareholder Stock Purchase Agreement Stock Registry Book Teller Term Usable Inventory VAT Wheel Wheelmaking Equipment Wheel Division Wheel Requirements Agreement


SECTION 1.2 Incorporation of Recitals. The parties to this Agreement hereby acknowledge the accuracy of the recitals hereto and incorporate them herein by this reference.


ARTICLE II


Purpose and Initial Scope of the Joint Venture;
Corporate Joint Venture Entity


SECTION 2.1 Purpose and Initial Scope of the Joint Venture. The purpose of the Joint Venture shall be to create and realize synergies and efficiencies and to develop technological capabilities in the joint production, marketing and sale of Wheels. Initially, the scope of the Joint Venture shall be to design, manufacture, purchase, sell, import, export, market, deal in and distribute Wheels for the light vehicle, heavy truck, trailer, bus and agricultural and off-road vehicle markets, in Mexico and elsewhere in Latin America, in the United States of America and Canada, and in other countries where sufficient demand exists. The Joint Venture shall be authorized to undertake business activities outside its initial scope only upon the prior unanimous written approval of both Accuride and IASA.


SECTION 2.2 Corporate Joint Venture Entity. Each of Accuride and IASA desires and intends that the Joint Venture operate and conduct its business exclusively in the form of a variable capital corporation incorporated under the laws of the United Mexican States.


ARTICLE III


The Joint Venture Company


SECTION 3.1 Formation of the Company; Formation Expenses. The parties acknowledge that the Joint Venture was incorporated by Accuride and IASA under the name "Accuride de Mexico, S.A. de C.V.," as a sociedad anonima de capital variable


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under the General Law of Business Organizations, on October 17, 1997, before Lic. Jose Andres Garza Tamez, Corredor Publico No. 15 in the Municipality of Monterrey, Nuevo Leon, Mexico. The Company shall bear the costs arising from its incorporation (such as, for example, Corredor Publico fees and recording fees); notwithstanding the foregoing, however, each Shareholder shall bear in full the professional fees it incurs for its own attorneys, accountants and financial and other advisors in connection with the Company's formation and organization.


SECTION 3.2 Escritura Constitutiva; Bylaws. A copy of the Escritura Constitutiva of the Company, which includes the form of Bylaws that was adopted upon its incorporation, is attached hereto as Exhibit B (Spanish), and an English translation of the Bylaws only is attached hereto as Exhibit C; but the English version is provided for convenience only, the Spanish version of the Bylaws found in the Escritura Constitutiva to be controlling in every case and to govern in the event of any conflict with this Agreement. The Escritura Constitutiva was inscribed and registered in the Public Registry of Commerce for the Municipality of Monterrey, Nuevo Leon on October 22, 1997. Neither the Bylaws nor the Escritura Constitutiva has been amended or otherwise modified as of the Effective Date.


SECTION 3.3 Corporate Purpose. The corporate purpose of the Company shall be that which is stated in Article Second of the Bylaws.

SECTION 3.4 Ownership of the Fixed Portion of the Company's Capital Stock. The fixed portion of the Company's capital stock is in the amount of $50,000 Mexican pesos and is represented by Fifty Thousand (50,000) registered no-par value common shares. Accuride currently owns Twenty-Five Thousand Five Hundred (25,500) shares of the fixed capital stock of the Company, and IASA currently owns the remaining Twenty-Four Thousand Five Hundred (24,500) shares of the fixed capital stock (in percentage terms, Accuride owns fifty-one percent (51%) of the Company's fixed capital stock, and IASA owns the remaining forty-nine percent (49%) thereof); and copies of the certificates representing the shares of the fixed capital stock of the Company held by Accuride, and by IASA, respectively, are attached hereto as Exhibit D.


SECTION 3.5 Issuance of the Company's Variable Capital Stock. The Company shall issue the variable portion of its capital stock as provided in Article IV.


SECTION 3.6 Powers of Attorney. Attached hereto in Exhibit B (as part of the Escritura Constitutiva) are true and complete copies of all powers of attorney that have been granted by the Company at any time from its date of formation through the Effective Date.


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SECTION 3.7 Taxpayer Identification Number. Attached hereto as Exhibit E is a true and complete copy of the Cedula de Identificacion Fiscal that was issued to the Company on October 22, 1997 by the Ministry of Finance and Public Credit, which contains the Mexican federal taxpayer identification number that has been issued to the Company.


SECTION 3.8 PITEX Application. Attached hereto as F is a true and complete copy of the Application filed by the Company on October 24, 1997 with the Ministry of Commerce and Industrial Development to solicit authority for the Company to operate under the PITEX program.


SECTION 3.9 National Supplier Application. Attached hereto as Exhibit G is a true and complete copy of the Application filed by the Company on October 24, 1997 with the Ministry of Commerce and Industrial Development for registration as a National Supplier under the Automotive Decree.


ARTICLE IV


Issuance of Variable Portion of the Company's Capital Stock
and Related Transactions; Initial Business Plan;
Lease of Equipment to IASA; Wheel Requirements Agreement;
Purchase of Servicios Aisa; Office Leases; Commercial
Mediator Agreements; License Agreements; Technical Services Agreements

SECTION 4.1 Issuance of the Variable Portion of the Company's Capital Stock. At the Closing, immediately upon the execution of this Agreement, the Shareholders and the Company shall take the actions indicated in Sections 4.1(a) through (g), in the order indicated, in connection with the issuance of the variable portion of the Company's capital stock.


(a) Transfer of Wheel Division Business and Assets to the Company. IASA shall sell, bargain, transfer, convey and assign to the Company, free and clear of any and all Security Interests, and IASA shall deliver to the Company, all of the business and all of the assets of IASA that relate primarily to, or that are or have been used primarily in connection with or by, the Wheel Division (excluding only interests in real property and accounts receivable of IASA arising from sales of Wheels produced by the Wheel Division), the descriptions of the business and assets to be transferred to the Company under this Section 4.1(a) to be broadly construed and to include all Wheel Division equipment, machinery, fittings, tools, dies, jigs, hoists, furniture, personal computers and


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all other similar and related items of tangible personalty, all Wheel Division removable fixtures, and all Wheel Division automobiles, trucks, tractors, trailers, forklifts and other vehicles; provided additionally, that in the case of equipment, machinery and all other items of tangible personalty used primarily in connection with or by the Wheel Division but titled in the name of any Person other than IASA, or subject to any Security Interest, IASA hereby expressly undertakes to correct all such title deficiencies and to remove such Security Interests so as to be able to convey to the Company good and marketable title to such assets at Closing; and provided further, that in the case of trucks and trailers owned by IASA but subject to any lease or other similar financing arrangement, the Company shall have the right to take title thereto and assume the corresponding lease obligations at any time upon at least thirty (30) Days advance Notice to IASA, at the sole discretion of the Company; and provided further, that the business and assets transferred by IASA to the Company under this Section 4.1(a) shall include each and every one of the following:


(i) all assets shown on the Asset List attached hereto as Exhibit H;


(ii) all inventories of IASA relating in any manner to the Wheel Division, including all inventories of Wheels, of raw materials and supplies, of purchased and manufactured parts, and of goods, goods-in-progress and finished goods ("Inventory"), provided, however, that the transfer of Inventory to the Company under this Section 4.1(a)(ii) shall be subject to the further requirements of Section 5.1;

(iii) all rights of IASA arising under or in connection with any and all agreements, contracts, instruments and other binding arrangements of or relating in any manner to the business or assets of the Wheel Division, to the extent that the Company agrees to accept such rights, the Company retaining the right to accept or reject such rights on a case-by-case basis, at its sole discretion;


(iv) all original books, records, ledgers, files, correspondence, customer and other lists, plans, equipment manuals, drawings, advertising and promotional materials, specifications, studies, reports and all other documents and materials, all information relating in any manner to litigation, product warranties and claims, human resources, intellectual and industrial property, product design, engineering, manufacturing, testing or sales, and all other know-how, trade secrets and other business information of any kind or description whatsoever, of or relating in any manner to the business or assets of the Wheel Division, provided, however, that to the extent that it may be unlawful or otherwise reasonably impractical for IASA to deliver such original records to the Company, the delivery of exact copies thereof shall be deemed an acceptable substitute; and


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(v) any and all other business or assets of IASA that relate primarily to, or that are or have been used primarily in connection with, the conceptualization, design, tooling, manufacturing, production, packaging, marketing, sale, export, transportation or delivery of Wheels.


The parties acknowledge and agree that the fair market value of the assets transferred ("FMVAT") by IASA to the Company in accordance with this Section 4.1(a) shall be Sixteen Million One Hundred Fifty-Seven Thousand Eight Hundred Dollars (U.S. $16,157,800); and to evidence further the transfer to the Company of the Wheel Division business and assets, IASA and the Company shall execute and deliver the Asset Assignment, Purchase and Sale Agreement attached hereto as Exhibit I, which Asset Assignment, Purchase and Sale Agreement shall govern in the event of any conflict with this Agreement.


(b) Assumption of Certain Liabilities by the Company. At the Closing, IASA shall assign to the Company, and the Company shall assume from IASA, certain indebtedness of IASA, in accordance with and as more particularly described in the following provisions of this Section 4.1(b):

(i) IASA shall assign to the Company, and the Company shall assume from IASA, an aggregate of Two Million Five Hundred Fifty-Four Thousand Seven Hundred Sixty-Two Dollars (U.S. $2,554,762) of indebtedness of IASA, as follows: (A) Five Hundred Fifty-Four Thousand Three Hundred Seventy-Five Dollars (U.S. $554,375) of indebtedness to Fina Factor, S.A. de C.V.; (B) One Million Two Hundred Eleven Thousand Two Hundred Thirty-Four Dollars (U.S. $1,211,234) of indebtedness to Banca Quadrum, S.A. de C.V.; and (C) Seven Hundred Eighty-Nine Thousand One Hundred Fifty-Three Dollars (U.S. $789,153) of indebtedness to Factoraje Bancrecer, S.A. de C.V.;


(ii) IASA shall assign to the Company, and the Company shall assume from IASA, One Million Dollars (U.S. $1,000,000) of the trade indebtedness of IASA to Hylsa, S.A. de C.V.;


(iii) IASA shall assign to the Company, and the Company shall assume from IASA, an aggregate of One Million Two Hundred Thirty-Four Thousand Six Hundred Thirty-Seven Dollars (U.S. $1,234,637) of indebtedness of IASA, as follows: (A) Forty Thousand One Hundred Thirty-Seven Dollars (U.S. $40,137) of indebtedness to Arrendadora Atlas, S.A. de C.V.; (B) Three Hundred Fifty-Seven Thousand Dollars (U.S. $357,000) of indebtedness to Arrendadora Serfin, S.A.; and (C) Eight Hundred Thirty-Seven Thousand Five Hundred Dollars (U.S. $837,500) of indebtedness to Arrendadora Financiera Quadrum, S.A. de C.V.;


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(iv) IASA shall assign to the Company, and the Company shall assume from IASA, Nine Hundred Fifty-Five Thousand One Hundred Twenty-Five Dollars (U.S. $955,125) of indebtedness of IASA to Banca Serfin, S.A.;


(v) IASA shall assign to the Company, and the Company shall assume from IASA, a total of One Hundred Five Thousand Four Hundred Seventy-Six Dollars (U.S. $105,476) of indebtedness of IASA to the holders of commercial paper issued by IASA and currently outstanding; and


(vi) The Company hereby assumes contingent seniority and severance liabilities in an aggregate amount up to, but not to exceed, Seven Hundred Thousand Dollars (U.S. $700,000) ("Maximum Contingent Labor Liability Assumed"), such seniority and severance liabilities, if any, being those that otherwise would be incurred by IASA under the Mexican federal labor law as a direct result of the transfer or dislocation of Wheel Division workers arising from the conveyance hereunder of the business and assets of the Wheel Division to the Company; provided additionally that the parties intend that the Maximum Contingent Labor Liability Assumed shall include any and all liabilities of Servicios AISA, and of Ruedas AISA, that may arise at any time, directly or indirectly, as a result of or in connection with the transfer or dislocation of Wheel Division workers (regardless of whether paid on a salaried or hourly basis) due to the formation of the Joint Venture or of the Company or due to the conveyance by IASA of the business and assets of the Wheel Division to the Company; and the parties further intend that IASA shall be and remain solely responsible for any and all such labor or employment-related liabilities whatsoever, regardless of which party incurs them in the first instance, to the extent that such liabilities exceed, individually (as reflected in Exhibit AA) or in the aggregate, the amount of the Maximum Contingent Labor Liability Assumed by the Company, all in accordance with and as provided under Article VIII hereof.


The parties acknowledge and agree that the fair market value of the liabilities assumed ("FMVLA") by the Company in accordance with this Section 4.1(b) shall be Six Million Five Hundred Fifty Thousand Dollars (U.S. $6,550,000), consisting of fixed liabilities in the amount of Five Million Eight Hundred Fifty Thousand Dollars (U.S. $5,850,000) and contingent liabilities in the amount of Seven Hundred Thousand Dollars (U.S. $700,000); and the parties further acknowledge and agree that the fixed liabilities assumed by the Company under Sections 4.1(b)(i) through (v) shall be paid as follows and otherwise as provided in Section 5.2: (xx) at the Closing, the Company shall execute and deliver irrevocable instructions ("Company Bank Instructions") to Citibank Mexico, S.A. (the "Bank") to draw immediately upon the Loan, in the name of the Company, the sum of Five Million Eight Hundred Fifty Thousand Dollars (U.S. $5,850,000), to pay immediately One Million Dollars (U.S. $1,000,000) of such draw directly to Hylsa, S.A. de C.V. (which


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payment shall be deemed to satisfy fully and discharge the indebtedness assumed by the Company under Section 4.1(b)(ii)), and to transfer immediately the remaining portion of such draw, in the amount of Four Million Eight Hundred Fifty Thousand Dollars (U.S. $4,850,000), to the account maintained by IASA with the Bank; (yy) at the Closing, IASA shall execute and deliver irrevocable instructions to the Bank ("IASA Bank Instructions") to transfer immediately from the IASA Bank account to the bank account of IASA at The Laredo National Bank, Laredo, Texas, account number 06-2869-0, ABA 114900313, the sum of Four Million Eight Hundred Fifty Thousand Dollars (U.S. $4,850,000); and (zz) at the Closing, IASA shall execute and deliver irrevocable instructions to The Laredo National Bank to purchase Mexican pesos with funds deposited in the above-described account and to transfer such peso-denominated funds immediately to each of the creditors identified in Sections 4.1(b)(i)(A) and (B) (but not C), and 4.1(b)(iii), in amounts sufficient to discharge the peso-denominated indebtedness of IASA thereto (as specified in letters that IASA obtained from each such creditor and delivered to the Company prior to the Closing), respectively; provided that, to the extent that any excess funds may remain in the IASA account at The Laredo National Bank following the performance by that bank of IASA's instructions thereto (as set out above), and following the full performance by IASA of all its obligations under Section 5.2, such excess funds shall be the sole property of IASA.


(c) Fair Market Value of Net Assets Transferred by IASA to the Company. The parties hereby acknowledge and agree that the fair market value of the net assets transferred by IASA to the Company in accordance with Sections 4.1(a) and (b) equals FMVAT minus FMVLA, or Nine Million Six Hundred Seven Thousand Eight Hundred Dollars (U.S. $9,607,800) ("FMVNAT").


(d) Issuance of Note 1 and Note 2. The Company, in consideration of its receipt and assumption of the assets and liabilities transferred to it by IASA in accordance with Sections 4.1(a) and (b), shall issue two promissory notes to IASA: (I) the first of which ("Note 1") shall be in the original principal amount of Four Million Seven Hundred Seven Thousand Eight Hundred Twenty-Two Dollars (U.S. $4,707,822), which is forty-nine percent (49%) of FMVNAT, and otherwise in the form attached hereto as Exhibit J; and (ii) the second of which ("Note 2") shall be in the original principal amount of Four Million Eight Hundred Ninety-Nine Thousand Nine Hundred Seventy-Eight Dollars (U.S. $4,899,978), which is fifty-one percent (51%) of FMVNAT, and otherwise in the form attached hereto as Exhibit K.


(e) Issuance of Variable Capital Stock to IASA. IASA shall subscribe for, and the Company shall issue to IASA, forty-nine percent (49%) of the shares of the variable capital stock of the Company, the exact number of which shall be determined by an Extraordinary Shareholders' Meeting, in consideration of which, IASA shall cancel Note 1;


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a copy of the certificate representing the shares of the Company's variable capital stock issued to IASA, a copy of the Minutes of the Extraordinary Shareholders' Meeting approving the issuance thereof, and a copy of Note 1 showing the cancellation thereof, all to be attached hereto as Exhibit L.


(f) Purchase of Note 2 by Accuride. Accuride shall purchase Note 2 from IASA, and IASA shall sell, transfer, bargain, convey, assign and negotiate Note 2 to Accuride, for the sum of Four Million Eight Hundred Ninety-Nine Thousand Nine Hundred Seventy-Eight Dollars (U.S. $4,899,978).


(g) Issuance of Variable Capital Stock to Accuride. In the final step leading to the further equity capitalization of the Company under this Section 4.1, Accuride shall subscribe for, and the Company shall issue to Accuride, fifty-one percent (51%) of the shares of the variable capital stock of the Company, the exact number of which shall be determined by an Extraordinary Shareholders' Meeting, in consideration of which, Accuride shall cancel Note 2; a copy of the certificate representing the shares of the Company's variable capital stock issued to Accuride, a copy of the Minutes of the Extraordinary Shareholders' Meeting approving the issuance thereof, and a copy of Note 2 showing the cancellation thereof, all to be attached hereto as Exhibit M.


SECTION 4.2 Value-Added Tax Payable Upon Transfer of Assets Under Section 4.1(a); Issuance of Note 3. The parties acknowledge and agree that, as a result of the transfer of assets by IASA to the Company in accordance with Section 4.1(a), value-added tax ("VAT"), in the amount of Mexican pesos that is equivalent on the Closing Date to Two Million Four Hundred Twenty-Three Thousand Six Hundred Dollars (U.S. $2,423,670), shall be collected by IASA from the Company and paid under the VAT law to the applicable Mexican tax authorities; and to evidence this obligation, at the Closing, the Company shall issue to IASA a promissory note ("Note 3") in the same principal amount as the amount of the VAT due and payable, Note 3 to be paid in full on or before December 15, 1997, to bear interest on the unpaid principal at the same rate as that which would be applied to IASA as a penalty for late payment of the VAT due, and otherwise to be in the form attached hereto as Exhibit N.

SECTION 4.3 Initial Business Plan. The Company has adopted, and both Shareholders hereby formally adopt, ratify and approve, the Initial Business Plan of the Company attached hereto as Exhibit O, which Initial Business Plan corresponds to the period from the date of formation of the Company through December 31, 1998.

SECTION 4.4 Bailment of Certain Equipment. The Company shall deliver possession to IASA, for the use of IASA (and in the event the Company transfers Wheel


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Division equipment to any Affiliate of the Company, the Company shall cause such Affiliate to agree to deliver possession to IASA, for the use of IASA), and IASA shall receive from the Company or any Affiliate thereof, for nominal consideration, certain machinery and equipment; and to evidence such bailment the Company and IASA agree to execute and deliver at Closing the Company/IASA Equipment Bailment Agreement attached hereto as Exhibit P, which Company/IASA Equipment Bailment Agreement shall govern in the event of any conflict with this Agreement.


SECTION 4.5 Wheel Requirements Agreement. IASA agrees to manufacture, sell, supply and deliver to the Company, free and clear of any and all Security Interests, all of the Company's requirements of Wheels; provided that the Company shall have no obligation to purchase any minimum quantity or quantities of Wheels, nor shall the Company have any obligation to limit its purchases of Wheels; and provided further, that the Company and IASA shall evidence more fully the terms and conditions of this Wheel requirements supply arrangement by executing the form of Wheel Requirements Agreement attached hereto as Exhibit Q, which Wheel Requirements Agreement shall govern in the event of any conflict with this Agreement.

SECTION 4.6 Purchase of Servicios AISA. Exclusively in consideration of the payment of Six Thousand One Hundred Ninety-Nine Dollars (U.S. $6,199) by the Company to IASA, at the Closing, IASA shall sell, bargain, transfer, convey and assign to the Company Forty-Nine Thousand Nine Hundred Ninety-Nine (49,999) shares of the common stock of Servicios AISA, one (1) Peso par value per share, duly subscribed and paid up, free and clear of any and all Security Interests; and the Company and IASA shall evidence the terms and conditions of such stock purchase by executing a Stock Purchase Agreement in substantially the same form as that which is attached hereto as Exhibit R. Also at the Closing, IASA shall deliver to the Company the books and records of Servicios AISA. Exclusively in consideration of the payment of One Dollar (U.S. $1) by the Company's nominee to GIR, at the Closing, GIR shall sell, bargain, transfer, convey and assign t ...