Gmcl Purchase Order Agreement

GMCL PURCHASE ORDER AGREEMENT*


BETWEEN


AMERICAN AXLE & MANUFACTURING, INC.


AND


GENERAL MOTORS OF CANADA LIMITED


- -------- * Portions of this Exhibit 10.03 were omitted and filed separately with the
Secretary of the Securities and Exchange Commission (the "Commission")
pursuant to an application for confidential treatment filed with the
Commission pursuant to Rule 406 under the Securities Act of 1933, as amended.
Such portions are marked by the symbol "***".


GMCL PURCHASE ORDER AGREEMENT


This Agreement, (the "Agreement") effective March 1, 1994 (the "Effective Date"), is entered into by AMERICAN AXLE & MANUFACTURING, INC. ("AAM"), a corporation organized under the laws of the State of Delaware, and GENERAL MOTORS OF CANADA LIMITED ("GMCL"), a corporation organized under the laws of Canada.


P R E M I S E S


WHEREAS, AAM desires to sell to GMCL, and GMCL desires to purchase from AAM, certain motor vehicle components upon the terms and conditions stated herein;


NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and in consideration of the mutual promises contained herein, intending to be legally bound, AAM and GMCL hereby agree as follows:


ARTICLE 1 - PURCHASE AND SUPPLY COMMITMENTS


1.1 Commitment for Certain GMCL Requirements:


A) For purposes of this Agreement, the term "Existing Components" shall (collectively or individually) mean certain components which are currently produced by General Motors Corporation ("GM") or by GMCL's St. Catharines Axle operation including, but not limited to, front and rear axles, front suspensions, steering linkages, stabilizer bars, rear propshafts, front auxiliary prop shafts, brake drums, wheel spindles, forgings, connecting rods and caps, and related parts, (each a "Family" of Existing Components) as set forth in detail, with part numbers, on Exhibit "A" attached hereto and incorporated herein and shall include successors to such Existing Components which can be manufactured by AAM without significant changes in tooling.


B) GMCL and AAM agree that following the Effective Date of this Agreement AAM shall, subject to Paragraph 1.1(C) below, be the sole-source supplier to GMCL for the Existing Components and GMCL shall purchase from AAM, and AAM shall supply to GMCL, pursuant to purchase orders issued by GMCL and pursuant to this Agreement, all of GMCL's requirements for such Existing Components, so long as:


(a) GMCL continues regular production of the applicable vehicle
model requiring such Existing Components; or


(b) GMCL continues to require such Existing Components as service
parts for such vehicles, subject to Paragraph 3.5 herein.


Successors to Existing Components being supplied by AAM that require significant changes in tooling are referred to as "New Components" and shall be sourced in accordance with Paragraph 1.2 herein; and


C) AAM acknowledges that certain sourcing/purchasing and/or supply arrangements may exist on the Effective Date between GMCL, and any of GM, GM or GMCL affiliates or non-affiliated suppliers which relate to the sourcing/purchasing and/or supply of certain of the Existing Components (the "Existing Relationships"). To the extent that the Existing Relationships do not, on the Effective Date, rely on Existing Components produced in any of:


(a) the GM plants which, following the Effective Date will be
owned by AAM (the "AAM Plants"); or


(b) the GMCL rear drive assembly operation located in
St. Catharines, Ontario (the "GMCL Axle Operation")


and notwithstanding Section 1.1 of the U.S. Supply Agreement, such relationships shall continue unabated and shall not in any way be limited as a result of this Agreement notwithstanding the provisions of Paragraph 1.1(B) above and GMCL shall be permitted to supply and/or source such Existing Components in a manner consistent with the Existing Relationships; provided that any increases or


decreases in volume requirements of any GM division which is part of such an Existing Relationship for Existing Components will be shared by the parties in accordance with those proportions, of the GM division's requirements for such Existing Components, supplied by them as at the Effective Date. GMCL agrees that it shall provide a listing of the Existing Relationships, including a description thereof, within six (6) months of the Effective Date.


1.2 Sourcing of New Components. In addition to issuing purchase orders pursuant to Paragraph 1.1 herein, any purchase orders issued by GMCL during the term of this Agreement, or extension thereof, for New Components required by GMCL for use as original equipment or as service parts in vehicles manufactured or sold by GMCL shall be directed to AAM, provided in each case that AAM has submitted its proposal in a timely fashion in accordance with GMCL's request for quotation, that AAM possesses in GMCL's reasonable judgment the manufacturing capability to supply GMCL's requirements and AAM's terms are competitive with proposals submitted by companies excluding GM and its affiliates with respect to quality, service and price. In the event GMCL determines that a proposal submitted by AAM pursuant to this Paragraph is not competitive with respect to quality, service and price, GMCL shall so notify AAM and specify in writing the nature and extent to which AAM's proposal is not competitive. If within thirty (30) days after such notice AAM does not provide GMCL reasonable assurances of AAM's ability and commitment to meet or exceed such competitive standard, then GMCL may enter into contracts to purchase the New Components in question from other suppliers at terms no less favorable than those offered by AAM for such time periods and quantities as GMCL in its sole discretion may decide. The terms for the supply of any such New Components by AAM shall be independent of the terms of this Agreement except as specifically provided herein.


-2-


1.3 Opportunities to Supply Other Requirements. GMCL will provide AAM opportunities to submit proposals through GM's advanced purchasing process to supply GMCL's requirements for other components which AAM is or may be qualified to supply, with the terms of supply of any such components to be determined through that process, independent of the terms of this Agreement.


ARTICLE 2 - MINIMUM TERM, EVERGREEN TERM, TERMINATION


2.1 Minimum Seven (7) Year Term. This Agreement shall become effective upon the Effective Date and shall remain in effect for a minimum period of seven (7) years from the Effective Date, subject to an evergreen renewal under Paragraph 2.2 below, non-renewal under Paragraph 2.3 below, and early termination under Paragraphs 2.4 and 2.5 below.


2.2 ***


2.3 ***


2.4 Early Termination. GMCL may terminate this Agreement in any of the
following events:


(a) AAM becomes insolvent or enters into bankruptcy, receivership,
liquidation, an arrangement for the benefit of creditors,
dissolution or other similar proceeding;


(b) A significant portion of AAM's assets becomes subject to
attachment, embargo or expropriation; or


(c) More than ten percent (10%) of the voting shares of AAM become
owned or controlled, directly or indirectly, by a competitor
of GMCL in the business of manufacturing motor vehicles.
However, this Paragraph 2.4(c) shall not apply if AAM
registers and sells its shares in any public offering.


2.5 Early Termination procedure. In the event GMCL elects to terminate this Agreement pursuant to Paragraph 2.4 above, GMCL shall first notify AAM in writing of the grounds for the intended termination. In the event AAM fails to remedy such grounds for termination within sixty (60) days after such notice, then GMCL may, at its option, terminate this Agreement effective at any time during the remaining term of this Agreement.


ARTICLE 3 - PRICING


3.1 Prices and Adjustments. The unit prices for Existing Components applicable during the term of this Agreement, subject to increases or decreases pursuant to Paragraph 3.6 herein and the last sentence of this Paragraph 3.1 and further subject to adjustments in calendar year 1996


-3-


and all calendar years thereafter pursuant to Paragraph 3.2 herein, have been negotiated by GMCL and AAM and are stated in the Supply Schedule attached as Exhibit A. All prices for Existing Components are on a F.O.B. (shipping point) basis. Title and risk of damage or loss to the Existing Components and New Components shall pass upon delivery, F.O.B. (shipping point). Price increases or decreases shall be made as the result of engineering changes ordered by GMCL or GM in the specifications for Existing Components, limited to changes in the cost plus a proportional change in profit.


3.2 Cost Reductions. Any and all price reductions or increases to Existing Components effected for the benefit of GM and its subsidiaries pursuant to


Sections 3.2 and 3.3 of the Component Supply Agreement between AAM and GM dated February 17, 1994 (the "U.S. Supply Agreement") shall apply equally to the Existing Components and the prices for the Existing Components shall be adjusted accordingly at such time as the corresponding price adjustments are made pursuant to the above referenced Sections of the U.S. Supply Agreement.


3.3 Payment Terms.


A) GMCL will pay for all Existing Components and New Components shipped from any AAM Plant as follows:


(a) All AAM sales of Existing Components or New Components to GMCL
for the *** after the Effective Date shall be paid *** in
immediately available funds *** shipment of the product from
the AAM Plants or the GMCL Axle Operation, as the case may be.


(b) All AAM sales of Existing Components or New Components to GMCL
between the *** shall be paid in immediately available funds
*** following shipment of the product from the AAM Plants or
the GMCL Axle Operation, as the case may be.


(c) All AAM sales of Existing Components or New Components to GMCL
between the *** shall be paid in immediately available funds
*** following shipment of the product from the AAM Plants or
the GMCL Axle Operation, as the case may be.


(d) All AAM sales of Existing Components or New Components to GMCL
between the *** shall be paid in immediately available funds
*** following shipment of the product from the AAM Plants or
the GMCL Axle Operation, as the case may be.


(e) All AAM sales of Existing Components or New Components to GMCL
between the *** shall be paid in immediately available funds
*** following shipment of the product from the AAM Plants or
the GMCL Axle Operation, as the case may be.


-4-


(f) All AAM sales of Existing Components or New Components to GMCL
between the *** shall be paid in immediately available funds
*** following shipment of the product from the AAM Plants or
the GMCL Axle Operation, as the case may be.


(g) All AAM sales of Existing Components or New Components to GMCL
*** shall be made on the *** following GMCL's receipt of
shipments ***.


B) For all shipments of Existing Components and New Components shipped from any


location other than an AAM Plant, GMCL shall on the *** following GMCL's receipt of such shipment ***.


AAM and GMCL will meet no less frequently than every two (2) years to discuss payment terms and may modify the above schedule by joint agreement.


3.4 Service Parts. Regarding service parts, the following is agreed:


(a) General Motors of Canada Limited Service Parts Organization
("GMCL/SPO") will issue, annually, contracts for past model
service parts at competitive prices to be negotiated.


(b) For service parts which are for current models, prices will
be based on the original equipment price plus a markup for
packaging, bar coding and other value added requirements
specified by GMCL/SPO, limited to the costs of such
activities plus a proportional adjustment in profit.


(c) For current model and past model service parts requirements,
the parties agree to freeze the current prices through nine
(9) months following the Effective Date. During this time,
AAM will confirm its cost to produce the existing service
parts and GMCL will obtain competitive bids from companies
excluding GM and its affiliates in order to establish the
competitive prices. It is the expectation of the parties
that, at GMCL's option, (i) the prices may be adjusted to
reflect the market price; (ii) the service parts may be
re-sourced to other suppliers, provided AAM is given the
opportunity to supply such service requirements pursuant to
the procedures contained in Paragraph 1.2 above, or (iii) the
service parts may be subject to GMCL's one time purchase from
AAM for all of GMCL's future requirements for the parts in
question at a mutually agreed upon price. It is expected that
adjustments will be made as analyses are completed, but in no
event will adjustments be made later than nine (9) months
after the Effective Date. If in some extenuating situations
the analyses are not complete, AAM will consider an extension
of the deadline.


3.5 Resale of Productive Material. Any and all price reductions or increases to Existing Components produced in the AAM Plants, implemented for the benefit of GM, and its subsidiaries pursuant to Section 3.6 of the U.S. Supply Agreement shall apply equally to the


-5-


Existing Components and the prices for the Existing Components shall be adjusted accordingly at such time as the corresponding price adjustments are made pursuant to the U.S. Supply Agreement.


ARTICLE 4 - PURCHASE ORDERS AND FIELD WARRANTY COSTS


4.1 (a) Standard Purchase Orders: Attached hereto as Exhibit "B" is the standard form of purchase order to be utilized in connection with this Agreement. All purchase orders issued by GMCL and accepted by AAM pursuant to this Agreement shall utilize such standard form purchase order and shall be governed by its terms and conditions, provided however, that Paragraphs 6 and 15 of the purchase order terms and conditions shall be superseded by Article 2 of this Agreement and may not be invoked or exercised by GMCL with respect to any purchase orders issued and accepted under this Agreement, and Paragraph 13 of the purchase order terms and conditions shall be superseded by Article 7 of this Agreement. Paragraph 3 of the purchase order terms and conditions shall be superseded by Paragraph 4.1(b) below. To the extent that the terms of this Agreement and the purchase order conflict, this Agreement shall prevail. ***


(b) Force Majeure: Any delay or failure of either party to perform its obligations hereunder shall be excused if, and to the extent that it is caused by an event or occurrence beyond the reasonable control of the party and without its fault or negligence, such as by way of example and not by way of limitation, acts of God, actions by any governmental authority (whether valid or invalid), fires, floods, windstorms, explosions, riots, natural disasters, wars, sabotage, labour problems (including lockouts, strikes and slowdowns), inability to obtain power, material, labour, equipment or transportation, or court injunction or order; provided that written notice of such delay (including the anticipated duration of the delay) shall be given by the affected party to the other party within ten (10) days. During the period of such delay or failure to perform by AAM, GMCL, at its option, may purchase goods from other sources and reduce its schedules to AAM by such quantities, without liability to AAM, or have AAM provide the goods from other sources in quantities and at times requested by GMCL, and at the price set forth in this order. If requested by GMCL, AAM shall, within ten (10) days of such request, provide adequate assurance that the delay shall not exceed thirty (30) days. If the delay lasts more than thirty (30) days or AAM does not provide adequate assurance that the delay will cease within thirty (30) days, GMCL may immediately cancel the order without liability.


-6-


(c) Duty Drawback Rights: Each purchase order submitted to AAM includes all related customs duty and import drawback rights, if any (including rights developed by substitution and rights which may be acquired from AAM's suppliers), which AAM can transfer to GMCL. AAM agrees to inform GMCL of the existence of any such rights and upon request to supply such documents as may be required by GMCL to obtain such drawback.


ARTICLE 5 - QUALITY CONTROL


5.1 AAM will institute and maintain a company-wide continuous improvement process. This process will be customer driven from the standpoint of both GMCL and the customer of GMCL products. This process shall include preventive maintenance plans that will maintain the quality of parts as they are manufactured. The continuous improvement plan will document the method to monitor and evaluate the process.


5.2 AAM will maintain and strive to improve the current quality control and inspection system. Such improvement will incorporate General Quality Standards, Targets for Excellence and other GMCL policies generally applicable to suppliers. This also includes the use of the AIAG Production Part Approval Process manual, AIAG reference manual for Potential Failure Modes and Effects Analysis, AIAG reference manual for Fundamental Statistical Process Control, the GM reference manual for Key Characteristic Designation System and others.


5.3 AAM will provide support to GMCL for immediate problem resolution, analysis of various sources of customer dissatisfaction, such as PPM (parts per million), CAMIP (Continuous Automotive Marketing Information Program), glove box surveys, and other quality measurement date which may become available to the parties from time to time.


5.4 GMCL has the option to provide at its expense a PICOS team to support AAM cost and productivity improvement activities.


ARTICLE 6 - PRODUCT LIABILITY


6.1 AAM shall defend, indemnify, and hold harmless GMCL, its officers, agents, and employees, from and against any and all claims, suits, causes of action, liabilities, losses, damages, costs of settlement, and expenses (including reasonable counsel fees) which may be imposed upon or incurred by GMCL from claims, suits, or causes of action (including without limitation those for death, personal injury, or property damage) by any person whatsoever at any time against GMCL, its officers, agents, and employees, arising from, caused or alleged to be caused by the manufacture, operation, use, sale, or transfer of any Existing Components or New Components or the design of New Components supplied hereunder and any other products manufactured by AAM.


-7-


6.2 GMCL shall defend, indemnify, and hold harmless AAM, its officers, agents, and employees, from and against any and all claims, suits, causes of action, liabilities, losses, damages, costs of settlement, and expenses (including reasonable counsel fees) which may be imposed upon or incurred by AAM from claims, suits, or causes of action (including without limitation those for death, personal injury, or property damage) by any person whatsoever at any time against AAM, its officers, agents, and employees, arising from, caused or alleged to be caused ...