10-Q
[form10-q.htm]
EXECUTION COPY

SETTLEMENT AND
 
COMMERCIAL AGREEMENT
 
This Settlement and Commercial Agreement (this “Agreement”) is entered into as
of September 16, 2009 (the “Effective Date”), by and among General Motors
Company (“GM”), a Delaware corporation, American Axle & Manufacturing Holdings,
Inc., a Delaware corporation (“AAM Holdings”), and American Axle &
Manufacturing, Inc., a Delaware corporation, on behalf of itself and its
subsidiaries and affiliates (“AAM”).  GM, AAM Holdings or AAM may be
individually referred to herein as a “Party” or collectively, as the “Parties”.
 
Recitals
 
WHEREAS, on June 1, 2009 Motors Liquidation Company (f/k/a General Motors
Corporation) (“Liquidation Company”) and certain of its subsidiaries commenced
Case No. 09-50026 currently pending before the United States Bankruptcy Court
for the Southern District of New York (the “Bankruptcy Court”);
 
WHEREAS, on July 5, 2009 the Bankruptcy Court entered an order (the “Sale
Order”) approving the sale of substantially all of Liquidation Company’s assets
to GM pursuant to 11 U.S.C. § 363 (the “363 Transaction”); and
 
WHEREAS, in connection with the 363 Transaction and the assumption of certain
executory contracts between AAM and Liquidation Company by Liquidation Company
and subsequent assignment of such contracts to GM, the Parties desire to resolve
and settle certain outstanding commercial issues and modify the supply
relationship among the Parties in accordance with the terms and conditions set
forth in this Agreement.
 
NOW, THEREFORE, for good and valuable consideration the receipt and sufficiency
of which the Parties acknowledge, GM, AAM Holdings and AAM agree as follows:
 
1. ACCOMMODATIONS
 
 
1.1 Second Lien Term Loan Financing.
 
GM shall make available to AAM a delayed draw term loan facility in a maximum
principal amount of up to $100,000,000.00 (the “Second Lien Term Loan”),
pursuant to the terms and conditions of a loan agreement to be entered into
among GM, AAM Holdings and AAM in the form of the attached Exhibit 1.1 (the
“Second Lien Term Loan Agreement”), and certain ancillary agreements and
documents as described in the Second Lien Term Loan Agreement (collectively,
with the Second Lien Term Loan Agreement, the “Second Lien Term Loan
Documents”).
 
AAM agrees that (i) on the Effective Date, it will execute the Second Lien Term
Loan Documents, (ii) AAM may not terminate the Second Lien Term Loan facility
until June 30, 2011, and (iii) if AAM requires additional liquidity that cannot
be satisfied utilizing (a) expedited payments provided under Section 1.5(g),
(b) the proceeds from sales of common equity, (c) the proceeds from the issuance
of equity linked securities if not prohibited under Section 6.01 of the Second
Lien Term Loan Agreement, (d) cash flow generated by AAM from its ordinary
course business operations, (e) the availability existing from time to time
under the revolving credit agreement governing the Revolving Debt (the
“Revolving Credit Agreement”), (f) the incurrence of indebtedness permitted
under Section(s) 6.01(a)(vii) and/or 6.01(a)(v) of the Second Lien Term Loan
Agreement, or (g) any Permitted Refinancing Indebtedness (as defined in the
Second Lien Term Loan Agreement) in an amount incurred to refinance any of the
Senior Debt, AAM will fully borrow all amounts under the Second Lien Term Loan
Documents before borrowing any additional amounts (assuming availability exists
under the Second Lien Term Loan Documents); provided, however that AAM may only
seek liquidity from a source permitted under (c), (e) or (f) above, if, at the
time, the sum of (i) AAM’s indebtedness outstanding under the Revolving Debt and
Term Debt, plus (ii) any amounts provided as a result of AAM’s utilization of
(c), (e) or (f) above, does not exceed, in the aggregate, the Senior Debt Cap
(as defined below), plus the aggregate principal amount of the indebtedness
outstanding as of the Effective Date as set forth on Schedule 6.01 to the Second
Lien Term Loan Agreement.  If AAM borrows under the Second Lien Term Loan
facility, AAM may not prepay the amounts outstanding thereunder until June 30,
2011 unless the source of such prepayment is proceeds in respect of
sub-section (d) above.
 
AAM further agrees that for the period commencing on the Effective Date and
continuing through AAM’s termination of the Second Lien Term Loan facility in
accordance with the terms of this Agreement:
 
(a) it will not increase the aggregate principal amount of the Revolving Debt
and Term Debt (as each are defined below) (collectively, the “Senior Debt”) in
excess of the Senior Debt Cap (defined below); provided, that the foregoing will
not prohibit the capitalization of interest or other fees.  The following terms
shall have the indicated meanings:  (i) “Senior Debt Cap” means $726.9 million,
(ii) “Revolving Debt” means the amounts outstanding under the Amended and
Restated Credit Agreement, dated as of January 9, 2004, as amended and restated
as of November 7, 2008, and as further amended and restated as of September 16,
2009, among AAM, AAM Holdings, the Lenders party thereto, JPMorgan Chase Bank,
N.A., J.P. Morgan Securities Inc. and Banc of America Securities LLC, and
(iii) “Term Debt” means the amounts outstanding under the Credit Agreement,
dated as of June 14, 2009, as amended and restated as of September 16, 2009,
among AAM, AAM Holdings, the Lenders party thereto, JPMorgan Chase Bank, N.A.,
J.P. Morgan Securities Inc. and Banc of America Securities LLC; and
 
(b) if any Senior Debt is refinanced prior to its scheduled maturity, such
refinanced debt and any other Senior Debt will not exceed, in the aggregate, the
Senior Debt Cap.
 
1.2 Commercial Accommodation Payment; Release.
 
(a) On the Effective Date, GM shall make a one-time payment to AAM of
$110,000,000.00 (the “Commercial Accommodation Payment”) via wire transfer of
immediately available funds to an account designated in writing by AAM in
consideration of (i) AAM’s agreement to GM’s decision not to source to AAM the
[…***…] program and (ii) any and all
 
*** CONFIDENTIAL TREATMENT REQUESTED
 

 
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payments associated with (a) the assumption of the Assumed Agreements and the
Modified Assumed Agreements (as each are defined below), in each case, as are
required to “cure” any defaults under 11 U.S.C. § 365, (b) the termination of
the Terminated Agreements (as defined below), and (c) the acknowledgement of
performance of the Performed Agreements (as defined below) and the release in
subsection (b) below.
 
(b) On the Effective Date, AAM hereby fully and forever releases and discharges
GM, Liquidation Company, GM’s and Liquidation Company’s respective subsidiaries
and affiliates, and each of their respective officers, directors, employees,
agents, successors and assigns (the “Released Parties”), from all manner of
action and causes of action, suits, damages and rights whatsoever, in law or in
equity, existing or accrued as of the date hereof, whether known or unknown, by
reason of, or arising out of or in any way related or connected to the
agreements or programs referenced in Sections 1.2(a)(i) and (ii) above.  AAM
hereby covenants that AAM will refrain from commencing any suit, prosecuting any
pending action or suit, or participating or assisting in any manner in the
commencement or prosecution of any action or suit, in law or in equity, against
any of the Released Parties on account of any action or cause of action released
hereby.
 
1.3 OPEB Obligations.
 
AAM and GM will negotiate in good faith for the settlement of GM’s reimbursement
and other obligations to AAM for any post-retirement health care, life insurance
and other post-retirement welfare benefits of any kind for UAW represented and
non-UAW represented current and former AAM employees and their spouses,
dependents and beneficiaries (collectively, the “OPEB”) arising out of or
relating to that certain Asset Purchase Agreement, dated as February 8, 1994 by
and between Liquidation Company and AAM, and that certain Agreement, dated
May 3, 2008, as amended May 16, 2008 by and between Liquidation Company and AAM
or any other existing agreement between Liquidation Company and AAM (the “OPEB
Obligations”).
 
1.4 Warrants.
 
(a) As of the Effective Date, AAM Holdings shall issue to GM warrants (the
“Warrants”) to purchase 4,093,729 shares of common stock, representing 7.4% of
the outstanding common stock of AAM Holdings (the “Initial Warrants”), as
described in the warrant agreement dated as of the Effective Date (the “Warrant
Agreement”) which shall include registration rights and standstill provisions,
in the form of the attached Exhibit 1.4(a).
 
(b) In the event that AAM elects to make a draw pursuant to the terms and
conditions of Second Lien Term Loan Agreement, AAM Holdings shall, as a
condition precedent to each draw, issue Warrants to GM to purchase a pro rata
portion of an additional 6,915,083 shares of common stock of AAM Holdings based
upon the amount of each Second Lien Term Loan drawn (the “Potential Subsequent
Warrants”), in the form of the attached Exhibit 1.4(a).  For clarification, if
AAM makes a draw of $25,000,000 on the Second Lien Term Loan, AAM will issue
Warrants to GM representing 1,728,771 shares of common stock of AAM Holdings
(25% of 6,915,083 shares).
 
1.5 Commercial Agreements.
 
(a) Agreements.
 
(1) Assumed Agreements.  GM shall promptly cause the agreements between
Liquidation Company and AAM set forth on Schedule 1 (collectively, the “Assumed
Agreements”) to be assumed by Liquidation Company according to their respective
terms without modification and assigned to GM as of the Effective Date.  Upon
receipt of the Commercial Accommodation Payment, the foregoing assumption and
assignment of the Assumed Agreements shall be deemed in full and final
satisfaction of all of the requirements of 11 U.S.C. § 365, including, without
limitation, the requirement to effect any further “cure” within the meaning of
11 U.S.C. § 365.  On the Effective Date, GM shall cause the GM contracts website
to update the status of the Assumed Agreements to “Assumed” and no further act
or requirement shall be necessary to evidence the assignment and assumption of
the Assumed Agreements to GM.
 
(2) Terminated Agreements.  The Parties agree that the agreements between
Liquidation Company and AAM set forth on Schedule 2 (collectively, the
“Terminated Agreements”) shall be deemed terminated and of no further force and
effect and all parties’ obligations thereunder, if any, will be deemed fully and
finally satisfied as of the Effective Date.
 
(3) Modified Assumed Agreements.  GM shall promptly cause the agreements between
Liquidation Company and AAM set forth on Schedule 3 (collectively, the “Modified
Assumed Agreements”) to be assumed by Liquidation Company according to their
respective terms, except that, upon assumption, the Modified Assumed Agreements
shall be deemed modified by the parties’ agreements set forth in this
Section 1.5, and assigned to GM.  Upon AAM’s receipt of the Commercial
Accommodation Payment, the foregoing modification and assignment of the Modified
Assumed Agreements shall be deemed in full and final satisfaction of all of the
requirements of 11 U.S.C. § 365, including, without limitation, the requirement
to effect any further “cure” under 11 U.S.C. § 365.
 
(4) Reservation of Rights.  The Parties agree that AAM’s entry into this
Agreement shall not be deemed to constitute a waiver of any of AAM’s rights
against Liquidation Company other than with respect to the Assumed Agreements,
the Terminated Agreements and the Modified Assumed Agreements; provided, that
nothing in this Agreement shall be deemed to modify, alter or amend Liquidation
Company’s rights, claims and defenses in respect thereof.
 
(5) Treatment of Existing, Future and New Business.
 
[…***…]
 
*** CONFIDENTIAL TREATMENT REQUESTED
 

 
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(E) Past Performance.  The Parties agree that the agreements set forth on
Schedule 6 (collectively, the “Performed Agreements”) have been fully performed
by each of the respective parties to the Performed Agreements as of the
Effective Date and, in the case of each of, AAM, AAM Holdings or GM, no Party
has any rights, claims or obligations arising out of or relating to the
Performed Agreements.
 
[…***…]
 
(c) Cost Transparency.  AAM shall complete to GM’s reasonable satisfaction all
1804 and 1810 forms that relate to all business subject to a GM New Lifetime
Program Contract, and GM shall have the right to audit to confirm the components
of the 1804/1810 forms in accordance with GM’s standard “Right to Audit” clause
contained on GM’s standard form purchase order contracts.  A representative copy
of a fully completed 1804/1810 form is attached as Exhibit 1.5(c) hereto and any
1804/1810 form submitted by AAM containing less detail than as set forth on the
attached example will not be deemed to comport with the requirements of this
Section 1.5(c).
 
[…***…]
 
(e) Cost Reduction.  AAM shall participate in GM’s standard technical cost
reduction program (including, without limitation, the program’s existing
allocations) for future cost reductions proposed by either AAM or GM, as the
case may be, after the Effective Date.
 
[…***…]
 
(g) Payment Terms.  For component and service parts received by GM on or after
August 1, 2009, and continuing through December 31, 2013, AAM shall have the
option, upon written notice to GM, to receive payment terms of “net 10 days” or
approximately equivalent expedited basis for shipments of component and service
parts following receipt in exchange for a 1.0% early payment discount; […***…].
 
[…***…]
 

 
*** CONFIDENTIAL TREATMENT REQUESTED
 

 
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1.6 Access and Security Agreement.
 
AAM and GM shall enter into an Access and Security Agreement in the form of the
attached Exhibit 1.6 (the “Access and Security Agreement”) on or prior to the
date on which AAM invokes the expedited payment terms provided in Section 1.5(g)
of this Agreement and, in any event, on or before the Effective
Date.  Notwithstanding anything to the contrary contained herein, on March 31,
2011, the Term of the Access and Security Agreement shall be automatically
extended through March 31, 2012 if AAM Holdings fails to achieve a Secured Debt
Leverage Ratio (as defined in the Revolving Credit Agreement) of the lesser of
(i) 3.5 to 1.0 and (ii) such lower ratio on which AAM Holdings and the Revolving
Lenders agree in the amendment to the Revolving Credit Agreement entered into as
of the Effective Date, measured as of March 31, 2011 (without regard to any
subsequent waiver, amendment, forbearance or modification to such covenant
granted by the Revolving Lenders).
 
1.7 Executive Compensation.
 
Beginning with the 2009 calendar year and continuing until 90 days following the
later to occur of (a) the repayment and termination of the Second Lien Term Loan
in accordance with the terms of the Second Lien Term Loan Agreement and (b) the
termination of the expedited payment terms provided in Section 1.5(g) of this
Agreement, AAM and its affiliates shall limit the total compensation of each
current or former employee of, current or former non-employee director of, and
current or former non-employee service provider to, AAM or any affiliate,
pursuant to any base salary, bonus, incentive, stock option, stock appreciation
right, restricted stock, excess benefit, SERP-type or other type of deferred
compensation (whether or not subject to Internal Revenue Code section 409A),
severance, employment, consulting, life insurance, or other type of formal or
informal, written or unwritten, agreement, policy, program, employee benefit
plan, or like arrangement, to $3,000,000 for each full calendar year, determined
on a paid basis with respect to base salary or with respect to annual bonus or
other annual compensation, or using the grant date fair value or the target
payment value, as applicable, of long-term incentive or other equity-based or
similar awards granted during the calendar year, or using the present value
determined in accordance with GAAP of any other amount with respect to which a
legally binding right is created in the calendar year.  Notwithstanding the
foregoing, the payment, in accordance with the current terms of the applicable
plan, contract or arrangement, of any amount of deferred compensation or other
compensation that was earned and vested prior to 2009 and the payment or accrual
during and after 2009, in accordance with a legally binding right created prior
to 2009 pursuant to the current terms of any plan, contract or arrangement in
effect on the date hereof, shall be excluded from the calculation of amounts
counting against the foregoing $3,000,000 limitation and shall not otherwise be
subject to the payment restrictions contained herein.
 
1.8 Golden Parachutes.
 
AAM and each affiliate shall terminate all existing “golden parachute”, change
of control, retention, and similar types of agreements or arrangements with any
employee of, non-employee director of, or non-employee service provider to, AAM
or any affiliate of AAM (“Golden Parachute Arrangements”).  Continuing until 90
days following the later to occur of (a) the repayment and termination of the
Second Lien Term Loan in accordance with the terms of the Second Lien Term Loan
Agreement and (b) the termination of expedited payment terms provided in
Section 1.5(g) of this Agreement, AAM and each affiliate shall not enter into
any Golden Parachute Arrangements with any current or former employee of,
current or former non-employee director of, and current or former non-employee
service provider to, AAM or any affiliate of AAM.
 
2. DELIVERIES
 
 
The Parties shall, in addition to other items specified elsewhere in this
Agreement, take the following actions on the Effective Date, the satisfaction of
each of which is a condition precedent to the effectiveness of this Agreement:
 
(a) GM, AAM and AAM Holdings shall execute and deliver the Second Lien Term Loan
Documents to which each is a party and AAM shall cause its subsidiaries and
affiliates to execute and deliver to GM any Second Lien Term Loan Documents to
which such subsidiary or affiliate is a party;
 
(b) GM shall make the Commercial Accommodation Payment;
 
(c) AAM Holdings shall execute and deliver to GM the Initial Warrants;
 
(d) GM and AAM shall execute and deliver the Warrant Agreement;
 
(e) GM and AAM shall execute and deliver the Access and Security Agreement and
all acknowledgments required thereunder; and
 
(f) AAM and AAM Holdings shall deliver fully executed copies of the amendments
to the Revolving Debt and Term Debt credit facility documents.
 
3. EVENTS OF DEFAULT
 
 
The occurrence of one or more of the following shall be “Events of Default”, or
individually, an “Event of Default” hereunder, unless a waiver or deferral is
agreed to in writing, in each instance, by the Party having the right to
exercise remedies pursuant to Section 4 of this Agreement as a result of such
Event of Default:
 
(a) AAM or AAM Holdings, as the case may be, becomes the subject of a voluntary
or involuntary petition in bankruptcy or any proceeding relating to insolvency,
receivership, liquidation, or composition for the benefit of creditors, which
petition or proceeding is not dismissed with prejudice within sixty (60) days
after filing;
 
(b) AAM or AAM Holdings breaches or fails to perform any express agreement,
covenant, term or condition of this Agreement or any Related Agreement (as
defined in Section 6(a) below) (except for the Second Lien Term Loan Agreement
and the Access and Security Agreement) and fails to cure that breach within 5
days after receiving written notice of the breach;
 
(c) an “Event of Default” occurs under the Second Lien Term Loan Agreement
(without regard to any “standstill period” provided for under any Intercreditor
Agreement (or related agreement) among any one or more of AAM Holdings, AAM, any
secured lender(s) to AAM Holdings and/or AAM, as the case may be, and GM) or the
Access and Security Agreement;
 
(d) One or more of AAM’s or AAM Holding’s loan facilities in respect of which
the indebtedness outstanding thereunder exceeds $5,000,000 USD (other than the
Second Lien Loan Agreement) expire or are terminated without AAM or AAM Holding
providing to GM written evidence of a binding substitute financing commitment
relating to such expired or terminated loan facility, which written evidence of
binding substitute financing commitment has not expired or been terminated, and
the consequence of such expiration or termination of the loan facility(ies) and
failure to provide a written substitute financing commitment is the substantial
likelihood that GM’s production at any one or more of GM’s assembly plants
worldwide may be imminently interrupted; or
 
(e) GM breaches or fails to perform any express agreement, covenant, term or
condition of this Agreement or any Related Agreement (except for the Second Lien
Term Loan Agreement and the Access and Security Agreement), and fails to cure
that breach within 5 days after receiving written notice of the breach.
 
 
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4. REMEDIES
 
 
(a) Upon an Event of Default pursuant to Sections 3(a), 3(b), 3(c) or 3(d), GM
shall be entitled to exercise all rights and remedies available to it under this
Agreement, applicable law, or at equity.  All of GM’s rights and remedies under
this Agreement are cumulative and not exclusive of any rights and remedies under
any other agreement, including, without limitation, the Related Agreements, the
New GM Lifetime Program Contracts, and the GM Long-Term Contracts, or under
applicable law or at equity all of which rights and remedies, in each case, are
expressly reserved.
 
(b) Upon an Event of Default pursuant to Section 3(e) of this Agreement, AAM
shall be entitled to exercise all rights and remedies available to it under
applicable law or at equity; provided that, with respect to an Event of Default
resulting from a breach of the expedited payment terms in accordance with
Section 1.5(g) above, if such breach has not been cured within the cure period
set forth in Section 3(e), GM and AAM shall promptly arrange a meeting between a
representative of AAM and GM’s Chief Financial Officer of Global Purchasing and
Supply Chain, and the Parties shall attempt to resolve such dispute in good
faith prior to AAM exercising any other remedy available to it under this
Agreement, the New GM Lifetime Program Contracts, or under applicable law or at
equity.
 
5. TOOLING ACKNOWLEDGEMENT
 
 
5.1 AAM acknowledges and agrees that exclusive of AAM Owned Tooling (as defined
below) and Unpaid Tooling (as defined below), all tooling, dies, test and
assembly fixtures, jigs, gauges, patterns, casting patterns, cavities, molds,
and documentation, including engineering specifications, PPAP books, and test
reports together with any accessions, attachments, parts, accessories,
substitutions, replacements, and appurtenances thereto (collectively, “Tooling”)
used by AAM in connection with its manufacture of Component Parts (collectively,
the “GM Owned Tooling”) are owned by GM and are being held by AAM or, to the
extent AAM has transferred the GM Owned Tooling to third parties, by such third
parties, as bailees at will.  Upon payment in full of the applicable purchase
order price for any item of Unpaid Tooling, such item shall thereafter be
included in the definition of the GM Owned Tooling under this Agreement;
provided, however, that nothing in this Section 5 is intended to modify any of
GM’s obligations to AAM on account of Unpaid Tooling.  For the purposes of this
Section 5, the term (i) “Unpaid Tooling” means Tooling for which GM has not paid
the applicable purchase order price for such Tooling to AAM, any of its
predecessor(s)-in-interest, or to any third party on account or for the benefit
of AAM, and (ii) “AAM Owned Tooling” means any Tooling that is neither Unpaid
Tooling nor GM Owned Tooling.
 
5.2 AAM will provide to GM, within sixty (60) days after the Effective Date, a
list of AAM Owned Tooling and Unpaid Tooling relating to that GM’s Component
Parts (“Tooling Lists”).  AAM will have a period of 45 days thereafter within
which to supplement the Tooling Lists regarding AAM Owned Tooling or Unpaid
Tooling inadvertently omitted from the Tooling Lists, after which the Tooling
Lists will become final.  GM will provide assistance to AAM in preparing the
Tooling Lists as reasonably requested by AAM.  GM reserves the right to dispute
any Tooling List provided by AAM.  If a GM disagrees with a Tooling List, AAM
and GM will meet and attempt, in good faith, to resolve the dispute.  If the
dispute cannot be resolved by AAM and GM within thirty (30) days after GM’s
receipt of the Tooling List, the matter will be jointly submitted to a neutral
third party on whom AAM and GM agree for expedited resolution.  The costs of the
neutral third party shall be shared equally by AAM and GM.  Any Tooling used to
manufacture Component Parts not included in the Tooling List will be subject to
the dispute resolution mechanics set forth in Section 5.4.  If AAM fails to
timely provide a Tooling List or seek GM’s consent to extend the date by which
AAM must provide the Tooling Lists, which consent will not be unreasonably
withheld, all Tooling will be deemed GM Owned Tooling.
 
5.3 Neither AAM nor any other person or entity other than GM has any right,
title, or interest in the GM Owned Tooling other than AAM’s obligation, subject
to GM’s unfettered discretion, to use the GM Owned Tooling in the manufacture of
GM’s component and service parts in accordance with the GM purchase orders.  GM
and its designee(s) shall have the right to take immediate possession of the GM
Owned Tooling at any time at GM’s expense, without payment of any kind from GM
to AAM, provided, that, GM shall promptly repair, at GM’s expense, physical
damage to AAM’s equipment or AAM’s facilities directly and proximately caused by
any removal of the GM Owned Tooling from AAM’s equipment or AAM’s
facilities.  Should GM elect to exercise such right, AAM shall cooperate fully
with GM in its taking possession of its GM Owned Tooling, including, without
limitation, by allowing access to AAM’s facilities.  GM shall, within 10
business days of removal of any Tooling, provide to AAM and Lenders a detailed
list of all items removed from any AAM facility.  The rights and obligations
contained in this Section 5 shall continue notwithstanding the expiration or
termination of this Agreement.
 
5.4 In the event of a dispute between AAM and GM over whether any Tooling is GM
Owned Tooling, AAM Owned Tooling or Unpaid Tooling, the Tooling subject to the
dispute will be presumed to be GM Owned Tooling pending resolution of the
dispute, and GM will have the right to immediate possession of the applicable
Tooling pending resolution of the dispute (and AAM may not withhold delivery of
possession of the Tooling to GM pending such resolution), but the Tooling will
remain subject to any lien of AAM, or any claim or right to payment of AAM for
the disputed amounts (despite AAM’s relinquishment of possession).  The rights
and obligations contained in this Section 5 are in addition to (and not in lieu
of) the rights of GM arising out of its purchase orders, including GM’s T’s&C’s,
and other agreements with AAM, and will continue in effect notwithstanding the
expiration or termination of this Agreement.  In the event of a conflict between
the GM’s T’s&C’s and conditions and this Section 5, the terms and conditions of
this Section 5 will control.
 
6. REPRESENTATIONS AND WARRANTIES
 
 
As of the date of this Agreement, each Party represents and warrants to the
other Party the following:
 
(a) Organization; Authority Relative to this Agreement.  Such Party is duly
formed, validly existing, and in good standing under the laws of its state of
organization, and has the requisite power and authority to execute, deliver, and
perform its obligations under this Agreement, the Warrant Agreement, and the
Access and Security Agreement (collectively, the “Related Agreements”) and to
consummate the transactions contemplated by this Agreement and the Related
Agreements.  Such Party’s execution, delivery, and performance of this Agreement
and the Related Agreements have been duly authorized by all necessary corporate
or similar governing authority.  No other action on the part of such Party or
any other individual, person or entity is necessary to authorize this Agreement
or the Related Agreements or the consummation of the transactions contemplated
by this Agreement or the Related Agreements.  Such Party has duly and validly
executed and delivered this Agreement and the Related Agreements, and this
Agreement and the Related Agreements, upon execution, will constitute a valid
and binding obligation of such party enforceable against such Party in
accordance with its terms, except as they may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting creditors’ rights generally, and except as they may be limited by
general principles of equity, regardless of whether such enforceability is
considered in a proceeding at law or in equity.
 
 
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(b) Consents and Approvals; No Violation.  Neither such Party’s execution nor
delivery of this Agreement or the Related Agreements, nor such Party’s
consummation of the transactions contemplated by this Agreement and the Related
Agreements, except for such consents and approvals required in connection with
AAM’s Amended and Restated Revolving Credit Facility, dated January 9, 2004, as
amended and restated on November 7, 2008 and Credit Agreement dated as of
June 14, 2007, nor such Party’s compliance with the terms and provisions of this
Agreement and the Related Agreements (a) requires any authorization, consent or
approval of any governmental or regulatory authority or of any other person or
entity; (b) will accelerate any obligation under, violate or breach any
provision of, constitute a default under, result in the creation of any lien or
security interest under, result in the termination of, require the consent,
authorization or approval of any third party under, or in connection with, any
of the terms, covenants, provisions or conditions of any note, bond, mortgage,
indenture, deed of trust, license, franchise, lease, contract, agreement or
other instrument, commitment or obligation to which such party is a party; or
(c) will violate any order, writ, injunction, decree, judgment or arbitration
award, or any statute, rule, regulation or ruling of any court or governmental
authority, United States or foreign, applicable to such party.
 
7. MISCELLANEOUS
 
 
7.1 Assignment.
 
This Agreement will be binding upon and inure to the benefit of the Parties and
their respective successors and assigns.  No Party may assign its rights,
privileges or obligations under this Agreement without the prior written consent
of the other Party, and any attempted assignment without the written consent of
the other Party will be void, except that GM may assign or otherwise transfer
this Agreement and its rights or obligations under this Agreement to any
affiliated or successor company or to any purchaser of a substantial part of
GM’s business to which this Agreement relates.  In addition, GM may delegate, in
whole or in part, this Agreement and its rights and obligations under this
Agreement to any such affiliate, successor or purchaser.  GM will provide AAM
written notice of any such assignment, transfer or other delegation.
 
7.2 Notice.
 
Any notice or communication under this Agreement will be in writing and either
delivered personally, sent by certified or registered mail, postage prepaid,
delivered by a recognized overnight courier service, or transmitted via
facsimile with confirmation receipt of such notice, addressed as follows:
 
 
If to GM:
General Motors Company

 
 
30009 Van Dyke Road

 
 
P.O. Box 9025

 
 
Mail Code 480-206-116

 
 
Warren, Michigan  48090-9025

 
 
Attention:  Christopher F. Dubay

 
 
Group Counsel, Global Purchasing &

 
 
Supply Chain

 
 
Facsimile:  (586) 575-1887

 
 
With a copy to:
Honigman Miller Schwartz and Cohn LLP

 
 
2290 First National Building

 
 
660 Woodward Avenue

 
 
Detroit, Michigan  48226

 
 
Attention:  Robert B. Weiss

 
 
Facsimile:  (313) 465-7597

 
 
If to AAM:
American Axle & Manufacturing, Inc.

 
 
One Dauch Drive

 
 
Detroit, Michigan  48211

 
 
Attention:  Patrick S. Lancaster

 
 
Facsimile:  (313) 758-4262

 
 
And to:
General Counsel

 
 
American Axle & Manufacturing, Inc.

 
 
One Dauch Drive

 
 
Detroit, Michigan  48211

 
 
Facsimile:  (313) 758-3897

 
 
Attn:  Richard Raymond

 
 
With a copy to:
Shearman & Sterling LLP

 
 
599 Lexington Avenue

 
 
New York, NY 10022

 
 
Attention:  Peter D. Lyons

 
 
Facsimile:  (646) 848-7666

 
or to such other address as may be furnished in writing by either party in the
preceding manner.
 
 
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7.3 Entire Agreement.
 
This Agreement together with all exhibits and schedules hereto constitutes the
entire agreement between the parties with respect to the subject matter of this
Agreement.  No waiver, amendment or other modification of this Agreement will be
valid unless evidenced by a writing signed by the Party or Parties whose rights
or obligations are affected by such waiver, amendment or modification.  All
rights and remedies granted in this Agreement to either Party shall be
cumulative and nonexclusive of all other rights and remedies that such Party may
have.
 
7.4 Press Releases and Public Announcements; Confidentiality.  The Parties shall
mutually agree in advance the substance of any press release to be issued by
either Party with respect to this Agreement and the Related Agreements.  Prior
to the issuance of any such press release, no Party shall issue any other press
release or make any other public announcement relating to the subject matter of
this Agreement or the Related Agreements without the prior written consent of
the Parties.  There shall be no restrictions on the Parties in commenting
regarding this Agreement other than the initial press release referenced above
and the confidentiality provisions set forth in this Section 7.4.  Without
limiting the other provisions of this Section 7.4, the Parties acknowledge that
the specific terms of this Agreement are of a confidential nature and no Party
shall make, and each will direct its respective representatives not to make,
directly or indirectly, any disclosure, whether written or oral, of the specific
terms of this Agreement without the prior written approval of each other
Party.  Notwithstanding the foregoing, following the issuance by AAM of the
press release referred to above, any Party may make any public disclosure it
believes in good faith is required by applicable law or any listing or trading
agreement concerning its publicly traded securities; provided that any such
Party shall use commercially reasonable efforts to provide the other Parties a
minimum of 24 hours prior notice of any such public disclosure.
 
7.5 Interpretation.
 
(a) This Agreement is being entered into among competent and experienced
business persons, represented by counsel, and have been reviewed by the parties
and their counsel.  Therefore, any ambiguous language in this Agreement will not
necessarily be construed against any particular Party as the drafter of such
language.
 
(b) The captions and headings contained in this Agreement are solely for
convenience of reference and will not affect the interpretation of any provision
of this Agreement.
 
(c) All references in this Agreement to section numbers, schedules or exhibits
are references to the sections in, or schedules or exhibits to, as applicable,
this Agreement.
 
7.6 Severability.
 
If any provision of this Agreement is determined to be contrary to law or
unenforceable by any court of law, the provision will be reformed to provide the
maximum expression of the intent of the parties permissible under law.
 
7.7 Counterparts and Effectiveness.
 
This Agreement may be executed in counterparts (each of which shall be deemed an
original, but all of which take together shall constitute one and the same
agreement) and shall become effective when one or more counterparts have been
signed by each of the Parties and delivered to the other Parties.  The exchange
of copies of this Agreement and of signature pages by facsimile or electronic
transmissions shall constitute effective execution and delivery of this
Agreement as to the Parties and may be used in lieu of the original Agreement
for all purposes.  Signatures of the Parties transmitted by facsimile or
electronic transmission shall be deemed to be their original signatures for all
purposes.
 
7.8 Applicable Law; Forum.
 
This Agreement is made in the State of Michigan and will be governed by, and
construed and enforced in accordance with, the laws of the State of Michigan,
without regard to principles of conflicts of laws.  The Parties agree that the
federal and state courts sitting in Wayne County, Michigan, have personal
jurisdiction over the Parties and that proper jurisdiction and venue for any
dispute arising from or under this Agreement will be in the federal or state
courts sitting in Wayne County, Michigan.
 
7.9 Third Party Beneficiary.
 
Except for Liquidation Company, which is an express third party beneficiary of
the terms and conditions of this Agreement, including, without limitation, the
provisions of Section 1.2, this Agreement is for the sole benefit of the Parties
hereto, and nothing herein expressed or implied shall give or be construed to
give any person other then the Parties hereto any legal or equitable rights
hereunder.
 
7.10 JURY TRIAL WAIVER.
 
THE PARTIES HERETO ACKNOWLEDGE THAT THE RIGHT TO TRIAL BY JURY IS A
CONSTITUTIONAL RIGHT, BUT THAT THIS RIGHT MAY BE WAIVED.  THE PARTIES HEREBY
KNOWINGLY, VOLUNTARILY AND WITHOUT DURESS, INTIMIDATION, OR COERCION, WAIVE ALL
RIGHTS TO A TRIAL BY JURY OF ALL DISPUTES ARISING OUT OF OR IN RELATION TO THIS
AGREEMENT OR ANY OTHER AGREEMENTS BETWEEN THE PARTIES EXECUTED IN CONNECTION
WITH THIS AGREEMENT.  NO PARTY SHALL BE DEEMED TO HAVE RELINQUISHED THE BENEFIT
OF THIS WAIVER OF JURY TRIAL UNLESS SUCH RELINQUISHMENT IS IN A WRITTEN
INSTRUMENT SIGNED BY THE PARTY TO WHICH SUCH RELINQUISHMENT WILL BE CHARGED.
 
7.11 Treatment of Certain Agreements in Potential Subsequent Chapter 11
 
.
 
AAM and AAM Holdings irrevocably covenant and agree that in the event that
either were to commence proceedings (a “Chapter 11 Case”) under chapter 11 of
title 11 of the United States Code (the “Bankruptcy Code”) following the
Effective Date, AAM and/or AAM Holdings, as the case may be, will move in the
Chapter 11 Case, under section 365(a) of the Bankruptcy Code, to assume this
Agreement and the Access and Security Agreement.
 
{Signatures on following page.}
 
 
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IN WITNESS WHEREOF, the parties have executed this Settlement and Commercial
Agreement as of the date first written above.
 

GENERAL MOTORS COMPANY
 
By:  /s/ MW Fischer                                                      
 
Name: M W Fischer
 
Its: Director, Supply Risk MGT
 
 
AMERICAN AXLE & MANUFACTURING, INC., on behalf of itself and its subsidiaries
and affiliates
 
By:  /s/ David C. Dauch                                           
 
Name: David C. Dauch
 
Its: President & Chief Operating Officer
 
 
AMERICAN AXLE & MANUFACTURING HOLDINGS, INC.
 
                                                                                                              
By:  /s/ David C. Dauch                                           
                                                                                                              
Name: David C. Dauch
                                                                                                              
Its: President & Chief Operating Officer

 
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Schedules
 
Schedule 1
Assumed Agreements
Schedule 2
[…***…]
Schedule 3
[…***…]
Schedule 4
[…***…]
Schedule 5
[…***…]
Schedule 6
Performed Agreements
Schedule 7
[…***…]
Schedule 8(1)
[…***…]
Schedule 8(2)
[…***…]
Schedule 9
[…***…]
Schedule 10
[…***…]
Schedule 11
[…***…]

Exhibits
 
Exhibit 1.1
Second Lien Term Loan Agreement
Exhibit 1.4(a)
Warrant Agreement
Exhibit 1.5(a)(5)(1)
GM Standard Lifetime Contract
Exhibit 1.5(a)(5)(2)
GM Terms and Conditions
Exhibit 1.5(a)(5)(3)
GM Long-Term Contract
Exhibit 1.5(c)
Form 1804 / 1810
Exhibit 1.6
Access and Security Agreement

*** CONFIDENTIAL TREATMENT REQUESTED
 

NYDOCS01/1215580.2                                                                    
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