EXHIBIT 10 (xxxviii)
 
 
 
SUPPLEMENTARY AGREEMENT
BY AND AMONG
SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES
COOPER TIRE INVESTMENT HOLDING (BARBADOS) LTD.
JOY THRIVE INVESTMENTS LIMITED
CHENGSHAN GROUP COMPANY LIMITED
CTB (BARBADOS) INVESTMENT CO., LTD.
 
 
Date: October 27, 2005

 

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TABLE OF CONTENTS

             
1.
  Interpretation     1  
2.
  Capital Contribution     2  
3.
  Transfer of Equity Interests     2  
4.
  Sale of Cooper Branded Products     3  
5.
  Non-Compete     3  
6.
  Transfer of Intellectual Property     4  
7.
  Purchase of Inventory     5  
8.
  Pricing Adjustment     6  
9.
  Restrictions on the CST     6  
10.
  Tire Business Expansion     6  
11.
  Breach of Agreement     6  
12.
  Confidentiality     6  
13.
  Effectiveness and Termination     7  
14.
  Dispute Resolution     7  
15.
  Governing Law     7  
16.
  Miscellaneous     7  
 
           
Schedule 1
  Description of land and buildings (TO BE CONTRIBUTED BY CST)     11  
Part 1
  Land Use Right     11  
Part 2
  Buildings with Building Ownership Certificates     13  
Part 3
  Buildings without Building Ownership Certificates     15  
Schedule 2
        16  
Part 1
  Equity Transfer/Pledge Rules     16  
Part 2
  Qualified Lenders as selected by SPV BArbados     18  
Schedule 3
  Policies For Sale Of Cooper Branded Products     19  

 

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SUPPLEMENTARY AGREEMENT
This Supplementary Agreement (this “Agreement”) is entered into as of this 27th
day of October 2005, by and among the following:

(1)   SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES (“CST”), a company
limited by shares duly organized and existing under the laws of the People’s
Republic of China (“China” or “PRC”) with its legal address at No. 98, Nanshan
Road North, Rongcheng City, Shandong Province, PRC;

(2)   COOPER TIRE INVESTMENT HOLDING (BARBADOS) LTD. (“SPV Barbados”), a company
duly organized and existing under the laws of Barbados with its legal address at
Whitepark House, White Park Road, Bridgetown, Barbados;

(3)   JOY THRIVE INVESTMENTS LIMITED (“SPV BVI”), a company duly organized and
existing under the laws of British Virgin Islands with its legal address at P.O.
Box 957, Offshore Incorporations Center, Road Town, Tortola, British Virgin
Islands;

(4)   CHENGSHAN GROUP COMPANY LIMITED (“CSG”), a limited liability company
registered and incorporated under the laws of the PRC with its registered
address at No. 98, Nanshan Road North, Rongcheng City, Shandong Province, PRC;
and

(5)   CTB (BARBADOS) INVESTMENT CO., LTD. (“CTB BARBADOS”), a company duly
organized and existing under the laws of Barbados with its legal address at
Chancery House, High Street, Bridgetown, Barbados, W. I.

(Each party is hereinafter individually referred to as a “Party” and
collectively as the “Parties”.)
WHEREAS, CST, SPV Barbados and SPV BVI have executed two (2) Sino-foreign equity
joint venture contracts (the “JV Contracts”) on the date of this Agreement for
the joint establishment of Cooper Chengshan (Shandong) Tire Company Ltd. and
Cooper Chengshan (Shandong) Passenger Tire Company Ltd. (the “JVs”);
WHEREAS, the Parties agree that the JVs should merge as soon as practicable;
WHEREAS, the JVs have entered into two (2) asset purchase agreements with CST
(the “Asset Purchase Agreements”) to acquire the assets and business of CST;
WHEREAS, CTB Barbados and CSG have executed a Sino-foreign equity joint venture
contract (the “Steel Cord JV Contract”) for the establishment of Cooper Taiji
(Shandong) Steel Cord Company Ltd. (the “Steel Cord JV”);
WHEREAS, to facilitate the cooperation in connection with the above contemplated
transactions, the Parties have been contemplating certain terms and conditions
supplementary to the relevant arrangements, covenants and undertakings agreed
upon among the Parties.
NOW, THEREFORE, in consideration of the agreements set forth herein, the
adequacy of which hereby is acknowledged, the Parties, intending to be legally
bound, hereby agree as follows:

1.   Interpretation       Terms and expressions defined in or construed for the
purposes of the JV Contracts and Asset Purchase Agreement shall have the same
meanings or be construed in the same manner when used in this Agreement, unless
otherwise specifically referred to in this Agreement.

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2.   Capital Contribution

2.1   CST shall contribute all of the land use rights and buildings free of all
liens and encumbrances to the JVs, as detailed in Schedule 1 of this Agreement,
representing thirty five percent (35%) of the Registered Capital of the JVs
respectively.

2.2   CST, SPV Barbados and SPV BVI hereby agree that their capital
contributions to the JVs are conditional upon satisfaction of the following
conditions:

  (a)   the Supplementary Contracts have been executed by the parties to the JV
Contracts and ratified by the Board pursuant to Article 7.4 of the JV Contracts;
    (b)   all parties to the JV Contracts have obtained corporate approvals in
respect of the JV Contracts and Supplementary Contracts from their respective
board of directors and/or shareholders assembly as may be necessary;     (c)  
the conditions precedent stipulated in Article 5 of the Asset Purchase
Agreements have been fully satisfied; and     (d)   the approvals have been
issued as required by the U.S. Hart-Scott-Rodino Antitrust Improvement Act of
1976 and any other appropriate governmental authority.

3.   Transfer of Equity Interests

3.1   CST, SPV Barbados and SPV BVI hereby agree to be bound by the detailed
rules set forth in Schedule 2 attached hereto, which rules are to implement the
transfer of their equity interests in the JVs.

3.2   CST and SPV BVI shall have the right (but not the obligation) to sell, and
SPV Barbados shall have the obligation to buy, SCT and SPV BVI’s Percentage
Interests in the JVs during the period commencing from January 1, 2009 until
December 31, 2011 (the “Exercise Period”), at a price equal to the greater of:

  (a)   Sale Price = {A + [(B x C) x (1 - D) - A] x (1 - E)} x F; or     (b)   A
x F.

     For purpose of the above formulas:
      A = Agreed-upon value of CST (US$128,000,000)
      B = Average net income of the JVs during the three (3) trailing years
      C = Agreed PE multiple (10)
      D = Liquidity discount (20%)
      E = Discount for SPV Barbados’s added value (20%)
      F = Percentage Interests of CST and SPV BVI (49%)

    The Parties agree that any income tax of the JVs exempted or reduced in
accordance with applicable PRC tax laws and regulations shall be inputted in the
calculation of the average net income during the three (3) trailing years as set
out in item B above as though such income tax exemption or reduction were not
available.       CST, SPV Barbados and SPV BVI hereby agree to exercise the
right and obligation stated in this Article 3.2 in accordance with one of the
following schedules:

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  (i)   CST and SPV BVI shall have the right to sell in one lump sum the entire
part of their Percentage Interests in both JVs to SPV Barbados during the
Exercise Period, provided that as long as either of them exercises such right,
both of them shall sell the entire part of their Percentage Interests in both
JVs; or     (ii)   CST and SPV BVI to sell one third (1/3) of their Percentage
Interests in both JVs to SPV Barbados in 2009, to sell one third (1/3) of their
Percentage Interests in both JVs to SPV Barbados in 2010, and to sell remaining
one third (1/3) of their Percentage Interests in both JVs to SPV Barbados in
2011; or     (iii)   CST and SPV BVI to sell half (1/2) of their Percentage
Interests in both JVs to SPV Barbados in 2010, and to sell the other half (1/2)
of their Percentage Interests in both JVs to SPV Barbados in 2011.

3.3   Upon the completion of the transfer as referred to in Article 3.2, CTB
Barbados shall have the right (but not the obligation) to, and CSG shall have
the obligation to buy, the entire part of CTB Barbados’ Percentage Interest in
the Steel Cord JV during the period commencing from January 1, 2009 until
December 31, 2011, at a price equal to the greater of:

  (a)   Sale Price = {A + [(B x C) x (1 - D) - A]} x E; or     (b)   A x E.

    For purpose of the above formulas:

      A = Agreed-upon value of Rongcheng Chengshan Steel Cord Company Ltd.
(US$[25,600,000])
      B = Average net income of the Steel Cord JV during the three (3) trailing
years
      C = Agreed PE multiple (10)
      D = Liquidity discount (20%)
      E = Percentage Interest of CTB Barbados (25%)

    The Parties hereby agree that any income tax of the Steel Cord JV exempted
or reduced in accordance with applicable PRC tax laws and regulations shall be
inputted in the calculation of the average net income during the three
(3) trailing years as set out in item B above as though such income tax
exemption or reduction were not available.

4.   Sale of Cooper Branded Products       CST, SPV Barbados and SPV BVI hereby
acknowledge that the tire products to be produced by the JVs and branded with
the trademarks belonging to Cooper to be licensed to the JVs (the “Cooper
Branded Products”) will be merely sold to and distributed by Cooper or its
Affiliates. Subject to the approval by the Board of the JVs, the Cooper Branded
Products will be sold to Cooper or its Affiliate at a price equal to the formula
set forth in the policies for sale of Cooper Branded Products attached as
Schedule 3 hereto.   5.   Non-Compete

5.1   CST hereby specifically undertakes that it shall, and shall cause its
Affiliates or related companies to, refrain from directly or indirectly engaging
in, whether by itself or through any individual or entity, any activities that
compete with any business or activities of the JVs anywhere in the PRC, except
as otherwise provided in this Article 5, during the period when it holds any
Interest in the JVs and for a period of five (5) years after it has ceased to
hold any Interest in the JVs, provided, however, that CST shall have the right
to sell its inventories under Customs control outside of China within nine
(9) months from the date of the JV Contracts.

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5.2   Without prejudice to the terms and conditions under this Article 5, in the
event that SPV Barbados or any of its Affiliate contemplates an investment in
Shandong Province in a tire manufacturing entity other than the JVs during the
period of CST or its permitted successor holding any Interest of the JVs, SPV
Barbados or its said Affiliate will consider and support in good faith and with
every best effort the opportunity for CST or its permitted successor to
participate in such investment, subject to the following conditions that:

  (a)   SPV Barbados or its said Affiliate shall own majority percentage of such
investment;     (b)   CST or its permitted successor shall use its own funds for
such investment;     (c)   the extent of CST or its permitted successor’s
participation in such investment shall be agreed upon by SPV Barbados or its
said Affiliate, CST or its permitted successor and the said tire manufacturing
entity where such investment will be made; and     (d)   the said investment of
CST or its permitted successor shall originate from within the territory of
China.

6.   Transfer of Intellectual Property

6.1   For purpose of this Article 6, “Intellectual Property” means all of the
following which is owned by, issued to or licensed to CST in relation to the
tire business of CST, along with all income, royalties, damages and payments due
or payable at Closing or thereafter including, without limitation, damages and
payments for past or future infringements or misappropriations thereof, the
right to sue and recover for past infringements or misappropriations thereof and
any and all corresponding rights that, now or hereafter, may be secured
throughout the world: patents, patent applications, patent disclosures and
inventions (whether or not patentable and whether or not reduced to practice)
and any reissue, continuation, continuation-in-part, revision, extension or
re-examination thereof; trademarks, service marks, logos, trade names, internet
domain names and corporate names together with all goodwill associated
therewith, including, without limitation, the use of the current corporate name
and all translations, adaptations, derivations and combinations of the
foregoing; copyrights and copyrightable works (including without limitation, web
sites); and all registrations, applications and renewals for any of the
foregoing; trade secrets and confidential information (including, without
limitation, ideas, know-how, drawings, specifications, plans, proposals,
financial, business and marketing plans, sales and promotional literature, and
customer and supplier lists and related information); information technologies
(including, without limitation, software programs, data and related
documentation); and all copies and tangible embodiments of the foregoing (in
whatever form or medium).

6.2   The JVs desire to acquire, and CST wishes to sell, the Intellectual
Property as defined in Article 6.1 at the consideration agreed upon by the CST
and JVs, in the manner of, including without limitation to, the execution of a
trademark assignment contract and a patent and know-how assignment contract
between CST and JVs.

6.3   Except for disclosure, CST warrants, represents and undertakes to the JVs
in respect of the Intellectual Property as to the matters set forth hereunder:

  (i)   the Intellectual Property comprises all of the intellectual property
rights necessary for the operation of the tire business as conducted by CST
prior to the date hereof;     (ii)   CST owns and possesses all right, title and
interest in and to, or has a valid and enforceable license to use, the
Intellectual Property necessary for the operation of the tire business as
conducted by it prior to the date hereof, free and clear of all liens, licenses,
security interests, encumbrances and other restrictions;

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  (iii)   no claim by any third party contesting the validity, enforceability,
use or ownership of any of the Intellectual Property in relation to the tire
business of CST has been made, is currently outstanding or, is threatened and
there are no grounds for the same;     (iv)   no loss or expiration of any part
of the Intellectual Property in relation to the tire business of CST is pending
or reasonably foreseeable;     (v)   CST has not received any notices of, and is
not aware of any facts which indicate a likelihood of, any infringement or
misappropriation by, or conflict with, any third party with respect to the
Intellectual Property in relation to its tire business (including, without
limitation, any demand or request that CST license any rights from a third
party);     (vi)   CST has not infringed, misappropriated or otherwise
conflicted with any intellectual property rights or other rights of any third
parties and CST is not aware of any infringement, misappropriation or conflict
which will occur as a result of the continued operation of its business as
conducted by CST prior to the date hereof or as currently proposed to be
conducted; and     (vii)   the transactions contemplated by this Agreement will
have no effect on the CST’s right, title and interest in and to the Intellectual
Property in relation to the tire business (except for its transfer to the JVs).
CST has taken all necessary action, in its reasonable business judgment, to
maintain and protect such Intellectual Property so as to not affect the validity
or enforceability of the Intellectual Property. The owners of any Intellectual
Property in relation to the tire business licensed to CST have taken all
necessary and desirable action to maintain and protect that portion of the
Intellectual Property subject to such licenses.

6.4   The Parties hereby also agree that the total amount of the JVs’ payment
obligations under Article 5.1(b) of the Technical Assistance and Technology
License Agreements entered into between Cooper Tire & Rubber Company (“Cooper”)
and the JVs on October 27, 2005 (the “Cooper Technology License Agreements”)
shall not exceed US$6,000,000 for any calendar year. In the event that the JVs
are merged into a new company (the “New Co.”), the New Co. shall have the right
to use the Cooper-licensed technologies under the Cooper Technology License
Agreements and shall pay annually by quarterly payments to Cooper a royalty fee
in the amount of (i) 0.5% of Net Sales Price (as such term defined in the Cooper
Technology License Agreements) of the New Co.’s annual gross sales if such Net
Sales Price is not more than RMB3,000,000,000; plus (ii) 1.6% of the amount in
excess of RMB3,000,000,000 if such Net Sales Price is more than
RMB3,000,000,000, provided that such royalty fee payment is up to a maximum of
US$6,000,000 per calendar year.

7.   Purchase of Inventory

7.1   The JVs and CST have agreed that all the inventories owned by CST in
connection with its tire business will be sold to the JVs by way of normal trade
business at an estimated amount of Fifty Million United States Dollars
(US$50,000,000), provided, however, that CST shall have the right to sell its
inventories under Customs control outside of China and North America within nine
(9) months from the date of the JV Contracts. The inventories shall be sold to
the JVs at the price of the original cost of such inventories reduced by the
increase in asset value of the Purchased Assets covered in the Asset Purchase
Agreements as determined by the asset appraisal conducted in reference to the
establishment of the JVs, and the valid value added tax invoices in connection
with such sales which shall be issued by CST to the satisfaction of the JVs.

7.2   The JVs shall not be liable for any act, neglect or omission of CST in
respect of any inventories purchased, and CST shall hold the JVs harmless and
indemnified against any claim, expense, loss or damage arising from the purchase
of any inventories, with the

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    exception of expenses or losses covered by reserves established on the
balance sheet as of the Closing Audit.

8.   Pricing Adjustment       CST and the JVs have agreed that upon Closing an
audit of the balance sheet dated as of the Closing Date (the “Closing Audit”)
shall be completed by an independent third party in accordance with the Chinese
general accepted accounting principles (“GAAP”) and relevant PRC laws and
regulations, the JVs shall not claim any compensation from CST as a result of
balance sheet adjustments made to the Purchased Assets or Assumed Liabilities
other than those described below as resulting from undisclosed information,
untrue, inaccurate or incomplete information provided or items not in compliance
with relevant PRC law. If CST has not disclosed some information which CST knows
or should have known, or in the event some information CST has disclosed is not
true, accurate or complete or is not in compliance with relevant PRC law, after
the Closing Audit the JVs shall have the right to claim compensation from CST as
a result of the adjustment due to the value change of the Purchased Assets or
Assumed Liabilities.   9.   Restrictions on the CST       CST shall not, between
the date of the Asset Purchase Agreement and Closing (except as may be expressly
provided in the Asset Purchase Agreement) without the prior written consent of
the JVs, incur or enter into any agreement or commitment involving any capital
expenditure (including without limitation any leasing, hire purchase or other
agreement or arrangement for payment on deferred terms) in relation to CST’s
business in excess of RMB¥1,000,000 or a monthly accumulative amount of
RMB¥8,000,000.

10.   Tire Business Expansion       After the formation of the JVs and provided
that it is economically feasible to do so, with sufficient customer sales
requirements, CST, SPV Barbados and SPV BVI shall agree to implement as soon as
possible the new half steel radial tire project.   11.   Breach of Agreement    
  In the event that a breach of agreement committed by any Party to this
Agreement results in the non-performance of or inability to fully perform this
Agreement, the liabilities arising from the breach of agreement shall be borne
by the Party in breach. In the event that the Parties commit a breach of
agreement, each Party shall bear its individual share of the liabilities arising
from the breach of agreement. Any breach of this Agreement by any Party’s
Affiliate shall be deemed a breach by such Party.   12.   Confidentiality   12.1
  The Parties undertake with each other that they shall treat as strictly
confidential all information received or obtained by them or their employees,
agents or advisers as a result of entering into or performing this Agreement
including information relating to the provisions of this Agreement, the
negotiations leading up to this Agreement, the subject matter of this Agreement
or the business or affairs of each Party and that it will not at any time
hereafter make use of or disclose or divulge to any person any such information
and shall use its best endeavors to prevent the publication or disclosure of any
such information.   12.2   The restrictions contained in Article 12.1 shall not
prevent Parties from making any disclosure required by law or by any supervisory
or regulatory or governmental body or from making any disclosure to any
professional adviser for the purposes of obtaining advice, nor shall the

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    restriction apply in respect of any information which comes into the public
domain other than by a breach of this Article 12 by any Party.   13.  
Effectiveness and Termination   13.1   Once signed by legally authorized
representatives of each Party, this Agreement shall be effective as of the date
first above written (“Effective Date”).   13.2   This Agreement shall expire or
may be terminated if and when any of the JV Contracts or Asset Purchase
Agreements expires or is terminated in accordance therewith. This Agreement may
also be terminated by written consent of both Parties.   14.   Dispute
Resolution   14.1   Any and all disputes, controversies or claims (the
“Dispute”) arising out of or relating to the formation, validity,
interpretation, implementation or termination of this Agreement, or the breach
hereof or relationships created hereby shall be settled through friendly
consultations. If a Dispute is not resolved through friendly consultations
within thirty (30) days from the date a Party gives the other Parties written
notice of a Dispute, then it shall be resolved exclusively and finally by
arbitration in Hong Kong at the Hong Kong International Arbitration Center
(“HKIC”) in accordance with the arbitration rules of the HKIC (the “HKIC Rules”)
for the time being in force which rules are deemed to be incorporated by
reference to this clause.   14.2   Any arbitration shall be heard before a
tribunal consisting of three (3) arbitrators. Each side of the Dispute shall
appoint one (1) arbitrator. The two (2) arbitrators thus appointed shall choose
the third arbitrator who will act as the presiding arbitrator of the tribunal.
If the two arbitrators have not agreed on the choice of the presiding
arbitrator, the presiding arbitrator shall be appointed by the Chairman of the
HKIC. The language of the arbitration shall be English and Chinese. The
arbitration shall be final and binding on the Parties, shall not be subject to
any appeal, and the Parties agree to be bound thereby and to act accordingly.
The award of the arbitration may be enforced by any court having jurisdiction to
do so. Throughout any dispute resolution and arbitration proceedings, the
Parties shall continue to perform this Agreement, to the extent practical, with
the exception of those parts of this Agreement that are under arbitration.
Except as otherwise determined by the arbitration tribunal, each Party shall be
responsible for its expenses incurred in connection with resolving any Dispute,
but the arbitration fees shall be borne by the losing side of the Dispute.  
14.3   The Parties agree that in all agreements where the arbitration is in
accordance with the arbitration rules of the HKIC, such arbitration shall be
administered and conducted in accordance with the arbitration rules of the HKIC.
  15.   Governing Law       The formation of this Agreement, its validity,
interpretation, execution and any performance of this Agreement, and the
settlement of any Disputes hereunder, shall be governed by published and
publicly available laws, rules and regulations of the PRC, the applicable
provisions of any international treaties and conventions to which PRC is a
party, and, if there are no published or publicly available PRC laws, rules or
regulations, or treaties or conventions governing a particular matter, by
general international commercial practices.   16.   Miscellaneous   16.1   This
Agreement is written and executed in a Chinese version and in an English
version. Both language versions of this Agreement are of equal validity and
effect.

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16.2   In the event of discrepancy between this Agreement and the Joint Venture
Contracts, Assets Purchase Agreements, Joint Venture Contract for steel cord and
any other arrangements, understandings, commitments relevant to this Agreement,
this Agreement shall prevail.   16.3   No delay on the part of any Party in
exercising any right, power or privilege under this Agreement shall operate as a
waiver thereof, nor shall any waiver on the part of any Party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or other exercise thereof
hereunder. The rights and remedies herein provided are cumulative and are not
exclusive of any rights or remedies that any Party may otherwise have.   16.4  
All notices or other communications under this Agreement shall be in writing and
shall be delivered or sent to the correspondence addresses or facsimile numbers
of the Parties set forth below or to such other addresses or facsimile numbers
as may be hereafter designated in writing on seven (7) days’ notice by the
relevant Party. All such notices and communications shall be effective: (i) when
delivered personally; (ii) when sent by telex, telefacsimile or other electronic
means with sending machine confirmation; (iii) ten (10) days after having been
sent by registered or certified mail, return receipt requested, postage prepaid;
or (iv) four (4) days after deposit with a commercial overnight courier, with
evidence of delivery provided by the courier.

             
 
  CST   Address:   No. 98, Nanshan Road North, Rongcheng City,
 
          Shandong Province, PRC
 
      Tel:   0631-7523205
 
      Fax:   0631-7523888
 
      Attn:   Zhang Junquan
 
           
 
  SPV Barbados   Address:   701 Lima Avenue
 
          Findlay, Ohio, U.S.A. 45840
 
      Tel:   1-419-427-4757
 
      Fax:   1-419-831-6876
 
      Attn:   Mr. Hal Miller
 
      Copy to:   Mr. James Kline
 
           
 
  SPV BVI   Address:   P.O. Box 957, Offshore Incorporations Center,
 
          Road Town, Tortola, British Virgin Islands
 
      Tel:   00852-2526-8111
 
      Fax:   00852-2526-5322
 
      Attn:   Iris Yeung
 
           
 
  CSG   Address:   No. 98, Nanshan Road North, Rongcheng City,
 
          Shandong Province, PRC
 
      Tel:   0631-7523206
 
      Fax:   0631-7506826
 
      Attn:   Zhang Junquan
 
           
 
  CTB Barbados   Address:   701 Lima Avenue
 
          Findlay, Ohio, U.S.A. 45840
 
      Tel:   1-419-427-4757
 
      Fax:   1-419-831-6876
 
      Attn:   Mr. Hal Miller
 
      Copy to:   Mr. James Kline

16.5   If any provision of this Agreement should be or become fully or partially
invalid, illegal or unenforceable in any respect for any reason whatsoever, the
validity, legality and enforceability of the remaining provisions of this
Agreement shall not in any way be affected or impaired thereby.

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16.6   No amendment or modification of this Agreement, whether by way of
addition, deletion or other change of any of its terms, shall be valid or
effective unless a variation is agreed to in writing and signed by authorized
representatives of each of the Parties.

16.7   This Agreement shall inure to the benefit of and be binding upon each of
the Parties and their respective permitted successors and permissible assignees.

16.8   This Agreement is executed in nine (9) original counterparts, each of
which shall have equal effect in law.

[Signature Page Follows]

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IN WITNESS WHEREOF, each of the Parties has executed this Agreement or has
caused this Agreement to be executed by its duly authorized officer or officers
as of the date first above written.

            SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES
      By:   /s/ Che Hong-Zhi         Name:   Che Hong-Zhi        Title:  
Chairman     

            COOPER TIRE INVESTMENT HOLDING (BARBADOS) LTD.
      By:   /s/ Harold C. Miller         Name:   Harold C. Miller       
Title:   Authorized Representative     

            JOY THRIVE INVESTMENTS LIMITED
      By:   /s/ Stacey Wong         Name:   Stacey Wong        Title:  
Authorized Representative     

            CHENGSHAN GROUP COMPANY LIMITED
      By:   /s/ Che Hong-Zhi         Name:   Che Hong-Zhi        Title:  
Chairman     

            CTB (BARBADOS) INVESTMENT CO., LTD.
      By:           Name:           Title:        

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Schedule 1
DESCRIPTION OF LAND AND BUILDINGS (TO BE CONTRIBUTED BY CST)
Part 1
Land Use Right
(confirmed by Chengshan and only refer to tire business)

                          Land Use Right   Area       Type of Land Use     No.  
Certificate No.   (M 2)   Use   Right   Termination Date
 
                   
1
  13407   11,700   Cafeteria   Granted   2039.12.02
 
                   
2
  13408   48,913   Workshop for 300,000 unit bias tire   Granted   2038.09.21
 
                   
3
  13415   9,844   Mechanic workshop   Granted   2043.03.22
 
                   
4
  13416   19,933   Tube workshop   Granted   2042.12.02
 
                   
5
  13417   12,846   All-steel workshop   Granted   2022.04.24
 
                   
6
  13420   11,370   Workshop for 300,000 unit bias tire   Granted   2039.12.02
 
                   
7
  13421   186,373   Workshop for 1,000,000 unit all-steel tire,   Granted  
2043.07.27
 
          all-steel workshop, rubber refining workshop        
 
          (phase II), warehouse A, warehouse B, water        
 
          pump workshop (phase II), air-compressor        
 
          station (phase II), battery car garage,        
 
          security guard room (phase II), carbon black        
 
          warehouse (phase II), sub-station (phase II)        
 
                   
8
  13422   13,000   All-steel workshop   Granted   2039.12.02
 
                   
9
  13423   2,198.8   /   Granted   2038.06.07
 
                   
10
  13529   117,731   Banburying workshop, carbon black warehouse,   Granted  
2039.12.02
 
          switch board room, original laboratory,        
 
          semi-steel radial tire workshop, small tire        
 
          forming workshop, dynamic workshop, weighing        
 
          room, de-oxygen station, boiler room, original        
 
          mechanic workshop, warehouse, de-bagging room,        
 
          fluidized bed furnace, carbon black        

11

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                          Land Use Right   Area       Type of Land Use     No.  
Certificate No.   (M 2)   Use   Right   Termination Date
 
                   
 
          warehouse,        
 
          semi-steel vulcanization, five store rooms,        
 
          cogeneration, engineering tire workshop,        
 
          original garage, mileage laboratory, original        
 
          factory office, kitchen, rubber refining        
 
          workshop, 2 big tire forming workshops, big        
 
          tire vulcanization        
 
          workshop        
 
                   
11
  131200   19,939.7   Semi-steel warehouse   Granted   2038.06.07

12

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Schedule 1
Part 2
Buildings with Building Ownership Certificates
(confirmed by Chengshan and only refer to tire business)

                                                  Underlying Land Use          
      Building Ownership   Right Certificate   Construction Area         No.  
Certificate No.   No.   (M 2)   Use   Used Term (Yrs)
1
    200500856       13529       3402     Banburying workshop     12  
 
            13529       658     Carbon black warehouse     29  
 
            13529       662     Switch board room     6  
 
            13529       1564     Original laboratory        
2
    200500857       13417,
13422,
13421       59069.22     All-steel radial tire     6  
3
    200500858       13407       3588.3     Cafeteria     5  
4
    200500859       13421       41062.12     Rubber refining
workshop (phase II)     1  
5
    200500862       13529       21000     Semi-steel radial tire
workshop     10  
6
    200500863       13529       5424     Small tire forming
workshop     7  
7
    200500864       13529       1766.25     Dynamic workshop        
 
            13529       186.75     Weighing room        
 
            13529       96     De-oxygen station        
 
            13529       2942.24     Boiler room        
 
            13529       2200.75     Original mechanic
workshop     14  
8
    2005000865       13529       721.06     Warehouse     5  
9
    2005000866       13529       307.52     De-bagging room     14  
10
    2005000867       13529       264.1     Fluidized bed furnace        
11
    2005000868       13529       485     Carbon black warehouse     9  
12
    2005000869       13529       5415     Semi-steel vulcanization     10  
 
            13529       3935.1     Five store rooms     10  
13
    2005000870       13415       2757.83     Mechanic workshop     9  
14
    2005000871       13529       1470     Cogeneration     10  

13

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                                                  Underlying Land Use          
      Building Ownership   Right Certificate   Construction Area         No.  
Certificate No.   No.   (M 2)   Use   Used Term (Yrs)
15
    2005000872       13529       4406     Engineering tire
workshop     8  
16
    2005000873       13416       5318.15     Tube workshop     12  
17
    2005000877       13421       1178     Water pump room
(phase II)     8  
18
    2005000879       13421       1178     Air-compressor station
(phase II)     2  
19
    2005000880       13529       1227     Original garage        
 
            13529       744     Mileage laboratory     5  
 
            13529       431.2     Original factory office     5  
 
            13529       452.4     Kitchen     6  
20
    2005000881       13421       771.75     Battery car garage     3  
 
            13421       87.2     Security guard room
(Phase II)     1  
21
    2005000882       13421       2435.56     Carbon black warehouse
(phase II)     1  
22
    2005000883       13529       6300     Rubber refining workshop     14  
23
    2005000885       13421       1329.82     Sub-station (phase II)     8  
24
    2005000896       13529       6360     Big tire vulcanization
workshop     11  
 
            13529       6360     Big tire forming
workshop     12  
 
            13529       3903.88     Small tire vulcanization     12  
25
                          Wei Hai Jia Cheng
building        
 
  In Total             201460.20              

14

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Schedule 1
Part 3
Buildings without Building Ownership Certificates
(confirmed by Chengshan and only refer to tire business)

                      Underlying Land Use                 Right Certificate  
Construction Area         No.   No.   (M 2)   Use   Used Term (Yrs)
1
  13421   5,400   Raw rubber warehouse A   2
2
  13421   2,750   Raw rubber warehouse B   2
3
  13421   1,003   Comprehensive house   2
4
  13421   363   Carbon black warehouse   2
5
  13407   480   East gate   2
6
  13421   45   Security guard West room   2
7
  13529   628   Parking lot   2
8
  13421   430   Connection corridor   2
9
  13421   1,667   Carbon black distribution room   2
10
  13529   1,944   Rubber filter garage   4
11
  13529   648   Nitrogen charging room   2
12
  13408   28,830   Rubber refining workshop   3
13
  13421   38,000   1,000,000 unit all-steel   3
14
  13416   9,000   Tube east shed   8
15
  131200   5,400   Tube south shed   8
16
  131200   5,933   Tube east shed   8
17
  13421   34.67   Weighing room (phase II)    
18
  13529   313.5   De-oxygen station, No. 6 workshop West    
19
  13529   1,812   Steel cord warehouse    
20
  13529   620.4   Dynamic workshop de-oxygen station    
 
      11475.59   300,000 unit bias    
 
  In Total   106,838.99        

15

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Schedule 2
Part 1
EQUITY TRANSFER/Pledge RULES

1.   General Principles. Each of CST, SPV Barbados and SPV BVI undertakes that,
except as permitted in this Schedule 2 or as otherwise agreed by the Parties, it
shall not sell, transfer, assign or otherwise dispose of the legal or beneficial
ownership of, or create any mortgage, charge, pledge, or other encumbrance over
or security interest in, either the entire or any part of its equity interest in
the JVs or its rights and obligations under the JV Contracts or otherwise in
relation to the JVs whatsoever without the prior written consent of the other
parties to the JV Contracts and subject to compliance with relevant PRC law.

2.   Procedure for Transfers.

  (1)   In the event that a Party (the “Transferring Party”) desires to transfer
or otherwise dispose of all or any portion of its Percentage Interest in either
of the JVs (the “Interest”) (other than pursuant to the provisions of paragraph
2(3) below), it shall first notify the other Parties (the “Non-Transferring
Parties”) in writing of (i) its intent to transfer or otherwise dispose of its
Interest, (ii) the proposed percentage of the Interest to be transferred or
disposed, (iii) the price and principal terms and conditions of the proposed
transfer or disposal, and (iv) the identity of the proposed third party
transferee (the “Notice”). The Non-Transferring Parties will have thirty
(30) days from the receipt of the Notice to notify the Transferring Party
whether they desire to purchase the Interest and, if so, the sale of Interest
shall be completed in accordance with the terms and conditions set forth in the
Notice within the longer of the period of ninety (90) days after receipt of the
Notice or fifteen (15) days after such sale of Interest is duly approved by the
Examination and Approval Authority and registered with the Registration
Authority. If no response or a negative response is given by the
Non-Transferring Parties in respect of a proposed transfer within the thirty
(30) day period, the Non-Transferring Parties shall be deemed to have consented
to the proposed transfer or disposal of the Interest between the Transferring
Party and the proposed transferee identified in the Notice excluding any third
party capable of competing against the Joint Venture. It shall be a condition of
the transfer that such transferee shall agree to become party to and to be bound
by the terms of the JV Contracts and thereafter any reference to a Party herein
shall be deemed to include a reference to such transferee as if named herein as
a Party. If both of the Non-Transferring Parties exercise their pre-emptive
rights, each shall have the right to purchase a fraction of the Interest of the
Transferring Party equal to its Percentage Interest divided by the sum of the
Percentage Interests of both Non-Transferring Parties.

  (2)   In circumstances of a transfer of Interest under paragraph 2(1), the
Non-Transferring Parties shall be deemed to consent to, and shall cause all of
the Directors nominated by it to vote in favor of, any such transfer carried out
in accordance with the procedures stipulated herein.

  (3)   Notwithstanding any other provisions in the JV Contracts or this
Schedule, if a Party wishes to transfer all or any part of its portion of its
Percentage Interest to an Affiliate, such Party shall notify the other Parties
in writing, and shall provide documentary evidence of the relationship between
the Party proposing the transfer and the relevant Affiliate. The other Parties
shall immediately agree such transfer, waive its preemptive rights, and cause
all Directors nominated by them to vote in favor of such transfer, and such
transfer shall thereafter be duly presented to the Examination and Approval
Authority for approval.

16

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  (4)   No transfer of any part of a Party’s Interest shall become effective
until the transferee (whether an Affiliate or a third party) has delivered to
the Non-transferring Parties a valid and effective undertaking to perform the
obligations of the Transferring Party under the JV Contracts and be bound by its
terms as if the transferee had been an original Party to the JV Contracts.

  (5)   Any sale, transfer, assignment, or disposal pursuant to this Schedule
shall be submitted to the Examination and Approval Authority for examination and
approval. Upon receipt of the approval document from the Examination and
Approval Authority the JV(s) shall register the change in ownership with the
Registration Authority.

3. Pledge of Interest
CST or its permitted successor may pledge not more than 70% of its Percentage
Interest (the “Pledged Interest”) to any of the Qualified Lenders set forth in
the Part 2 herein for its own financing purposes with the prior written consent
of SPV Barbados, subject to the following conditions that:
any Qualified Lenders, at the time of execution of such financing agreements or
other instruments in the similar effect, shall grant SPV Barbados in writing a
first right of refusal to repay the borrowings of CST or its permitted successor
and acquire the Pledged Interest pursuant to the applicable PRC laws and
regulations in the event that such Qualified Lender forecloses at the default of
CST or its permitted successor.

17

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Schedule 2
Part 2
Qualified Lenders as selected by SPV BArbados

(a)   licensed PRC national commercial banks (and their permitted branches or
subsidiaries), such as, Bank of China, China Construction Bank, Industrial and
Commercial Bank of China, Agricultural Bank of China;

(b)   reputable international banks (and their permitted branches or
subsidiaries) licensed to carry out financial business and service in China;

(c)   licensed PRC national policy banks (and their permitted branches or
subsidiaries), such as, Export and Import Bank of China, National Development
Bank, Agricultural Development Bank of China; and

(d)   PRC joint-stock commercial banks (and their permitted branches or
subsidiaries) licensed to carry out nationwide financial business and service in
China, such as, for example, Bank of Communications, Minsheng Bank, China
Merchants Bank, etc.

18

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Schedule 3
POLICIES FOR SALE OF COOPER BRANDED PRODUCTS
The method to compute the transferring price

(a)   The formula will be reviewed and adjusted every six (6) months on the
basis of the actual performance of the JVs during such six (6) months trailing
period (January — June calculated in July, July — December calculated in
January). Pricing adjustments may or may not be made depending on the amount of
the change.

(b)   For calculation purposes, products will be grouped into semi-steel PCT &
RLT, all-steel TBR, bias, engineering (OTR) and related products produced by the
JVs. The formula will be calculated for the said tire category only.

(c)   Begin with the Joint Venture’s GP Margin % (GPM_CS) for tires with
Chengshan’s brands. GP Margin is calculated as Net Sales less manufactured cost
(which include materials, factory labor, factory overhead and depreciation on
factory buildings and equipment).

(d)   Deduct expense items (expressed as a percent of sales) not borne by tires
with Cooper’s brands. This is the GP Margin % for Cooper branded products.

(e)   The selling price for Cooper branded products = the Manufactured Cost
divided by (1 - GPM_CTB).

An example for half-steel tires

                  Chengshan
Price
    149.00          
Cost
    125.00            
GPM_CS
    24.00       16.1 %  
Selling Exp.
    7.40       5.0 %
Inventory Provision
    1.50       1.0 %
Advertising
    1.50       1.0 %
Bad debts
    1.50       1.0 %
 
               
Amortization of Intangible Assets
    0.15       0.1 %  
GPM_CTB
    11.95       8.0 %  

                  Cooper
Price
    135.90          
Cost
    125.00            
GPM_CTB
    10.90       8.0 %  

19

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Explanation for this example

(a)   The GPM_CS shall be the average margin for same product group in the
trailing 6 months   (b)   Deducted items:

  (1)   Selling expense: both parties need to work together on specific items
that included here and will included, but not be limited to the following items:

  •   Customer Freight     •   Salesmen and Marketing Employee salaries,
fringes, social costs and business trips     •   Distribution & Logistics costs
    •   Product Advertising and promotions     •   Export Expenses

  (2)   Finish goods inventory     (3)   Advertising: advertising to promote
CST’s brands not the JVs     (4)   Bad debts     (5)   Amortization of
intangible assets: Mainly includes land use right for land used for producing
non-radial tires

(c)   Where possible, the excluded costs shall be identified by product type.
Otherwise, the excluded item will be total Joint Venture costs for the item
expressed as a percent of total sales.

(d)   The unit cost for tires with Cooper’s brands shall be determined by the
actual cost if different from those with CST’s brands   (e)   The transfer price
of Cooper brand shall be:

      Transferring Price = Cost for Cooper brand / (1 - GPM_CTB)
Margin Premium

(a)   In years 5 and 6, a 1% premium will be added to the Cooper Margin
(GPM_CTB) in calculating the selling price. In the above example, the selling
price would be calculated as: 125/(1 - (8.0% + 1%)) = 137.36

(b)   In year 7 and beyond a 2% margin premium will be added to the GPM_CTB
resulting in a calculated price of:

      Cost for Cooper brand / (1 - (GPM_CTB+2%))
                                                       =125/ (1-10.0%)
                                                                      =138.89

20