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Exhibit 10
 
 

 
ASSET PURCHASE AGREEMENT
 
among
 
Titan Tire Corporation of Bryan
 
(Purchaser)
 
Titan Tire Corporation
 
(Parent)
 
and
 
Continental Tire North America, Inc.
 
(Seller)
 

 
Dated as of July 31, 2006
 

 

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TABLE OF CONTENTS
 

TABLE OF CONTENTS
 
 

1. AGREEMENT TO SELL AND AGREEMENT TO PURCHASE 1
1.1 Assets to be Conveyed   1
1.2 Excluded Assets   3
1.3 Closing   4
2. CONSIDERATION TO BE PAID BY PURCHASER 4
2.1 Purchase Price for Acquired Assets; Payment Thereof   4
2.2 Liabilities Assumed by Purchaser   4
2.3 Liabilities Retained by Seller   5
2.4 Inventory Purchase Price Adjustment   6
2.5 Sales Taxes   7
2.6 Price Allocation   7
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER 7
3.1 Organization, Good Standing, Authority and Enforceability  8
3.2 Agreement Not in Breach of Other Instruments   8
3.3 Consents   8
3.4 Available Funds   8
3.5 No Brokerage Fees   8
4. REPRESENTATIONS AND WARRANTIES OF SELLER 9
4.1 Organization, Good Standing and Authority   9
4.2 Authorization of Agreement.   9
4.3 Acquired Assets   9
4.4 Financial Statements   10
4.5 Real Property   10
4.6 Utilities   10
4.7 Environmental Matters   11
4.8 Employment Matters   11
4.9 Employee Benefit Plans   11
4.10 Consents   12
4.11 Disclaimer   12
4.12 Absence of Changes   12
4.13 Assumed Contracts   13
4.14 Compliance with Laws   13
4.15 Customers and Suppliers   13
4.16 No Broker’s Fees   13
4.17 No Other Representations and Warranties   14
5. CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES 14
5.1 Reasonable Efforts; Further Assurances   14
5.2 Employment Matters   14
5.3 Consents   17
 
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5.4 Use of Business Names by Purchaser; Trademark License   17
5.5 Compound Supply Agreement   17
5.6 Know-How License   17
5.7 Transition Services Agreement   17
5.8 Raw Materials Supply Agreement   17
5.9 Bead and Steel Fabric Supply Agreements   18
5.10 Master Distributorship Agreement   18
5.11 Other Agreements   18
5.12 Prorations   18
5.13 Access to Records   18
5.14 Tax Matters   19
5.15 Access   19
5.16 Employee Benefit Matters; Union Ratification   19
5.17 Conduct of Business Pending the Closing   19
6. CONDITIONS TO CLOSING 20
6.1 Conditions to Obligations of Each Party   20
6.2 Conditions to Obligations of Purchaser   20
6.3 Conditions to Obligations of Seller   22
7. INDEMNIFICATION 23
7.1 Indemnification by Seller   23
7.2 Indemnification by Parent and Purchaser   24
7.3 Determination of Loss   25
7.4 Limitations on Indemnification.   25
7.5 Indemnification Procedure   27
7.6 Exclusive Remedy   28
8. ADDITIONAL COVENANTS AND AGREEMENTS 28
8.1 Expenses   28
8.2 Public Releases   29
8.3 Termination Events   29
8.4 Effect of Termination   29
8.5 Unaudited Financial Statements   30
9. MISCELLANEOUS 31
9.1 Entire Agreement   31
9.2 Amendments; Waiver   31
9.3 Successors; Assignment   31
9.4 Notices   31
9.5 Severability   33
9.6 No Third Party Beneficiary   33
9.7 Applicable Law   33
9.8 Counterparts   33
9.9 Headings; Construction   33
9.10 Certain Information   34
 
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9.11 No Strict Construction   34
9.12 Further Assurances   34
10. CERTAIN DEFINITIONS 34
10.1 Definitions   34

 
 

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ASSET PURCHASE AGREEMENT
 
THIS ASSET PURCHASE AGREEMENT (“Agreement”) is dated as of July 31, 2006,
between Titan Tire Corporation of Bryan, an Ohio corporation (“Purchaser”),
Titan Tire Corporation, an Illinois corporation and an Affiliate of Purchaser
(“Parent”), and Continental Tire North America, Inc., an Ohio corporation
(“Seller”). Section 10 of this Agreement defines certain capitalized terms used
but not elsewhere defined in this Agreement.
 
RECITALS:
 
A. Seller, among other things, is engaged in the Business.
 
B. Purchaser desires to purchase certain of the assets of Seller used
exclusively by Seller in the operation of the Business, including the Facility,
and Seller desires to sell such assets of the Business to Purchaser, all upon
the terms and conditions hereinafter set forth.
 
NOW, THEREFORE, for and in consideration of the mutual promises and covenants
herein contained and for other good and valuable consideration, the receipt and
adequacy of which hereby are acknowledged, the parties hereto agree as follows:
 
1.  AGREEMENT TO SELL AND AGREEMENT TO PURCHASE
 
1.1  Assets to be Conveyed
 
 On the terms and subject to the conditions set forth herein, and except as
provided in Section 1.2 hereof, on the Closing Date (as defined in Section 1.3
hereof), Seller shall and shall cause its Affiliates, where appropriate, to
convey, sell, transfer, assign and deliver to Purchaser free and clear of any
Liens of any nature whatsoever, and Purchaser shall and shall cause its
Affiliates, where appropriate, to purchase, acquire and accept from Seller and
such Affiliates of Seller, all of the tangible assets used exclusively in the
operation of the Business as of the Closing Date (whether or not located at the
Facility) and the certain intangible assets related thereto (collectively, the
“Acquired Assets”), which Acquired Assets include the following:
 
(a)  All inventories of finished goods wherever located and recorded, in the
internal accounting records of Seller, as directly owned by Seller, and all raw
materials (including raw materials in transit and owned by Seller), work in
process, supplies, tooling, dies, jigs, spare parts, replacement and component
parts located at the Facility including those set forth on Schedule 1.1(a) which
Schedule shall be dated no earlier than sixty (60) days before the date hereof
and shall be updated thereafter from time to time by Seller as appropriate (raw
materials, inventory and work in process collectively referred to herein as, the
“Inventory”); provided, however, that, with respect to any tooling owned by a
third party, which tooling is listed on Schedule 1.1(a), possession of such
items will be transferred to Purchaser if and only to the extent that Purchaser
assumes the contract between Seller and such third party pursuant to Section
1.1(e) or, if no written contract exists, the obligations of Seller with respect
to such tooling. To the extent any of the Acquired Assets described in this
Section 1.1(a) are located at a site other than the Facility, Purchaser shall be
provided a reasonable period after the Closing Date, but not to exceed sixty
(60) days, to remove all such Acquired Assets;
 
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(b)  All molds, wherever located, and all machinery and equipment located at the
Facility including those items listed on Schedule 1.1(b) (“MM&E”); provided,
however, that, with respect to items of MM&E owned by a third party, which items
are listed on Schedule 1.1(b), possession of such item will be transferred to
Purchaser if and only to the extent that Purchaser assumes the contract between
Seller and such third party pursuant to Section 1.1(e) or, if no written
contract exists, the obligations of Seller with respect to such items;
 
(c)  All furniture, fixtures, owned vehicles and owned computer hardware located
at the Facility. Schedule 1.1(c) lists all owned and leased vehicles and all
owned and leased computer hardware located at the Facility;
 
(d)  All customer lists, sales brochures, data bases, books and records,
correspondence and production records and the following proprietary software
systems that are in stand-alone operation at the Facility: (i) the program for
Foxpro used for tracking production, quality information and shipping data, (ii)
the program for Access that runs scales for weighing compounds in the mixing
department, (iii) the program for Access used for cure press monitoring and
control, and (iv) the “birth certificate” system;
 
(e)  All warranties and guaranties by, and rights, choses in action and claims,
known or unknown, matured or unmatured, accrued or contingent against, third
parties;
 
(f)  Other than the contracts, agreements and commitments set forth on Schedule
1.1(f) (the “Excluded Contracts”) (which Schedule 1.1(f) and Excluded Contracts
will expressly include the Union Contracts), all of Seller’s right, title and
interest in and to all contracts, agreements and commitments (including unfilled
customer and purchase orders) to which Seller is a party at the Closing Date or
by which any of the Acquired Assets is then bound and, in each case, which are
utilized exclusively in the conduct of the Business, including, without
limitation, all warranty agreements and off-take agreements entered into by
Seller exclusively in the conduct of the Business (all of the foregoing to be
assigned to Purchaser pursuant hereto (subject to Section 5.3) are hereinafter
referred to collectively as the “Assumed Contracts” and individually as an
“Assumed Contract”); provided, however, that the parties acknowledge that
agreements that otherwise would be included in the definition of “Assumed
Contracts” that are between Seller and Affiliates of Seller (“Affiliate
Contracts”) shall not be assumed by Purchaser and shall be included on Schedule
1.1(f); provided, further, that Seller will cause such Affiliates to enter into
new arrangements with Purchaser as of the Closing on terms substantially similar
to those set forth in such Affiliate Contracts but in any case the pricing of
products supplied under such Affiliate Contracts shall not exceed cost plus 5%.
An Affiliate shall not terminate an Affiliate Contract except upon six (6)
months advance written notice to Purchaser.
 
(g)  All telephone and telecopy numbers;
 
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(h)  The owned real estate encompassing the Facility, together with all rights
of way, licenses, permits, easements and appurtenances thereto (the “Owned Real
Property”); and
 
(i)  All governmental approvals, licenses and permits which are utilized in the
conduct of the Business at the Facility, including those listed on Schedule
1.1(g) (the “Transferred Permits”).
 
1.2  Excluded Assets
 
 Notwithstanding anything contained in Section 1.1 hereof to the contrary,
Seller is not selling, and Purchaser is not purchasing (i) any assets of Seller
set forth in this Section 1.2 and (ii) any assets of Seller not used exclusively
in the operation of the Business, all of which shall be retained by Seller (the
“Excluded Assets”). To the extent that any of the Excluded Assets are located at
the Facility, Seller shall be provided a reasonable period after the Closing
Date, but not to exceed sixty (60) days, to remove all such Excluded Assets. The
Excluded Assets include, but are not limited to:
 
(a)  Any cash, investments and other cash equivalents;
 
(b)  Seller’s minute books, Tax returns and other organizational documents, and
Seller’s financial records and employment records, other than those employment
records pertaining to Employees and allowed to be transferred to Purchaser under
applicable Laws;
 
(c)  All qualifications to transact business as a foreign corporation,
arrangements with registered agents with respect to foreign qualifications, and
taxpayer and other identification numbers;
 
(d)  Any Tax benefits and rights to refunds, including rights to any net
operating losses;
 
(e)  Any contracts (other than the Assumed Contracts) or rights relating to
borrowed money;
 
(f)  Except as provided for in the Trademark License, all trademarks, trade
names and business names, including “Continental,” “General” and any and all
variations thereof and any related intangibles, trademark applications and
registrations, and internet domain names which consist of or incorporate the
names “Continental” and “General” and any and all variations thereof;
 
(g)  Any prepaid items, deposits, advance payments, deferred charges and other
similar assets;
 
(h)  All accounts and notes receivable and any security held by Seller for the
payment thereof;
 
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(i)  Except as provided for in the Know-How License, all business, proprietary
and confidential information, including trade secrets, capabilities, technical
information, know-how, process technology, ideas, designs, processes,
procedures, algorithms, discoveries, inventions, blueprints, engineering data,
patterns, bills of materials, and drawings and specifications, and all
improvements thereof (the “Know-How”); provided, however, that the Know-How
related to the compounds used in the Business known as “B1035” and “B1548” shall
not be included in the Know-How provided in the Know-How License, but rather
will be supplied and delivered to Purchaser pursuant to the terms of the
Compound Supply Agreement;
 
(j)  Except as provided for in the Know-How License, all intellectual property
licenses, patents, patent applications, copyrights, copyright applications,
computer programs and formula not used exclusively in the operations of the
Business;
 
(k)  Employee benefit plans, policies and arrangements except as set forth in
the Retiree Medical, Pension and Union Related Agreements referenced in Section
5.16 below; and
 
(l)  All inventories of finished goods owned by those reporting entities of
Seller identified (by code number and name) on Schedule 1.2(l).
 
1.3  Closing
 
The closing of the transactions herein contemplated (the “Closing”) shall take
place at 10 A.M., local time, on the later of July 31, 2006, or the second
business day after the day on which the last of the conditions set forth in
Section 6 hereof shall have been fulfilled or waived (the “Closing Date”) unless
another date is agreed to by the parties, at a place mutually agreed to by the
parties. The Closing will be effective as of 11:59 p.m. on the Closing Date.
 
2.  CONSIDERATION TO BE PAID BY PURCHASER
 
2.1  Purchase Price for Acquired Assets; Payment Thereof
 
Purchaser shall pay to Seller $52,900,000 (the “Initial Purchase Price”) as the
aggregate purchase price for the Acquired Assets, subject to the post-Closing
adjustments as provided in Section 2.4 below. On the Closing Date, Purchaser
shall pay to Seller the Initial Purchase Price by wire transfer thereof in
immediately available funds to an account designated by Seller. The Initial
Purchase Price (as adjusted pursuant to Section 2.4) will be allocated among the
Acquired Assets in the manner set forth in Section 2.6.
 
2.2  Liabilities Assumed by Purchaser
 
As further consideration for the purchase of the Acquired Assets and
consummation of the other transactions contemplated hereby, on the Closing Date,
Purchaser shall assume and agree to perform and discharge in full, when due, the
liabilities of Seller and the Business arising under or associated with
(collectively, the “Assumed Liabilities”):
 
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(a)  Purchaser’s conduct of the Business after the Closing Date, including with
respect to the use of the Acquired Assets and the hiring and employment of the
Employees; provided that:
 
(i)  obligations for services rendered both prior to and after the Closing Date
will be allocated between Purchaser and Seller based on the Closing Date (e.g.,
an invoice for services rendered for the third quarter would be allocated 1/3 to
Seller as an Excluded Liability and 2/3 to Purchaser as an Assumed Liability;
 
(b)  All product liability claims caused by or the result of any product
produced or manufactured by Purchaser after Closing;
 
(c)  All outstanding warranty claims and all warranty claims asserted in writing
from and after the Closing;
 
(d)  Any recalls by a third party of a product of such third party which
utilizes a product sold, distributed or otherwise placed in the stream of
commerce by Purchaser in the Business after Closing (other than any such product
that was manufactured by Seller on or before Closing), or manufactured by
Purchaser in the Business after Closing;
 
(e)  Except as expressly provided in Section 2.3 below, any of the following
matters: (i) any violation of any Environmental Law with respect to the
operation of the Business; and (ii) any generation, treatment, storage,
transport, management, use, handling, disposal, leakage, spill or release of any
Hazardous Material with respect to the operation of the Business on, under or
migrating from the Owned Real Property (collectively, items (i) and (ii) are
hereinafter sometimes referred to as the “Environmental Liabilities”),
regardless of when or where such Environmental Liabilities arose or arise, or
whether the facts on which they are based occurred prior to or subsequent to the
Closing; and
 
(f)  The Assumed Contracts.
 
2.3  Liabilities Retained by Seller
 
. With respect to the Environmental Liabilities, notwithstanding the terms of
Section 2.2(e) above, Seller will remain liable only for (and the Environmental
Liabilities will not include), (i) any obligation or liability relating directly
to or in connection with any disposal or arrangement for disposal of any
Hazardous Material from the Owned Real Property on or before the Closing at any
Off-Site Location and (ii) the Environmental Law liabilities, if any, of which
Seller has Actual Knowledge including those listed on Schedule 4.7. Except for
the assumption by Purchaser of the Assumed Liabilities, Seller will retain all
liabilities relating to the Business (including those specifically referenced as
retained in the first sentence of this Section 2.3) and, except for the Assumed
Liabilities, Purchaser shall not assume nor be liable or responsible for,
whether as a successor or otherwise, any obligation or liability of Seller or
the Business of any kind or nature whatsoever (such liabilities collectively
referred to herein as the “Excluded Liabilities”).
 
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2.4  Inventory Purchase Price Adjustment
 
Within 30 days after the Closing Date, Seller shall deliver to Purchaser a
schedule (the “Closing Inventory Schedule”) setting forth the value of the
Inventory used or useable by the Business as of the close of business on the
last business day preceding the Closing Date (the “Closing Inventory”). The
valuation of the Closing Inventory reflected on the Closing Inventory Schedule
shall be determined on all Inventory produced or acquired by Seller in the
Ordinary Course of Business as follows: (i) with respect to finished goods, the
value of each class of OTR Tire as determined in a manner consistent with
Seller’s accounting practices as set forth on below shall be used to determine
the aggregate value of such finished goods, (ii) with respect to raw materials,
the per pound value of each component thereof is set forth on Schedule 2.4 and
the raw materials shall be valued in a manner consistent with Seller’s
accounting practices and (iii) with respect to work in process, such value shall
be determined in accordance with Seller’s established accounting practices. All
Closing Inventory will be valued consistent with Seller’s accounting practices
which include assessing inventory for reserves at the lower of cost or net
realizable value and reserves for obsolete inventory in accordance with Seller’s
applicable accounting principles (which accounting principles comply with GAAP
except in respect to the capitalized costs related to pension and retiree,
medical and depreciation, all of which are accounted for using principles in
accordance with IFRS.)
 
(a)  The Closing Inventory as reflected in the Closing Inventory Schedule (the
“Closing Inventory Value”), shall become final and binding upon the written
agreement of the parties. In the event of any disagreement, Seller and Purchaser
shall negotiate in good faith to resolve any differences. If within ten (10)
days following receipt of the Closing Inventory Schedule by Purchaser, any such
differences have not been resolved, they shall be resolved by KPMG or such other
independent accounting firm of national reputation as may be mutually acceptable
to Seller and Purchaser (the “Independent Accountants”). The Independent
Accountants will be instructed to conduct such dispute resolution and perform
their services as expeditiously as possible, and to deliver a revised Closing
Inventory Value to Seller and Purchaser as a result thereof, which revised
Closing Inventory Value shall be binding on the parties. The revised Closing
Inventory Value shall be prepared by the Independent Accountants in compliance
with Seller’s current accounting and inventory costing practices currently in
place and established in Seller’s accounting manual. The fees and expenses of
Independent Accountants in preparing the revised Closing Inventory Value and in
taking the physical inventory shall be borne equally by Seller and Purchaser.
 
(b)  The final and binding Closing Inventory Value determined pursuant to
Section 2.4(a), whether by (i) Seller’s and Purchaser’s mutual agreement in
writing, or (ii) delivery thereof by the Independent Accountants, is hereinafter
referred to as the “Final Closing Inventory Value.”
 
(c)  If the Final Closing Inventory Value is less than $11,500,000, then (A) the
Initial Purchase Price shall be reduced, dollar for dollar, by the amount of
such shortfall (with the amount of the Initial Purchase Price as so reduced
referred to herein as the “Final Purchase Price”), and (B) Seller shall pay to
Purchaser an amount equal to (x) the Initial Purchase Price less (y) the Final
Purchase Price.
 
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(d)  If the Final Closing Inventory Value is greater than $11,500,000, then (A)
the Initial Purchase Price shall be increased, dollar for dollar, by the amount
of such excess (with the amount of the Initial Purchase Price as so increased
also referred to herein as the “Final Purchase Price”) and (B) Purchaser shall
pay to Seller an amount equal to (x) the Final Purchase Price less (y) the
Initial Purchase Price.
 
(e)  Any payment due by Seller to Purchaser or by Purchaser to Seller pursuant
to this Section 2.4 shall be paid no later than three business days after the
determination of the Final Closing Inventory Value, by wire transfer of
immediately available funds to such account as shall be designated by the
recipient.
 
(f)  Payments owing by one party to the other under this Section 2.4 shall bear
interest at the Agreed Rate from the date of determination of the Final Closing
Inventory Value until the date payment-in-full is made.
 
2.5  Sales Taxes
 
Provided that Purchaser delivers to Seller at the Closing the exemption
certificate referenced in Section 6.3(d)(iii) below, Seller shall be responsible
for and duly pay all sales, use, excise, transfer, value added and similar Taxes
imposed by any Government in any jurisdiction on the purchase and sale of any of
the Acquired Assets.
 
2.6  Price Allocation
 
The Final Purchase Price shall be allocated in accordance with a schedule to be
mutually agreed upon by the parties following the Closing. After the Closing,
Purchaser and Seller shall make consistent use of the agreed upon allocation for
all purposes (including financial and regulatory reporting purposes and Tax
purposes). Purchaser and Seller further agree to file, as applicable, their
respective U.S. federal income Tax returns and Form 8594 and, to the extent not
in conflict with applicable Law, their other Tax returns reflecting such
allocation and any other reports required by Section 1060 of the Code, in
accordance with said allocation. Each party agrees to prepare and timely file
all applicable IRS forms, to cooperate with the other party in the preparation
of such forms and to furnish the other party with a copy of such forms prepared
in draft, within a reasonable period before the due date thereof. In addition,
each party agrees to notify the other party in the event any taxing authority
takes or purports to take a position inconsistent with the agreed-upon
allocations.
 
3.  REPRESENTATIONS AND WARRANTIES OF PURCHASER
 
Purchaser represents and warrants to Seller that:

 

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3.1  Organization, Good Standing, Authority and Enforceability
 
Each of Parent and Purchaser is a corporation duly organized, validly existing
and in good standing under the Laws of the State of its incorporation. Each of
Parent and Purchaser has all requisite power and authority to enter into this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and each other agreement and instrument to be executed by Parent or Purchaser,
as applicable, in connection herewith have been (or upon execution shall have
been) duly executed and delivered by Parent or Purchaser, as applicable, have
been duly authorized by all necessary corporate action and constitute (or upon
execution shall constitute) legal, valid and binding obligations of Parent and
Purchaser enforceable against Parent and Purchaser in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other Laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law).
 
3.2  Agreement Not in Breach of Other Instruments
 
Neither the execution and delivery of this Agreement or the Transaction
Agreements by Parent or Purchaser nor the consummation of the transactions
contemplated herein or therein shall result in a violation or breach of, or
constitute a default under (i) any agreement, indenture or other instrument to
which Parent or Purchaser is a party or by which it is bound, (ii) the
organizational and charter documents of Parent or Purchaser, (iii) any judgment,
decree, order or award of any court, Government or arbitrator by which parent or
Purchaser is bound, or (iv) any Law applicable to Parent or Purchaser.
 
3.3  Consents
 
The execution and delivery of this Agreement and the Transaction Agreements by
Parent and Purchaser and the consummation by them of the transactions
contemplated in this Agreement and in the Transaction Agreements (i) do not
require the consent, approval or action of, or any filing with or notice to, any
Person or Government, including any filing under the HSR Act, other than as
specified in Schedule 3.3, and (ii) do not require the consent or approval of
Parent’s or Purchaser’s, as applicable, stockholders or board of directors,
except such as have been obtained and are in full force and effect.
 
3.4  Available Funds
 
Purchaser has readily available to it funds sufficient to allow it to consummate
the transactions contemplated by this Agreement on a timely basis.
 
3.5  No Brokerage Fees
 
Neither Parent, Purchaser nor anyone acting on their behalf has incurred any
liability or obligation to pay fees or commissions to any broker, finder or
agent with respect to the transactions contemplated by this Agreement for which
Seller or any of its Affiliates shall be liable.
 
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4.  REPRESENTATIONS AND WARRANTIES OF SELLER
 
Seller represents and warrants to Purchaser that:
 
4.1  Organization, Good Standing and Authority
 
Seller is a corporation duly organized, validly existing and in good standing
under the Laws of the State of Ohio. Seller has full corporate authority and
power to carry on the Business as it is now conducted, and to own, lease or
operate the Acquired Assets. Set forth in Schedule 4.1 is a true and correct
list of all jurisdictions in which the Business owns or leases property for use
in the Business.
 
4.2  Authorization of Agreement. 
 
(a)  Seller has all requisite power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. Subject to receipt of
approval from the shareholders of Seller, this Agreement and each other
agreement and instrument to be executed by Seller in connection herewith have
been (or upon execution shall have been) duly executed and delivered by Seller,
have been duly authorized by all necessary corporate and shareholder action and
constitute (or upon execution shall constitute) legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium or other Laws relating to or affecting the rights and remedies of
creditors generally and to general principles of equity (regardless of whether
considered in a proceeding in equity or at law); and
 
(b)  Except as set forth in Schedule 4.2, neither the execution and delivery of
this Agreement by Seller nor the consummation of the transactions contemplated
herein shall result in a violation or breach of, or constitute a default under
(i) the Articles of Incorporation or Code of Regulations of Seller, (ii) any
material term or provision of any Assumed Contract or other contract, indenture,
note, mortgage, bond, security agreement, loan agreement, guaranty, pledge, or
other agreement, instrument or document to which Seller is a party or by which
Seller is bound, (iii) any judgment, decree, order or award of any court,
Government or arbitrator by which Seller is bound, or (iv) to Seller’s Knowledge
any Law applicable to Seller.
 
4.3  Acquired Assets
 
Except as set forth in Schedule 4.3, Seller is the lawful owner of or has the
right to use each of the Acquired Assets free and clear of all Liens. Except for
Excluded Assets and except as set forth on Schedule 4.3, there are no assets or
properties used exclusively in and necessary for the operation of the Business
as currently conducted and owned by any Person other than Seller that shall not
be leased or licensed to Purchaser under a valid, current lease or license
arrangement included among the Assumed Contracts. Seller has, and will, as of
the Closing Date, have the right, power and authority to convey, transfer,
assign and deliver the Acquired Assets to Purchaser free and clear of any Lien.
The Acquired Assets comprise the tangible assets used or held for use by Seller
and necessary to operate the Business as currently being operated by Seller. All
Acquired Assets are in operating condition and have been reasonably maintained
in accordance with normal industry practice.
 
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4.4  Financial Statements
 
Seller previously has delivered to Purchaser copies of certain management
measurements of income and losses and certain assets and liabilities with
respect to the Business (collectively, the “Reports”). The Reports (a) were
prepared in all material respects in accordance with the internal accounting
practices of Seller and (b) were prepared in all material respects consistent
with past practices of Seller for measuring income and loss for unincorporated
business units based on business unit accounting and not necessarily in
accordance with GAAP.
 
4.5  Real Property
 
Except as set forth in Schedule 4.5 and except with respect to matters arising
under Environmental Laws, for which Seller makes only those representations and
warranties set forth in Section 4.7:
 
(a)  Seller owns good and marketable fee simple title to the Owned Real
Property, free and clear of all Liens;
 
(b)  the Owned Real Property constitutes all of the real property currently
owned by Seller and used for the operation of the Business as presently
conducted;
 
(c)  each parcel of Owned Real Property has adequate access to the existing
roads and other public rights of way for the operation of the Business as
presently conducted;
 
(d)  the present use, occupancy and operation of the Owned Real Property, and
all aspects of the improvements to the Owned Real Property (the “Real Property
Improvements”), are in compliance in all material respects with all applicable
Laws;
 
(e)  all Real Property Improvements are located within the lot lines of the
Owned Real Property (and within the mandatory set-backs from such lot lines
established by applicable Law or otherwise) and not over areas subject to any
easements or rights of way which would make the Owned Real Property unusable for
its current use or impair the value of the Owned Real Property; and
 
(f)  all material certificates of occupancy and other permits and approvals
required with respect to the Real Property Improvements and the use, occupancy
and operation thereof have been obtained and paid for and are currently in
effect, and Seller has not received any notices of violation in connection with
such items.
 
4.6  Utilities
 
Except as set forth on Schedule 4.6, each parcel of Owned Real Property at which
the Business is conducted has access to utilities (including electric, natural
gas, water, sewer, telephone, and similar services but excluding electronic data
transmission services) adequate to operate the Business operated at such parcel
in the manner currently conducted.
 
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4.7  Environmental Matters
 
To Seller’s Knowledge, Schedule 4.7 contains a list of all environmental
studies, analyses and reports prepared during the last five years and in
Seller’s possession or reasonably available to Seller relating to the
environmental condition of the Owned Real Property and the operation of the
Business (collectively, the “Environmental Reports”), and Seller has made
available to Purchaser copies of all such Environmental Reports, if any. To the
Actual Knowledge of Seller, except as set forth in Schedule 4.7, Seller is and
has been conducting the Business and the Facility in compliance, in all material
respects, with all applicable Environmental Laws.
 
4.8  Employment Matters
 
Seller or an Affiliate has withheld or collected from each payment made to each
of the Employees the amount of all Taxes required to be withheld or collected
therefrom, and Seller or an Affiliate has paid the same when due to the
applicable Government agency.
 
(a)  Schedule 4.8(a) lists all current non-represented Employees, as of May 1,
2006, and their hourly rates of compensation or base salaries. To the extent any
Employees were on a leave of absence as of January 1, 2005, Schedule 4.8(b)
indicates the nature of such leave of absence and each such Employee’s
anticipated date of return to active employment. Seller has complied, in all
material respects, with all Laws relating to the recruitment and hiring and the
employment of the Employees, including Laws relating to wages, hours, equal
opportunity, immigration, collective bargaining and occupational health and
safety.
 
(b)  Schedule 4.8(b) list all workers’ compensation and occupational disease
claims and occurrences by any existing Employees or Former Employees of the
Business made since January 1, 2006, and all claims made prior to that date that
remain open.
 
4.9  Employee Benefit Plans
 
To Seller’s Knowledge, except as set forth on Schedule 4.9, each Plan, and the
administration of each Plan, complies with all applicable Laws (including, in
the case of Plans which are intended to be tax-qualified, all applicable
provisions of the Code, including Sections 401(a) and 401(k)), except for any
noncompliance that would not reasonably be expected to have a Material Adverse
Effect. Except as set forth on Schedule 4.9, Seller has not, with respect to the
Business, established, maintained or contributed to or otherwise participated in
a multi-employer retirement plan (as defined in Section 3(37)(A) of ERISA), any
defined benefit plan within the meaning of Section 3(35) of ERISA, or any other
plan which is subject to the provisions of Sections 302 or Title IV of ERISA or
Section 412 of the Code, and Seller and its ERISA Affiliates have timely made
any contributions required by them to any such plan, and have no unpaid
withdrawal liability or termination liability under Title IV of ERISA with
respect to any such plan. Schedule 4.9 identifies all Employees and Former
Employees and their dependents eligible for health benefits as required by COBRA
from Seller or any of its ERISA Affiliates. To Seller’s Knowledge, notice in
accordance with the requirements of COBRA, has been provided to all Employees
and Former Employees (and their spouses and dependants) entitled thereto, and
all such persons electing such coverage are being (or will be or have been, as
applicable) provided such coverage, except to the extent failure to give such
notice would not result in a Material Adverse Effect.
 
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4.10   Consents
 
The execution and delivery of this Agreement and the Transaction Agreements by
Seller and the consummation by Seller of the transactions contemplated in this
Agreement and in the Transaction Agreements (i) do not require the consent,
approval or action of, or any filing with or notice to, any Government entity
other than as specified in Schedule 4.10, and (ii) requires the consent and
approval of Seller’s shareholders and board of directors.
 
4.11  Disclaimer
 
EXCEPT AS EXPRESSLY AND SPECIFICALLY SET FORTH HEREIN, (i) ALL ACQUIRED ASSETS
ARE BEING CONVEYED HEREUNDER ON AN “AS IS, WHERE IS” BASIS AND (ii) SELLER MAKES
NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, WITH RESPECT TO THE
ACQUIRED ASSETS OR THE BUSINESS, INCLUDING WARRANTIES OF MERCHANTABILITY,
FITNESS FOR A PARTICULAR PURPOSE AND WARRANTIES AS TO THE PROSPECTS OF THE
BUSINESS AFTER THE CLOSING, ALL OF SUCH EXPRESS AND IMPLIED WARRANTIES AND
REPRESENTATIONS ARE HEREBY EXCLUDED.
 
4.12  Absence of Changes
 
Except as provided for in this Agreement or as set forth in Schedule 4.12, since
March 31, 2006:
 
(a)  no event has occurred that has had or would reasonably be expected to have
a Material Adverse Effect;
 
(b)  the Business has been operated in the Ordinary Course of Business;
 
(c)  no liability or obligation (whether absolute, accrued, contingent or
otherwise) in excess of $250,000 has been incurred by Seller with respect to the
Business, other than liabilities incurred in the Ordinary Course of Business;
 
(d)  Seller has not (i) paid any judgment in excess of $250,000 resulting from
any Action against Seller relating to the Acquired Assets or (ii) made any
payment to any Person in excess of $250,000 in settlement of any Action against
Seller relating to the Business or the Acquired Assets;
 
(e)  there has been no sale, transfer, lease or other disposition of any assets
of Seller that are necessary for or used exclusively in the Business, other than
sales of Inventory in the Ordinary Course of Business and any other asset that
is not material to the current operation of the Business; or
 
(f)  Seller has not entered into any contract, oral or written, to do or engage
in any of the foregoing after the date hereof.
 
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4.13  Assumed Contracts
 
Schedule 4.13 hereto lists all of the Assumed Contracts. Except as set forth on
Schedule 4.13, and assuming due execution and delivery by the counterparties
thereto, each Assumed Contract is in full force and effect and is, in all
material respects, a valid and binding obligation, enforceable in all material
respects in accordance with its terms, subject only to bankruptcy,
reorganization, receivership and other laws affecting creditors’ rights
generally and to general principals of equity, whether invoked in a proceeding
in equity or at law. Seller is not in default under or in violation of any of
the Assumed Contract, and to Seller’s Knowledge, no event has occurred which,
with notice or lapse of time or both, would constitute such a default or
violation. To Seller’s Knowledge, there is no default under or violation of any
of the Assumed Contracts by any other party thereto.
 
4.14  Compliance with Laws
 
Seller is and has been conducting the Business in compliance, in all material
respects, with all applicable Laws relating to the Acquired Assets and the
operation and conduct of the Business and no assertion of a violation of any
such Laws has been received or, to Seller’s Knowledge, is threatened.
Notwithstanding the foregoing or anything to the contrary in this Agreement, the
representations or warranties in this Section 4.14 shall NOT apply to
Environmental Laws and Seller may look only to the representations or warranties
in Section 4.7 as they may relate to Seller’s compliance with Environmental
Laws.
 
4.15  Customers and Suppliers
 
Schedule 4.15 sets forth the names of the ten (10) most significant (i)
customers (by revenue, including percentages of total revenues) of the Business
and (ii) suppliers (by expense) exclusively to the Facility, in each case for
the twelve (12) month period ending December 31, 2005. Except as disclosed on
Schedule 4.15, to Seller’s Knowledge, no material customer or supplier of the
Business has canceled or otherwise terminated, or made any threat to cancel or
otherwise terminate, its relationship with Seller. To Seller’s Knowledge, with
respect to the Business, no such customer has provided written notice that such
customer intends to cancel or otherwise terminate its relationship with Seller
or to materially decrease its purchase of products and services from Seller.
 
4.16  No Broker’s Fees
 
Neither Seller nor anyone acting on Seller’s behalf has incurred any liability
or obligation to pay fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which Purchaser
or any Affiliate of Purchaser shall be liable.
 
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4.17  No Other Representations and Warranties
 
Seller has not made, and Seller shall not be deemed to have made, any
representation or warranty other than as expressly made by Seller in this
Section 4, the Schedules or the Transaction Agreements . Without limiting the
generality of the foregoing, and notwithstanding any representations and
warranties made by Seller in this Section 4, Seller makes no representation or
warranty with respect to (i) any projections, estimates or budgets delivered or
made available to Purchaser or its Representatives at any time with respect to
future revenues, expenses or expenditures or future results of operations, or
(ii) except as expressly covered by a representation and warranty contained in
this Section 4, any other information or documents (financial or otherwise) made
available to Purchaser or its Representatives before or after the date of this
Agreement. No representation or warranty of Seller contained in this Section 4
or in any Schedule hereto contains an untrue statement of material fact or omits
to state a material fact required to be stated therein or necessary to make the
statements made, in the context in which made, not false or misleading.
 
5.  CERTAIN UNDERSTANDINGS AND AGREEMENTS OF THE PARTIES
 
5.1  Reasonable Efforts; Further Assurances
 
Each party shall use its reasonable efforts to take or cause to be taken all
actions necessary, proper or advisable to fulfill and perform its obligations in
respect of this Agreement, or otherwise to consummate and make effective the
transactions contemplated hereby and to cause its respective conditions set
forth in Sections 6.1, 6.2 and 6.3 to be satisfied. From time to time after the
Closing, each party shall execute and deliver any documents and take any other
actions that the other party reasonably requests to confirm or effectuate the
consummation of the transactions contemplated by this Agreement.
 
5.2  Employment Matters.
 
(a)  Purchaser and its Affiliates, as appropriate, shall:
 
(i)  effective as of the Closing Date, offer “at will” employment to all
non-represented Employees who timely complete and deliver Purchaser’s standard
employment application, which offer will be contingent upon such non-represented
Employees passing Purchaser’s medical exam and drug test requirements. Said
Employees shall also be offered the same benefits as currently available to
Purchaser’s employees; provided, however, that such non-represented Employees
shall be offered positions with base salaries not less than 90% of the base
salaries such non-represented Employees earned immediately prior to the Closing
Date. Purchaser shall prepare and timely deliver to Seller the following
information: (1) the names of all Employees to whom offers of employment have
been made, (2) the location of employment, (3) the job title, and (4) whether
such offer of employment was accepted or rejected;
 
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(ii)  negotiate and enter into an agreement with the Union establishing terms
and conditions of employment for Hired Employees represented by the Union to be
effective as of the Closing Date that complies with Article I, Section 1:03 of
the 1999-2006 collective bargaining agreement (“CBA”) between the Union and
Seller;
 
(iii)  offer employment to all represented Employees on the terms and conditions
negotiated by the Purchaser with the Union; and
 
(iv)  recognize the Union as the collective bargaining representative of all
Hired Employees represented by the Union and comply with any legal obligations
to engage in collective bargaining with the Union.
 
(b)  Represented and non-represented Employees who accept offers of employment
with the Purchaser shall, once they become employed, be referred to as the
“Hired Employees.”
 
(c)  Purchaser shall be solely responsible for any liabilities resulting from
its practices and procedures in screening and hiring Employees of the Business
and for its employment decisions with respect to the hiring or refusal to hire
any Employees of the Business.
 
(d)  Purchaser shall be solely responsible for all liability, costs and expenses
(including reasonable attorneys’ fees) for all claims filed by any Employees
with respect to acts or omissions by Purchaser or its agents or employees,
including, but not limited to arbitrations, unfair labor practice charges,
litigation under any statute or ordinance pertaining to labor relations,
employment discrimination charges, employment claims or litigation of any kind,
breach of contract claims, wrongful termination claims, workers’ compensation
claims, any employment-related tort claim or other similar claims or charges of
or by any Employees. Seller shall be solely responsible for all liability, costs
and expenses (including reasonable attorneys’ fees) for all claims filed by any
Employees with respect to acts or omissions by Seller or its agents or
employees, including, but not limited to arbitrations, unfair labor practice
charges, litigation under any statute or ordinance pertaining to labor
relations, employment, discrimination charges, employment claims or litigation
of any kind, breach of contract claims, wrongful termination claims, workers’
compensation claims, any employment-related tort claim or other similar claims
or charges of or by any Employees.
 
(e)  Seller shall be solely responsible for (i) the payment or provision of all
salaries, wages, benefits and other incidents of, or claims relating to, the
employment of the Employees for the period prior to the Closing, (ii) claims
made or incurred by any Employee under the Plans prior to the Closing and (iii)
compliance with the requirements of COBRA (as hereinafter defined), including,
without limitation, the provision of continuation coverage, with respect to all
Employees and their qualified beneficiaries for whom a qualifying event occurs
before the Closing Date. For purposes of this Section 5.2, “COBRA” means Section
4980B of

 

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the Internal Revenue Code of 1986, as amended, and part 6 of subtitle B of Title
I of the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et
seq., and “qualified beneficiary” and “qualifying event” shall have the meanings
given such terms in COBRA. Purchaser shall be solely responsible for the payment
or provision of all salaries, wages, benefits and other incidents of, or claims
relating to, the employment of any of the Hired Employees and, if applicable,
for any of their respective dependents for the period following the Closing or,
if later, the effective date of hire.
 
(f)  Seller and its Affiliates, as appropriate, shall:
 
(i)  provide reasonable assistance to Purchaser in connection with its
negotiations with the Union as contemplated by this Section 5.2;
 
(ii)  comply with their legal obligations, if any, to bargain with the Union
regarding the transfer of the Business and the concomitant termination of Hired
Employees and the effects of these actions on Employees represented by the
Union;
 
(iii)  provide reasonable assistance to the Purchaser in connection with the
transition of ownership of the Business and the hiring and employment of the
Hired Employees; and
 
(iv)  retain all liabilities under the Union Contracts, all of which Union
Contracts to which Seller is a party and that relate to the Business are listed
on Schedule 5.2.
 
(g)  Without Purchaser’s prior written consent, Seller shall take no action that
results in a “plant closing” or “mass layoff” within the definitions of the
Worker Adjustment and Retraining Notification Act and related regulations
(“WARN”) and any similar Laws prior to the Closing. Purchaser shall take all
other steps necessary to eliminate any obligation of Seller or any of its
Affiliates under WARN or any other similar Laws to give notice of the transfer
of any operations or the loss of employment or loss of pay or benefits or to pay
any amounts in lieu of such notice. In addition, after Closing, Purchaser shall
comply with the notice provisions of WARN and any similar Laws in connection
with the termination of any Hired Employees.
 
(h)  The parties agree that the provisions of this Section 5.2 is solely among
and for the benefit of the parties hereto and do not inure to the benefit of or
confer rights upon any third party, including any Employee.
 
(i)  Purchaser will provide to Seller a service history of employment with
Purchaser and any Affiliate of Purchaser of all salaried employees who were
employees of Seller employed in the Business as of the Closing Date at the
request of Seller or at least not less than annually. The service history shall
include, at a minimum, full name, social security number, date of birth, date of
hire and date of termination or layoff.
 
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5.3  Consents
 
Each party shall use its reasonable efforts to cooperate with the other party to
obtain any necessary consent to assignment and transfer of the Acquired Assets
to Purchaser at Closing. If consent to assignment of a particular Acquired Asset
is not obtained or if such assignment is not permitted regardless of consent,
Seller shall use its reasonable efforts to cooperate with Purchaser in any
reasonable arrangement designed to provide Purchaser all material benefits of
that Acquired Asset.
 
5.4  Use of Business Names by Purchaser; Trademark License
 
Effective as of the Closing Date, Purchaser and Seller shall, and Seller shall
cause its Affiliate, Continental A.G. and its subsidiary, Continental Automotive
Licensing Corp., a Michigan corporation, to enter into a license agreement for
the use of the “Continental” and “General” name substantially in the form
attached hereto as Exhibit A (the “Trademark License”).
 
5.5  Compound Supply Agreement
 
Effective as of the Closing Date, Purchaser and Seller shall enter into a supply
agreement pursuant to which Seller or an Affiliate of Seller will supply to
Purchaser for its use in the Business the compounds used in the Business known
as “B1035” and “B1548” substantially in the form attached hereto as Exhibit B
(the “Compound Supply Agreement”).
 
5.6  Know-How License
 
Effective as of the Closing Date, Seller shall, and to the extent applicable,
shall cause its Affiliates to, grant to Purchaser a paid-up perpetual and
worldwide license to use the Know- How used by the Business on the Closing Date
substantially in the form attached hereto as Exhibit C (the “Know-How License”).
 
5.7  Transition Services Agreement
 
Effective as of the Closing Date, Purchaser and Seller shall enter into an
transition services agreement substantially in the form attached hereto as
Exhibit D (the “Transition Services Agreement”).
 
5.8  Raw Materials Supply Agreement
 
Effective as of the Closing Date, Purchaser and Seller shall enter into a raw
materials supply agreement pursuant to which Purchaser shall agree to acquire
its supply of certain specified OTR raw materials from Seller for a period
commencing as of the Closing Date and continuing through December 31, 2006,
which agreement shall be substantially in the form attached hereto as Exhibit E
(the “Raw Materials Supply Agreement”).
 
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5.9  Bead and Steel Fabric Supply Agreements
 
Effective as of the Closing Date, Purchaser and Seller shall enter into (i) a
supply agreement pursuant to which Purchaser will acquire OTR beads from Seller
or an Affiliate of Seller, which agreement shall be substantially in the form
attached hereto as Exhibit F-1 (the “Bead Supply Agreement”) and (ii) a supply
agreement pursuant to which Purchaser will acquire OTR steel fabric from Seller
or an Affiliate of Seller, which agreement shall be substantially in the form
attached hereto as Exhibit F-2 (the “Steel Fabric Supply Agreement”).
 
5.10  Master Distributorship Agreement
 
Effective as of the Closing Date, Purchaser and Continental Aktiengesellschaft
shall enter into a master distributorship agreement substantially in the form
attached hereto as Exhibit G (the “Master Distributorship Agreement”).
 
5.11  Other Agreements
 
Effective as of the Closing Date, Purchaser and Seller shall enter into such
other supply and services arrangements that Purchaser and Seller deem reasonably
necessary or advisable for each of them to carry on their respective businesses
after the Closing, each on terms reasonably acceptable to Purchaser and Seller.
 
5.12  Prorations
 
All personal and real property Taxes affecting the Acquired Assets shall be
prorated to the Closing Date in accordance with local custom. Seller shall pay
all installments of special assessments with respect to the Owned Real Property
that come due on or before the Closing Date, and Purchaser shall pay all such
installments that come due after the Closing Date. All water, sewer, utility and
other similar charges, and all prepaid rent and other similar credits, affecting
the Owned Real Property shall be prorated to the Closing Date (with Closing Date
meter readings as appropriate). The foregoing prorations shall be paid by the
responsible party, insofar as feasible, at the Closing, or to the extent not
feasible, within thirty (30) days following the Closing, by immediately
available funds. Any errors or omissions in computing prorations at the Closing,
or any re-computations required as a result of facts that become known after the
Closing, shall be corrected (and paid as specified above) as soon as practicable
thereafter. Payments owing by one party to the other under this Section 5.8
shall bear interest at the Agreed Rate from the Closing Date until the date
payment-in-full is made.
 
5.13  Access to Records
 
Each party shall preserve for seven years after Closing all business records
relating to the Business and shall provide the other party and its
Representatives, during reasonable business hours and upon reasonable advance
notice, access to and the right to copy (at the other party’s own expense) such
records for any legitimate business purpose, including a Tax audit or
governmental inquiry, and each party to whom the records are disclosed hereby
agrees to keep confidential any confidential or proprietary information included
in those records and to use the records for no other purpose.
 
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5.14  Tax Matters
 
The parties shall cooperate in the preparation of all federal, state, local and
foreign Tax returns and reports for which one party could reasonably require the
assistance of the other party, including providing any information reasonably
requested by another party to assist in the preparations of any such returns.
 
5.15  Access
 
During the period between the date hereof and the Closing Date, Seller will give
Purchaser and its representatives reasonable access to the employees,
consultants, assets, properties, contracts, accounts, books and records, and
other documents of Seller related to the Business and the Acquired Assets during
normal business hours, and Seller will furnish to Purchaser copies of all such
documents and all such financial and operating data and information with respect
to the Business and the Acquired Assets as Purchaser may from time to time
reasonably request. In the event that the transactions contemplated by this
Agreement should fail to be consummated, all documents, data, information, books
and records delivered by Seller to Purchaser will promptly be returned to Seller
and any information obtained by Purchaser from such documents, data,
information, books and records or otherwise learned by Purchaser about the
Business as a result of such investigation will thereafter be kept confidential,
unless such information (i) is or becomes a matter of public knowledge or
otherwise is known to competitors of Seller through no fault of Purchaser, or
(ii) can be shown to have been in the possession of Purchaser prior to such
information’s disclosure by Seller.
 
5.16  Employee Benefit Matters; Union Ratification
 
Contemporaneously with the execution and delivery of this Agreement, Buyer, the
VEBA, the SPT and/or Seller, as applicable, will enter into and deliver that
certain (i) Pension Reimbursement Agreement, (ii) Pension Transfer Agreement,
(iii) Retiree Medical Transfer Agreement and (iv) Letter Agreement relating to
the Transfer of Certain Assets and Liabilities of Bryan, OH OTR Tire Business,
which agreement(s) will be in a form acceptable to Seller in its reasonable
discretion and which agreement(s), by their terms, will be effective as of the
Closing Date (the “Retiree Medical, Pension and Union Related Agreements”). In
addition, contemporaneously with the execution and delivery of this Agreement,
Buyer will deliver to Seller an agreement ratified and approved by the Union, to
be effective as of the Closing Date, establishing terms and conditions of
employment for Hired Employees represented by the Union that both complies with
Section 5.2 hereof and Article I, Section 1:03 of the CBA between the Union and
Seller, which agreement will be in a form and substance reasonably acceptable to
Seller.
 
5.17  Conduct of Business Pending the Closing
 
Between the date hereof and the Closing Date, except as contemplated herein
(including, without limitation, the activities regarding the Union
negotiations), Seller will conduct the Business in the Ordinary Course of
Business. Further, Seller agrees that between the date hereof and the Closing
Date, Seller will (i) use commercially reasonable efforts to maintain the
Acquired Assets and to preserve its relationships with its present suppliers and
customers relating to the Business and (ii) absent the written consent of
Purchaser, not sell, transfer or otherwise dispose of any of the Acquired Assets
other than Inventory sold in the Ordinary Course of Business.
 
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6.  CONDITIONS TO CLOSING
 
.
 
6.1  Conditions to Obligations of Each Party
 
As a condition to the obligations of Purchaser and Seller to consummate the
transactions contemplated hereby (which condition may be waived by any party and
which shall be deemed to have been waived in whole if the Closing occurs), all
consents, approvals and authorizations of, and any filings with or notices to,
any Government that are necessary for the consummation of the transactions
contemplated by this Agreement must have been received and must be in full force
and effect and there must not have occurred any change resulting in a Material
Adverse Effect.
 
6.2  Conditions to Obligations of Purchaser
 
As an additional condition to the obligation of Purchaser to consummate the
transactions contemplated hereby (which condition may be waived, in whole or in
part, by Purchaser in writing and shall be deemed to have been waived in whole
if the Closing occurs), Purchaser must have received the following documents,
dated the Closing Date (unless another date is identified) and the following
conditions must have been satisfied:
 
(a)  A copy, certified by an authorized officer of Seller, of resolutions of the
board of directors and shareholders of Seller authorizing the execution,
delivery and performance of this Agreement and all other agreements, documents
and instruments relating hereto and the consummation of the transactions
contemplated hereby;
 
(b)  A certificate executed by an authorized officer of Seller to the effect
that all of Seller’s representations and warranties in this Agreement and the
Transaction Agreements are accurate in all material respects as of the Closing
Date as if made on the Closing Date (unless made as of another date) and that
all of the covenants and obligations that Seller is required to perform or to
comply with pursuant to this Agreement and the Transaction Agreements at or
prior to the Closing have been duly performed and complied with in all material
respects;
 
(c)  A bill of sale for the Acquired Assets and an assignment and assumption
agreement for the Assumed Contracts, each in form and substance reasonably
satisfactory to Purchaser, covering items of tangible and intangible personal
property included in the Acquired Assets and transferring Seller’s rights,
duties and obligations in the Assumed Contracts to Purchaser;
 
(d)  A general warranty deed for the Owned Real Property;
 
(e)  The Trademark License;
 
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(f)  The Compound Supply Agreement;
 
(g)  The Know-How License;
 
(h)  The Transition Services Agreement;
 
(i)  The Raw Materials Supply Agreement;
 
(j)  The Bead Supply Agreement;
 
(k)  The Steel Fabric Supply Agreement;
 
(l)  The Master Distributorship Agreement;
 
(m)  The consents set forth on Schedule 6.2(m);
 
(n)  Such further documents and instruments of sale, transfer, conveyance,
assignment or delivery covering the Acquired Assets or any part thereof as
Purchaser may reasonably require to assure the sale and assignment of the
Acquired Assets as contemplated by this Agreement;
 
(o)  Purchaser shall have completed its due diligence investigation of the
Acquired Assets and shall not have discovered any fact, circumstance,
transaction or event of which Purchaser did not have notice as of the date
hereof and that constitutes a material breach of the representations and
warranties of Seller set forth herein; provided, however, that Purchaser shall
not be entitled to rely on the condition set forth in this Section 6.2(o) at any
time after the date that is twenty (20) days after the date of this Agreement;
provided, further, that the foregoing limitations shall not apply to the extent
that (i) Seller has not complied, in all material respects, with its obligations
under Section 5.15 hereof and (ii) Purchaser has provided Seller with prior
written notice of, and a reasonable opportunity to cure, such non-compliance.
For purposes of the preceding sentence “material breach” shall mean facts,
circumstances, transactions or events, including a claim under or relating to
Environmental Law, which alone or in the aggregate would, or would reasonably be
expect to equal or exceed One Million Dollars ($1,000,000). If, prior to
Closing, Purchaser delivers written notice to Seller claiming that Seller has
failed to cooperate with Purchaser, (which notice shall set forth in detail the
claimed failure to cooperate), and if Seller fails or refuses to cure such claim
within five (5) business days of receipt of such notice, then Purchaser may
deliver a second written notice to Seller terminating this Agreement effective
upon delivery of said second notice, and thereupon, Purchaser shall have no
obligation or liability under this Agreement for said termination; and
 
(p)  A certificate from each of Paul Hawkins, Jim Houston, Steve Newell and
Keith Tarnovich attesting and verifying that such individual is not aware of any
breach of any of the representations and warranties of Seller as set forth in
Section 4 of this Agreement.
 
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6.3  Conditions to Obligations of Seller
 
The obligation of Seller to consummate the transactions contemplated hereby
shall be subject to the fulfillment, at or prior to the Closing Date, of the
following additional conditions (any of which condition may be waived, in whole
or in part, by Seller in writing and shall be deemed to be waived in whole if
the Closing occurs):
 
(a)  Purchaser must have paid to Seller the Initial Purchase Price for the
Acquired Assets in immediately available funds pursuant to Section 2.1 of this
Agreement;
 
(b)  The shareholders of Seller shall have approved the transactions
contemplated herein; and
 
(c)  Seller must have received at the Closing the following documents, each
dated the Closing Date:
 
(i)  Copies, certified by the Secretary of Purchaser, of resolutions of the
managers or board of directors of Purchaser authorizing the execution and
delivery of this Agreement and all other agreements, documents or instruments
relating hereto and the consummation of the transactions contemplated hereby;
 
(ii)  A certificate executed by an authorized officer of Purchaser to the effect
that all of Purchaser’s representations and warranties in this Agreement and the
Transaction Agreements are accurate in all material respects as of the Closing
Date as if made on the Closing Date (unless made as of another date) and that
all of the covenants and obligations that Purchaser is required to perform or to
comply with pursuant to this Agreement and the Transaction Agreements at or
prior to the Closing have been duly performed and complied with in all material
respects;
 
(iii)  An Exemption Certificate, in form and substance reasonably satisfactory
to Seller, covering a resale exemption for the Inventory included in the
Acquired Assets;
 
(iv)  Assignment and assumption agreements for the Assumed Liabilities and the
Assumed Contracts, each in form and substance reasonably satisfactory to
Purchaser, wherein Purchaser assumes all of Seller’s rights, duties and
obligations in and to the Assumed Liabilities and the Assumed Contracts, as
applicable;
 
(v)  The Trademark License;
 
(vi)  The Compound Supply Agreement;
 
(vii)  The Know-How License;
 
(viii)  The Transition Services Agreement;
 
(ix)  The Raw Materials Supply Agreement;
 
(x)  The Bead Supply Agreement;
 
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(xi)  The Steel Fabric Supply Agreement;
 
(xii)  The Master Distributorship Agreement;
 
(xiii)  A certificate from each of Paul Hawkins, Jim Houston, Steve Newell and
Keith Tarnovich attesting and verifying that such individual is not aware of any
breach of any of the representations and warranties of Seller as set forth in
Section 4 of this Agreement; and
 
(xiv)  Such further documents and instruments reasonably requested by Seller to
assure the assumption of the Assumed Liabilities and the Assumed Contracts as
contemplated by this Agreement.
 
7.  INDEMNIFICATION
 
7.1  Indemnification by Seller
 
Subject to the terms hereof, Seller agrees to defend, indemnify and hold
Purchaser and its managers, directors, officers, Affiliates and Representatives
(the “Purchaser Indemnified Parties”) harmless from and against any claim,
liability, expense, loss or other damage (including reasonable attorneys’ fees
and expenses) (collectively, “Claims”) asserted against, imposed upon or
incurred by any Purchaser Indemnified Party by reason of, resulting from or
arising out of:
 
(a)  any breach by Seller of any representation or warranty made by Seller in
Section 4 of this Agreement or any other document executed and delivered by
Seller to Purchaser at Closing with respect to the transactions contemplated by
this Agreement;
 
(b)  any breach or non-performance by Seller of any covenant or agreement made
by Seller in this Agreement or any other document executed and delivered by
Seller to Purchaser at Closing with respect to the transactions contemplated by
this Agreement;
 
(c)  any imposition (including, but not limited to, imposition by operation of
any bulk transfer or other Law) or attempted imposition by a third party upon
any of the Purchaser Indemnified Parties of any liability of Seller which is not
an Assumed Liability;
 
(d)  any personal injury or property damage alleged to have been caused by or
the result of any product produced, sold, distributed or otherwise placed in the
stream of commerce by Seller in the Business on or prior to the Closing Date,
but not including any Claims solely for product repair or product replacement
that arise under, and are made pursuant to and consistent with, the terms of
Seller’s standard outstanding warranty obligations (collectively, the “Product
Liability Claims”). For purposes of clarification, if a Claim is asserted
(orally or in writing) after the Closing Date by a third party solely for
product repair or replacement arising under and made pursuant to and consistent
with, the terms of Seller’s standard outstanding warranty obligations (a
“Warranty Claim”), Seller shall have no obligation to indemnify the Purchaser
Indemnified Parties for such Warranty Claim pursuant to this Section 7.1(d);
 
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(e)  any brokerage or finders’ fees arising out of the transaction contemplated
hereby owing to any party engaged by Seller;
 
(f)  any recall by a third party of a product of such third party which utilizes
a product of Seller produced, sold, distributed or otherwise placed in the
stream of commerce by Seller in the Business on or prior to the Closing, for
purposes of repair or replacement of such product of Seller (a “Product
Recall”), but excluding any Warranty Claims;
 
(g)  any liability under the Union Contracts, the National Labor Relations Act,
as amended, 29 U.S.C. §§ 151 et seq., or any other Laws relating to labor or
employment with respect to the Union Contracts;
 
(h)  any liability under the WARN or similar Law resulting from or arising out
of Seller’s violation of Section 5.2(g) hereof; and
 
(i)  the reasonable costs and expenses relating to enforcement of the
indemnification rights under this Section 7.1.
 
7.2  Indemnification by Parent and Purchaser
 
Subject to the terms hereof, Purchaser and Parent, jointly and severally, agree
to defend, indemnify and hold Seller and its directors, officers, Affiliates and
Representatives (the “Seller Indemnified Parties”) harmless from and against any
Claim asserted against, imposed upon or incurred by any Seller Indemnified Party
by reason of, resulting from or arising out of:
 
(a)  any breach by Purchaser of any representation or warranty made by Purchaser
in Section 3 of this Agreement or any other document executed and delivered by
Purchaser to Seller at Closing with respect to the transactions contemplated by
this Agreement;
 
(b)  any breach or non-performance by Purchaser of any covenant or agreement
made by Purchaser in this Agreement or any other document executed and delivered
by Purchaser to Seller at Closing with respect to the transactions contemplated
by this Agreement;
 
(c)  any imposition (including, but not limited to, by operation of Law) or
attempted imposition by a third party upon any of the Seller Indemnified Parties
of any of the Assumed Liabilities and any liability resulting from or arising
out of the conduct of the Business by Purchaser following the Closing, including
with respect to the use of the Acquired Assets;
 
(d)  (1) any Product Liability Claim caused by or the result of any product
produced or manufactured by Purchaser after Closing, (2) any Warranty Claim
outstanding as of the Closing or made after the Closing, and (3) any recall by a
third party of a product of such third party which utilizes a product sold,
distributed or otherwise placed in the stream of commerce by Purchaser in the
Business after Closing (other than any such product that was manufactured by
Seller on or before Closing), or manufactured by Purchaser in the Business after
Closing;
 
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(e)  any injury to or damage to property or persons arising out of any entry
onto the Facility by Purchaser, its employees, agents, representatives,
contractors, consultants or invitees prior to the Closing Date and any
mechanic’s, materialmen’s or laborer’s lien or other lien or claims in
connection with the making of such survey, tests, borings or any other
activities by the Purchaser;
 
(f)  any liability under any applicable Law resulting from or arising out of the
conduct of the Purchaser in collective bargaining with the Union, including
without limitation any liability under the National Labor Relations Act, as
amended, 29 U.S.C. §§ 151 et seq., and the Labor Management Relations Act, as
amended, 29 U.S.C. §§ 185 et seq.;
 
(g)  any liability under any applicable state, federal or local Law resulting
from or arising out of the conduct of the Purchaser in connection with its
hiring and employment of the Hired Employees or Purchaser’s failure or refusal
to hire any Employee in violation of Section 5.2;
 
(h)  any liability under the WARN or any similar Law resulting from or arising
out of Purchaser’s violation of Section 5.2(g) hereof;
 
(i)  any brokerage or finders’ fees arising out of the transaction contemplated
hereby owing to any party engaged by Purchaser; and
 
(i)  the reasonable costs and expenses relating to enforcement of the
indemnification rights under this Section 7.2.
 
7.3  Determination of Loss
 
Indemnification pursuant to this Section 7 shall be payable with respect to any
Claim described herein as subject to indemnification upon the happening of the
earlier of the following:
 
(a)  Resolution of such Claim by mutual agreement of Seller and Purchaser; or
 
(b)  The issuance of a final, non-appealable judgment, award, order or other
ruling by a court of competent jurisdiction or arbitration panel.
 
7.4  Limitations on Indemnification.
 
(a)  Seller shall not have any liability under Section 7.1(a), including Claims
solely for breach of any representation or warranty with respect to the
Unaudited Financial Information made under Section 8.5 below (“Section 8.5
Warranty Claims”), until the aggregate amount of all Claims described in Section
7.1(a), including Section 8.5 Warranty Claims, exceeds $1,020,000 (the
“Threshold Amount”), and then only for the amount by which such Claims exceed
the Threshold Amount. Upon reaching the Threshold Amount, Seller shall be liable
to the Purchaser Indemnified Parties with respect to Claims described in Section
7.1(a) including Section 8.5 Warranty Claims, in excess of the Threshold Amount
up to an aggregate amount of $10,200,000 (the “Cap”). Notwithstanding anything
contained herein to the contrary,

 

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the limitations set forth in this Section 7.4(a) will not apply to a Claim (i)
for a breach of a representation or warranty contained in Section 4.2(a), the
first sentence of Section 4.3 and Section 4.5(a), or (ii) for actual (and not
constructive) fraud.
 
(b)  Purchaser and Parent shall not have any liability under Section 7.2(a)
until the aggregate amount of all Claims described in Section 7.2(a) exceeds the
Threshold Amount, and then only for the amount by which such Claims exceed the
Threshold Amount. Upon reaching the Threshold Amount, Purchaser and Parent shall
be jointly and severally liable to the Seller Indemnified Parties with respect
to Claims described in Section 7.2(a) in excess of the Threshold Amount up to an
aggregate amount equal to the Cap. Notwithstanding anything contained herein to
the contrary, the limitations set forth in this Section 7.4(b) will not apply to
a Claim (i) for a breach of a representation or warranty contained in Section
3.1 and Section 3.4, or (ii) for actual (and not constructive) fraud.
 
(c)  All representations and warranties contained in this Agreement, including
the representations and warranties as to the Unaudited Financial Information in
Section 8.5 below, the Schedules and Exhibits hereto and any agreement,
document, instrument or certificate delivered hereunder will survive the Closing
for a period of twelve (12) months; provided, however, that (i) a claim for
indemnification relating to the representations and warranties in Section 3.1
(other than the first sentence thereof), Section 4.2(a), the first sentence of
Section 4.3 and Section 4.5(a) will survive the Closing indefinitely and (ii) a
claim for indemnification relating to the representations and warranties
contained in Section 4.7 and Section 4.9 must be made with six (6) months after
the expiration of the applicable statute of limitations (including extensions).
However, as to any breach of, or misstatement in, any such representation or
warranty as to which the non-breaching party has given notice to the breaching
party on or prior to the expiration of the applicable period, as above set
forth, the same will continue to survive beyond said period, but only as to the
matters contained in such notice. All covenants and agreements made by a party
hereto in this Agreement or in any Transaction Agreement (including, without
limitation, the indemnification obligations set forth in this Section) will
survive the Closing until fully performed, discharged and satisfied.
 
(d)  To the extent an Indemnifying Party (as defined below) indemnifies any
Indemnified Party (as defined below) on any Claim, each Indemnified Party shall
assign to the Indemnifying Party, to the fullest extent allowable, their rights
and causes of action with respect to such Claim against third parties, or in the
event assignment is not permissible, the Indemnifying Party shall be allowed to
pursue such Claim in the name of the applicable Indemnified Party, as
applicable, at the Indemnifying Party’s expense. The Indemnifying Party shall be
entitled to retain all recoveries for its own accounts made as a result of any
such action. Each Indemnified Party shall provide, at no expense to themselves,
to the Indemnifying Party reasonable assistance in prosecuting such Claim,
including making their books and records relating to such Claim available and
making their employees available for interviews and similar matters. If an
Indemnified Party recovers from a third party any part of any Claim that had
been paid by the Indemnifying Party pursuant to its indemnification obligations
hereunder, each such Indemnified Party shall promptly remit to the Indemnifying
Party the amount of such recovery without regard to the time limitations
described in Section 7.4(c).
 
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(e)  No Indemnified Party shall be entitled to any indemnity on account of
consequential, incidental or indirect damages or losses (unless such damages or
losses are asserted against any Indemnified Party by a third party) and, in
particular, no “multiple of profits” or other items shall be applied in
calculating any indemnity amount.
 
(f)  No Indemnified Party shall have liability for indemnification with respect
to any Claim for indemnification that relates to the passing of, or any change
in, after the Closing Date, any Law or any accounting policy, principle or
practice or any increase in Tax rates in effect on the Closing Date, even if the
change or increase has retroactive effect or requires action at a future date.
 
7.5  Indemnification Procedure.
 
(a)  Third-Party Claims.
 
(i)  Promptly after receipt by a party entitled to be indemnified under this
Section 7 (an “Indemnified Party”) of notice of the commencement of any Action
for which the Indemnified Party intends to assert a claim for indemnification
against the other party (an “Indemnifying Party”) under this Section 7, the
Indemnified Party shall give notice to the Indemnifying Party of the
commencement of such Action with reasonable promptness (so as to not prejudice
the Indemnifying Party’s rights).
 
(ii)  The Indemnifying Party shall be entitled to participate in any Action
described in Section 7.5(a)(i) above and, to the extent that it wishes, to
assume the defense of such Action with counsel reasonably satisfactory to the
Indemnified Party. Following the assumption of defense by an Indemnifying Party,
the Indemnifying Party shall not be liable for any subsequent fees of legal
counsel or other expenses incurred by the Indemnified Party in connection with
the defense of such Action, and the Indemnified Party shall have the right to
participate in the defense with its own counsel at its own expense. No
compromise or settlement of any claims in an Action shall be binding on an
Indemnifying Party for purposes of the Indemnifying Party’s indemnity
obligations under this Agreement without the Indemnifying Party’s express
written consent. The Indemnifying Party may not compromise or settle any claims
in an Action without the Indemnified Party’s express written consent, which
shall not be unreasonably withheld, unless the compromise or settlement involves
only the payment of money (which is paid by the Indemnifying Party) and does not
include any admission of liability by the Indemnified Party.
 
(iii)  A party granted the right to direct the defense of any Action under this
Section 7.5 shall (A) keep the other party hereto informed of material
developments in the Action, (B) promptly submit to the other parties copies of
all pleadings, responsive pleadings, motions and other similar legal documents
and papers received in connection with the Action, (C) permit the other parties
and their counsel, to the extent practicable, to confer on the conduct of the
defense of the Action, and (D) to the extent practicable, permit the other
parties and their counsel an opportunity to review all legal papers to be
submitted prior to their submission. The

 

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parties shall make available to each other and each other’s counsel and
accountants all of their books and records relating to the Action, and each
party shall provide to the other such assistance as may be reasonably required
to insure the proper and adequate defense of the Action. Each party shall use
its good faith efforts to avoid the waiver of any privilege of another party.
The assumption of the defense of any Action by an Indemnifying Party shall not
constitute an admission of responsibility to indemnify or in any manner impair
or restrict the Indemnifying Party’s rights to later seek to be reimbursed its
costs and expenses if indemnification under this Agreement with respect to the
Action was not required.
 
(b)  Other Claims. A claim for indemnification for any matter not involving a
third-party claim may be asserted by written notice of the claim, setting forth
in reasonable detail the factual and contractual bases for the claim, to the
party from whom indemnification under this Section 7 is sought.
 
7.6  Exclusive Remedy
 
Except (a) as provided in Sections 2.4 and 5.12, and (b) actual (and not
constructive) fraud, this Section 7 sets forth the exclusive remedy owing from
Purchaser, Parent or Seller for claims that arise from or are related to this
Agreement. Each of the parties hereby waives any other claim, cause of action,
or remedy that it might assert against the other, with respect to the matters
that arise from or are related to this Agreement, whether under statutory or
common Law, any Environmental Law, or securities, trade regulation or other Law.
No party shall be entitled to rescind this Agreement following the Closing in
the event of a breach of any representation, warranty or covenant made by
another party in this Agreement.
 
8.  ADDITIONAL COVENANTS AND AGREEMENT
 
8.1  Expenses.
 
Except as otherwise set forth in this Agreement, each party hereto shall bear
and pay all costs and expenses incurred by it in connection with the
transactions contemplated by this Agreement, including fees, costs and expenses
of its own Representatives. In connection with the purchase of the Owned Real
Property, (a) Seller shall pay (i) all applicable real estate transfer taxes and
conveyance fees; (ii) that portion of all title insurance costs, including but
not limited to, search fees, commitment fees and title insurance premiums for
issuance of an owner’s policy pursuant to the title commitment equal to the cost
of a title guaranty in the amount of the Purchase Price allocated to the Owner
Real Property; (iii) the cost of recording releases or terminations of any
mortgages given by Seller or any leases, liens or other encumbrances to be
released or terminated by Seller; and (iv) Seller’s customary share of the
closing agent’s fees, if any, and (b) Purchaser shall pay (i) the cost of any
survey; (ii) that portion of all title insurance costs that exceeds the cost of
a title guaranty in the amount of the Purchase Price allocated to the Owner Real
Property; (iii) the recording fees for the deed; and (iv) Purchaser’s customary
share of the closing agent’s fee, if any.
 
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8.2  Public Releases
 
Purchaser and Seller shall agree with each other as to the form and substance of
any press release related to this Agreement or the transactions contemplated
hereby, shall consult with each other as to the form and substance of other
public disclosures related thereto, and shall not make any such press release or
such other disclosures prior to such agreement or consultation; provided,
however, that nothing contained herein shall prohibit any party hereto from
making any disclosure which it deems necessary in light of applicable Law, after
notice to the other parties with the opportunity to comment, to the extent that
delay of the disclosure is permitted under such Law.
 
8.3  Termination Events
 
This Agreement may, prior to the Closing, be terminated (i) by Purchaser, if a
breach of any provision of this Agreement has been committed by Seller and such
breach has not been waived, in writing, by Purchaser or cured by Seller within
thirty (30) days of notice by Purchaser to Seller of such breach; (ii) by
Seller, if a breach of any provision of this Agreement has been committed by
Purchaser and such breach has not been waived, in writing, by Seller or cured by
Purchaser within thirty (30) days of notice by Seller to Purchaser of such
breach; (iii) by Purchaser, if any of the conditions in Section 6.2 has not been
satisfied on or before July 31, 2006, or if satisfaction of such a condition by
such date is or becomes impossible (other than through the failure of Purchaser
to comply with its obligations under this Agreement) and Purchaser has not
waived such condition on or before the Closing Date; (iv) by Seller, if any of
the conditions in Section 6.3 has not been satisfied on or before July 31, 2006,
or if satisfaction of such a condition by such date is or becomes impossible
(other than through the failure of Seller to comply with their respective
obligations under this Agreement) and Seller has not waived such condition on or
before the Closing Date; (v) by either the Seller or Purchaser if any
Governmental authority shall have issued an order, decree or ruling or taken any
other action permanently enjoining, restraining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and nonappealable; or (vi) by mutual
written consent of Purchaser and Seller.
 
8.4  Effect of Termination
 
Each of Purchaser’s and Seller’s right of termination under Section 8.3 is in
addition to any other rights such party may have under this Agreement or
otherwise, and the exercise of a right of termination will not be an election of
remedies. If this Agreement is terminated pursuant to Section 8.3, all further
obligations of the parties under this Agreement will terminate, except that the
obligations in Sections 7.2(e) (“Indemnification by Purchaser”) and 8.1
(“Expenses”) and the Confidentiality Agreement will survive; provided, however,
that if this Agreement is terminated by a party because of the breach of the
Agreement by the other party or because one or more of the conditions to the
terminating party’s obligations under this Agreement is not satisfied as a
result of the other party’s failure to comply with its obligations under this
Agreement, the terminating party’s right to pursue all legal remedies will
survive such termination unimpaired.
 
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8.5  Unaudited Financial Statements
 
(a)  To the extent information is reasonably available and as soon as reasonably
practicable following the Closing Date, but not later than 30 days after the
Closing Date, Seller shall deliver to Purchaser (i) unaudited balance sheets of
the Business as of the end of the years ended December 31, 2003, 2004 and 2005
and (ii) unaudited statements of operations and cash flows for the Business for
the years ended December 31, 2003, 2004 and 2005 (collectively, the “Unaudited
Financial Information”).
 
(b)  Purchaser understands that information may not be available to create
complete statements of operations, balance sheets and statements of cash flows
in accordance with GAAP as the Business was accounted for as an operational unit
and no separate GAAP financial statements (income statement, balance sheet and
statement of cash flows) were maintained other than for operational purposes
which may include allocations of certain amounts and balances not in accordance
with GAAP. Nevertheless, Seller will use commercially reasonable efforts to
prepare and deliver the Unaudited Financial Information in accordance with GAAP.
In addition, certain support and detail may not be available for all amounts or
balances for all years.
 
(c)  Seller will use commercially reasonable efforts to prepare the Unaudited
Financial Information in a form reasonably acceptable to Purchaser based on
Purchaser’s SEC reporting requirements. If the SEC requires all or any part of
the Unaudited Financial Information to be reported by Purchaser in the form of
audited statements, Seller will use commercially reasonable efforts to provide
Purchaser all information reasonably necessary to enable Purchaser to prepare
such audited statements, all at Purchaser’s expense. To the Actual Knowledge of
Seller, subject to Section 8.5(b) above, the Unaudited Financial Information
fairly presents, in all material respects, the financial condition of the
Business at the dates thereof and the results of operations of the Business for
the periods then ended.
 
(d)  Seller will provide Purchaser and its Independent Registered Public
Accounting Firm with customary and reasonable assistance as may be requested by
Purchaser in connection with the audit of the Unaudited Financial Information
conducted on behalf of Purchaser, including, without limitation, access at all
reasonable times to Seller’s personnel, properties, books and records of or
related to the Business and in the employ or possession, as applicable, of
Seller. Customary and reasonable assistance will include the delivery by Seller
of a properly executed management representation letter, in a customary format
to be mutually agreed, to Purchaser’s Independent Registered Public Accounting
Firm. In addition, to the extent Purchaser requests partial relief from
applicable reporting requirements of the Securities and Exchange Commission with
regard to the nature of the audited financial statements of the Business to be
filed, Seller agrees to cooperate with said process and provide applicable
documentation as may reasonably be deemed necessary.
 
(e)  To the extent that Seller requires the assistance of actuaries or outside
accountants to prepare financial information for Purchaser’s filing requirements
to the SEC, Purchaser will pay for all such assistance.
 
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9.   MISCELLANEOUS
 
9.1  Entire Agreement
 
Except for the Retiree Medical, Pension and Union Related Agreements and the
Confidentiality Agreement, dated September 13, 2005, as amended, executed by
Purchaser and Seller, this Agreement (including all Schedules, Exhibits and
other documents executed and delivered pursuant hereto) supersedes any and all
other agreements, oral or written, among the parties hereto with respect to the
subject matter hereof, and contains the entire agreement among the parties with
respect to the transactions contemplated hereby.
 
9.2  Amendments; Waiver
 
This Agreement may be amended, modified, superseded or canceled and any of its
provisions may be waived only by a written instrument executed by both of the
parties or, in the case of a waiver, by or on behalf of the party waiving
compliance. The failure of any party at any time to require performance of any
provision of this Agreement shall in no manner affect the right of that party at
a later time to enforce the same or a different provision. No waiver by either
party of any condition or of any breach of any provision of this Agreement, in
any one or more instances, shall be deemed to be or construed as a further or
continuing waiver of any such condition or of any breach of the same or a
different provision. If any party expressly waives in writing an unsatisfied
condition, representation, warranty, undertaking, covenant or agreement (or
portion thereof) set forth herein, the waiving party shall thereafter be barred
from recovering, and thereafter shall not seek to recover, any Claims from the
other parties in respect of the matter or matters so waived.
 
9.3  Successors; Assignment
 
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective successors and permitted transferees and assignees.
Neither this Agreement nor any interest herein may directly or indirectly be
transferred or assigned by any party, in whole or in part, without the written
consent of the other parties.
 
9.4  Notices
 
Any notice, request, demand or other communication to be given pursuant to the
terms of this Agreement must be in writing and shall be deemed to have been duly
given on the day it is delivered by hand, on the day it is sent by facsimile
with confirmation of receipt by the transmitting facsimile machine, on the next
business day after it is sent by a nationally recognized overnight mail service
(delivery charge prepaid), or on the third business day after it is mailed first
class, postage prepaid, in each case to the following addresses:

 

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If to Seller:
 
Continental Tire North America, Inc.
1800 Continental Boulevard
Charlotte, North Carolina U.S.A. 28273
Fax (704) 583-3935
Attn: Tim Rogers, Vice President, Finance
and: Rick J. Holcomb, Esq.
 
with copies to: 
George R. Jurch III, Esq.
One Continental Drive
Auburn Hills, Michigan U.S.A. 48326-1581
Fax (248) 393-8722
 
and
 
Calfee, Halter & Griswold LLP
1400 McDonald Investment Center
800 Superior Avenue
Cleveland, Ohio 44114
Attention: Robert A. Ross, Esq.
Facsimile: (216) 241-0816
 
If to Purchaser or to Parent: 
Titan Tire Corporation of Bryan
2345 East Market Street
Des Moines, Iowa 50317
Attention: Maurice M. Taylor, Jr.
Facsimile: (217) 228-3166
 
with copies to: 
Cheri T. Holley
General Counsel
Titan International, Inc.
2701 Spruce St.
Quincy, IL 62301
Facsimile: (217) 228-3040
 
and
 
Bodman LLP
6th Floor At Ford Field
1901 St. Antoine St.
Detroit, Michigan 48226
Attention: Robert J. Diehl, Jr.
Facsimile: (313) 393-7579
 
or to such other address or to such other person as any party shall have last
designated by written notice provided to the other parties in the manner set
forth in this Section.
 
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9.5  Severability
 
If any provision of this Agreement or any application thereof shall be invalid
or unenforceable, the remainder of this Agreement and any other application of
such provision shall not be affected thereby.
 
9.6  No Third Party Beneficiary
 
This Agreement is for the benefit of, and may be enforced only by, Seller and
Purchaser and their respective successors and permitted transferees and
assignees, and is not for the benefit of, and may not be enforced by, any third
party.
 
9.7  Applicable Law
 
This Agreement shall be governed by and construed and enforced in accordance
with the laws of the State of Ohio without regard to conflict of law principles.
 
9.8  Counterparts
 
This Agreement may be executed in two or more counterparts and by the parties on
separate counterparts, all of which shall be considered one and the same
instrument, and each of which shall be deemed an original. Each of the parties
hereto (i) has agreed to permit the use, from time to time, of faxed or
otherwise electronically transmitted signatures in order to expedite the
consummation of the transactions contemplated hereby, (ii) intends to be bound
by its respective faxed or otherwise electronically transmitted signature, (iii)
is aware that the other parties hereto shall rely on the faxed or otherwise
electronically transmitted signature, and (iv) acknowledges such reliance and
waives any defenses to the enforcement of the documents effecting the
transaction contemplated by this Agreement based on the fact that a signature
was sent by fax or otherwise electronically transmitted.
 
9.9  Headings; Construction
 
The headings of the sections and paragraphs in this Agreement have been inserted
for convenience of reference only and shall not restrict or otherwise modify any
of the terms or provisions of this Agreement. Unless otherwise expressly
provided, the words “including” or “includes” whenever used in this Agreement do
not limit the preceding words or terms. With regard to all dates and time
periods set forth or referred to in this Agreement, time is of the essence.
 
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9.10  Certain Information
 
Neither the specification of any dollar amount in the representations and
warranties contained in this Agreement nor the inclusion of any item in any
Schedule to this Agreement is intended, or will be construed or offered in any
dispute between the parties, as evidence of, the material nature of such dollar
amount or item, nor shall it establish any standard of materiality upon which to
judge the inclusion of any other items in any Schedules to this Agreement. The
information contained in this Agreement and the Schedules to this Agreement is
disclosed solely for the purposes of this Agreement, and no information
contained herein or therein shall be deemed to be an admission by any party to
any Person of any matter whatsoever, including of any violation of Law or breach
of any contract.
 
9.11  No Strict Construction
 
The language used in this Agreement will be deemed to be the language chosen by
the parties to express their mutual intent, and no rule of strict construction
will be applied against either party.
 
9.12  Further Assurances
 
Seller and Purchaser will reasonably cooperate with each other and cause their
respective directors, officers and employees to cooperate with those of
Purchaser or Seller, as applicable, in furnishing information, and other
assistance as may be reasonably requested by Purchaser or Seller, as applicable,
resulting or arising from the transactions contemplated by this Agreement or any
of the Transaction Agreements, or any fact, situation, circumstance, status,
condition, activity, practice, failure to act or transaction relating to the
Business. The party requesting such assistance will pay or reimburse the other
party for all reasonable out-of-pocket expenses incurred by the party providing
such assistance.
 
10.  CERTAIN DEFINITIONS
 
10.1  Definitions
 
For purposes of this Agreement, the following capitalized terms shall have the
meanings given to them below, and all other capitalized terms used in this
Agreement that are not defined in this Section 10.1 but defined elsewhere in
this Agreement shall have for purposes of this Agreement the meanings set forth
elsewhere in this Agreement:
 
“Action” means any action, suit, complaint, claim, counter-claim, petition,
set-off, inquiry, investigation, administrative proceeding, arbitration, or
private dispute resolution proceeding, whether at law, in equity, by contract or
agreement, or otherwise, and whether conducted by or before any Government, any
Forum, or other Person.
 
“Actual Knowledge” shall mean the current actual individual knowledge (without
any duty of inquiry of any other Person) of Paul Hawkins, Jim Houston, Steve
Newell and Keith Tarnovich.

 

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“Agreed Rate” means the one (1) month USD-LIBOR rate in effect as of the Closing
Date plus 50 basis points.
 
“Affiliate” of any Person means any other Person directly or indirectly
controlling, controlled by, or under direct or indirect common control with the
former Person. A Person shall be deemed to control another Person if such Person
possesses, directly or indirectly, the power to direct or cause the direction of
the management and policies of such Person, whether through the ownership of
voting securities, by contract or otherwise.
 
“Business” means the business of Seller and, to the extent applicable, Seller’s
Affiliates relating to the manufacturing and production of “Off-the-Road” tires
and related products (bladders, etc.) at the Facility and the sale of such tires
and related products to customers worldwide, but shall not include any of the
business of certain of Seller’s Affiliates relating to the manufacturing and
production of “Off-the-Road” tires and related products at the South African
facility and at the Malaysian facility and, subject to the Trademark License
Agreement, the sale of such tires and related products from such facilities
worldwide.
 
“Code” means the Internal Revenue Code of 1986, as amended.
 
“Employee” or “Employees” means those persons employed by Seller or an Affiliate
of Seller immediately prior to the Closing Date and dedicated exclusively to the
operation of the Business, including, without limitation, any such Persons on an
approved leave of absence as of the Closing Date or similar absence requiring
recall rights.
 
“Environmental Law” means any and all applicable Laws in effect as of the date
of this Agreement relating to pollution or protection of human health or the
environment.
 
“ERISA” means the Employee Retirement Income Security Act of 1974, as amended.
 
“ERISA Affiliate” means, together with any employer, an entity required under
Code Section 414 to be treated as a single employer with such employer.
 
“Facility” means Seller’s facility located in Bryan, Ohio, at which the Business
is conducted.
 
“Former Employee” or “Former Employees” means those persons formerly employed by
Seller or any Affiliate of Seller exclusively in connection with the Business
who terminated employment associated with the Business, whether by retirement or
otherwise, and their dependants.
 
“Forum” means any federal, state, local or municipal court, governmental agency,
administrative body or agency, tribunal, private alternative dispute resolution
system, or arbitration panel.
 
“GAAP” means United States generally accepted accounting principles.

 

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“Government” means any court, tribunal, arbitrator, authority, agency,
commission, official or other instrumentality of the United States, any foreign
country or any domestic or foreign state, county, city or other political
subdivision.
 
“Hazardous Material” means any pollutant, contaminant, toxin, petroleum or
petroleum by-product, asbestos or material containing friable asbestos,
polychlorinated bi-phenyl, pesticide, flammable, explosive or radioactive
material, hazardous material, including, but not limited to, any solid waste or
hazardous waste or substance or material defined in or regulated pursuant to any
Environmental Law.
 
“HSR Act” means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended.
 
“IFRS” means International Financial Reporting Standards as applied by Seller.
 
“Law” means all federal, state, local or municipal constitutions, statutes,
rules, orders, regulations, ordinances, acts, codes, legislation, conventions
and similar laws and legal requirements, as in effect on the date of this
Agreement.
 
“Lien” means any mortgage, pledge, hypothecation, security interest,
encumbrance, lien or charge of any kind, however evidenced or created, but
excluding any of the foregoing (i) for water, sewage and similar charges and
current Taxes and assessments not yet due and payable or being contested in good
faith, (ii) relating to mechanics’, carriers’, workers’, repairers’,
materialmen’s, warehousemen’s and other similar liens arising or incurred in the
Ordinary Course of Business of the Business, (iii) arising or resulting from any
action taken by Purchaser or its Affiliates, (iv) relating to easements, rights
of way, restrictions and other similar liens that do not materially interfere
with the ordinary conduct of operations, (v) relating to imperfections or
defects in title that do not materially adversely affect the value or use of the
applicable asset, (vi) consisting of purchase money security interests created
in the Ordinary Course of Business, (vii) arising under Law in favor of
landlords, and (viii) to which Purchaser consents in writing.
 
“Material Adverse Effect” means an actual, material adverse effect on the
financial condition of the Business considered as a whole, but shall be deemed
to exclude (i) any changes resulting from general economic, regulatory or
political conditions, (ii) circumstances that affect the industries in which the
Business operates generally, or (iii) any changes resulting from the
announcement or pendency of the transactions contemplated by this Agreement.
 
“Off-Site Location” means any real property other than the Owned Real Property;
provided, however, that Off-Site Location shall not include any real property
contiguous with the Owned Real Property where any Hazardous Material is or comes
to be present at, on or under such real property as a result of having migrated
from the Owned Real Property.
 
“Ordinary Course of Business” means an action taken (in compliance with
applicable Laws) by a Person that is consistent with the past practices of such
Person or the industry practice and is taken in the ordinary course of the
normal day-to-day operations of such Person.

 

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“Person” means and includes an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated association
or organization, and a Government.
 
“Plan” means any plan, policy or arrangement maintained or contributed to by
Seller (excluding any multiemployer pension plan within the meaning of ERISA
Section 3(37)) on behalf of the Employees.
 
“Representative” means with respect to a particular Person, any director,
officer, manager, member, employee, agent, consultant, advisor or other
representative of such Person, including legal counsel, lenders, accountants and
financial advisors.
 
“Seller’s Knowledge” shall mean the current actual knowledge (after reasonable
inquiry) of Paul Hawkins, Jim Houston, Steve Newell and Keith Tarnovich.
 
“SPT” shall mean the Steelworkers Pension Trust.
 
“Taxes” shall mean all income, gross receipts, profits, real property, real
property assessments, assessments both general and special, personal property,
sales, use, customs, duties, franchise, value added, ad valorem, withholding,
employees’ income withholding, occupation, transfer, payroll, employment,
excise, environmental (including any taxes under Section 59A of the Code),
registration, license, severance, stamp, premium, windfall profits, capital
stock, social security (or similar), unemployment, disability, Medicare,
alternative or add-on minimum, estimated and any other taxes of any nature
whatsoever imposed by any Government, together with any interest, penalties or
additions to the tax imposed with respect thereto, and any obligations under any
agreement or arrangement with respect to the foregoing taxes.
 
“Transaction Agreements” shall mean, collectively, the Trademark License, the
Compound Supply Agreement, the Know-How License, the Transition Services
Agreement, the Raw Materials Supply Agreement, the Bead Supply Agreement, the
Steel Fabric Supply Agreement and the Master Distributorship Agreement.
 
“Union” shall mean the United Steel, Paper and Forestry, Rubber, Manufacturing,
Energy, Allied Industrial and Service Workers International Union, AFL-CIO, CLC
and its Local Union No. 890L, collectively.
 
“Union Contracts” shall mean the December 7, 1999 - December 10, 2006,
collective bargaining agreement and December 7, 1999 - December 10, 2006,
pension and insurance agreement between Seller and the Union covering
represented Employees at the Facility.
 
“VEBA” shall mean the Titan Tire Corporation Voluntary Retiree Benefit Trust.

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