EX-10.38



 





EXHIBIT 10 (xxxviii)



 





 

 






SUPPLEMENTARY AGREEMENT




BY AND AMONG




SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES




COOPER TIRE INVESTMENT HOLDING (BARBADOS) LTD.




JOY THRIVE INVESTMENTS LIMITED




CHENGSHAN GROUP COMPANY LIMITED




CTB (BARBADOS) INVESTMENT CO., LTD.




 

 






Date: October 27, 2005




 









 








TABLE OF CONTENTS




	 	 	 	 	 	 	 
	1.

	 	Interpretation
	 	 	1	 
	2.

	 	Capital Contribution
	 	 	2	 
	3.

	 	Transfer of Equity Interests
	 	 	2	 
	4.

	 	Sale of Cooper Branded Products
	 	 	3	 
	5.

	 	Non-Compete
	 	 	3	 
	6.

	 	Transfer of Intellectual Property
	 	 	4	 
	7.

	 	Purchase of Inventory
	 	 	5	 
	8.

	 	Pricing Adjustment
	 	 	6	 
	9.

	 	Restrictions on the CST
	 	 	6	 
	10.

	 	Tire Business Expansion
	 	 	6	 
	11.

	 	Breach of Agreement
	 	 	6	 
	12.

	 	Confidentiality
	 	 	6	 
	13.

	 	Effectiveness and Termination
	 	 	7	 
	14.

	 	Dispute Resolution
	 	 	7	 
	15.

	 	Governing Law
	 	 	7	 
	16.

	 	Miscellaneous
	 	 	7	 
	 
	 	 	 	 	 	 
	Schedule 1

	 	Description of land and buildings (TO BE CONTRIBUTED BY CST)
	 	 	11	 
	Part 1

	 	Land Use Right
	 	 	11	 
	Part 2

	 	Buildings with Building Ownership Certificates
	 	 	13	 
	Part 3

	 	Buildings without Building Ownership Certificates
	 	 	15	 
	Schedule 2

	 	 	 	 	16	 
	Part 1

	 	Equity Transfer/Pledge Rules
	 	 	16	 
	Part 2

	 	Qualified Lenders as selected by SPV BArbados
	 	 	18	 
	Schedule 3

	 	Policies For Sale Of Cooper Branded Products
	 	 	19	 






 









 






SUPPLEMENTARY AGREEMENT



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





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






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






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






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






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




(Each party is hereinafter individually referred to as a “Party” and collectively as the
“Parties”.)



WHEREAS, CST, SPV Barbados and SPV BVI have executed two (2) Sino-foreign equity joint venture
contracts (the “JV Contracts”) on the date of this Agreement for the joint establishment of
Cooper Chengshan (Shandong) Tire Company Ltd. and Cooper Chengshan (Shandong) Passenger Tire
Company Ltd. (the “JVs”);



WHEREAS, the Parties agree that the JVs should merge as soon as practicable;



WHEREAS, the JVs have entered into two (2) asset purchase agreements with CST (the “Asset
Purchase Agreements”) to acquire the assets and business of CST;



WHEREAS, CTB Barbados and CSG have executed a Sino-foreign equity joint venture contract (the
“Steel Cord JV Contract”) for the establishment of Cooper Taiji (Shandong) Steel Cord
Company Ltd. (the “Steel Cord JV”);



WHEREAS, to facilitate the cooperation in connection with the above contemplated transactions, the
Parties have been contemplating certain terms and conditions supplementary to the relevant
arrangements, covenants and undertakings agreed upon among the Parties.



NOW, THEREFORE, in consideration of the agreements set forth herein, the adequacy of which hereby
is acknowledged, the Parties, intending to be legally bound, hereby agree as follows:





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




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	2.	 	Capital Contribution






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






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






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






	3.	 	Transfer of Equity Interests






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






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






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




     For purpose of the above formulas:


      A = Agreed-upon value of CST (US$128,000,000)

      B = Average net income of the JVs during the three (3) trailing years

      C = Agreed PE multiple (10)

      D = Liquidity discount (20%)

      E = Discount for SPV Barbados’s added value (20%)

      F = Percentage Interests of CST and SPV BVI (49%)





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




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






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






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






	 	 	For purpose of the above formulas:





      A = Agreed-upon value of Rongcheng Chengshan Steel Cord Company Ltd. (US$[25,600,000])

      B = Average net income of the Steel Cord JV during the three (3) trailing years

      C = Agreed PE multiple (10)

      D = Liquidity discount (20%)

      E = Percentage Interest of CTB Barbados (25%)





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






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






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




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






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






	6.	 	Transfer of Intellectual Property






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






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






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






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




4









 












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






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






	7.	 	Purchase of Inventory 






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






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




5









 






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






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






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




6









 






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




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





	 	 	 	 	 	 	 
	 

	 	CST
	 	Address:
	 	No. 98, Nanshan Road North, Rongcheng City,
	 

	 	 	 	 	 	Shandong Province, PRC
	 

	 	 	 	Tel:
	 	0631-7523205
	 

	 	 	 	Fax:
	 	0631-7523888
	 

	 	 	 	Attn:
	 	Zhang Junquan
	 
	 	 	 	 	 	 
	 

	 	SPV Barbados
	 	Address:
	 	701 Lima Avenue
	 

	 	 	 	 	 	Findlay, Ohio, U.S.A. 45840
	 

	 	 	 	Tel:
	 	1-419-427-4757
	 

	 	 	 	Fax:
	 	1-419-831-6876
	 

	 	 	 	Attn:
	 	Mr. Hal Miller
	 

	 	 	 	Copy to:
	 	 Mr. James Kline
	 
	 	 	 	 	 	 
	 

	 	SPV BVI
	 	Address:
	 	P.O. Box 957, Offshore Incorporations Center,
	 

	 	 	 	 	 	Road Town, Tortola, British Virgin Islands
	 

	 	 	 	Tel:
	 	00852-2526-8111
	 

	 	 	 	Fax:
	 	00852-2526-5322
	 

	 	 	 	Attn:
	 	Iris Yeung
	 
	 	 	 	 	 	 
	 

	 	CSG
	 	Address:
	 	 No. 98, Nanshan Road North, Rongcheng City,
	 

	 	 	 	 	 	Shandong Province, PRC
	 

	 	 	 	Tel:
	 	0631-7523206
	 

	 	 	 	Fax:
	 	0631-7506826
	 

	 	 	 	Attn:
	 	Zhang Junquan
	 
	 	 	 	 	 	 
	 

	 	CTB Barbados
	 	Address:
	 	 701 Lima Avenue
	 

	 	 	 	 	 	Findlay, Ohio, U.S.A. 45840
	 

	 	 	 	Tel:
	 	1-419-427-4757
	 

	 	 	 	Fax:
	 	1-419-831-6876
	 

	 	 	 	Attn:
	 	Mr. Hal Miller
	 

	 	 	 	Copy to:
	 	Mr. James Kline







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




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






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






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





[Signature Page Follows]




9









 







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




	 	 	 	 	 
	 	SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES

 	 
	 	By:  	/s/ Che Hong-Zhi
 	 
	 	 	Name:  	Che Hong-Zhi 	 
	 	 	Title:  	Chairman 	 
	 



	 	 	 	 	 
	 	COOPER TIRE INVESTMENT HOLDING (BARBADOS) LTD.

 	 
	 	By:  	/s/ Harold C. Miller
 	 
	 	 	Name:  	Harold C. Miller 	 
	 	 	Title:  	Authorized Representative 	 
	 



	 	 	 	 	 
	 	JOY THRIVE INVESTMENTS LIMITED

 	 
	 	By:  	/s/ Stacey Wong
 	 
	 	 	Name:  	Stacey Wong 	 
	 	 	Title:  	Authorized Representative 	 
	 



	 	 	 	 	 
	 	CHENGSHAN GROUP COMPANY LIMITED

 	 
	 	By:  	/s/ Che Hong-Zhi
 	 
	 	 	Name:  	Che Hong-Zhi 	 
	 	 	Title:  	Chairman 	 
	 



	 	 	 	 	 
	 	CTB (BARBADOS) INVESTMENT CO., LTD.

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 




10









 





Schedule 1

DESCRIPTION OF LAND AND BUILDINGS (TO BE CONTRIBUTED BY CST)




Part 1

Land Use Right




(confirmed by Chengshan and only refer to tire business)




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






11









 






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







12










 





Schedule 1




Part 2

Buildings with Building Ownership Certificates




(confirmed by Chengshan and only refer to tire business)




	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Underlying Land Use	 	 	 	 	 	 
	 	 	Building Ownership	 	Right Certificate	 	Construction Area	 	 	 	 
	No.	 	Certificate No.	 	No.	 	(M 2)	 	Use	 	Used Term (Yrs)
	1

	 	 	200500856	 	 	 	13529	 	 	 	3402	 	 	Banburying workshop
	 	 	12	 
	 

	 	 	 	 	 	 	13529	 	 	 	658	 	 	Carbon black warehouse
	 	 	29	 
	 

	 	 	 	 	 	 	13529	 	 	 	662	 	 	Switch board room
	 	 	6	 
	 

	 	 	 	 	 	 	13529	 	 	 	1564	 	 	Original laboratory	 	 	 	 
	2

	 	 	200500857	 	 	 	13417,

13422,

13421	 	 	 	59069.22	 	 	All-steel radial tire
	 	 	6	 
	3

	 	 	200500858	 	 	 	13407	 	 	 	3588.3	 	 	Cafeteria
	 	 	5	 
	4

	 	 	200500859	 	 	 	13421	 	 	 	41062.12	 	 	Rubber refining

workshop (phase II)
	 	 	1	 
	5

	 	 	200500862	 	 	 	13529	 	 	 	21000	 	 	Semi-steel radial tire

workshop
	 	 	10	 
	6

	 	 	200500863	 	 	 	13529	 	 	 	5424	 	 	Small tire forming

workshop
	 	 	7	 
	7

	 	 	200500864	 	 	 	13529	 	 	 	1766.25	 	 	Dynamic workshop	 	 	 	 
	 

	 	 	 	 	 	 	13529	 	 	 	186.75	 	 	Weighing room	 	 	 	 
	 

	 	 	 	 	 	 	13529	 	 	 	96	 	 	De-oxygen station	 	 	 	 
	 

	 	 	 	 	 	 	13529	 	 	 	2942.24	 	 	Boiler room	 	 	 	 
	 

	 	 	 	 	 	 	13529	 	 	 	2200.75	 	 	Original mechanic

workshop
	 	 	14	 
	8

	 	 	2005000865	 	 	 	13529	 	 	 	721.06	 	 	Warehouse
	 	 	5	 
	9

	 	 	2005000866	 	 	 	13529	 	 	 	307.52	 	 	De-bagging room
	 	 	14	 
	10

	 	 	2005000867	 	 	 	13529	 	 	 	264.1	 	 	Fluidized bed furnace	 	 	 	 
	11

	 	 	2005000868	 	 	 	13529	 	 	 	485	 	 	Carbon black warehouse
	 	 	9	 
	12

	 	 	2005000869	 	 	 	13529	 	 	 	5415	 	 	Semi-steel vulcanization
	 	 	10	 
	 

	 	 	 	 	 	 	13529	 	 	 	3935.1	 	 	Five store rooms
	 	 	10	 
	13

	 	 	2005000870	 	 	 	13415	 	 	 	2757.83	 	 	Mechanic workshop
	 	 	9	 
	14

	 	 	2005000871	 	 	 	13529	 	 	 	1470	 	 	Cogeneration
	 	 	10	 






13









 






	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	Underlying Land Use	 	 	 	 	 	 
	 	 	Building Ownership	 	Right Certificate	 	Construction Area	 	 	 	 
	No.	 	Certificate No.	 	No.	 	(M 2)	 	Use	 	Used Term (Yrs)
	15

	 	 	2005000872	 	 	 	13529	 	 	 	4406	 	 	Engineering tire

workshop
	 	 	8	 
	16

	 	 	2005000873	 	 	 	13416	 	 	 	5318.15	 	 	Tube workshop
	 	 	12	 
	17

	 	 	2005000877	 	 	 	13421	 	 	 	1178	 	 	Water pump room

(phase II)
	 	 	8	 
	18

	 	 	2005000879	 	 	 	13421	 	 	 	1178	 	 	Air-compressor station

(phase II)
	 	 	2	 
	19

	 	 	2005000880	 	 	 	13529	 	 	 	1227	 	 	Original garage	 	 	 	 
	 

	 	 	 	 	 	 	13529	 	 	 	744	 	 	Mileage laboratory
	 	 	5	 
	 

	 	 	 	 	 	 	13529	 	 	 	431.2	 	 	Original factory office
	 	 	5	 
	 

	 	 	 	 	 	 	13529	 	 	 	452.4	 	 	Kitchen
	 	 	6	 
	20

	 	 	2005000881	 	 	 	13421	 	 	 	771.75	 	 	Battery car garage
	 	 	3	 
	 

	 	 	 	 	 	 	13421	 	 	 	87.2	 	 	Security guard room

(Phase II)
	 	 	1	 
	21

	 	 	2005000882	 	 	 	13421	 	 	 	2435.56	 	 	Carbon black warehouse

(phase II)
	 	 	1	 
	22

	 	 	2005000883	 	 	 	13529	 	 	 	6300	 	 	Rubber refining workshop
	 	 	14	 
	23

	 	 	2005000885	 	 	 	13421	 	 	 	1329.82	 	 	Sub-station (phase II)
	 	 	8	 
	24

	 	 	2005000896	 	 	 	13529	 	 	 	6360	 	 	Big tire vulcanization

workshop
	 	 	11	 
	 

	 	 	 	 	 	 	13529	 	 	 	6360	 	 	Big tire forming

workshop
	 	 	12	 
	 

	 	 	 	 	 	 	13529	 	 	 	3903.88	 	 	Small tire vulcanization
	 	 	12	 
	25

	 	 	 	 	 	 	 	 	 	 	 	 	 	Wei Hai Jia Cheng

building	 	 	 	 
	 

	 	In Total
	 	 	 	 	 	 	201460.20	 	 	 	 	 	 	 






14









 






Schedule 1




Part 3

Buildings without Building Ownership Certificates




(confirmed by Chengshan and only refer to tire business)




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







15










 





Schedule 2




Part 1

EQUITY TRANSFER/Pledge RULES





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






	2.	 	Procedure for Transfers.






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






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






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




16









 












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






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





3. Pledge of Interest





CST or its permitted successor may pledge not more than 70% of its Percentage Interest (the
“Pledged Interest”) to any of the Qualified Lenders set forth in the Part 2 herein for its
own financing purposes with the prior written consent of SPV Barbados, subject to the
following conditions that:




any Qualified Lenders, at the time of execution of such financing agreements or other
instruments in the similar effect, shall grant SPV Barbados in writing a first right of
refusal to repay the borrowings of CST or its permitted successor and acquire the Pledged
Interest pursuant to the applicable PRC laws and regulations in the event that such
Qualified Lender forecloses at the default of CST or its permitted successor.



17









 





Schedule 2




Part 2

Qualified Lenders as selected by SPV BArbados





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






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






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






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




18









 











Schedule 3




POLICIES FOR SALE OF COOPER BRANDED PRODUCTS




The method to compute the transferring price





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






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






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






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






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





An example for half-steel tires




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





	 	 	 	 	 	 	 	 	 
	Cooper
	Price
	 	 	135.90	 	 	 	 	 
	Cost
	 	 	125.00	 	 	 	 	 
	 
	GPM_CTB
	 	 	10.90	 	 	 	8.0	%
	 






19









 






Explanation for this example





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






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






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






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






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






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





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



Margin Premium





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






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





      Cost
for Cooper brand / (1 - (GPM_CTB+2%))

                                                       =125/ (1-10.0%)

                                                                      =138.89




20