Document:

SHARE PURCHASE AGREEMENT

THIS AGREEMENT is made and entered into as of March 1, 2011 by and between

KENDA GLOBAL INVESTMENT CORPORATION, an international business company duly incorporated pursuant to the law of Mauritius (hereinafter referred to as “Kenda”)

COOPER TIRE & RUBBER COMPANY (BARBADOS) LTD., an international business company duly incorporated pursuant to the laws of Barbados (hereinafter referred to as “Cooper”)

CTB (BARBADOS) INVESTMENT CO. LTD., an international business company duly incorporated pursuant to the laws of Barbados (hereinafter referred to as “CTB (Barbados”)

Kenda, Cooper and CTB (Barbados) shall be referred to individually as a “Party”, and collectively as the “Parties”.

 

WHEREAS:

1.  COOPER KENDA GLOBAL HOLDING CO. LTD. (hereinafter referred to as “JV”) has been formed in accordance with the Law of Barbados, who owns 100% of the equity of COOPER KENDA TIRE (KUNSHAN) CO., LTD., a company duly incorporated in accordance with the law of PRC (hereinafter referred to as “WFOE”).

2.  The JV has authorized and issued capital of US$ 100, consisting of 100 ordinary shares with a par value of US$1.00 per share (“Share”), 50% of which is held by Kenda and 50% of which is held by CTB (Barbados). All the capital has been contributed accordingly.

3.  The WFOE has a registered capital of US$ 99,000,000 while the total investment is US$ 150,000,000.

4.  Kenda desires to sell, and Cooper desires to purchase, the 50% of the issued shares of the JV held by Kenda for the consideration specified in Section 2.02 of this Agreement.

5. COOPER KENDA GLOBAL INVESTMENT CO. LTD. (hereinafter referred to as “JV2”) has been formed in accordance with the Law of Barbados. 20% of its share is held by Kenda and 80% of its share is held by CTB (Barbados).

6.  JV2 is inactive and Kenda and CTB (Barbados) desire to dissolve JV2.

 

  

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     NOW THEREFORE in consideration of and reliance upon the representations and warranties and mutual covenants and agreements contained herein the parties hereto agree as follows:

ARTICLE I

INTERPRETATION

Section 1.01 Definitions

In this Agreement, unless something in the subject matter or context is inconsistent therewith:

 

(a)   “Closing” has the meaning set out in Section (4.01).

(b)   “Closing Date” has the meaning set out in Section (4.01).

 

(c)  “Shareholders Agreement” means the Shareholders Agreement regarding the WFOE dated on April 1st, 2004 by and between Kenda and CTB (Barbados).

(d)  “Purchase Price” has the meaning set out in Section 2.02.

 (e)  “Sale Share” means the 50% of the issued shares of the JV held by Kenda.

(f)  "Affiliate" of a party means any entity, whether incorporated or not, that is controlled by, controls, or is under common control with such party.  “Control” means the ability, whether directly or indirectly, to direct or cause the direction of the affairs of another by means of ownership, contract or otherwise.

(g)  “Shareholder Loan” means the Shareholder Loan Contract between the JV and WFOE which will be used to pay off the loans which are guaranteed by the Kenda Guaranty Agreements, as defined in Section 4.05.

ARTICLE II

SALE AND PURCHASE

Section 2.01 Purchase of Sale Share

Subject to the terms and conditions hereof, Kenda as legal and beneficial owner of the Sale Share shall sell and Cooper shall purchase free from all liens charges and encumbrances and together with all rights now or hereafter attached thereto all of the Sale Share.

 

  

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Section 2.02 Purchase Price

	
  

	
(a)

	
The Purchase Price for the Sale Share shall be US$116,500,000.

	
  

	
(b)

	
On the Closing Date, Cooper shall pay to Kenda the Purchase Price by wire transfer of immediately available funds to the bank account(s) specified by Kenda.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.01    Kenda’s Representations and Warranties

Kenda represents and warrants to Cooper that:

 (a)  Kenda is an international business company duly incorporated, organized, validly licensed and subsisting under the laws of Mauritius;

 (b) Kenda is the legal and beneficial owner of the Sale Share free and clear of all liens, charges, encumbrances and any other rights of others;

 (c) as at the date hereof, the Sale Share constitutes 50% of the issued shares of the JV.

 (d) Kenda has good and sufficient power, authority and right to enter into and deliver this Agreement and to transfer the legal and beneficial title and ownership of the Sale Share to Cooper free and clear of all liens, charges, encumbrances and any other rights of others;

(e) there is no contract, option or any other right of another binding upon or which at any time in the future may become binding upon Kenda to sell, transfer, assign, pledge, charge, mortgage, or in any other way dispose of or encumber the Sale Share;

 

(f)  there are no actions, suits or proceedings, pending or, to the knowledge of Kenda after due inquiry, threatened against or affecting, Kenda at law or in equity, or before or by any governmental department, court, commission, board, bureau, agency or instrumentality, domestic or foreign, or by or before an arbitrator or arbitration board that would prevent Kenda from complying with its obligations under this Agreement;

(g)  neither the entering into nor the delivery of this Agreement nor the completion of the transactions contemplated hereby by Kenda will result in the violation of:

 

  

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(i)

	
any of the provisions of the constituting documents or by-laws of Kenda;

	
  

	
(ii)

	
any agreement or other instrument to which Kenda is a party or by which Kenda is bound;

	
  

	
(iii)

	
any law or regulation applicable to Kenda.

(h)  Kenda shall be responsible for paying and/or otherwise resolving any tax liability it may have as the result of entering into the transaction that is the subject of this Agreement and upon request by Cooper, will timely furnish evidence of same.  Kenda shall be permitted to exhaust any reasonable efforts it may pursue to reduce or eliminate any of its potential tax liability prior to being subject to Cooper and its Affiliates’ indemnification rights under Section 3.06, except that in the event Cooper provides Kenda with reasonably sufficient evidence that the applicable taxing authority is requiring Cooper and/or its Affiliates to pay tax that Kenda is otherwise responsible for as a result of
entering into this transaction, so long as Cooper and Kenda have worked together diligently and in good faith to exhaust any other reasonable remedies to avoid such payment by Cooper and/or its Affiliates, Cooper and/or its Affiliates may pay the tax and Kenda shall promptly reimburse Cooper and/or its Affiliates for any such amounts and reasonable fees incurred regarding same.

Section 3.02    Cooper’s Representations and Warranties

Cooper represents and warrants to Kenda that:

(a)    Cooper is an international business company duly organized, validly licensed and subsisting under the laws of Barbados;

 

(b)  Cooper has good and sufficient power, authority and right to enter into and deliver this Agreement;

(c)  neither the entering into nor the delivery of this Agreement nor the completion of the transactions contemplated hereby by Cooper will result in the violation of:

	
  

	
(i)

	
any of the provisions of the constituting documents or by-laws of Cooper;

	
  

	
(ii)

	
any agreement or other instrument to which Cooper is a party or by which Cooper is bound;

	
  

	
(iii)

	
any law or regulation applicable to Cooper.

(d)           there are no actions, suits or proceedings, pending or, to the knowledge of Cooper after due inquiry, threatened against or affecting, Cooper at law or in equity, or before or by any governmental department, court, commission, board, bureau, agency or instrumentality, domestic or foreign, or by or before an arbitrator or arbitration board that would prevent Cooper from complying with its obligations under this Agreement;

 

  

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(e)  Cooper shall file necessary information and pay any and all applicable taxes assessed upon Cooper in connection with this transaction in accordance with applicable tax law and regulations and upon request by Kenda, will timely furnish evidence of said tax filings and payment(s).

Section 3.03    CTB (Barbados)’s Representations and Warranties

CTB (Barbados) represents and warrants to Kenda that:

(a)    CTB (Barbados) is an international business company duly organized, validly licensed and subsisting under the laws of Barbados;

 

(b)  CTB (Barbados) has good and sufficient power, authority and right to enter into and deliver this Agreement;

(c)  neither the entering into nor the delivery of this Agreement nor the completion of the transactions contemplated hereby by CTB (Barbados) will result in the violation of:

	
  

	
(i)

	
any of the provisions of the constituting documents or by-laws of CTB (Barbados);

	
  

	
(ii)

	
any agreement or other instrument to which CTB (Barbados) is a party or by which CTB (Barbados) is bound;

	
  

	
(iii)

	
any law or regulation applicable to CTB (Barbados).

(d)           there are no actions, suits or proceedings, pending or, to the knowledge of CTB (Barbados) after due inquiry, threatened against or affecting, CTB (Barbados) at law or in equity, or before or by any governmental department, court, commission, board, bureau, agency or instrumentality, domestic or foreign, or by or before an arbitrator or arbitration board that would prevent CTB (Barbados) from complying with its obligations under this Agreement;

(e)  CTB (Barbados) shall file necessary information and pay any and all applicable taxes assessed upon CTB (Barbados) in connection with this transaction in accordance with applicable tax law and regulations and upon request by Kenda, will timely furnish evidence of said tax filings and payment(s).

Section 3.04    Survival of Representations and Warranties

The representations and warranties of the Parties shall survive the Closing.

 

  

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Section 3.05    Kenda Indemnification

In accordance with and subject to the provisions of this Section, Kenda and/or its Affiliates shall indemnify and hold harmless Cooper, its Affiliates, and the officers, directors, agents and employees of Cooper and its Affiliates (collectively, the “Cooper Indemnitees”) from and against and in respect of any and all loss, damage, liability, cost and expense, including reasonable attorneys’ fees and amounts paid in settlement, suffered or incurred by any one or more of the Cooper Indemnitees by reason of, or arising out of:

Any misrepresentation, breach of representation or warranty, or breach of covenants or promises (including, but not limited to, any post-Closing promises or obligations) contained in this Agreement, or in or with respect to any schedule, certificate, instrument, agreement or other writing delivered by or on behalf of Kenda pursuant to this Agreement or in connection with the transactions contemplated herein, including, but not limited to, Kenda’s failure to comply with its obligations under Section 3.01(h) of this Agreement, any failure to enter into any termination on or before the Closing Date that is required under Section 4.05 of this Agreement (notwithstanding any other actions taken by the Parties subsequent to the Closing Date that are required under Section 4.05), and any failure of Kenda or its
Affiliates to comply with  its/their obligations (including, but not limited to, any post-Closing obligations) under Section 4.05 of this Agreement.

Section 3.06    Cooper and CTB (Barbados) Indemnification

In accordance with and subject to the provisions of this Section, Cooper and CTB (Barbados) and/or their respective Affiliates shall indemnify and hold harmless Kenda, its Affiliates and the officers, directors, agents and employees of Kenda and its Affiliates (collectively, the “Kenda Indemnitees”) from and against and in respect of any and all loss, damage, liability, cost and expense, including reasonable attorneys’ fees and amounts paid in settlement, suffered or incurred by any one or more of the Kenda Indemnitees by reason of, or arising out of: the operation of the JV or the WFOE after the Closing Date other than for product manufactured prior to the Closing Date; any payments required of or made by Kenda and/or its Affiliates in connection with the Kenda Guaranty Agreements; and

Any misrepresentation, breach of representation or warranty, or breach of covenants or promises (including, but not limited to, any post-Closing promises or obligations) contained in this Agreement, or in or with respect to any schedule, certificate, instrument, agreement or other writing delivered by or on behalf of Cooper pursuant to this Agreement or in connection with the transactions contemplated herein, including, but not limited to, any failure to enter into any termination on or before the Closing Date that is required under Section 4.05 of this Agreement (notwithstanding any other actions taken by the Parties subsequent to the Closing Date that are required under Section 4.05), and any failure of Cooper or its Affiliates to comply with  its/their obligations (including, but not limited to, any
post-Closing obligations) under Section 4.05 of this Agreement.

 

  

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Section 3.07    Limit on Indemnification

The aggregate amount required to be paid by Kenda pursuant to Section 3.05 shall not exceed the Purchase Price.  Notwithstanding any other provision of this Agreement, Kenda shall not be liable unless and until the aggregate amount of all claims pursuant to Section 3.05 exceeds US$100,000, in which event Kenda shall be liable for amounts from the first dollar.

ARTICLE IV

CLOSING ARRANGEMENTS

Section 4.01  Closing

The closing of the sale and purchase of the Sale Share (the “Closing”) shall be on or no later than the date agreed to by the Parties (the “Closing Date”) which shall be no later than fifteen (15) days after the satisfaction of all of the Conditions Precedent set forth in Section 4.06 and Section 4.07.

Section 4.02 Transfer of the Sale Share

On the Closing Date, Kenda shall deliver to Cooper or its representative the documentation representing the Sale Share duly endorsed, and do all such other acts necessary to permit the Sale Share to be duly and legally transferred to and registered in the name of Cooper.  Cooper shall take all actions reasonably necessary, proper, or advisable to cooperate with and assist Kenda in order to facilitate the provisions of this Section 4.02.

Section 4.03  Records

At the Closing, Kenda shall deliver to Cooper or its representative any original instruments, agreements, statutory records, minute book or statements in its possession or under its control pertaining to the JV, WFOE or the Sale Share.

 

  

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Section 4.04    Dissolution of JV2

On or before the Closing Date, CTB (Barbados) shall deliver to Kenda all documentation necessary to dissolve JV2, including, but not limited to, any documentation that must be executed by Kenda for such dissolution.

Section 4.05    Terminations

Except as otherwise provided for herein, on or before the Closing Date, the Parties shall have entered into terminations of, and/or caused terminations to be entered into for, all agreements between Kenda or any of its Affiliates and the JV or WFOE, as well as any agreements, obligations or responsibilities that Kenda or any of its Affiliates have entered into with third parties for the benefit of the JV or WFOE (collectively, the “Kenda Obligations”).  It is the Parties understanding that the only Kenda Obligations are (a) the Shareholders Agreement; (b) the Secondment Agreement dated January 1, 2006; (c) the Guarantee and Indemnity agreement between Kenda Rubber Industrial Co., Ltd and Ta Chong Bank Ltd. dated August 31, 2009; (d) the Guarantee and Indemnity dated November 5, 2010 between
Kenda Rubber Industrial Co., Ltd. and Shanghai Commercial & Savings Bank Ltd; and (e) the Guarantee and Indemnity dated September 1, 2010 between Kenda Rubber Industrial Co., Ltd. and Chinatrust Commercial Bank Ltd.  In the event any additional Kenda Obligations are identified or found after the Closing Date, the Parties will work together to terminate such additional Kenda Obligations as soon as possible.

In the event the Parties are unable to terminate or cause the termination of the three guaranty agreements identified in the preceding paragraph (the “Kenda Guaranty Agreements), Cooper shall pay off the underlying subject loans the earlier of (i) ten (10) days after approval by S.A.F.E. of the Shareholder Loan between Cooper Kenda Global Holding Co. Ltd. and WFOE or (ii) within 30 days of the Closing Date, and Cooper and Kenda shall work together in good faith to do everything reasonably possible to cause the Kenda Guaranty Agreements to be terminated as part of that process.

Section 4.06  Conditions Precedent to Obligations of Cooper

The obligation of Cooper to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by Cooper for purposes of consummating such transactions, but without prejudice to any right or remedy which Cooper may have hereunder as a result of any misrepresentations by, or breach of any covenant, promise or warranty of Kenda contained in this Agreement or any other certificate or instrument furnished by Kenda hereunder:

 

  

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(a)  The representations and warranties made by Kenda in this Agreement or any document or instrument delivered to Cooper or its representatives hereunder shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made on and as of such time;

(b)  Kenda shall have duly performed all of the covenants, acts and undertakings to be performed by them pursuant to this Agreement on or prior to the Closing Date;

 

(c)  No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Cooper would make it inadvisable to consummate such transactions;

 

(d)    The execution and delivery to Cooper of the resolution of Board of Directors of Kenda and the Kenda representatives on the Board of Directors of the JV approving the transfer of the Sale Share to Cooper, and the documentation necessary to transfer the Sale Share executed by Kenda and, if necessary, the Kenda representatives on the Board of Directors of the JV.

 

(e)     The resignation from the Board of Directors and as officers of the JV, JV2 and/or WFOE by anyone appointed by Kenda.

 

(f)     The execution and delivery to Cooper of the executed documentation set forth in Sections 4.04 and 4.05 with the exception that the Board Resolution of WFOE for the Shareholder Loan shall be executed along with this Agreement

Section 4.07    Conditions Precedent to Obligations of Kenda

 

The obligation of Kenda to consummate the transactions contemplated by this Agreement shall be subject to the satisfaction, on or before the Closing Date, of each and every one of the following conditions, all or any of which may be waived, in whole or in part, by Kenda for purposes of consummating such transactions, but without prejudice to any right or remedy which Kenda may have hereunder as a result of any misrepresentations by, or breach of any covenant, promise or warranty of Cooper contained in this Agreement or any other certificate or instrument furnished by Cooper hereunder:

(a)  The representations and warranties made by Cooper in this Agreement or any document or instrument delivered to Kenda or its representatives hereunder shall be true and correct on the Closing Date with the same force and effect as though such representations and warranties had been made on and as of such time;

(b)   Cooper shall have duly performed all of the covenants, acts and undertakings to be performed by them pursuant to this Agreement on or prior to the Closing Date;

 

  

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(c)  No action, proceeding, investigation, regulation or legislation shall have been instituted, threatened or proposed before any court, governmental agency or legislative body to enjoin, restrain, prohibit, or obtain substantial damages in respect of, or which is related to, or arises out of, this Agreement or the consummation of the transactions contemplated hereby, if such action, proceeding, investigation, regulation or legislation, in the reasonable judgment of Kenda would make it inadvisable to consummate such transactions;

 

(d)   The execution and delivery to Kenda of the resolution of the Board of Directors of Cooper and the CTB (Barbados) representative on the Board of Directors of the JV approving the transfer of the Sale Share to Cooper.

 

(e)    The delivery to Kenda of the documents set forth in Section 4.04, and the termination document(s) relating to the Shareholders Agreement.

 

(f)    The execution and delivery to Kenda of a written consent by CTB (Barbados) approving the transfer of the Sale Share to Cooper.

ARTICLE V

POST-CLOSING

Section 5.01    Kenda Support

 

The Secondment Agreement dated on January 1, 2006 by and between KENDA RUBBER INDUSTRIAL CO., LTD. and the WFOE shall continue for a period of thirty (30) days after the Closing Date, at which time it shall be terminated.

 

Section 5.02    Cooper Filings

 

Within five (5) days of the Closing Date, CTB (Barbados) shall file with the proper agency and/or authorities the executed documentation described in Section 4.04, and any other necessary documents or records that are required to effectuate the dissolution of JV2.  CTB (Barbados) shall also take any additional actions that may be necessary to effectuate such dissolution as promptly as possible and Kenda shall reasonably assist CTB (Barbados), as necessary, in such process.

In addition, within five (5) days of the Closing Date, Cooper, CTB (Barbados) and WFOE shall file all documents and take all actions necessary to initiate the name changes of the JV and WFOE to names that do not in any manner include reference to “Kenda”.  Thereafter, Cooper, CTB (Barbados) and WFOE shall take any additional actions that may be necessary to ensure the completion of the name changes as promptly as possible, and Kenda shall reasonably assist Cooper, CTB (Barbados) and WFOE, as necessary, in such process.  Cooper, CTB (Barbados) and WFOE shall provide copies to Kenda of any and all documentations and filings referred to or required under this Section 5.02.

 

  

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Sections 5.03 Non-Solicitation

 

Unless otherwise agreed by the Parties in writing on a case by case basis, Kenda, its Affiliates and/or related companies (whether alone or jointly with another and whether directly or indirectly), hereby covenant and agree that for a period of two (2) years following the Closing Date, none of them shall, directly or indirectly, recruit, discuss employment with, hire, employ, solicit for employment or otherwise contract with or enter into any arrangements for services with any of the JV’s or WFOE's officers, directors, employees, consultants or independent contractors.  Additionally, unless otherwise agreed by the Parties in writing on a case by case basis, Cooper, CTB (Barbados), the JV and the WFOE, and their Affiliates and/or related companies (whether alone or jointly with another and whether
directly or indirectly), hereby covenant and agree that for a period of two (2) years following the Closing Date, none of them shall, directly or indirectly, recruit, discuss employment with, hire, employ, solicit for employment or otherwise contract with or enter into any arrangement for services with any of Kenda’s or Kenda’s Affiliate’s and/or related companies’ officers, directors, employees, consultants, agents or independent contracts.

Section 5.04 Pricing Adjustment

 

Kenda hereby confirms that the Purchase Price will not be increased in any event. To avoid any misunderstanding, Kenda is not entitled to any portion of VAT refund, if any, to the WFOE arising from the imported equipments when the WFOE was established.

 

Section 5.05 Intellectual Property

 

Kenda and its affiliates are restricted from using any trade secret, as defined in the Uniform Trade Secrets Act as enacted in Ohio (hereinafter “Trade Secret(s)”), and/or confidential information of CTB (Barbados) and/or its Affiliates.  Cooper and its affiliates are restricted from using any Trade Secret and/or confidential information of Kenda and/or its Affiliates.  In consideration of the promises contained herein, Kenda is hereby granted a perpetual, irrevocable royalty-free license to use any confidential information, technology, intellectual property or Trade Secret, of the WFOE that existed as of the Closing Date, other than Trade Secrets that incorporate Cooper or its Affiliates’
Trade Secrets, that have been identified to Kenda prior to the Closing Date.

 

  

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ARTICLE VI

GENERAL

Section 6.01    Further Assurances

 

Each party shall from time to time execute and deliver all such further documents and instruments and do all acts and things as the other party may, either before or after the Closing, reasonably require to effectively carry out or better evidence or perfect the full intent and meaning of this Agreement.

 

Section 6.02 Confidentiality

 

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 and that it will not at any time hereafter make use of or disclose or divulge to any unaffiliated person any such information and shall use commercially reasonable efforts to prevent the publication or disclosure of any such information. The restrictions above shall not apply so as to prevent the Parties or their Affiliates from making any disclosure required by law or by any supervisory or regulatory or governmental body.  Except
as required by applicable law and except for routine communications with the shareholders of the ultimate parent of each party hereto, all press releases and other public announcements respecting the subject matter hereof shall be made only with the mutual written agreement of Kenda and Cooper.

Section 6.03    Assignment

 

Neither Party may assign this Agreement, in whole or in part, or any of its rights or responsibilities under this Agreement to a non-Affiliate, without the express prior written consent of the other Party.

 

Section 6.04  Benefit of the Agreement

 

This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and permitted assigns.

 

  

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Section 6.05  Counterparts

 

This Agreement may be executed by the parties in separate counterparts each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument.

 

Section 6.06  Headings

 

The section headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

 

Section 6.07  Severability

 

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.

 

Section 6.08  Governing Law

 

This Agreement shall be governed by and construed in accordance with the substantive laws of the State of Ohio, United States of America, without giving effect to the principles of conflict of laws thereof.

Section 6.09  Dispute Resolution

 

Unless otherwise required by applicable law and this Agreement, any controversy, claim or dispute arising out of or relating to this Agreement, or any breach of it, shall be finally and conclusively settled by arbitration conducted by a panel of three (3) arbitrators, to be held in the Singapore International Arbitration Center in accordance with its then current rules for arbitration.  Each Shareholder shall select one arbitrator within twenty (20) days of the date of such written notice, and the two arbitrators so chosen shall jointly select a third arbitrator within fifteen (15) days of the date the last of such arbitrators is appointed.  The Singapore International Arbitration Center shall administer the arbitration and act as an appointing authority if any of the arbitrators fails to
be selected in accordance with the foregoing.  In the event of any conflict between the Singapore International Arbitration Center and this clause, this clause shall govern.  The arbitrators’ award will be final and binding and may be entered in any court having jurisdiction thereof.  Each Shareholder will bear its own costs and attorneys’ fees and shall share the fees and expenses of the arbitrators in the manner determined by the arbitrators.

 

  

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Section 6.10 Termination

 

Either Party shall have the right to terminate this Agreement (by giving written notice to other Party) if the Conditions Precedent to the Obligations of the Party (as contained in either Section 4.06 or Section 4.07, as the case may be) are not satisfied by the close of business March 15, 2011.

 

Section 6.11  Expenses

 

Except as otherwise provided herein, all expenses incurred by Cooper and CTB (Barbados)  in connection with the negotiations among the Parties, and the authorization, preparation, execution and performance of this Agreement and the transactions contemplated hereby shall be paid by Cooper and/or CTB (Barbados).  Except as otherwise provided herein, all expenses incurred by the Kenda in connection with the negotiations among the Parties, and the authorization, preparation, execution and performance of this Agreement and the transactions contemplated hereby shall be paid by the Kenda.

Section 6.12   Notices

All notices and other communications required or permitted under this Agreement shall be in writing and may be given by personal delivery; by certified or registered mail, return receipt requested, postage prepaid; or by facsimile or other electronic transmission, followed by telephone confirmation of receipt. All such notices shall be addressed as follows:

	
Kenda:

	
Kenda Global Investment Corporation

	  	
St. James Court, Suite 802

	  	
Port Luis, Mauritius

	  	
Attention:  President

	  	  
	  	
With a copy to:

	  	  
	  	
American Kenda Rubber Ind., Co., Ltd

	  	
7095 Americana Parkway

	  	
Reynoldsburg, OH  43608  USA

	  	
Attention:  President

 

  

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and to:

	  	  
	  	
Kenda Rubber Industrial Co., Ltd.

	  	
146, Sec. 1 Chung Shan Road

	  	
Yuanlin, Taiwan

	  	
Attention:  Chairman

	  	  
	
Cooper:

	
Cooper Tire & Rubber Company (Barbados) Ltd.

	  	
Chancery House

	  	
High Street

	  	
Bridgetown, Barbados

	  	
Attention:  Corporate Secretary

	  	  
	  	
With a copy to:

	  	  
	  	
Cooper Tire & Rubber Company

	  	
701 Lima Avenue

	  	
Findlay, OH  45840  USA

	  	
Attention:  General Counsel

	  	  
	
CTB (Barbados):

	
CTB (Barbados) Investment Co. Ltd.

	  	
Chancery House

	  	
High Street

	  	
Bridgetown, Barbados

	  	
Attention:  Corporate Secretary

	  	  
	  	
With a copy to:

	  	  
	  	
Cooper Tire & Rubber Company

	  	
701 Lima Avenue

	  	
Findlay, OH  45840  USA

	  	
Attention:  General Counsel

or such other address as a Party shall designate by like notice. The effective date of any such notice or other communication shall be the date on which it is received by the addressee.

 

  

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Section 6.13  Entire Agreement.

 

This Agreement, including all Exhibits attached hereto, constitutes the entire understanding and agreement between the Parties with respect to the subject matter hereof, there being no oral or other written agreements between them relating to the subject matter of this Agreement, and supersedes all prior agreements, understandings, negotiations, commitments or any other writings or communications with respect hereto. No modification, amendment, waiver or release of any provision of this Agreement or of any right, obligation, claim or cause of action arising under this Agreement shall be valid or binding for any purpose unless in writing and duly executed by the Party against whom the same is sought to be asserted.

IN WITNESS WHEREOF the parties have executed this Agreement as of the day and year first above written.

	
KENDA GLOBAL INVESTMENT CORPORATION

	  
	  	  	  
	
By:

	
/s/ Jimmy Yang 

	  
	
Name:  Jimmy Yang

	  
	 	 
	
Title: Director

	  
	  	  	  
	
COOPER TIRE & RUBBER COMPANY (BARBADOS) LTD.

	  
	  	  	  
	
By:

	
/s/ Harold C. Miller

	  
	
Name: Harold C. Miller

	  
	
Title:  Director

	  
	  	  	  
	
CTB (BARBADOS) INVESTMENT

	  
	
CO.  LTD.

	  
	  	  	  
	
By:

	
/s/ Harold  C. Miller 

	  
	
Name: Harold C. Miller

	  
	
Title:  Director

	  

 

  

16Unassociated Document

EXECUTION VERSION

CONVERTIBLE PROMISSORY NOTE

THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS.  THESE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER SUCH ACT.  ANY SUCH DISPOSITION MAY ALSO BE SUBJECT TO APPLICABLE STATE SECURITIES LAWS.

CONVERTIBLE PROMISSORY NOTE

	
Up to $1,600,000

	
March 2, 2011                

FOR VALUE RECEIVED, DELTATHREE, INC., a Delaware corporation, DELTA THREE ISRAEL, LTD., an Israeli company, and DME SOLUTIONS, INC., a New York corporation (jointly and severally, the “Borrower”), hereby absolutely, irrevocably, unconditionally and jointly and severally promises to pay to the order of D4 HOLDINGS, LLC, a Delaware limited liability company (“Lender”), in United States dollars and in immediately
available funds, the principal sum of ONE MILLION SIX HUNDRED THOUSAND DOLLARS ($1,600,000), or such lesser amount as may be advanced by Lender to the Borrower from time to time in accordance with the terms and conditions of that certain Loan and Security Agreement dated of even date herewith, between the Borrower and Lender (as it may be amended, modified, extended or restated from time to time, the “Loan Agreement”), together with interest thereon, as provided in the Loan Agreement; provided, however, that upon conversion of any principal due under this Convertible Promissory Note (this “Note”) into Conversion Shares pursuant to and subject to the terms of Section 4 hereof, such conversion will constitute the discharge of such principal so converted under this Note to the extent herein
provided.  The aggregate principal amount outstanding under this Note shall not exceed one million six hundred thousand dollars ($1,600,000).  This Note is subject to all of the terms and conditions set forth in, and such terms and conditions are hereby incorporated herein by reference to, the Loan Agreement.  All capitalized terms not otherwise defined herein shall have the meanings set forth in the Loan Agreement.  In the event of any conflict between the provisions of this Note and the Loan Agreement, the provisions of the Loan Agreement shall prevail.

1.           The obligations of the Borrower evidenced by this Note are secured as set forth in the Loan Agreement.  Payment of such obligations, and the liens securing such obligations, are subordinated as set forth in the Loan Agreement

 

  

  

  

 

2.           Except as otherwise provided in the Loan Documents, all outstanding principal and interest with respect to Loan Advances shall be due and payable in full on the Maturity Date.  The daily unpaid principal balance outstanding under this Note shall bear interest at the rate(s) set forth in the Loan Agreement.  All payments in respect of amounts outstanding under this Note shall be paid in immediately available funds to the account(s) specified by Lender from time to time.  Any payment due in respect of this Note which falls due on a day other than a Business Day shall be made on the next Business Day.

3.           Upon the occurrence of an Event of Default, Lender shall have, and shall be entitled to exercise, all of the rights and remedies set forth in the Loan Agreement and the other Loan Documents.

4.           Conversion

(a)           Optional Conversion.  The Lender may, at any time and from time to time prior to the Maturity Date, upon giving written notice to the Borrower, elect to convert all or any portion of the outstanding principal amount of this Note  into that number of whole shares of the Borrower’s Common Stock (or such other securities and property at any time receivable or issuable upon conversion of this Note in accordance with its terms ) (“Conversion Shares”) as is determined by dividing (x) such principal amount by (y) $.08 (the “Conversion Price Per
Share”),  subject to adjustment as provided in this Section 4.  Any accrued and unpaid interest outstanding on the portion of this Note being converted, at the time of such conversion will become immediately due and payable to the Lender in cash.  Any accrued and unpaid interest on the principal portion of this Note that is not converted shall be due and payable in accordance with the Loan Agreement.

 

(b)           Reservation.  The Borrower will at all times reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Note into Conversion Shares, such number of shares of its duly authorized shares of Common Stock as will from time to time be sufficient to effect the conversion of this Note into Conversion Shares in full.  If at any time the number of authorized but unissued shares of Common Stock is not sufficient to effect the conversion of this Note into Conversion Shares, the Borrower will take such action as may, in the reasonable opinion of its counsel, be necessary to increase its
authorized but unissued shares of Common Stock to such number as is sufficient for such purpose, including engaging in commercially reasonable efforts to obtain the requisite stockholder approval of any necessary amendment to its certificate of incorporation.  The Borrower further agrees that all shares of Common Stock that may be issued upon the conversion of the rights represented by this Note will be duly authorized and will be validly issued, fully paid and non-assessable, free from all taxes, Liens (other than Liens created by Lender), charges and preemptive rights with respect to the issuance thereof, other than restrictions imposed by federal and state securities laws.

 

  

  

  

 

(c)           Mechanics of Conversion; Delivery of Shares.  Upon total or partial conversion of this Note, the Lender will surrender the original of this Note, duly endorsed, to the Borrower at its principal office.  The Borrower will deliver a certificate or, if requested by the Lender, certificates for Conversion Shares issuable on conversion of this Note as soon as practicable after surrender of this Note for conversion (bearing such legends as may be required in the reasonable opinion of counsel to the Borrower), but the Person or Persons to whom such certificates are issuable will be considered the holder of record of the Conversion Shares from the time this Note is
surrendered by the Lender.  If less than all of the outstanding principal amount of this Note is converted pursuant to Section 4(a), the Borrower will additionally deliver to the Lender an amended and restated Note, containing an original principal amount equal to that portion of the then-outstanding principal amount not converted containing the other terms and provisions of this Note and otherwise in form and substance reasonably satisfactory to the Lender.  Upon the conversion of this Note, all rights of the Lender, except the right to receive the Conversion Shares in accordance with this Article 4, will cease as to that portion of the Note so converted and this Note will no longer be deemed to be outstanding as to that portion of the Note so converted.

(d)           Fractional Shares. In lieu of issuing fractional shares upon conversion of all or any portion of this Note, the Borrower shall pay cash in an amount equal to the product of the then applicable Conversion Price Per Share and the number of fractional shares that would otherwise be issuable hereunder.

(e)           Adjustment.  The number of Conversion Shares issuable upon conversion of this Note or any portion thereof (or any shares of stock or other securities or property at the time receivable or issuable upon conversion of this Note or any portion thereof) and the Conversion Price Per Share therefor are subject to adjustment upon the occurrence of any of the following events between the Issue Date and the date that all Obligations hereunder are repaid or this Note is converted into Conversion Shares:

 (i)           Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc.  The Conversion Price Per Share of this Note will be proportionally adjusted to reflect any stock dividend, stock split, reverse stock split, reclassification, recapitalization or other similar event affecting the number of outstanding Conversion Shares.

 (ii)          Adjustment for Other Dividends and Distributions. In case the Borrower shall make or issue, or shall fix a record date for the determination of eligible holders entitled to receive, a dividend or other distribution payable with respect to the capital stock that is payable in (i) securities of the Borrower or (ii) other assets or property, then, and in each such case, the Lender, upon conversion of this Note at any time after the consummation, effective date or record date of such event, shall receive, in addition to the number of Conversion Shares issuable upon such exercise prior to such date, the securities or such other assets of the Borrower to which the Lender would have been
entitled upon such date if the Lender had converted this Note immediately prior thereto (all subject to further adjustment as provided in this Note).

 

  

  

  

 

 (iii)         Adjustment for Reorganization, Consolidation, Merger.  In case of any reorganization, reclassification or similar event involving the Borrower (or of any other corporation the stock or other securities of which are at the time receivable on the conversion of this Note) after the initial issuance date of this Note, or in case, after such date, the Borrower (or any such corporation) shall consolidate with or merge with another entity, then, and in each such case, the Lender, upon the conversion of this Note at any time after the consummation of such reorganization, consolidation or merger, will be entitled to receive, in lieu of the stock or other securities and property
receivable upon the conversion of this Note prior to such consummation, the stock or other securities or property to which the Lender would have been entitled upon the consummation of such reorganization, consolidation or merger if the Lender had converted this Note immediately prior thereto, subject to further adjustment as provided in this Note, and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors of the Borrower) will be made in the application of the provisions in this Section 4 with respect to the rights and interests thereafter of the Lender, to the end that the provisions set forth in this Section 4 will thereafter be applicable, as nearly as reasonably may be, in relation to any securities or other property thereafter deliverable upon the conversion of this Note.  The successor or purchasing corporation in any such reorganization, consolidation or merger (if other than the Borrower) will duly execute and deliver to the
Lender a supplement hereto reasonably acceptable to the Lender acknowledging such entity’s obligations under this Note and, in each such case, the terms of the Note will be applicable to the shares of stock or other securities or property receivable upon the conversion of this Note after the consummation of such reorganization, consolidation or merger.

 (iv)         Conversion of Stock.  In case all the authorized Common Stock of the Borrower is converted, pursuant to the Borrower’s Certificate of Incorporation, into other securities or property, or the Common Stock otherwise ceases to exist, then, in such case, the Lender, upon conversion of this Note at any time after the date on which the Common Stock is so converted or ceases to exist (the “Termination Date”), will receive, in lieu of the number of Conversion Shares that would have been issuable upon such exercise immediately prior to the Termination Date (the “Former Number of Conversion Shares”), the stock and other securities and property which the Lender would have been entitled to receive upon the Termination Date if the Lender had converted this Note with respect to the Former Number of Conversion Shares immediately prior to the Termination Date (all subject to further adjustment as provided in this Note).

(f)           Certificate of Adjustments.  The Borrower will, at its expense, cause an authorized officer promptly to prepare a written certificate showing each adjustment or readjustment of the Conversion Price Per Share or the number of Conversion Shares or other securities issuable upon conversion of this Note and cause such certificate to be delivered to the Lender in accordance with the provisions of this Section 4.  The certificate will describe the adjustment or readjustment and include a description in reasonable detail of the facts on which the adjustment or readjustment is based.

(g)           No Change Necessary.  The form of this Note need not be changed because of any adjustment in the Conversion Price Per Share or in the number of Conversion Shares issuable upon its conversion.

5.           General

(a)           The Borrower hereby waives presentment and demand for payment, notice of dishonor, protest and notice of protest of this Note.  No release of any security for the payment of this Note or extension of time for payment of this Note, and no alteration, amendment or waiver of any provision of this Note made by agreement between Lender and any other Person shall release, discharge, modify, change or affect the liability of the Borrower under this Note.

 

  

  

  

 

(b)           Each right, power and remedy of Lender under this Note, the Loan Agreement, any other Loan Document, or under applicable laws shall be cumulative and concurrent, and the exercise of any one or more of them shall not preclude the simultaneous or later exercise by Lender of any or all such other rights, powers or remedies.  No failure or delay by Lender to insist upon the strict performance of any one or more provisions of this Note, the Loan Agreement, any other Loan Document, or to exercise any right, power or remedy consequent upon an Event of Default shall constitute a waiver thereof, or preclude Lender from exercising any such right, power or remedy.  No modification, change,
waiver or amendment of this Note shall be deemed to be made unless in writing signed by the Borrower and Lender. This Note shall inure to the benefit of and be binding upon the Borrower and Lender and their respective successors and assigns; provided that except as set forth in the Loan Agreement, the Borrower shall have no right to assign any of its rights or delegate any of its obligations under this Note; and provided further that there shall be no restrictions of any nature on Lender’s right to assign this Note or its rights hereunder.  The invalidity, illegality or unenforceability of any provision of this Note shall not affect or impair the validity, legality or enforceability of any other provision.  This Note shall be deemed to be made in, and shall be governed by the laws of, the State of Delaware (without regard to its conflicts of laws principles).

[signature page follows]

 

  

  

  

 

IN WITNESS WHEREOF, this Convertible Promissory Note has been duly executed by the undersigned as of the day and year first above written.

	  	
BORROWER:

	  	  
	  	
DELTATHREE, INC.

	  	  
	  	
By: 

	
/s/ Effi Baruch

	  	
Name: Effi Baruch

	  	
Title: CEO and President

	  	  
	  	
DELTA THREE ISRAEL, LTD.

	  	  
	  	
By:

	
/s/ Effi Baruch

	  	
Name: Effi Baruch

	  	
Title: CEO and President

	  	  
	  	
DME SOLUTIONS, INC.

	  	  
	  	
By:

	
/s/ Effi Baruch

	  	
Name: Effi Baruch

	  	
Title: CEO and President

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