Document:

EX-10.5

 

Exhibit 10.5

MEMORANDUM OF AGREEMENT

(Amendment No. 4 to Shareholders Agreement for the Europe JVC)

(Amendment No. 3 to Operating Agreement for Goodyear Dunlop Tires North America, Ltd.)

This Memorandum of Agreement (“Agreement”) is dated as of 26 April, 2007 and is by and between
The Goodyear Tire & Rubber Company, a company organized and existing under the laws of the State of
Ohio, United States of America having its principal office of 1144 East Market Street, Akron, Ohio
44316-0001, United States of America (“Goodyear”) and Sumitomo Rubber Industries, Ltd., a company
organized and existing under the laws of Japan having its principal office at 6-9, 3-Chome,
Wakinohama-cho, Chuo-ku, Kobe 651-0072, Japan (“Sumitomo” ).

WHEREAS, following discussion of the current operation of the Alliance, the parties have agreed the
matters set out below.

NOW, IT IS AGREED AS FOLLOWS:

	1.	 	The Europe JVC
	 
	 	 	Confirmation of Europe Shareholders Agreement
	 
	1.1	 	The parties confirm that, except to the extent otherwise contemplated by the
Shareholders Agreement for the Europe JVC (hereinafter, the “Europe Shareholders Agreement”),
any of the Alliance Agreements, the Articles of Association of the Europe JVC or as otherwise
provided by law:

	 	1.1.1	 	responsibility for management of the business, strategy and operations of the
Europe JVC resides with its board of directors; and
	 
	 	1.1.2	 	the exclusive territorial coverage of the Europe JVC is the European
Territory as described in Article 9.5 (a) of the Europe Shareholders Agreement, as it
may be amended from time to time.

	1.2	 	The parties confirm as follows:

	 	1.2.1	 	Sumitomo agrees to the use of the PBU structure for the Europe JVC, provided
however, that should Goodyear cause a material breach of this Agreement, then Sumitomo
shall have the right to revert to the sales or organizational structure in the original
Europe Shareholders Agreement. Under the PBU structure, the PBU executes daily
tactical operations to carry out strategy decisions made by the board of directors of
the Europe JVC. The parties agree that, subject to the other provisions of the Europe
Shareholders Agreement, no future material

 

 

	 	 	 	change to the management or organizational structure of the Europe JVC, Goodyear
Dunlop Tires Germany GmbH, Dunlop GmbH & Co KG, Goodyear Dunlop Tires OE GmbH,
Goodyear Dunlop Tires France S.A., Goodyear Dunlop Tyres UK Limited, Dunlop Tyres
Limited or Goodyear Luxembourg Tires S.A. (each of such companies or partnerships
considered alone without its Affiliates controlled by it) shall be made without
the Chairman of the Europe JVC making a prior consultation with the Vice-Chairman
of the Europe JVC appointed by Sumitomo.
	 
	 	1.2.2	 	The exclusive territorial coverage (i.e. unified Western and Eastern Europe)
and the single and efficient management and organizational structure of the Europe JVC
shall be operated by 30 June 2008 so as to fully reflect the principles confirmed in
paragraph 1.1. In particular, Goodyear will ensure that, notwithstanding the
arrangement of Goodyear’s own internal SBU structure, responsibility for the management
and operation of the business of the Europe JVC and its Affiliates controlled by it
will, except as mentioned in paragraph 1.1, reside with the board of directors of the
Europe JVC, and not with any of Goodyear’s SBUs.
	 
	 	1.2.3	 	Proposals for such operation and for involvement of SRI-appointed Directors
in the operation of the PBU structure, including the role of the Vice-Chairman of the
Europe JVC as it relates to the SRI European Trademarks tires in the Europe JVC for
sales and marketing, will initially be discussed between Mr. de Bok and Mr. Nakaseko,
who will report their conclusions to Mr. Gingo and Mr. Sawada in the first calendar
quarter of 2007. Items to be considered in the course of these discussions include the
governance and management structure of the Europe JVC and the role of PBUs. Pending
agreement on the details of the operation, the SRI-appointed Directors of the Europe
JVC will be entitled to attend and participate in such management meetings of the
Europe JVC and its Affiliates controlled by it as the Vice-Chairman may determine.

	1.3	 	As one interim measure towards improved integration of the territorial coverage of
the Europe JVC, the President of the Goodyear EEMEA business unit (currently Mr. Kaplan) has
been appointed to the board of directors of the Europe JVC as one of Goodyear’s nominated
directors.
	 
	 	 	Hanau Technical Center
	 
	1.4	 	The parties agree that, subject as mentioned below, the Sumitomo nominated Director
of the Europe JVC responsible for Dunlop technical matters (currently Mr. Nishi) shall also

 

 

	 	 	be appointed as the head of the Hanau Technical Center. Goodyear nevertheless reserves the
right, after consultation with Sumitomo, to require those two functions to be split between
two different persons at any time in the future.
	 
	1.5	 	Goodyear and Sumitomo agree that the head of the Hanau Technical Center shall report
to and cooperate with the technical director of the Luxembourg Technical Center with respect
to the following matters:

	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	Report

	 	 	1.5.1	 	 	annual budget and capital expenditure control, under the current Contract
Research Agreement as of 1 January, 2000 between Goodyear and Dunlop GmbH;
	 
	 	 	 	 	 	 
	Cooperate

	 	 	1.5.2	 	 	commonality of technical matters;
	 
	 	 	 	 	 	 
	 

	 	 	1.5.3	 	 	material specification;
	 
	 	 	 	 	 	 
	 

	 	 	1.5.4	 	 	such other matters (if any) as may be agreed from time to time in writing by
Goodyear and Sumitomo; and
	 
	 	 	 	 	 	 
	 

	 	 	1.5.5	 	 	the areas of cooperation (1-10) listed in a letter dated July 18, 2005
from Mr. Gingo to Mr. Takahashi which have been extracted and attached hereto as Annex A.

	1.6	 	Goodyear and Sumitomo agree to procure that the head of the Hanau Technical Center
will communicate and coordinate with Consumer, Truck and Motorcycle PBU’s Directors in order
to meet business objectives.
	 
	1.7	 	Goodyear agrees to consult with Sumitomo with respect to any proposals to close or
significantly (that is, more than twenty percent (20%) reduction in operations, either alone
or taken together with any related prior reduction effected within the preceding twelve (12)
months) wind down of the Hanau Technical Center.
	 
	1.8	 	Goodyear undertakes to Sumitomo to procure that the Hanau Technical Center shall not
be closed or significantly (that is, more than twenty percent (20%) reduction in operations,
either alone or taken together with any related prior reduction effected within the preceding
twelve (12) months) wound down unless Sumitomo has first given written notice to Goodyear that
it is satisfied that there are arrangements in place for Dunlop research and development to
continue that are satisfactory to Sumitomo and, following such closure, German-origin OE
customers will continue to be properly served by the Europe JVC. Sumitomo agrees that it shall
not unreasonably withhold such written notice of satisfaction to Goodyear.

 

 

	2.	 	The North America JVC
	 
	 	 	Delegation of Chairman’s responsibilities
	 
	2.1	 	The parties agree that the Chairman of the North America JVC may delegate some or all of his
responsibilities for Japan-origin OEM matters to the Goodyear-appointed OEM Sales/Marketing
Director (currently Mr. Finkelmeier) and Goodyear confirms to Sumitomo that the
Goodyear-appointed OEM Sales/Marketing Director (currently Mr. Finkelmeier) will at all times
act, and be committed to work, in and for the best interests of the North America JVC in
compliance with the terms of the North America Operating Agreement.
	 
	 	 	Sumitomo appointments
	 
	2.2	 	Goodyear and Sumitomo agree to procure that the SRI-appointed OEM Sales/Marketing Director
(currently Mr. Hasegawa) is appointed as:

	 	2.2.1	 	the sales/marketing director with responsibility for the management of
relationships with Japan-origin OEMs for both the SRI North American Trademarks
(“Dunlop brands”) and Goodyear North American Trademarks (“Goodyear brands”) and for
sales to all motorcycle OEMs and ATV OEMs and for replacement sales of motorcycle
tires; and
	 
	 	2.2.2	 	vice president with responsibility for sales (except final pricing and
marketing strategy determinations) of the Dunlop brands to Japan-origin OEMs and for
the direction and strategy for sales of Goodyear brands to Japan-origin OEMs.

	2.3	 	Goodyear and Sumitomo also agree:

	 	2.3.1	 	to procure that the SRI-appointed OEM Sales/Marketing Director (currently
Mr. Hasegawa) shall be appointed as an officer of the North America JVC;
	 
	 	2.3.2	 	that the SRI-appointed OEM Sales/Marketing Director (currently
Mr. Hasegawa) will have a direct report line to the Chairman and to the
Vice-Chairman of the North America JVC, who will in turn report to the Chairman of the
North America JVC; and
	 
	 	2.3.3	 	to procure that the SRI-appointed OEM Sales/Marketing Director (currently
Mr. Hasegawa) and the Goodyear-appointed OEM Sales/Marketing Director (currently Mr.
Finkelmeier) co-ordinate on all pricing decisions, subject to paragraph 2.2.2.
	 
	 	 	 	Goodyear employees

 

 

	2.4	 	Goodyear undertakes to procure that:

	 	2.4.1	 	except for the Goodyear-appointed OEM Sales/Marketing Director (currently Mr.
Finkelmeier), all Goodyear employees from time to time with responsibility for sales to
Japan-origin OEMs shall report to SRI-appointed OEM Sales/Marketing Director (currently
Mr. Hasegawa) for all Japan-origin OEM matters;
	 
	 	2.4.2	 	the Goodyear employee who is currently exclusively responsible for sales to
Japan-origin OEMs will be transferred to the North America JVC; and
	 
	 	2.4.3	 	all other Goodyear employees from time to time who are in charge of both
Japan-origin OEMs and non Japan-origin OEMs will work with the North America JVC on a
shared service basis.

	2.5	 	Goodyear and Sumitomo agree that the reasonable charges associated with Japan-origin OEM
activities by such Goodyear employees will be for the account of the North America JVC, but
the shared service cost for such employees will only be for the account of the North America
JVC to the extent it relates to their time selling Dunlop brands to Japan-origin OEMs.
Goodyear undertakes to procure that the Goodyear-appointed OEM Sales/Marketing Director
(currently Mr. Finkelmeier) shall not charge any of his time to the North America JVC.
	 
	 	 	Strategy
	 
	2.6	 	Goodyear and Sumitomo agree to:

	 	2.6.1	 	procure that Toyota global strategy meetings for the Alliance JVCs are held on a
regular basis and, in any event, not less than once every calendar quarter unless
otherwise agreed; and
	 
	 	2.6.2	 	work together in good faith to establish and agree for the Alliance JVCs a
cooperative strategy for Acura (Honda) and Infinity (Nissan) by a time to be agreed
between Goodyear and Sumitomo.

	 	 	CAPEX plan approval
	 
	2.7	 	Goodyear and Sumitomo agree to procure that each capital expenditure plan (or material
amendment thereto) for the North America JVC shall be drafted by the Vice Chairman and the
Chairman of the North America JVC and successively submitted to the

 

 

	 	 	shareholders (members) of the North America JVC for shareholder approval or disapproval
prior to being implemented by the North America JVC.
	 
	 	 	Plant production
	 
	2.8	 	Goodyear undertakes to respect, and to procure that its Affiliates respect, the North America
JVC’s plant production scheduling for the Buffalo plant prepared by the North America JVC for
motorcycle tires. The production scheduling for all other tires will be based and coordinated
on the overall production planning of Goodyear’s North American plants.
	 
	3	 	Third Party Sourcing
	 
	 	 	The parties will establish procedures for authorizing, on a case-by-case basis, the
disclosure of technology owned by either of them to third parties for use in manufacturing
products to be supplied to either of them.
	 
	4	 	Implementation
	 
	 	 	The parties will endeavor to implement this Agreement, including by way of entering into any
further agreements they may identify as appropriate, as soon as practicable and shall review
progress up to that implementation on a quarterly basis.
	 
	5	 	General
	 
	5.1	 	Goodyear (for itself and those of its Affiliates which are parties to the relevant Alliance
Agreements) and Sumitomo (for itself and those of its Affiliates which are parties to the
relevant Alliance Agreements) agree that, in the case of any inconsistency between the
provisions of this Agreement and the provisions of any of the Alliance Agreements, the former
provisions shall prevail and the relevant provisions of the Alliance Agreements shall be
deemed to be modified accordingly.
	 
	5.2	 	Unless otherwise defined herein, all capitalized terms used in this Agreement shall have
	 
	 	 	the meanings given in the Umbrella Agreement between Goodyear and Sumitomo dated as of June
14, 1999 (the “Umbrella Agreement”), and/or the other Alliance Agreements.
	 
	5.3	 	The provisions of Article XVIII of the Umbrella Agreement and the corresponding provisions of
the Alliance Agreements amended by this Agreement are hereby incorporated into and made a part
of this Agreement by this reference, and this Agreement shall be governed as if it is one of
the agreements governed by such provisions of Article XVIII and the corresponding provisions
of the Alliance Agreements amended by this Agreement.

 

 

	6	 	Condition Precedent
	 
	 	 	This Agreement shall not take effect unless and until it has been approved by the Sumitomo
Board of Directors at a meeting to be held no later than 27 February, 2007.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed for and on
behalf of themselves and their Affiliates as of 26 April, 2007.

	 	 	 	 	 
	
	 	 	 	 
	 
	 	 	 	 
	 	 	THE GOODYEAR TIRE & RUBBER COMPANY
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Robert Keegan
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Robert J. Keegan
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:
	 	Chairman of the Board, Chief Executive
Officer and President
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Attest:
	 	/s/ Anthony E. Miller
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Anthony E. Miller
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:
	 	Assistant Secretary
	 

	 	 	 	 
	 
	 	 	 	 
	 
	 	 	 	 
	 	 	SUMITOMO RUBBER INDUSTRIES, LTD.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Tetsuji Mino
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Tetsuji Mino
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:
	 	President and
Representative Director
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Attest:
	 	/s/ Makoto Teshima
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Name:
	 	Makoto Teshima
	 

	 	 	 	 
	 
	 	 	 	 
	 

	 	Title:
	 	General Manager, Legal DepartmentEX-10.6

 

Exhibit 10.6

Schedule of 2007 Salary and Target Bonus for Named

Executive Officers (as defined in Item 402(a)(3) of regulation S-K)

Effective May 1, 2007, the annual salary compensation for each of the Named Executive Officers is:

     Robert J. Keegan, Chairman of the Board, Chief Executive Officer and President, $1,190,000.

     Richard J. Kramer, President, North American Tire and Chief Financial Officer, $560,000.

     C. Thomas Harvie, Senior Vice President, General Counsel and Secretary, $480,000.

     Joseph M. Gingo, Executive Vice President, Quality Systems and Chief Technical Officer,
$394,000.

     Target bonuses for 2007 under the Company’s Performance Recognition Plan for each of the Named
Executive Officers are:

     Mr. Keegan, $1,750,000;

     Mr. Kramer, $500,000;

     Mr. Harvie, $300,000; and

     Mr. Gingo, $260,000.

     Payment of 2007 bonuses will be made from a payment pool, the size of which will depend on the
extent to which the specific financial performance targets established by the Committee are met.
The target aggregate payment pool for 2007 is approximately $31 million. Earnings before interest
and taxes less finance charges (“EBIT”) and operating cash flow are the financial performance
measures for corporate officers under the Performance Recognition
Plan for fiscal year 2007. For officers of the Company's operating units the performance measures are the operating unit's net sales, less cost of goods sold and selling, administrative and general expenses and the operating unit's operating cash flow. Funding of the 2007 payment
pool will be based 50% on each performance measure and could range from zero to 200% of the target
amount depending on the level of operating cash flow and EBIT achieved, as such levels may be
adjusted for non-recurring restructuring charges, significant one-time unanticipated, non-operating
or extraordinary events, and other qualitative factors recommended by
the CEO and approved by the Committee. Funding of the payment pool for officers of the operating units, is based 60% on that operating unit's results and 40% on overall company results. In addition,
payouts for the participants may be adjusted based on individual performance.

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