Document:

EX-10.26

 

Exhibit 10.26

FORM OF

AMENDED AND RESTATED

CHANGE IN CONTROL SEVERANCE AGREEMENT

     THIS AMENDED AND RESTATED AGREEMENT (“Agreement”), initially effective as of the 10th day
of February, 2000 (the “Effective Date”), and amended and restated in its entirety effective as of
July 13, 2000, March 12, 2003 and February 24, 2005 is further amended and restated as of February
22, 2006, by and between Allegheny Technologies Incorporated, a Delaware corporation (hereinafter
referred to as the “Company”), and the individual identified on the signature page of this
Agreement (the “Executive”).

W I T N E S S E T H:

          WHEREAS, the Board of Directors of the Company (the “Board”) has approved the Company’s
entering into this agreement providing for certain severance protection for the Executive following
a Change in Control (as hereinafter defined);

          WHEREAS, the Board of the Company believes that, should the possibility of a Change in Control
arise, it is imperative that the Company be able to receive and rely upon the Executive’s advice,
if requested, as to the best interests of the Company and its stockholders without concern that the
Executive might be distracted by the personal uncertainties and risks created by the possibility of
a Change in Control; and

          WHEREAS, in addition to the Executive’s regular duties, the Executive may be called upon to
assist in the assessment of a possible Change in Control, advise management and the Board of the
Company as to whether such Change in Control would be in the best interests of the Company and its
stockholders, and to take such other actions as the Board determines to be appropriate.

          NOW, THEREFORE, to assure the Company that it will have the continued dedication of the
Executive and the availability of Executive’s advice and counsel notwithstanding the possibility,
threat, or occurrence of a Change in Control, and to induce the Executive to remain in the employ
of the Company, and for good and valuable consideration and the mutual covenants set forth herein,
the Company and the Executive, intending to be legally bound, agree as follows:

Article I. Definitions

          1.1 Definitions. Whenever used in this Agreement, the following terms shall have the meanings
set forth below when the initial letter of the word or abbreviation is capitalized:

(a) “Accrued Obligations” means, as of the Effective Date of Termination, the sum of (i) the
Executive’s Base Compensation through and including the Effective Date of Termination, (ii) the
amount of any bonus, incentive compensation, deferred compensation and other cash compensation
accrued by the Executive as of the Effective Date of Termination under the terms of any such
arrangement and not then paid, including, but not limited to, AIP accrued but not

 

 

paid for a year ending prior to the year in which occur, the Effective Date of Termination, (iii) unused vacation
time monetized at the then rate of Base Compensation, (iv) expense reimbursements or other cash
entitlements, (v) amounts accrued, including but not limited to amounts accrued as a result of the
application of Section 2.2(g), under any qualified, non-qualified or supplemental employee benefit
plan, payroll practice, policy or perquisite.

(b) “AIP” means the Company’s Annual Incentive Plan as it exists on the date hereof and as it may
be amended, supplemented or modified from time to time or any successor plan.

(c) “Base Compensation” shall mean (1) the highest annual rate of base salary of the Executive
within the time period consisting of two years prior to the date of a Change in Control and the
Effective Date of Termination and (2) the AIP bonus target for performance in the calendar year
that a Change in Control occurs or the actual AIP payment for the year immediately preceding the
Change in Control, whichever is higher.

(d) “Beneficiary” shall mean the persons or entities designated or deemed designated by the
Executive pursuant to Section 7.2 herein.

(e) “Board” shall mean the Board of Directors of the Company.

(f) For purposes hereof, the term “Cause” shall mean the Executive’s conviction of a
felony, breach of a fiduciary duty involving personal profit to the Executive or intentional
failure to perform stated duties reasonably associated with the Executive’s position; provided,
however, an intentional failure to perform stated duties shall not constitute Cause unless and
until the Board provides the Executive with written notice setting forth the specific duties that,
in the Board’s view, the Executive has failed to perform and the Executive is provided a period of
thirty (30) days to cure such specific failure(s) to the reasonable satisfaction of the Board.

(g) For the purposes of this Agreement, “Change in Control” shall mean, and shall be deemed
to have occurred upon the occurrence of, any of the following events:

(1) The Company acquires actual knowledge that (x) any Person, other than the
Company, a subsidiary, any employee benefit plan(s) sponsored by the Company or a
subsidiary, has acquired the Beneficial Ownership, directly or indirectly, of
securities of the Company entitling such Person to 20% or more of the Voting Power
of the Company, or (y) any Person or Persons agree to act together for the purpose
of acquiring, holding, voting or disposing of securities of the Company or to act
in concert or otherwise with the purpose or effect of changing or influencing
control of the Company, or in connection with or as Beneficial Ownership, directly
or indirectly, of securities of the Company entitling such Person(s) to 20% or more
of the Voting Power of the Company; or

(2) The completion of a Tender Offer is made to acquire securities of the Company
entitling the holders thereof to 20% or more of the Voting Power of the Company; or

(3) The occurrence of a successful solicitation subject to Rule 14a-11 under the
Securities Exchange Act of 1934 as amended (or any successor Rule) (the “1934 Act”)
relating to the election or removal of 50% or more of the members of the

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Board or any class of the Board shall be made by any person other than the Company or less
than 51% of the members of the Board (excluding vacant seats) shall be Continuing
Directors; or

(4) The occurrence of a merger, consolidation, share exchange, division or sale
or other disposition of assets of the Company as a result of which the stockholders
of the Company immediately prior to such transaction shall not hold, directly or
indirectly, immediately following such transaction a majority of the Voting Power
of (i) in the case of a merger or consolidation, the surviving or resulting
corporation, (ii) in the case of a share exchange, the acquiring corporation or
(iii) in the case of a division or a sale or other disposition of assets, each
surviving, resulting or acquiring corporation which, immediately following the
transaction, holds more than 20% of the consolidated assets of the Company
immediately prior to the transaction;

provided, however that (A) if securities beneficially owned by Executive are included in
determining the Beneficial Ownership of a Person referred to in Section (i), (B) if Executive is
named pursuant to Item 2 of the Schedule 14D-1 (or any similar successor filing requirement)
required to be filed by the bidder making a Tender Offer referred to in Section (ii) or (C) if
Executive is a “participant” as defined in Instruction 3 to Item 4 of Schedule 14A under the 1934
Act in a solicitation referred to in Section (iii) then no Change of Control with respect to
Executive shall be deemed to have occurred by reason of any such event.

     For the purposes of Section 1(g), the following terms shall have the following meanings:

(i) The term “Person” shall be used as that term is used in Section 13(d) and 14(d)
of the 1934 Act as in effect on the Effective Date hereof.

(ii) “Beneficial Ownership” shall be determined as provided in Rule 13d-3 under the
1934 Act as in effect on the Effective Date hereof.

(iii) A specified percentage of “Voting Power” of a company shall mean such number
of the Voting Shares as shall enable the holders thereof to cast such percentage of
all the votes which could be cast in an annual election of directors (without
consideration of the rights of any class of stock, other than the common stock of
the company, to elect directors by a separate class vote); and “Voting Shares”
shall mean all securities of a company entitling the holders thereof to vote in an
annual election of directors (without consideration of the rights of any class of
stock, other than the common stock of the company, to elect directors by a separate
class vote).

(iv) “Tender Offer” shall mean a tender offer or exchange offer to acquire
securities of the Company (other than such an offer made by the Company or any
subsidiary), whether or not such offer is approved or opposed by the Board.

(v) “Continuing Directors” shall mean a director of the Company who either (x) was a director of the Company on the date hereof or (y) is an individual whose
election, or nomination for election, as a director of the Company was approved

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by a vote of at least two-thirds of the directors then still in office who were
Continuing Directors (other than an individual whose initial assumption of office
is in connection with an actual or threatened election contest relating to the
election of directors of the Company which would be subject to Rule 14a-11 under
the 1934 Act, or any successor Rule).

(h) “Code” shall mean the Internal Revenue Code of 1986, as amended.

(i) “Effective Date of Termination” shall mean the date on which the Executive’s employment
terminates in a circumstance in which Section 2.1 provides for Severance Benefits (as defined in
Section 2.1).

(j) “Good Reason” shall mean, without the Executive’s express written consent, the occurrence of
any one or more of the following:

     (1) A material diminution of the Executive’s authorities, duties, responsibilities, or
status (including offices, titles, or reporting relationships) as an employee of the Company from
those in effect as of one hundred eighty (180) days prior to the Change in Control or as of the
date of execution of this Agreement if a Change in Control occurs within one hundred eighty (180)
days of the execution of this Agreement (the “Reference Date”) or the assignment to the Executive
of duties or responsibilities inconsistent with his position as of the Reference Date, other than
an insubstantial and inadvertent act that is remedied by the Company promptly after receipt of
notice thereof given by the Executive, and other than any such alteration which is consented to by
the Executive in writing;

     (2) The Company’s requiring the Executive to be based at a location in excess of thirty-five
(35) miles from the location of the Executive’s principal job location or office immediately prior
to the Change in Control, except for required travel on the Company’s business to an extent
substantially consistent with the Executive’s present business obligations;

     (3) A reduction in the Executive’s annual salary or any material reduction by the Company of
the Executive’s other compensation or benefits from that in effect on the Reference Date or on the
date of the Change in Control, whichever is greater;

     (4) The failure of the Company to obtain an agreement satisfactory to the Executive from any
successor to the Company to assume and agree to perform the Company’s obligations under this
Agreement, as contemplated in Article 5 herein; and

     (5) Any purported termination by the Company of the Executive’s employment that is not
effected pursuant to a Notice of Termination satisfying the requirements of Section 2.6 below, and
for purposes of this Agreement, no such purported termination shall be effective.

The Executive’s right to terminate employment for Good Reason shall not be affected by the
Executive’s (A) incapacity due to physical or mental illness or (B) continued employment following
the occurrence of any event constituting Good Reason herein.

(k) “KEPP” means the Company’s Key Executive Performance Plan as it exists on the date hereof and
as it may be amended, supplemented or modified from time to time or any successor plan.

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(l) “Severance Compensation” means three times Base Compensation.

(m) “TSRP” means the Total Shareholder Return Program as it exists on the date of the amendment and
restatement of this Agreement and as it may be amended, supplemented or modified from time to time
or a successor plan.

Article II. Severance Benefits

     2.1 Right to Severance Benefits. The Executive shall be entitled to receive from the
Company severance benefits described in Section 2.2 below (collectively, the “Severance Benefits”)
if a Change in Control shall occur and within twenty-four (24) months after the Change in Control
either of the following shall occur:

	 	(a)	 	an involuntary termination of the Executive’s employment with
the Company without Cause; or
	 
	 	(b)	 	a voluntary termination of the Executive’s employment with
the Company for Good Reason.

     2.2 Severance Benefits. In the event that the Executive becomes entitled to receive
Severance Benefits, as provided in Section 2.1, the Company shall provide the Executive with total
Severance Benefits as follows (but subject to Sections 2.5 and 2.6):

	 	(a)	 	The Executive shall receive a single lump sum cash Severance
Compensation payment within thirty (30) days of the Effective Date of
Termination.
	 
	 	(b)	 	The Executive shall receive the Accrued Obligations.
	 
	 	(c)	 	The Executive shall receive as AIP for the year in which the
termination occurs a lump sum cash payment paid within thirty (30) days of the
Effective Date of Termination equal to that which would have been paid if corporate and
personal performance had achieved 120% of target objectives established
for the annual period in which the Change in Control occurred, multiplied
by a fraction, the numerator of which is the number of days elapsed in the
current fiscal period to the Effective Date of Termination, and the
denominator of which is 365.
	 
	 	(d)	 	The Executive shall receive a lump sum payment paid within
thirty (30) days of the Effective Date of Termination (i) of any earned but
unpaid TSRP Awards (as defined in the TSRP) and (ii) with respect to any TSRP
Awards for then uncompleted TSRP Performance Periods (as defined in the TSRP);
provided that portion of the TSRP award that would be paid in stock under the
TSRP is to be paid in cash based on the then current market value of the stock
and the payment for then uncompleted TSRP Performance Periods will be
determined based upon a deemed “Outstanding” level of Total Shareholder Return
(as defined in the TSRP

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	 	 	 	and set forth in the applicable TSRP agreement) for each uncompleted TSRP Performance Period.	 
	 
	 	(e)	 	All perquisites and welfare benefits, including medical,
dental, vision, life and disability benefits pursuant to plans under which the
Executive and/or the Executive’s family is eligible to receive benefits and/or
coverage shall be continued for a period of thirty-six (36) months after the
Effective Date of Termination. Such benefits shall be provided to the
Executive at no less than the same coverage level as in effect as of the date
of the Change in Control. The Company shall pay the full cost of such
continued benefits, except that the Executive shall bear any portion of such
cost as was required to be borne by key executives of the Company generally at
the date of the Change in Control. Notwithstanding the foregoing, the
benefits described in this Section 2.2(e) may be discontinued prior to the end
of the periods provided in this Section to the extent, but only to the extent,
that the Executive receives substantially similar benefits from a subsequent
employer. In the event any insurance carrier shall refuse to provide coverage
to a former employee, the Company shall secure comparable coverage or may
self-insure the benefits if it pays such benefits together with a payment to
the Executive equal to the federal income tax consequences of payments to a
former highly compensated employee from a discriminatory self-insured plan.
	 
	 	(f)	 	The Executive shall be entitled to reimbursement for actual
payments made for professional outplacement services or job search not to
exceed $15,000 in the aggregate.
	 
	 	(g)	 	In determining the Executive’s pension benefit following entitlement to a
Severance Benefit, (i) the Executive shall be deemed to have satisfied the age
and service requirements for full vesting under the Company’s qualified
(within applicable legal parameters), non-qualified and supplemental pension
plans as of the Effective Date of Termination in which the Executive then
participates such that the Executive shall be entitled to receive the full
accrued benefit (based on actual service rendered through the Effective Date
of Termination plus the service under subsection 2.2(g)(ii)) under all such
plans in effect as of the date of the Change in Control, without any actuarial
reduction for early payment and (ii) the Executive shall be credited with
years of service for all purposes under each such plan equal to the number
used to multiply Base Compensation in Section 1.1(m) (not to exceed a
maximum total of ten credited years of service under the Company’s
Supplemental Pension Plan, if applicable). To the extent the amounts
determined after giving effect to this Section 2.2(g) cannot be paid from
or under a qualified plan, as determined by the administrator of the
qualified plan(s), such amounts shall be paid in a single cash payment
with the Accrued Obligations as provided in Section 2.2(b), it being
understood that the Executive will receive all amounts that can be paid
from or under a qualified plan from such plan when such amounts otherwise
become due.

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	 	(h)	 	If the Company is providing the Executive with the use of an
automobile on the date of the Change in Control within sixty (60) days of the
Effective Date of Termination, the Company shall acquire title to such
automobile if it does not then have title, satisfy any lease obligation, lien
or encumbrance related to such automobile and transfer to the Executive, free
and clear of all encumbrances, title to the automobile.

     2.3. Stock Options. All Company stock options previously granted to the
Executive shall be fully vested and exercisable immediately upon a Change in Control. Such options
shall be exercisable for the remainder of the term established by the Company’s stock option plan
as if the options had vested in accordance with the normal vesting schedule and the Executive had
remained an employee of the Company. Company stock acquired pursuant to any such exercise may be
sold by the Executive free of any Company restrictions, whatsoever (other than those imposed by
federal and state securities laws).

     2.4. KEPP. In the event of entitlement to a Severance Benefit and the Executive then
participates in KEPP, the Company shall pay to the Executive an amount in a single cash payment
within thirty (30) days of the Effective Date of Termination equal to the amount determined as the
sum of (i) any earned but unpaid KEPP amounts and (ii) with respect to any KEPP opportunities for
any then uncompleted KEPP Performance Periods, at the highest achievement measure for each of such
uncompleted KEPP Performance Periods.

     2.5. Termination for any Other Reason. If the Executive’s employment with the
Company is terminated under any circumstances other than those set forth in Section 2.1, including
without limitation by reason of retirement, death, disability, discharge for Cause or resignation
without Good Reason, or any termination, for any reason, that occurs prior to a Change in Control
(other than as provided below) or after twenty-four (24) months following a Change in Control, the
Executive shall have no right to receive the Severance Benefits under this Agreement or to receive
any payments in respect of this Agreement. In such event Executive’s benefits, if any, in respect
of such termination shall be determined in accordance with the Company’s retirement, survivor’s
benefits, insurance, and other applicable plans, programs, policies and practices then in effect.
Notwithstanding anything in this Agreement to the contrary, if the Executive’s employment with the
Company is terminated at any time from three (3) to eight (8) months prior to the date on which a
Change in Control occurs either (i) by the Company other than for Cause or (ii) by the Executive
for Good Reason, and it is reasonably demonstrated that termination of employment (a) was at the
request of an unrelated third party who has taken steps reasonably calculated to effect a Change in
Control, or (b) otherwise arose in connection with or in anticipation of the Change in Control,
then for all purposes of this Agreement the termination shall be deemed to have occurred as if
immediately following a Change in Control for Good Reason and the Executive shall be entitled to
Severance Benefits as provided in Section 2.2 hereof. Notwithstanding anything in this Agreement to
the contrary, if the Executive’s employment with the Company is terminated at any time within three
(3) months prior to the date on which a Change in Control occurs either (i) by the Company other
than for Cause or (ii) by the Executive for Good Reason, such termination shall conclusively be deemed to have occurred as if immediately
following a Change in Control for Good Reason and the Executive shall be entitled to Severance
Benefits as provided in Section 2.2. hereof.

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2.6. Notice of Termination. Any termination by the Company for Cause or by the
Executive for Good Reason shall be communicated by Notice of Termination to the other party. For
purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall
indicate the specific termination provision in this Agreement relied upon, and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated.

     2.7. Withholding of Taxes. The Company shall withhold from any amounts payable under
this Agreement all Federal, state, local, or other taxes that are legally required to be withheld.

     2.8. Certain Additional Payments by the Company.

	 	(a)	 	Notwithstanding anything in this Agreement to the contrary,
in the event it shall be determined that any economic benefit or payment or
distribution by the Company to or for the benefit of the Executive, whether
paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise (a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Code or any interest or penalties with respect
to such excise tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the “Excise Tax”), then
the Executive shall be entitled to receive an additional payment (a
“Gross-Up-Payment”) in an amount such that after payment by the Executive of
all taxes (including any interest or penalties imposed with respect to such
taxes), including any Excise Tax imposed upon the Gross-Up Payment, the
Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
	 
	 	(b)	 	Subject to the provisions of Section 2.8(c), all
determinations required to be made under this Section 2.8, including whether a
Gross-Up Payment is required and the amount of such Gross-Up Payment, shall be
made by the Company’s regular outside independent public accounting firm (the
“Accounting Firm”) which shall provide detailed supporting calculations both
to the Company and the Executive within fifteen (15) business days of the
Effective Date of Termination, if applicable, or such earlier time as is
requested by the Company . The initial Gross-Up Payment, if any, as determined
pursuant to this Section 2.8(b), shall be paid to the Executive within five
(5) days of the receipt of the Accounting Firm’s determination. If the
Accounting Firm determines that no Excise Tax is payable by the Executive, it
shall furnish the Executive with an opinion that the Executive has substantial
authority not to report any Excise Tax or excess parachute payments on
Executive’s federal income tax return. Any determination by the Accounting
Firm shall be binding upon the Company and the Executive. As a result of the
uncertainty in the application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have
been made (“Underpayment”), consistent with the calculations required to be
made hereunder. In the

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	 	 	 	event that the Company exhausts its remedies pursuant
to Section 2.8(c) and the Executive thereafter is required to make a payment
of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly
paid by the Company to or for the benefit of the Executive.
	 
	 	(c)	 	The Executive shall notify the Company in writing of any
claim by the Internal Revenue Service that, if successful, would require the
payment by the Company of the Gross-Up Payment. Such notification shall be
given as soon as practicable but no later than ten (10) business days after
the later of either (i) the date the Executive has actual knowledge of such
claim, or (ii) ten (10) days after the Internal Revenue Service issues to the
Executive either a written report proposing imposition of the Excise Tax or a
statutory notice of deficiency with respect thereto, and shall apprise the
Company of the nature of such claim and the date on which such claim is
requested to be paid. The Executive shall not pay such claim prior to the
expiration of the thirty-day period following the date on which he gives such
notice to the Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the Company notifies
the Executive in writing prior to the expiration of such period that the
Company desires to contest such claim, the Executive shall: (i) give the
Company any information reasonably requested by the Company relating to such
claim, (ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time, including,
without limitation, accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company, (iii) cooperate with the
Company in good faith in order effectively to contest such claim, (iv) permit
the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection
with such contest and shall indemnify and hold the Executive harmless, on an
after-tax basis, for any Excise Tax or income tax, including interest and
penalties with respect thereto, imposed as a result of such representation and
payment of costs and expenses. Without limitation of the foregoing provisions
of this Section 2.8(c), the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect of such claim and may, at its sole option, either
direct the Executive to request or accede to a request for an extension of the
statute of limitations with respect only to the tax claimed, or pay the tax
claimed and sue for a refund or contest the claim in any permissible manner,
and the Executive agrees to prosecute such contest to a determination before
any administrative tribunal, in a court of initial jurisdiction and in one or
more appellate courts, as the Company shall determine; provided, however, that
if the Company directs the Executive to pay such claim and sue for a refund,
the Company shall advance the amount of such payment to the Executive, on an
interest-free basis and

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	 	 	 	shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax, including interest or
penalties with respect thereto, imposed with respect to such advance or with
respect to any imputed income with respect to such advance; and provided
further that any extension of the statute of limitations requested or acceded
to by the Executive at the Company’s request and relating to payment of taxes
for the taxable year of the Executive with respect to which such contested
amount is claimed to be due is limited solely to such contested amount.
Furthermore, the Company’s control of the contest shall be limited to issues
with respect to which a Gross-Up Payment would be payable hereunder and the
Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing
authority.
	 
	 	(d)	 	If, after the receipt by the Executive of an amount advanced
by the Company pursuant to Section 2.8(c), the Executive becomes entitled to
receive any refund with respect to such claim, the Executive shall (subject to
the Company’s complying with the requirements of Section 2.8(c)) promptly pay
to the Company the amount of such refund (together with any interest paid or
credited thereon after taxes applicable thereto). If, after the receipt
by the Executive of an amount advanced by the Company pursuant to Section
2.8(c), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify
the Executive in writing of its intent to contest such denial of refund
prior to the expiration of thirty (30) days after such determination, then
such advance shall be forgiven and shall not be required to be repaid and
the amount of such advance shall offset, to the extent thereof, the amount
of Gross-Up Payment required to be paid.
	 
	 	(e)	 	In the event that any state or municipality or subdivision
thereof shall subject any Payment to any special tax which shall be in
addition to the generally applicable income tax imposed by such state,
municipality, or subdivision with respect to receipt of such Payment, the
foregoing provisions of this Section 2.8 shall apply, mutatis mutandis, with
respect to such special tax.

Article III. The Company’s Payment Obligation

     3.1 Payment Obligations Absolute. Except as otherwise provided in the last sentence
of Section 2.2(e), the Company’s obligation to make the payments and the arrangements provided for
in this Agreement shall be absolute and unconditional, and shall not be affected by any
circumstances, including, without limitation, any offset, counterclaim, recoupment, defense, or
other right that the Company may have against the Executive or any other party. All amounts
payable by the Company under this Agreement shall be paid without notice or demand. Each and every
payment made hereunder by the Company shall be final, and the Company shall not seek to recover all
or any part of such payment from the Executive or from whomsoever may be entitled thereto, for any
reasons whatsoever. Notwithstanding any other provisions of this Agreement to the contrary, the
Company shall have no obligation to make any payment to the

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Executive hereunder to the extent, but only to the extent, that such payment is prohibited by the terms of any final order of a Federal or
state court or regulatory agency of competent jurisdiction; provided, however, that such an order
shall not affect, impair, or invalidate any provision of this Agreement not expressly subject to
such order.

     3.2 Contractual Rights to Payments and Benefits. This Agreement establishes and
vests in the Executive a contractual right to the payments and benefits to which the Executive is
entitled hereunder. Nothing herein contained shall require or be deemed to require, or prohibit or
be deemed to prohibit, the Company to segregate, earmark, or otherwise set aside any funds or other
assets, in trust or otherwise, to provide for any payments to be made or required hereunder. The
Executive shall not be obligated to seek other employment in mitigation of the amounts payable or
arrangements made under any provision of this Agreement, and the obtaining of any such other
employment shall in no event effect any reduction of the Company’s obligations to make the payments
and arrangements required to be made under this Agreement, except to the extent provided in the
last sentence of Section 2.2(e).

Article IV . Enforcement and Legal Remedies

     4.1. Consent to Jurisdiction. Each of the parties hereto irrevocably consents to
personal jurisdiction in any action brought in connection with this Agreement in the United States
District Court for the Western District of Pennsylvania or any Pennsylvania court of competent
jurisdiction. The parties also consent to venue in the above forums and to the convenience of the
above forums. Any suit brought to enforce the provisions of this Agreement must be brought in the
aforementioned forums.

     4.2 Cost of Enforcement. In the event that it shall be necessary or desirable for the
Executive to retain legal counsel in connection with the enforcement of any or all of Executive’s
rights to Severance Benefits under Section 2.2 of this Agreement, and provided that the Executive
substantially prevails in the enforcement of such rights, the Company, as applicable, shall pay (or
the Executive shall be entitled to recover from the Company, as the case may be) the Executive’s
reasonable attorneys’ fees, costs and expenses in connection with the enforcement of Executive’s
rights.

Article V. Binding Effect; Successors

     The rights of the parties hereunder shall inure to the benefit of their respective successors,
assigns, nominees, or other legal representatives. The Company shall require any successor
(whether direct or indirect, by purchase, merger, reorganization, consolidation, acquisition of
property or stock, liquidation, or otherwise) to all or a significant portion of the assets of the
Company, as the case may be, by agreement in form and substance reasonably satisfactory to the
Executive, expressly to assume and agree to perform this Agreement in the same manner and to the
same extent that the Company, as the case may be, would be required to perform if no such
succession had taken place. Regardless of whether such agreement is executed, this Agreement shall
be binding upon any successor in accordance with the operation of law and such successor shall be
deemed the “Company”, as the case may be, for purposes of this Agreement.

-11-

 

Article VI. Term of Agreement

     The term of this Agreement shall commence on the Effective Date and shall continue in effect
for three (3) full years (the “Term”) unless further extended as provided in this Article. The
Term of this Agreement shall be automatically and without action by either party extended for one
additional calendar month on the last business day of each calendar month so that at any given time
there are no fewer than 35 nor more than 36 months remaining unless one party gives written notice
to the other that it no longer wishes to extend the Term of this Agreement, after which written
notice, the Term shall not be further extended except as may be provided in the following sentence.
However, in the event a Change in Control occurs during the Term, this Agreement will remain in
effect for the longer of: (i) thirty-six (36) months beyond the month in which such Change in
Control occurred; or (ii) until all obligations of the Company hereunder have been fulfilled and
all benefits required hereunder have been paid to the Executive or other party entitled thereto.

Article VII. Miscellaneous

     7.1 Employment Status. Neither this Agreement nor any provision hereof shall be
deemed to create or confer upon the Executive any right to be retained in the employ of the Company
or any subsidiary or other affiliate thereof.

     7.2 Beneficiaries. The Executive may designate one or more persons or entities as
the primary and/or contingent Beneficiaries of any Severance Benefits owing to the Executive under
this Agreement. Such designation must be in the form of a signed writing acceptable to the Board
of Directors of the Company. The Executive may make or change such designation at any time.

     7.3 Entire Agreement. This Agreement contains the entire understanding of the
Company and the Executive with respect to the subject matter hereof. Any payments actually made
under this Agreement in the event of the Executive’s termination of employment shall be in lieu of
any severance benefits payable under any severance plan, program, or policy of the Company to which
the Executive might otherwise be entitled.

     7.4 Gender and Number. Except where otherwise indicated by the context, any
masculine term used herein also shall include the feminine; the plural shall include the singular,
and the singular shall include the plural.

     7.5 Notices. All notices, requests, demands, and other communications hereunder must
be in writing and shall be deemed to have been duly given if delivered by hand or mailed within the
continental United States by first-class certified mail, return receipt requested, postage prepaid,
to the other party, addressed as follows:

     (a) If to the Company:

Allegheny Technologies Incorporated

1000 Six PPG Place

Pittsburgh, PA 15222-5479

Attn: Executive Vice President, Human Resources, Chief Legal and Compliance Officer, General

Counsel and Corporate Secretary

-12-

 

     (b) If to Executive, to the Executive’s address set forth at the end of this Agreement.
Addresses may be changed by written notice sent to the other party at the last recorded address of
that party.

     7.6 Execution in Counterparts. The parties hereto in counterparts may execute this
Agreement, each of which shall be deemed to be original, but all such counterparts shall constitute
one and the same instrument, and all signatures need not appear on any one counterpart.

     7.7. Severability. In the event any provision of this Agreement shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining
parts of the Agreement, and the Agreement shall be construed and enforced as if the illegal or
invalid provision had not been included. Further, the captions of this Agreement are for
convenience of reference and not part of the provisions hereof and shall have no force and effect.

     7.8. Modification. No provision of this Agreement may be modified, waived, or
discharged unless such modification, waiver, or discharge is agreed to in writing and signed by the
Executive and on behalf of the Company.

     7.9. Applicable Law. To the extent not preempted by the laws of the United States,
the laws of the Commonwealth of Pennsylvania, other than the conflict of law provisions thereof,
shall be the controlling laws in all matters relating to this Agreement.

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

	 	 	 	 	 
	 	ALLEGHENY TECHNOLOGIES INCORPORATED 

 	 
	 	By:  	 	 
	 	 	 	 
	 	 	Title:  	Executive Vice President, Human Resources, Chief Legal
and Compliance Officer, General
Counsel and Corporate Secretary 	 
	 

	 	 	 
	 

	 	EXECUTIVE:
	 
	 	 
	 

	 	 
	 
	 	 
	 

	 	Name:
	 

	 	Address:

-13-<PAGE>

                                                              EXHIBIT 10 (xxvii)

================================================================================

                   SINO-FOREIGN EQUITY JOINT VENTURE CONTRACT

                                       FOR

             COOPER CHENGSHAN (SHANDONG) PASSENGER TIRE COMPANY LTD.

                                  BY AND AMONG

                SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES

                                       AND

                 COOPER TIRE INVESTMENT HOLDING (BARBADOS) LTD.

                                       AND

                         JOY THRIVE INVESTMENTS LIMITED

================================================================================

                                OCTOBER 27, 2005

<PAGE>

                                TABLE OF CONTENTS
<TABLE>
<CAPTION>
CHAPTER                                                                   PAGE
----------                                                                ----
<S>                                                                       <C>
CHAPTER 1   DEFINITIONS.................................................    1
CHAPTER 2   PARTIES TO THE CONTRACT.....................................    1
CHAPTER 3   ESTABLISHMENT OF THE JOINT VENTURE..........................    2
CHAPTER 4   PURPOSE, BUSINESS SCOPE AND SCALE OF THE JOINT VENTURE......    3
CHAPTER 5   TOTAL INVESTMENT AND REGISTERED CAPITAL.....................    3
CHAPTER 6   REPRESENTATIONS AND WARRANTIES..............................    5
CHAPTER 7   RESPONSIBILITIES OF THE PARTIES.............................    7
CHAPTER 8   BOARD OF DIRECTORS..........................................    9
CHAPTER 9   OPERATION AND MANAGEMENT....................................   13
CHAPTER 10  LABOR MANAGEMENT............................................   15
CHAPTER 11  FINANCIAL AFFAIRS AND ACCOUNTING............................   16
CHAPTER 12  PROFIT DISTRIBUTION.........................................   17
CHAPTER 13  TAXATION AND INSURANCE......................................   18
CHAPTER 14  PURCHASE OF MATERIALS AND SALE OF PRODUCTS..................   18
CHAPTER 15  CONFIDENTIALITY AND NON-COMPETE.............................   19
CHAPTER 16  DURATION, TERMINATION AND LIQUIDATION.......................   21
CHAPTER 17  BREACH OF CONTRACT..........................................   26
CHAPTER 18  FORCE MAJEURE...............................................   26
CHAPTER 19  DISPUTE RESOLUTION..........................................   26
CHAPTER 20  GOVERNING LAW & CHANGE OF LAW...............................   27
CHAPTER 21  EFFECTIVE DATE OF THE CONTRACT..............................   28
</TABLE>

                                       i

<PAGE>

<TABLE>
<S>                                                                        <C>
CHAPTER 22  MISCELLANEOUS PROVISIONS....................................   28
APPENDIX 1  DEFINITIONS AND INTERPRETATION
APPENDIX 2  CAPITAL CONTRIBUTION SCHEDULE
APPENDIX 3  ASSET PURCHASE AGREEMENT
APPENDIX 4  AGREEMENT ON LABOR/PERSONNEL ISSUES
APPENDIX 5  OFFICE, SINGLE-WORKER DORMITORY AND
            EMPLOYEE CAFETERIA LEASE AGREEMENT
</TABLE>

                                       ii

<PAGE>

                          EQUITY JOINT VENTURE CONTRACT

This Sino-foreign Equity Joint Venture Contract (this "CONTRACT") is made and
entered into in the People's Republic of China ("CHINA" or "PRC") on this 27th.
day of October, 2005, in accordance with the PRC Sino-foreign Equity Joint
Venture Law (the "JOINT VENTURE LAW") and other relevant PRC laws and
regulations, by and among:

(1)   SHANDONG CHENGSHAN TIRE COMPANY LIMITED BY SHARES, a company limited by
      shares duly organized and existing under the laws of the PRC with its
      legal address at No. 98, Nanshan Road North, Rongcheng City, Shandong
      Province, PRC ("PARTY A");

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

(3)   JOY THRIVE INVESTMENTS LIMITED, 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 ("PARTY C").

(Each party is hereinafter individually referred to as a "PARTY" and
collectively as the "PARTIES".)

In accordance with the principles of equality and mutual benefit, the Parties
have held friendly negotiations in relation to the terms and conditions for
establishing a Sino-foreign equity joint venture.

NOW, THEREFORE, the Parties hereby agree as follows:

                              CHAPTER 1 DEFINITIONS

Unless the terms or context of this Contract provide otherwise, capitalized
terms used herein without definition have the meanings assigned to them in
Appendix 1 attached to this Contract.

                        CHAPTER 2 PARTIES TO THE CONTRACT

2.1  The Parties. The Parties to this Contract are as follows:

     (1) Party A:                       Shandong Chengshan Tire Company Limited
                                        by Shares

         Country of Registration:       PRC

         Legal Address:                 No. 98, Nanshan Road North, Rongcheng
                                        City, Shandong Province, PRC

         Current Legal Representative:  Che Hong-Zhi

                                       1

<PAGE>

         Nationality:                   Chinese

     (2) Party B:                       Cooper Tire Investment Holding
                                        (Barbados) Ltd.

         Country of Registration:       Barbados

         Legal Address:                 Whitepark House, White Park Road,
                                        Bridgetown, Barbados

         Current Legal Representative:  Harold C. Miller

         Nationality:                   U.S.A

     (3) Party C:                       Joy Thrive Investments Limited

         Country of Registration:       British Virgin Islands

         Legal Address:                 P.O. Box 957, Offshore Incorporations
                                        Center, Road Town, Tortola, British
                                        Virgin Islands

         Current Legal Representative:  Nuansir Sirisuwat

         Nationality:                   Thailand

                  CHAPTER 3 ESTABLISHMENT OF THE JOINT VENTURE

3.1   Establishment of the Joint Venture. In accordance with the Joint Venture
      Law and other relevant PRC laws and regulations, the Parties hereby enter
      into this Contract for the establishment of the Joint Venture as a
      Sino-foreign equity joint venture in the form of a limited liability
      company.

3.2   Joint Venture Name, Legal Address.

      (1)   The name of the Joint Venture in English is "Cooper Chengshan
            (Shandong) Passenger Tire Company Ltd." The name of the Joint
            Venture in Chinese is [CHINESE CHARACTERS]

      (2)   The legal address of the Joint Venture is No. 99, West Qingshan Road
            , Rongcheng City, Shandong Province, PRC.

3.3   Limited Liability Company. The Joint Venture shall be organized as a
      company with limited liability under PRC law, liable for its own debts
      with its own assets. The liability of each Party shall be limited to the
      amount of the Registered Capital expressly subscribed by such Party
      according to Article 5.2 hereof. No Party shall be obligated at any time
      to provide any funds to, or on behalf of, the Joint Venture by way of
      capital contribution, loan, advance, guarantee or otherwise, except as
      specifically provided in this Contract, or as otherwise agreed to in
      writing by the Parties. The Parties shall not be liable for the debts of
      the Joint Venture, unless otherwise specifically agreed in writing

                                       2

<PAGE>

      between a particular creditor and the Party or Parties concerned. Subject
      to the terms and conditions of this Contract, the profits, risks and
      losses of the Joint Venture shall be shared by the Parties in proportion
      to their respective contributions to the Registered Capital.

3.4   PRC Law. The activities of the Joint Venture shall be governed by, and its
      legal rights and operational autonomy shall be protected in accordance
      with, the laws and regulations of the PRC.

        CHAPTER 4 PURPOSE, BUSINESS SCOPE AND SCALE OF THE JOINT VENTURE

4.1   Purpose of Joint Venture. The purpose of the Joint Venture is to fully
      initiate advantages of the Parties so as to enhance production technical
      standard, to promote high quality products, to produce internationally
      reputable products, to apply brand-new operation concept and management
      method, to strengthen overall capacity and competitiveness in the
      international market, to increase economic benefit, and to produce a
      satisfactory return to all investors; meanwhile, to boost the industrial
      level through an integration of the tire industry, to provide job
      opportunities in the locale, to introduce more foreign capital to the
      locale, and for sure to enhance the fast economic development in Rongcheng
      City.

4.2   Scope of Business. The Joint Venture's scope of business shall be to
      design, develop, manufacture, and sell half-steel radial passenger tires
      and half-steel radial light truck tires; provide technical support and
      services for such products.

4.3   Scale of Joint Venture. The tire manufacture volume of the Joint Venture
      shall to the extent practicable increase by 10% per year over the next
      three years. The Joint Venture shall from time to time introduce and
      utilize the international modern technology and management expertise to
      fully activate investment benefits.

               CHAPTER 5 TOTAL INVESTMENT AND REGISTERED CAPITAL

5.1   Total Investment and Registered Capital. The Total Investment of the Joint
      Venture shall be United States Dollars ninety-nine million
      (US$99,000,000). The Registered Capital of the Joint Venture shall be
      United States Dollars thirty-three million (US$33,000,000).

5.2   Capital Contributions. Subject to the Capital Contribution Schedule
      attached as Appendix 2 hereto, each Party shall contribute to the
      Registered Capital as follows:

      (1)   Party A shall contribute all of the land use rights and buildings
            free of all liens and encumbrances to the Joint Venture, valued in
            the amount of United States Dollars eleven million five hundred
            fifty thousand (US$ 11,550,000), representing thirty five percent
            (35%) of the Registered Capital;

      (2)   Party B shall contribute cash in the amount of United States Dollars
            sixteen million eight hundred and thirty thousand (US$16,830,000),
            representing fifty one percent (51%) of the Registered Capital; and

                                       3

<PAGE>

      (3)   Party C shall contribute cash in the amount of United States Dollars
            four million six hundred and twenty thousand (US$4,620,000),
            representing fourteen percent (14%) of the Registered Capital.

5.3   Schedule for Capital Contributions. Subject to Article 5.4 below, the
      Parties shall contribute their respective contributions to the Registered
      Capital in accordance with the Capital Contribution Schedule attached as
      Appendix 2 hereto.

5.4   Conditions Precedent to the Contribution of Registered Capital. The
      Parties' contribution to the Registered Capital of the Joint Venture
      pursuant to Article 5.2 hereof shall be conditioned on the satisfaction of
      all of the following:

      (1)   the Examination and Approval Authority has issued a Certificate of
            Approval, and any required changes to this Contract have been agreed
            to in writing by the Parties; and

      (2)   a Business License has been granted to the Joint Venture which
            authorizes the full scope of business of the Joint Venture described
            in Article 4.2 or any required changes thereto have been agreed to
            in writing by the Parties.

5.5   Capital Contribution Verification and Certificate. An accountant
      registered in the PRC shall be engaged by the Joint Venture to verify the
      respective capital contributions of each Party and provide a capital
      verification report(s) accordingly. The Joint Venture, upon the receipt of
      a satisfactory capital verification report, shall issue a capital
      contribution certificate to the relevant Party. This certificate shall
      include the following items: name of the Joint Venture; the Establishment
      Date; the names of the Parties and the amount of their respective capital
      contributions; the date on which the capital contributions were made; and
      the date of issuance of the capital contribution certificate. Each capital
      contribution certificate shall be signed by the Chairman and the
      Vice-Chairman of the Joint Venture. The capital contribution certificates
      shall only certify the investment of each Party and shall not be deemed as
      a note or other negotiable instrument.

5.6   Financing. Subject to the terms and conditions of this Contract, to the
      greatest extent permitted by relevant law, the Joint Venture may finance
      its operations and capital needs by way of loans, including but not
      limited to shareholder loans, loans from such banks, other financial
      institutions or qualified lenders inside or outside of China and upon such
      terms and subject to such conditions as may be approved by the Board.

5.7   Increase of Registered Capital. The Registered Capital of the Joint
      Venture may be increased by a unanimous resolution of the Board, which
      resolution shall stipulate the timing and other terms of such increase,
      with such increase subject to the approval of the Examination and Approval
      Authority and registration with the Registration Authority. If any Party
      chooses not to participate in any such additional investment in the Joint
      Venture, any other Party or Parties shall have the option to make the
      additional contribution to the Joint Venture's Registered Capital and the
      ownership percentages of the Parties' equity in the Joint Venture shall be
      adjusted accordingly.

5.8   Failure to Make Contributions to Registered Capital.

                                       4

<PAGE>

      (1)   If any Party or Parties ("BREACHING PARTY(IES)") fails to make any
            contribution to the Registered Capital within the period set forth
            in Article 5.3 (the amount due and owing is referred to as the
            "DEFAULT CAPITAL CONTRIBUTION"), the Breaching Party(ies) shall pay
            the other Parties or Party (the "NON-BREACHING Party(ies)") (in
            proportion to their Percentage Interests) a default penalty of 0.05%
            per day based on the Default Capital Contribution from the first day
            of the breach until the day on which the Default Capital
            Contribution is contributed in full by the Breaching Party(ies).

      (2)   Notwithstanding the foregoing, if the Breaching Party(ies) fails to
            make the Default Capital Contribution for more than 30 days, the
            Non-Breaching Party(ies) shall have the right to determine, in
            accordance with the applicable laws and regulations, to:

            (i)   make the additional contribution to satisfy the amount of the
                  Registered Capital of the Joint Venture, so as to increase the
                  Percentage Interest(s) of the Non-Breaching Party(ies) and
                  dilute the Percentage Interest(s) of the Breaching Party(ies)
                  accordingly; or

            (ii)  terminate this Contract in accordance with Article 16.2,
                  subject to the approval of the Examination and Approval
                  Authority.

      (3)   The provisions of this Article 5.8 shall not prejudice any other
            rights or remedies the Non-Breaching Party(ies) may have under this
            Contract or under applicable laws and regulations with respect to
            the failure of the Breaching Party(ies) to contribute capital.

5.9   Transfer of Equity Interests. If one Party wishes to transfer all or part
      of its Percentage Interest in the Joint Venture to any third party, it
      shall obtain the written consent of (including waiver of preemptive rights
      by) the other Parties, and the transfer shall be presented to the
      Examination and Approval Authority for approval.

5.10  Assets Transfer. On the date of this Contract, Party A and the Joint
      Venture shall enter into an asset purchase agreement (the "ASSET PURCHASE
      AGREEMENT") in substantially the form attached as Appendix 3 hereto for
      any existing assets of Party A in respect of the business specified in
      Article 4.2 hereof, as identified by the Joint Venture and Party A, to be
      transferred to the Joint Venture.

                    CHAPTER 6 REPRESENTATIONS AND WARRANTIES

6.1   Representations and Warranties. Each Party hereby represents and warrants
      that, as of the date of this Contract and as of a date on which a Party
      makes a capital contribution to the Joint Venture in accordance with
      Article 5.2 herein, it:

      (1)   has the capacity and authority to enter into this Contract and to
            perform its obligations hereunder, and is duly organized and validly
            existing under the laws of the PRC in the case of Party A, and under
            the laws of Barbados in the case of Party B, and under the laws of
            British Virgin Islands in the case of Party C;

                                       5

<PAGE>

      (2)   is not a party to, bound by or subject to any contract, instrument,
            charter or by-law provision, statute, regulation, order, judgment,
            decree or law which would be violated, contravened or breached by,
            or under which any default would occur as a result of, the execution
            and delivery by such Party of this Contract or the performance by
            such Party of any of the terms of this Contract, or which restricts
            such Party from entering into this Contract or performing its
            obligations and abiding by the terms hereunder;

      (3)   has duly authorized, executed and delivered this Contract and that
            this Contract constitutes a legal, valid and binding obligation
            enforceable in accordance with its terms;

      (4)   will contribute or transfer assets in a manner which does not
            conflict with, violate or result in a breach of, any of the terms,
            conditions or provisions of any law, regulation, order, writ,
            injunction, decree, determination or award of any court,
            governmental department, board, agency or instrumentality or any
            arbitrator, or result in the creation or imposition of any lien,
            charge, security interest or encumbrance of any nature whatsoever
            upon such assets;

      (5)   freely enters into this Contract and has not and will not hereafter
            incur any obligations or commitments of any kind which would in any
            way hinder or interfere with its acceptance or performance of its
            obligations hereunder; and

      (6)   (i) has carefully read the entire Contract including the Appendices
            hereto; (ii) fully understands all of the terms, conditions,
            restrictions and provisions set forth in this Contract, (iii) agrees
            that the terms, conditions, restrictions and provisions herein are
            necessary for the reasonable and proper protection of the business
            of the Joint Venture and the other Parties, and (iv) acknowledges
            that each such term, condition, restriction and provision is fair
            and reasonable with respect to the subject matter thereof.

6.2   Representations and Warranties in Respect of Party A's Assets. In respect
      of Party A's existing assets relating to the business specified in Article
      4.2 hereof, Party A represents, warrants and undertakes to Party B and
      Party C, as of the date of this Contract and as of the Closing Date (as
      such term defined in the Asset Purchase Agreement), those representations,
      warranties and undertakings set forth in the Asset Purchase Agreement are
      true and accurate in material way.

6.3   Cure and Indemnification Obligations.

      (1)   In case of any breach of the Contract by any Party, it shall, in
            accordance with the direction of any non-breaching Party within
            thirty (30) days after receiving a notice of such non-breaching
            Party concerning any breach, take all necessary actions to cure such
            breach.

      (2)   Each Party agrees to indemnify and hold the other Parties and the
            Joint Venture harmless from and against any and all claims, losses,
            damages, and costs arising out of any of its breach of any of its
            covenants or representations and warranties contained herein,
            including reasonable attorneys' fees incurred in connection with the
            enforcement of this Contract or the undertaking of any necessary
            legal actions or responses involving any third parties.

                                       6

<PAGE>

                    CHAPTER 7 RESPONSIBILITIES OF THE PARTIES

7.1   Party A's Responsibilities. In addition to its other obligations under
      this Contract, Party A shall be responsible for the following matters:

      (1)   Providing capital contributions in accordance with the terms and
            conditions of this Contract and the Capital Contribution Schedule
            attached as Appendix 2 hereto;

      (2)   Using its best endeavors (acting at all times in close consultation
            with Party B and Party C) to assist the Joint Venture to:

            (a)   obtain all necessary governmental approvals and completing all
                  required registrations for the establishment and operation of
                  the Joint Venture;

            (b)   liaise with PRC national, provincial, municipal or local
                  governmental authorities and other relevant institutions or
                  organizations;

            (c)   obtain the most preferential tax, customs, foreign exchange
                  and other favorable treatment that are or may become available
                  to the Joint Venture and/or the Parties under relevant
                  national and local laws and regulations of the PRC; and

            (d)   procure necessary equipment, materials, articles for office
                  use, means of transportation, telecommunications facilities
                  and other public utilities, in accordance with the Joint
                  Venture's request.

      (3)   Using its best endeavors (acting at all times in close consultation
            with Party B and Party C) to assist the Joint Venture to register
            with the relevant tax bureau, to open such foreign exchange and RMB
            bank accounts, assist the Joint Venture with all required foreign
            exchange approvals, and assist the Joint Venture in applying for all
            approvals required to remit to Party B and Party C in foreign
            exchange distributable profits and all other payments required to be
            paid to Party B and/or Party C;

      (4)   Providing necessary assistance to the Joint Venture in recruiting
            suitable management personnel, technical personnel and other
            necessary employees to be employed by the Joint Venture;

      (5)   Assisting the Joint Venture to contact banks and other financial
            institutions inside the PRC and hold discussions with them with
            respect to the raising of any loans required by the Joint Venture;

      (6)   Assisting foreign workers, staff, and personnel (including
            Directors, managers, technicians, and contractors appointed or
            selected by Party B and/or Party C) in obtaining PRC visas and work
            permits for travel to China directly related to the operation of the
            Joint Venture if requested by Party B and/or Party C;

                                       7

<PAGE>

      (7)   Causing Chengshan Group to enter into the lease agreements in
            substantially the form attached as Appendix 5 hereto in respect of
            the office space, single-worker dormitories and employee cafeteria
            with the Joint Venture, pursuant to which Chengshan Group, at the
            discretion and request of the Joint Venture, shall lease the office
            space, single-worker dormitory and employee cafeteria to the Joint
            Venture as necessary for normal and effective use and operation of
            the Joint Venture.

      (8)   Executing and performing, in accordance with the terms therein, the
            various Supplementary Contracts to which it is a party;

      (9)   Be responsible for any environmental pollution, fines, charges or
            losses caused by it prior to the Establishment Date, and indemnify
            the Joint Venture for any financial burden and/or losses arising out
            of any contamination caused by Party A prior to the Establishment
            Date; and

      (10)  Assisting with and carrying out other relevant matters as may be
            reasonably requested by the Board from time to time.

7.2   Responsibilities of Party B. In addition to its other obligations under
      this Contract, Party B shall be responsible for the following matters:

      (1)   Providing capital contributions in accordance with the terms and
            conditions of this Contract and the Capital Contribution Schedule
            attached as Appendix 2 hereto;

      (2)   Providing any necessary assistance to the Joint Venture's
            recruitment of suitable expatriate management personnel, technical
            personnel and other necessary expatriate employees to be employed by
            the Joint Venture on the basis of merit;

      (3)   Assisting the Joint Venture to contact banks and other financial
            institutions outside of the PRC and hold discussions with them with
            respect to the raising of any foreign exchange loans required by the
            Joint Venture;

      (4)   Assisting the Joint Venture in training key staff and employees;

      (5)   Seconding relevant management personnel, technical personnel and
            other necessary staff to work for the Joint Venture as per the Joint
            Venture's request;

      (6)   To the extent practicable, providing internationally advanced
            technology to the Joint Venture; and

      (7)   Assisting with and carrying out other relevant matters requested by
            the Joint Venture from time to time.

7.3   Responsibilities of Party C. In addition to its other obligations under
      this Contract, Party C shall be responsible for the following matters:

      (1)   Providing capital contributions in accordance with the terms and
            conditions of this Contract and the Capital Contribution Schedule
            attached as Appendix 2 hereto; and

                                       8

<PAGE>

      (2)   Assisting with and carrying out other relevant matters requested by
            the Joint Venture from time to time.

7.4   Execution of Supplementary Contracts. Before the Establishment Date, the
      Parties may jointly sign the Supplementary Contracts on behalf of the
      Joint Venture. After the Establishment Date, all Supplementary Contracts
      signed by the Parties shall be ratified by the Board in accordance with
      the procedures set forth herein and in the Joint Venture's Articles of
      Association and formally executed by the legal representative of the Joint
      Venture. Each Party shall be bound by the relevant Supplementary Contracts
      to which it is a contracting party on his own behalf, provided that,
      however, no Party shall incur any liability or assume any obligations
      solely as a result of its signing of any Supplementary Contracts on behalf
      of the Joint Venture before the Establishment Date.

7.5   Related Party Transactions. The Parties shall procure that all related
      party transactions with respect to the Joint Venture shall be transparent
      to the Parties and be conducted on an arm's length basis. Any significant
      purchases (including purchases of raw materials but excluding Products) by
      the Joint Venture from Party B or its Affiliates shall be sold by Party B
      or its Affiliates to the Joint Venture at cost, unless otherwise agreed by
      the Parties. The Vice General Manager or another member of the senior
      management team nominated by Party A, and either the General Manager or
      another member of the senior management team nominated by Party B shall
      approve all related party purchases.

                          CHAPTER 8 BOARD OF DIRECTORS

8.1   Formation of the Board.

      (1)   The Board shall be the highest authority of the Joint Venture. It
            shall discuss and determine all strategic business and financial
            issues and operational issues of the Joint Venture in accordance
            with the provisions of this Contract and the Articles of
            Association.

      (2)   The Board shall consist of seven (7) Directors, of which two (2)
            shall be appointed by Party A, four (4) shall be appointed by Party
            B, and one (1) shall be appointed by Party C. At the time this
            Contract is executed and when replacement Directors are appointed,
            the Parties shall notify one another in writing of the names and
            addresses of its appointees, together with a brief curriculum vitae
            and a list of other official functions, if any, that the relevant
            appointees will concurrently carry out for the Joint Venture. Each
            Party shall cause the Directors appointed by it to perform the
            obligations specified in this Contract and as required under
            relevant PRC laws and regulations.

      (3)   Directors shall each be appointed for terms of four (4) years, and
            may serve consecutive terms if reappointed by the Party originally
            appointing such Director.

      (4)   Any Party may, at any time with or without cause, remove and replace
            a Director that it has appointed by written notice to the Joint
            Venture and to the other Party. If a seat on the Board is vacated
            due to the retirement, resignation, illness, disability or death of
            a Director or by the removal of such Director by the

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            original appointing Party, the Party which originally appointed such
            Director shall appoint a successor to serve the remainder of such
            Director's term.

      (5)   If either Party or the Board has reason to believe that a Director
            has materially breached his/her duties as a Director (provided such
            breach appear to be supported by reasonable grounds as determined by
            a simple majority of the Directors), or has been convicted of
            committing an act or omission constituting fraud, theft,
            embezzlement or other violations of relevant PRC law, the Board may
            remove the relevant Director immediately. Following any such
            removal, the Party that originally appointed the relevant Director
            shall appoint a successor to serve the remainder of such Director's
            term.

8.2   Chairman and Vice Chairman of the Board.

      (1)   The Board shall have one (1) Chairman and one (1) Vice Chairman. A
            Director appointed by Party B shall serve as Chairman of the Board,
            and a Director appointed by Party A shall serve as Vice Chairman of
            the Board.

      (2)   The Chairman of the Board shall be the sole legal representative of
            the Joint Venture. The Chairman shall perform his or her duties and
            responsibilities within the scope of authority delegated by the
            Board, and in accordance with this Contract and relevant PRC laws.
            Without prejudice to Article 8.1(4) above, when the Chairman is
            temporarily unable to perform his or her responsibilities, he or she
            may designate in writing the Vice Chairman or any other Director to
            represent the Joint Venture in such capacity within such temporary
            period.

8.3   Powers of the Board.

      (1)   Each Director shall have one vote on any matter subjected to Board
            vote. Neither the Chairman nor the Vice-Chairman, in their capacity
            as such, shall be entitled to have any extra vote in any meeting of
            the Board. This provision is without prejudice to Article 8.4(6) on
            proxies.

      (2)   The quorum necessary for a meeting of the Board shall be two thirds
            (2/3) of the Directors. This requires at least five (5) directors to
            be in attendance for a quorum.

      (3)   The following matters require a decision by the Board supported by
            the affirmative vote of all Directors present and eligible to vote
            (or represented in accordance with Article 8.4(6) in a duly
            constituted meeting of the Board or as per Article 8.4(9):

            (a)   any amendment of the Articles of Association;

            (b)   termination of this Contract;

            (c)   dissolution of the Joint Venture;

            (d)   increase or decrease of the Registered Capital of the Joint
                  Venture;

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            (e)   amalgamation or merger of the Joint Venture with any other
                  company, association, partnership or legal entity; and

            (f)   division or change in the form of legal organization of the
                  Joint Venture.

      (4)   The following matters require a decision by the Board supported by
            the affirmative vote of two thirds (2/3) of the Directors present
            and eligible to vote (or represented in accordance with Article
            8.4(6) in a duly constituted meeting of the Board or as per Article
            8.4(9):

            (a)   overall macro business strategy;

            (b)   derivation from profit distribution plan set forth in Article
                  12;

            (c)   the Joint Venture's external guarantee;

            (d)   major assets disposal (defined as assets with a net book value
                  greater than Five Million United States Dollars
                  (US$5,000,000));

            (e)   selection of the External Financial Auditor with the
                  restriction that the selected Auditor must be one of the Big
                  Four; and

            (f)   approval of financial control and financial reporting /
                  accounting policies (must be in compliance with Chinese law
                  and applicable U.S. law)

      (5)   The Parties agree that all matters except those listed in Article
            8.3(3) and Article 8.3(4) above can be decided by the Board
            supported by a simple majority of Directors present and eligible to
            vote (or represented in accordance with Article 8.4(6)) in a duly
            constituted meeting of the Board or as per Article 8.4(9).

      (6)   The Board shall by resolution supported by a simple majority of
            Directors formally authorize the General Manager and/or other
            Persons with necessary powers to implement decisions of the Board in
            accordance with this Contract, and, more generally, to conduct the
            day-to-day business of the Joint Venture in accordance with the then
            current business plan.

      (7)   The Board shall adopt rules and procedures regarding (a) provision
            of guarantee or security by the Joint Venture to any Person, (b)
            creation of any security interest on any property of the Joint
            Venture, (c) custody of the Joint Venture's chops, and (d) such
            other matters as the Board deems necessary.

8.4   Board Meetings.

      (1)   Board meetings shall be held at least twice (2) a year. Meetings
            shall be held at the registered address of the Joint Venture or such
            other address in China or abroad as may be agreed by the Board. The
            first Board meeting shall be held no later than sixty (60) days
            after the Establishment Date.

      (2)   The agenda for Board meetings shall be determined by the Chairman of
            the Board, but shall include in any event the items proposed by
            other members of the Board.

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      (3)   Board Meetings shall require prior written notice to all Directors
            of not less than four (4) weeks (unless otherwise agreed unanimously
            by all the Directors) setting forth the date, time, place and
            agenda. Directors may waive their right to receive prior written
            notice of any meeting.

      (4)   Upon the written notice of the Chairman of the Board or upon written
            request of one third (1/3) or more of the Directors of the Joint
            Venture specifying the matters to be discussed, the Chairman of the
            Board shall within thirty (30) days convene an interim meeting of
            the Board, provided that a quorum will be present for such an
            interim meeting, whether in person or by proxy.

      (5)   The Chairman is responsible for convening and presiding over all
            Board meetings. If the Chairman is unable to convene and/or preside
            over a Board meeting, the Vice Chairman or a Director designated in
            writing by the Chairman shall convene and/or preside over such Board
            meeting.

      (6)   Board meetings may be attended by Directors in person, by telephone
            or video conference, provided, however, that if a Director is unable
            to participate in a Board meeting, he/she shall issue a written
            proxy authorizing another Director or individual to attend the
            meeting on his/her behalf. A Director or other individual so
            entrusted shall have the same rights and powers as the Director who
            issued the proxy.

      (7)   Board meetings shall be duly convened if a quorum is constituted in
            attendance, in person or by proxy. In the event that the Directors
            appointed by any Party fail to attend a Board meeting resulting in a
            lack of a quorum, and such failure to attend is due to a dispute
            between the Directors or Parties, such Party shall be deemed to be
            in breach of this Contract, and Article 17 will become applicable.
            If after two attempts to convene Board meetings that are not
            achieved due to the lack of a quorum, a Board meeting may be
            convened with a simple majority of Directors (provided such policy
            only applies to the face-to-face Board meetings).

      (8)   For the purpose of this clause, if a written resolution is executed
            in identical counterparts, such signed counterparts shall together
            be deemed to constitute a single resolution, effective on the day
            the last Director signs the relevant counterpart.

      (9)   Notwithstanding any other provisions herein, Board resolutions may
            be adopted by written consent by the Board in lieu of a meeting if
            the relevant resolutions are sent to all Directors and the
            resolutions are affirmatively signed and adopted by all Directors.
            Such written Board resolutions may consist of several counterparts
            in identical form each signed by one or more of the Directors. Such
            written Board resolutions shall be filed with the Board meeting
            minutes and shall have the same force and effect as a Board
            resolution adopted at a duly constituted and convened Board meeting.

      (10)  Board meetings shall be held in English and Chinese and all Board
            minutes and Board resolutions and agendas and other Board meeting
            documents shall be prepared and provided in both English and
            Chinese. The Chairman shall cause complete and accurate minutes (in
            English and Chinese versions) to be kept of all

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            meetings (including meeting notices) and of matters addressed or
            raised at such meetings. Minutes of all Board meetings shall be
            circulated to all Directors promptly after each meeting. Any
            Director who wishes to propose any amendment or addition to the
            meeting minutes shall submit the same in writing to the Chairman not
            later than fifteen (15) days after receipt of the minutes, and the
            Chairman shall circulate such proposal to all the Directors. Any
            Director who wishes to object to the proposed amendment to the
            minutes shall submit the same in writing to the Chairman and all
            other Directors not later than fifteen (15) days after receipt of
            the proposed amendment, otherwise such proposed amendment shall be
            adopted and the minutes shall be amended accordingly. If the
            proposed amendment and relevant objection are not resolved within
            thirty (30) days of the Chairman's receipt of such objection,
            neither the proposal nor the objection shall be adopted but both
            would be noted as an attachment to the minutes. All Directors shall
            sign each page of the final minutes within sixty (60) days after
            receipt of same, and return such signed copy to the Joint Venture.
            The original minutes shall be kept on file with the Joint Venture
            and shall be available to any Director or their proxies for
            inspection or copying at any reasonable time.

      (11)  No remuneration shall be paid by the Joint Venture to any of its
            Directors in his/her capacity as such; provided, however, that in
            the event that a Director is concurrently an officer of the Joint
            Venture, such Director shall be entitled to remuneration for his/her
            service as an officer only. A Director may recover from the Joint
            Venture such expenses as are reasonably and properly incurred in
            connection with his/her attending the Board meetings or other
            activities of the Joint Venture where his/her presence is required.
            The Board shall establish a policy to implement this subsection.

                       CHAPTER 9 OPERATION AND MANAGEMENT

9.1   Operation Principle. The Joint Venture will through the technical exchange
      of the Parties constantly boost production technical level to reach an
      international modern level, including product design, manufacture process,
      testing method, material recipe, quality standard and personnel training.
      The Joint Venture will constantly exert efforts on technical reform based
      on the current production equipment, in order to enhance capability of
      product line and automatization, satisfy the technical requirement and the
      needs to promote the product grade.

9.2   Management Organization

      (1)   The Joint Venture shall establish an operation and management team
            to be responsible for the Joint Venture's daily operation and
            management. Such team shall include the General Manager and such
            other personnel as determined by the Board of Directors (the
            "MANAGEMENT PERSONNEL").

      (2)   The General Manager shall be appointed by the Board upon the
            nomination of Party B and the Joint Venture Controller ("JV
            CONTROLLER") shall be appointed by the Board upon the nomination of
            Party A. Each of the Management Personnel shall be appointed or
            removed by the General Manager, except that the Vice General Manager
            and JV Controller shall be appointed or removed by the Board. Any of
            the Management Personnel shall handle matters delegated to him or
            her

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            by the General Manager and shall be responsible to the General
            Manager for the efficient implementation of such responsibilities.

      (3)   In the event that the General Manager, Vice General Manager or JV
            Controller is found incompetent, commits graft or serious
            dereliction of duty, he/she shall be dismissed by the Board.

9.3   Responsibilities of Management Personnel

      (1)   The responsibility of the General Manager shall be to carry out the
            various resolutions of the Board and to organize and direct the
            daily operation and management of the Joint Venture. The General
            Manager may consult with the Vice General Manager in dealing with
            material matters, but the General Manager shall have the authority
            to make final decisions.

      (2)   Subject to the terms and conditions imposed by the Board, the JV
            Controller shall be in charge of the day-to-day financial operations
            of the Joint Venture under the supervision of the General Manager,
            shall assist the General Manager in preparation of the documents set
            out in Article 9.3(5)(a)(1) below, and shall carry out the decisions
            of the Board and General Manager.

      (3)   If the General Manager or any other Management Personnel intends to
            resign from his or her position, such person shall be required to
            submit the resignation notice to the Board at least thirty (30) days
            prior to the intended departure date.

      (4)   The General Manager shall, within the scope of the authority
            conferred upon him/her by the Board, represent the Joint Venture in
            dealings with other parties, and appoint and dismiss subordinates.

      (5)   The General Manager shall be responsible for preparation of
            following documents (all in both Chinese and English languages):

            (a)   he/she shall prepare for submission to the Board for review
                  and approval, and upon such approval shall implement, the
                  following:

                  (i)   an annual operating plan, operating budget, marketing
                        and sales budget, financial budget, business and sales
                        performance targets for the Joint Venture;

                  (ii)  the organizational and managerial rules of the Joint
                        Venture;

                  (iii) any other documents or plans for the Joint Venture that
                        are deemed necessary by the Board.

            (b)   he/she shall submit any major revisions to such budgets, plans
                  or manuals for the Joint Venture to the Board for review and
                  approval prior to their implementation.

      (6)   The General Manager shall submit a quarterly production and sales
            report and quarterly financial statements for the Joint Venture to
            the Board. Such reports

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            and statements shall be submitted in both Chinese and English
            languages within thirty (30) days following the close of the quarter
            to which such a report relates.

      (7)   When the General Manager is unable to carry out his duties, the Vice
            General Manager may serve as the acting General Manager until a new
            General Manager or acting General Manager is appointed by the Board
            upon the nomination of Party B in the next Board meeting convened in
            accordance with Article 8.4 herein.

      (8)   The General Manager and all other Management Personnel and working
            personnel of the Joint Venture shall be required not to disclose any
            commercial secrets or trade secrets of the Joint Venture.

9.4   Qualifications of Management Personnel

      (1)   The General Manager and the other Management Personnel shall be
            skilled and qualified as for the management of the Joint Venture,
            and meet other qualifications and the performance criteria
            established by the Board.

      (2)   Compensation and other terms and conditions of employment for the
            General Manager and other Management Personnel shall be determined
            by the Board and provided in the employment contracts signed between
            the relevant individual and the Joint Venture. The Joint Venture
            shall bear the salary as well as proper compensation package of
            expatriate employees (if any).

                           CHAPTER 10 LABOR MANAGEMENT

10.1  Governing Principle. Matters relating to the recruitment, employment,
      management, dismissal, resignation, wages, welfare benefits, subsidies,
      labor insurance, social security and other matters concerning the staff of
      the Joint Venture shall be determined by the Board in accordance with the
      labor and social security laws and regulations of the PRC. The General
      Manager shall implement plans approved by the Board.

10.2  Working Personnel. Employees of the Joint Venture shall be employed in
      accordance with the provisions of this Contract, the Articles of
      Association, and the terms and conditions of the individual employment
      contracts concluded with each respective employee.

10.3  Compensation. In accordance with PRC laws and regulations concerning labor
      compensation, the General Manager shall implement a compensation system
      whereby employees are compensated in accordance with their technical
      ability, education, performance and position.

10.4  Confidentiality and Non-compete. The Joint Venture shall enter into
      Non-Disclosure and Non-Compete Contracts with each of its key employees,
      and the terms of such contract shall be determined by the Board. The Board
      may require the Joint Venture to enter into similar contracts with other
      employees.

10.5  Labor Union. Employees of the Joint Venture may establish a labor union in
      accordance with the Labor Union Law of the PRC (the "LABOR UNION LAW") and
      other laws and

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<PAGE>

      regulations relating to labor union activities of foreign invested
      enterprises. The Joint Venture shall allocate an ascertained amount of
      funds to the labor union in accordance with the published and effective
      laws and regulations in relation to labor union, which amount shall be
      determined by the Board in accordance with the applicable laws and
      regulations in China.

10.6  Agreement on Labor/Personnel Issues. The Parties shall, at the same time
      of the execution of this Contract, enter into an agreement on
      labor/personnel issues as attached as Appendix 4 hereto to provide for the
      details of the labor personnel issues.

                   CHAPTER 11 FINANCIAL AFFAIRS AND ACCOUNTING

11.1  Business Plan and Financial Budget

      The Parties have agreed on the procedure to make the annual business plan
      and annual financial budget as follows: the Parties shall work together in
      the manner of from bottom to the top and for the best interest of the
      Joint Venture to establish the annual business plan and annual financial
      budget to be submitted to the Board.

11.2  Accounting System.

      (1)   The Joint Venture shall maintain its books and record in accordance
            with accounting systems and procedures established in accordance
            with relevant PRC laws and regulations. Accounting systems and
            records in accordance with any international accounting rules
            preferred by Party B shall also be maintained to the full extent
            permitted by PRC law. The accounting systems and procedures to be
            adopted by the Joint Venture shall be submitted to the Board for
            approval. Once approved by the Board, the accounting systems and
            procedures shall be filed with the relevant government finance
            department and tax department for records. The debit and credit
            method, as well as the accrual basis of accounting, shall be adopted
            as the methods and principles for keeping accounts.

      (2)   Unless this Article 11.2 provides otherwise, all accounting books
            and financial statements of the Joint Venture, and all routine
            accounting records, vouchers, etc., shall be made in both English
            and Chinese if necessary.

      (3)   The Joint Venture shall adopt RMB as its standard bookkeeping base
            currency and shall also use US Dollar as supplementary bookkeeping
            currency. For purposes of preparing the Joint Venture's accounts and
            statements of the Parties' capital contributions, and for any other
            purposes where it may be necessary to effect a currency conversion,
            such conversion shall be made in accordance with the applicable
            accounting rules and relevant PRC laws and regulations.

      (4)   Monthly and annual financial statements for the Joint Venture shall
            be prepared in both the Chinese and English languages, and in RMB
            and in US Dollars. Such statements shall include at least the
            following: balance sheet, profit and loss statements, and cash flow
            statement, and shall be kept and provided to each Party and to the
            relevant authorities as required by relevant PRC accounting
            regulations, and to Party B within ten (10) days following the close
            of the quarter to which each of them relates to meet the relevant
            U.S. reporting requirement.

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11.3  Auditing.

      (1)   At the expense of the Joint Venture, the Joint Venture's Auditor
            shall be appointed by the Board to conduct an audit of the annual
            financial statements and accounts of the Joint Venture. The Parties
            agree that the Joint Venture shall, within three (3) months after
            the end of a fiscal year, submit to the Parties an annual statement
            of final accounts (including the audited profit and loss statement,
            balance sheet, cash flow statement, and statement for retained
            earnings for the fiscal year), together with the audit reports of
            the Joint Venture's Auditor.

      (2)   Each Party shall have the right at any time to audit the entire
            accounts of the Joint Venture within thirty-six (36) months from the
            end of the period to be audited. At the end of such audit, the Party
            requesting such an audit may submit queries concerning the audit to
            the Board. The Board shall reply in written form within sixty (60)
            days after receipt of the queries concerning the audit. Reasonable
            access to the Joint Venture's financial records shall be given to
            such auditor and such auditor shall keep confidential all documents
            under his/her audit.

      (3)   When a Party conducts an audit pursuant to Article 11.3(2), it shall
            bear the expenses incurred and the responsibility for the appointed
            auditor in maintaining confidentiality of all the documents so
            audited.

11.4  Bank Account & Foreign Exchange Control. The Joint Venture shall open
      foreign exchange accounts and RMB accounts and handle foreign exchange
      transactions in accordance with relevant PRC laws and regulations. The
      Board shall determine the signatories required for any disbursements of
      funds from such accounts and shall establish internal control policies
      relating to these accounts.

11.5  Fiscal Year. The Joint Venture shall adopt the calendar year as its fiscal
      year, which shall begin on January 1 and end on December 31 of the same
      year. The first fiscal year of the Joint Venture shall commence on the
      Establishment Date and shall end on December 31 thereafter.

                         CHAPTER 12 PROFIT DISTRIBUTION

12.1  Allocation to Funds. After payment of income taxes by the Joint Venture,
      the Board shall determine the annual allocations from the after-tax net
      profits to set aside reserve funds, expansion funds and bonus and welfare
      funds for staff and workers in accordance with applicable PRC laws and
      regulations.

12.2  Dividend Policy. After payment of all payable income tax, and the
      allocation of funds pursuant to Article 12.1 hereof, the Board shall
      determine the annual dividend distribution of the Joint Venture each year.
      The amount of dividend to be distributed in respect of any year shall be
      25% (or such higher percentage as determined by the Board) of the Joint
      Venture's net income after tax as reported in the audited annual financial
      statements of the Joint Venture for the year as provided for in Article
      11.5 above, but not to exceed the projected Free Cashflow of the Joint
      Venture for the immediate

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      following year. The projected Free Cashflow for the immediate following
      year shall be the amount of surplus cash projected to be generated by the
      Joint Venture in its ordinary course of business less any projected
      capital expenditures for that immediate following year based on the Joint
      Venture's operating budget as approved by the Board for that immediate
      following year.

      For fiscal years 2009, 2010 and 2011, a dividend in the amount of the
      greater of (i) the amount calculated above; or (ii) 10% of the Joint
      Venture's net income after tax as reported in the audited annual financial
      statement will be distributed. In 2011, the Parties shall review and agree
      the methodology of the amount of dividend distribution for subsequent
      fiscal years.

      For the avoidance of doubt, the Joint Venture shall not, in any
      circumstances, obtain any additional borrowings from any bank or other
      third party for the purpose of financing such dividend payment other than
      the 10% dividend payable in fiscal years 2009, 2010 and 2011.

      All dividends payable to Party B and Party C shall be paid in US$. The
      Joint Venture shall bear any loss, gain or bank charges or other fees
      associated with the dividends payment.

                        CHAPTER 13 TAXATION AND INSURANCE

13.1  Income Tax, Customs Duties and Other Taxes. The Joint Venture and its
      employees shall pay taxes pursuant to relevant PRC laws and regulations.
      The Joint Venture shall use its best endeavors to apply for and obtain
      preferential treatment, including tax and customs benefits, permitted by
      the law.

13.2  Insurance. The Joint Venture shall maintain, in accordance with relevant
      PRC law, insurance as determined by the Board from time to time to cover
      the Joint Venture's assets, operations and other business activities.

13.3  Product Liability Insurance. The Joint Venture shall secure and will
      maintain combined limits of twenty-five million U.S. dollars
      (US$25,000,000.00) product liability insurance for each occurrence and
      aggregate. Such insurance coverage shall name Cooper and its Affiliates
      which might be held liable for the Products of the Joint Venture as
      additional insureds and such insurance shall not be subject to
      cancellation without thirty (30) calendar days prior written notice to
      Cooper. A certificate of such insurance will be provided to Cooper.

              CHAPTER 14 PURCHASE OF MATERIALS AND SALE OF PRODUCTS

14.1  Purchase of Materials

      (1)   In meeting its requirements for materials, equipment, components,
            transportation vehicles and articles for office use, the Joint
            Venture will at its discretion purchase such items inside or outside
            the PRC to the maximum extent consistent with the efficient
            operation and quality standards of the Joint Venture.

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      (2)   All the reasonable costs and expenses incurred by any Party in
            connection with the sourcing and purchase for the Joint Venture as
            stipulated in Article 14.1(1) shall be reimbursed by the Joint
            Venture.

14.2  Sale of Products

      (1)   The Joint Venture shall formulate and, with the approval of the
            Board, adopt both domestic and international sales plans for the
            Products. The Joint Venture shall market, distribute and sell its
            Products according to a pricing policy approved by the Board. The
            Joint Venture may appoint distributors and sale agents in different
            regions inside or outside the PRC, subject to the general terms and
            conditions of such appointment.

      (2)   In order for the convenience of distributing, marketing and selling
            the Products, the Joint Venture may establish branch offices inside
            or outside the PRC subject to authorization by the Board and the
            approval by the relevant authorities.

14.3  Sale of Cooper Branded Products

      The Parties hereby acknowledge that the Products to be produced by the
      Joint Venture and branded with the trademarks belonging to Cooper (the
      "COOPER BRANDED PRODUCTS") will be merely sold to and distributed by
      Cooper or its Affiliates.

                   CHAPTER 15 CONFIDENTIALITY AND NON-COMPETE

15.1  Confidentiality.

      (1)   Except as otherwise specifically provided in this Article 15.1,
            neither any Party nor the Joint Venture shall divulge, disclose or
            communicate, or permit to be divulged, disclosed or communicated, to
            any unaffiliated third party in any manner, directly or indirectly,
            any Confidential Information, and each Party and the Joint Venture
            shall ensure that their respective Affiliates, officers, directors,
            employees (including, without limitation, individuals seconded
            thereto), agents and contractors (collectively "REPRESENTATIVES") do
            not divulge, disclose or communicate, or permit to be divulged,
            disclosed or communicated, to any unaffiliated third party in any
            manner, directly or indirectly, any Confidential Information.
            Confidential Information shall remain the exclusive and sole
            property of the relevant disclosing party (the "PROTECTED PARTY")
            and shall be promptly returned upon the request of the Protected
            Party.

      (2)   The Parties and the Joint Venture shall only disclose or permit to
            be disclosed Confidential Information to those of their respective
            Representatives who have a need to know such Confidential
            Information (and then shall only disclose such portion of the
            Confidential Information as is necessary) in order to consummate the
            transactions contemplated herein and to establish or conduct the
            Joint Venture's business and operations in the ordinary course. Each
            Party and the Joint Venture shall advise its Representatives of the
            confidentiality provisions hereunder, shall require relevant
            Representatives to sign agreements substantially similar to the
            Non-Disclosure and Non-Compete Contract, and shall be

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            responsible to the Protected Party for any noncompliance by any such
            Representative.

      (3)   In the event that any Party, the Joint Venture, or any of their
            respective Representatives is required by applicable law or is
            validly ordered by a governmental entity having proper jurisdiction
            to disclose any Confidential Information, the affected party shall,
            as soon as possible in the circumstances, provide the Protected
            Party with prompt prior written notice of the disclosure request or
            requirement, and, if requested by the Protected Party, shall furnish
            to the Protected Party an opinion of legal counsel that the release
            of all such Confidential Information is required by applicable law.
            The proposed disclosing party shall seek, with the reasonable
            cooperation of the Protected Party if necessary, a protective order
            or other appropriate remedy and shall exercise best efforts to
            obtain assurances that confidential treatment will be accorded to
            any Confidential Information disclosed.

      (4)   The Parties and the Joint Venture shall take all other necessary,
            appropriate or desirable actions to preserve the confidentiality of
            the Confidential Information.

      (5)   This Article 15.1 and the obligations and benefits hereunder shall
            survive for a period of ten (10) years after the termination or
            expiration of this Contract or the termination, dissolution or
            liquidation of the Joint Venture or any of the Parties, provided
            that, however, any information concerning, directly or indirectly,
            the proprietary trade secrets of the Joint Venture or a Party shall
            be preserved in confidentiality and be entitled to the obligations
            and benefits hereunder in perpetuity.

15.2  Non-Compete.

      (1)   Party A 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 competes with any business
            or activities of the Joint Venture anywhere in the PRC, except as
            otherwise provided in this Contract, during the period when it holds
            any Interest in this Joint Venture and for a period of five (5)
            years after it has ceased to hold any Interest in the Joint Venture,
            provided, however, that Party A shall has the right to sell its
            inventories under Customs control outside of China within nine (9)
            months from the date of this Contract.

      (2)   Without prejudice to the terms and conditions under this Contract,
            in the event that Party B or any of its Affiliates contemplates an
            investment in Shandong Province in a half-steel radial passenger and
            light truck tires manufacturing entity other than the Joint Venture
            during the period of Party A or its permitted successor holding any
            Interest of the Joint Venture, Party B or its said Affiliate will
            consider and support in good faith and with every best effort the
            opportunity for Party A or its permitted successor to participate in
            such investment, subject to the following conditions that:

            (a)   Party B or its said Affiliate shall own majority percentage of
                  such investment;

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<PAGE>

            (b)   Party A or its permitted successor shall use its own fund for
                  such investment;

            (c)   the extent of Party A or its permitted successor's
                  participation in such investment shall be agreed upon by Party
                  B or its said Affiliate, Party A or its permitted successor
                  and the said tire manufacturing entity where such investment
                  will be made; and

            (d)   the said investment of Party A or its permitted successor
                  shall originate from within the territory of China.

                CHAPTER 16 DURATION, TERMINATION AND LIQUIDATION

16.1  Joint Venture Term and Extension. The term of the Joint Venture shall be
      fifty (50) years ("JOINT VENTURE TERM"), which shall commence on the
      Establishment Date. One (1) year prior to the expiration of the Joint
      Venture Term, the Parties may discuss the extension of such term. If the
      Parties agree and the Board approves, an application for such extension
      shall be submitted to the Examination and Approval Authority for approval
      no less than six (6) months prior to the expiration of the Joint Venture
      Term.

16.2  Termination.

      (1)   Unless extended in accordance with Article 16.1, this Contract shall
            terminate automatically upon the expiration of the Joint Venture
            Term.

      (2)   This Contract may be terminated at any time upon the written
            agreement of all of the Parties, in which case the Parties shall
            instruct the Directors to vote to liquidate the Joint Venture as per
            this Contract and the relevant laws and regulation of the PRC.

      (3)   A Party (the "NOTIFYING PARTY") shall have the right to terminate
            this Contract by providing written notice ("TERMINATION NOTICE") to
            the other Parties if any of the following events occur:

            (a)   one or more of the conditions specified in Article 5.4 are not
                  met within three (3) months of the date of execution by the
                  Parties of this Contract, and no resolution is agreed upon
                  following consultations between the Parties to extend the
                  Capital Contribution Schedule, or the extended Capital
                  Contribution Schedule would go beyond the required time period
                  under the relevant PRC laws and regulations;

            (b)   a Party (not being the Notifying Party) materially breaches
                  the obligations contained in this Contract or any
                  Supplementary Contract to which the Party is a party or any of
                  its representations or warranties under said contract is or
                  becomes untrue in any material respect (the "EVENT OF
                  DEFAULT"), and has failed to remedy such Event of Default
                  within sixty (60) days of a written notice from the Notifying
                  Party;

            (c)   a Party (not being the Notifying Party) is or becomes a party
                  to, bound by or held liable by any orders, decisions,
                  judgments, awards, decrees or

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<PAGE>

                  rulings of any courts, arbitral tribunals, governmental or
                  regulatory agencies, as a result of such Party's breach in any
                  way of any applicable legislation, laws, regulations,
                  statutes, rules, guidelines, notices, or circulars of any
                  statutory or regulatory bodies, and said breach would affect
                  or change the intent or mind of any other Party to enter into
                  this Contract or maintain the partnership with such Party, or
                  would in any way hinder or interfere with the execution or
                  delivery by any Party of this Contract or its performance of
                  any of the terms and obligations hereof;

            (d)   any Party (not being the Notifying Party) becomes bankrupt, or
                  is the subject of proceedings for liquidation or dissolution,
                  or ceases to carry on business (except Party A) or becomes
                  unable to pay its debts as they come due so as to become
                  insolvent, in which case the relevant Party shall immediately
                  notify the other Parties in respect of such situation;

            (e)   the Joint Venture becomes bankrupt, or is the subject of
                  proceedings for liquidation or dissolution, or ceases to carry
                  on business or becomes unable to pay its debts as they come
                  due;

            (f)   the conditions or consequences of any event of Force Majeure
                  continue for a period of three (3) months without any
                  equitable solution agreed to by the Parties;

            (g)   a majority of the members of the Board are unable to reach an
                  agreement on an annual operating plan, operating budget,
                  marketing and sales budget, financial budget, business and
                  sales performance targets for the Joint Venture or the issues
                  not specified in the business scope of the Joint Venture as
                  defined in Article 4.2 above and such deadlock cannot be
                  resolved after a period of one hundred and twenty (120) days;

            (h)   the Joint Venture's Business License is revoked, suspended, or
                  amended (in a manner not agreed to in writing by the Parties)
                  or in any other situation such that the Joint Venture is
                  precluded or prevented from carrying out its business; or

            (i)   the Joint Venture fails to obtain external finance such that
                  the Joint Venture is substantially prevented from implementing
                  its business plan, except if the Board decides to continue.

16.3  Subsequent Obligations

      (1)   Where a Termination Notice has been served in the circumstances set
            out in Article 16.2(3)(b) or Article 16.2(3)(c), the non-breaching
            Party(ies) shall have the option, but not the obligation, to buy out
            the breaching Party's Percentage Interest in the Joint Venture in
            accordance with the following procedures:

            (a)   within 30 days of the issuance of the Termination Notice, the
                  Board of Directors shall, by a majority vote appoint an
                  internationally recognized accounting firm or other appraiser
                  (an "APPRAISER") to determine the Book Value of the Joint
                  Venture, which value should not take into consideration the
                  values of the trademarks and technologies licensed by

                                       22

<PAGE>

                  Cooper to the Joint Venture. Such Appraiser shall complete its
                  assessment of the Book Value of the Joint Venture and notify
                  the Parties thereof in writing within 60 days of their
                  appointment.

            (b)   upon completion of the determination of the Book Value of the
                  Joint Venture, the non-breaching Party(ies) shall have the
                  option to purchase the breaching Party's share of the
                  Registered Capital of the Joint Venture at a price equal to:

                  Book Value x the breaching Party's share of the Registered
                  Capital at the time of valuation x 80%

                  If more than one non-breaching Party exercises its option,
                  each shall have the right to purchase a fraction of the
                  Interest of the breaching Party equal to its Percentage
                  Interest divided by the sum of the Percentage Interests of
                  both non-breaching Parties.

            (c)   The purchasing Party(ies) shall have the right to designate a
                  third party enterprise to purchase all or part of the
                  breaching Party's Percentage Interest for the price (or
                  portion thereof) set forth in Article 16.3(1)(b) hereof.

            (d)   The Parties agree to take all such steps as may be required to
                  effect the sale of the selling Party's Interest in the Joint
                  Venture, including obtaining all necessary government
                  approvals for the transfer of the Interest to the purchasing
                  Party (or its designee) and causing their respective Board
                  appointees to approve such transfer, and executing all
                  documents necessary or advisable to effect such transfer. If
                  such government approvals are not obtained within ninety (90)
                  days after the signing of the interest transfer agreement
                  between the selling Party and the purchasing Party(ies) (or
                  its designee), the exercise of the option shall be null and
                  void and the Joint Venture shall be liquidated, if so proposed
                  by a non-breaching Party, in accordance with the provisions of
                  Article 16.4 hereof. Such liquidation shall not prejudice the
                  rights that the non-breaching Party(ies) may otherwise have
                  against the breaching Party.

      (2)   Where a Termination Notice has been served in any circumstances
            except as set out in Article 16.2(3)(b) and Article 16.2(3)(c), the
            following shall apply:

            (a)   Party B shall have the right, at its sole discretion, to
                  purchase the Percentage Interest(s) of Party A and/or Party C
                  at a price equal to the Book Value as determined by the
                  Auditor of such Percentage Interest(s) at the time x 80%,
                  which value should not take into consideration the values of
                  the trademarks and technologies licensed by Cooper to the
                  Joint Venture. To exercise its right, Party B must provide a
                  written notice of its intention thereof ("NOTICE") within
                  fifteen (15) days after the Termination Notice was issued. The
                  Parties shall then complete the sale of Percentage Interest(s)
                  of Party A and/or Party C to Party B within the longer of the
                  period of ninety (90) days after receipt of the Notice or
                  fifteen (15) days after such sale of Percentage Interest(s) is
                  duly approved by the Examination and Approval Authority and
                  registered with the

                                       23

<PAGE>

                  Registration Authority. If Party B fails to exercise its right
                  to purchase the Percentage Interest of either Party A or Party
                  C, Party A and/or Party C shall have the right to purchase
                  Party B's Percentage Interest at a price equal to the Book
                  Value of such Percentage Interest at the time x 80%. To
                  exercise its right, Party A and/or Party C shall provide a
                  Notice to Party B within the 15-day period starting from the
                  sixteenth (16th) day after the Termination Notice is issued or
                  a later date on which Party A and/or Party C learns that Party
                  B will not exercise its right stated above. The Parties shall
                  then complete the sale of Party B's Percentage Interest to
                  Party A and/or Party C within the longer of the period of
                  ninety (90) days after receipt of the Notice or fifteen (15)
                  days after such sale of Percentage Interest is duly approved
                  by the Examination and Approval Authority and registered with
                  the Registration Authority. If Party A and Party C both
                  exercise their purchase options, each shall have the right to
                  purchase a fraction of the Interest of Party B equal to its
                  Percentage Interest divided by the sum of the Percentage
                  Interests of Party A and Party C.

            (b)   If no Party wishes to exercise its right to purchase the
                  Percentage Interest(s) of other Party(ies), the Parties shall
                  use all reasonable efforts to sell the Joint Venture as a
                  going concern to one or more third parties, either as a single
                  transaction or through more than one transaction. In this
                  Article 16.3(2), third parties include Affiliates. The Parties
                  shall cooperate and cause the Directors appointed by them to
                  cooperate in any required re-structuring of the Joint Venture
                  prior to such sale if necessary or desirable to facilitate the
                  same or optimize the salability of the Joint Venture and the
                  business conducted by it and the sales proceeds for the
                  Parties. The price and terms of such sale shall be agreed
                  between the third party(ies) concerned and the Parties.

      (3)   In the event that Party B together with any of its Affiliates cease
            to have any interest in the Registered Capital of the Joint Venture,
            each Party shall take all steps necessary to ensure that the name of
            the Joint Venture is immediately changed so that it no longer
            contains any reference to "Cooper" in English or the local Chinese
            language equivalent of such name.

      (4)   Termination of this Contract shall not affect the rights and
            obligations of the Parties and the Joint Venture incurred prior to
            the termination or caused by such termination. If termination of
            this Contract is caused by a Party's breach of any of its
            obligations under this Contract, then such Party shall compensate
            the other Party(ies) and the Joint Venture for all of their losses
            resulting from such breach.

16.4  Liquidation.

      (1)   Liquidation of the Joint Venture shall begin from the earliest of
            the date of liquidation approval by the relevant Examination and
            Approval Authority, the date on which this Contract is terminated
            under Article 16.2 (provided a buy-sell is not effected), the date
            on which the Asset Purchase Agreement is terminated under Article
            5.3.1, Article 7.5.3, Article 10.2.1 or Article 12.4 thereof, or by
            a court or arbitration order, or the date which is 30-day prior to
            expiration of the Joint Venture Term.

                                       24

<PAGE>

      (2)   The Board shall within fifteen (15) days from the beginning of the
            liquidation as provided in Article 16.4 hereof, appoint a
            liquidation committee that shall be entitled to represent the Joint
            Venture in all legal matters during the period of liquidation. The
            liquidation committee shall value and liquidate the Joint Venture's
            assets in accordance with applicable PRC laws and regulations and
            the principles set out herein.

      (3)   The liquidation committee shall be made up of three (3) members
            appointed by the Board, two (2) of whom shall be recommended by
            Party B and one (1) of whom shall be recommended by Party A and
            Party C. Members of the liquidation committee in principle shall be
            selected from the Directors of the Joint Venture. Any Party may
            recommend the appointment of professional advisors to be members of
            or to assist the liquidation committee.

      (4)   The liquidation committee shall conduct a thorough examination of
            the Joint Venture's assets and liabilities, on the basis of which it
            shall, in accordance with the relevant provisions of this Contract,
            develop a liquidation plan which, if approved by the Board, shall be
            executed under the liquidation committee's supervision. Settlement
            of any claim, debt or assets under liquidation shall be approved
            unanimously by members of the liquidation committee; failing such
            unanimous approval, simple majority approval by the Board shall be
            required.

      (5)   In developing and executing the liquidation plan, the liquidation
            committee shall use every effort to obtain the highest possible
            price for the Joint Venture's assets.

      (6)   The liquidation expenses, including remuneration to members of and
            advisors to the liquidation committee, shall be paid in accordance
            with the PRC law out of the Joint Venture's assets in priority to
            the claims of other creditors.

      (7)   After the liquidation committee has settled all legitimate debts of
            the Joint Venture, including, if applicable, the expenses of the
            liquidation committee in accordance with Article 16.4 (6), any
            remaining assets shall be distributed to the Parties in proportion
            to their Percentage Interests. With respect to fixed assets
            distributed to the Parties, in the event that a Party intends to
            sell such fixed assets to a third party, the other Parties shall
            have the preemptive right during the liquidation period to purchase
            such fixed assets on the same terms and conditions and at the same
            price as offered to any third party.

      (8)   On completion of liquidation, the liquidation committee shall
            prepare a liquidation report and liquidation accounting statement.
            The liquidation committee shall, with its unanimous approval
            (failing such approval, simply majority approval by the Board),
            appoint a certified public accounting firm to examine the report and
            statement and issue a verification report.

      (9)   After completion of the liquidation of the Joint Venture, unless the
            tax authority requires otherwise, the original accounting books and
            other documents of the Joint Venture shall be left in the care of
            Party A to make and retain copies of all or any of such books and
            documents, after which the copies of such books and documents shall
            be left in the care of Party B and Party C.

                                       25

<PAGE>

                          CHAPTER 17 BREACH OF CONTRACT

In the event that a breach of contract committed by any Party to this Contract
results in the non-performance of or inability to fully perform this Contract,
the liabilities arising from the breach of Contract shall be borne by the Party
in breach. In the event that the Parties commit a breach of Contract, each Party
shall bear its individual share of the liabilities arising from the breach of
Contract. Any breach of this Contract by any Party's Affiliate shall be deemed a
breach by such Party. Any breach of contract committed by any Party resulting in
the nonperformance of or inability to fully perform any Supplementary
Contract(s) shall be deemed a breach by such Party of this Contract.

                            CHAPTER 18 FORCE MAJEURE

18.1  Scope of Force Majeure. A "FORCE MAJEURE EVENT" shall mean any event,
      circumstance or condition that (i) directly or indirectly prevents the
      fulfillment of any material obligation set forth in this Contract, (ii) is
      beyond the reasonable control of the respective Party, and (iii) could
      not, by the exercise of reasonable care, have been avoided or overcome in
      whole or in part by such Party. Subject to the aforementioned items (i),
      (ii) and (iii), Force Majeure Event includes, but is not limited to,
      natural disasters such as acts of God, earthquake, windstorm and flood,
      terrifying events such as war, terrorism, civil commotion, riot, blockade
      or embargo, fire, explosion, off-stream or strike or other labor disputes,
      epidemic and pestilence, material accident or by reason of any law, order,
      proclamation, regulation, ordinance, demand, expropriation, requisition or
      requirement or any other act of any governmental authority, including
      military action, court orders, judgments or decrees.

18.2  Notice. Should any Party be prevented from performing the terms and
      conditions of this Contract due to the occurrence of a Force Majeure
      Event, the prevented Party shall send notice to the other Parties within
      fourteen (14) days from the occurrence of the Force Majeure Event stating
      in the details of such Force Majeure Event.

18.3  Performance. Any delay or failure in performance of this Contract caused
      by a Force Majeure Event shall not constitute a default by the prevented
      Party or give rise to any claim for damages, losses or penalties. Under
      such circumstances, the Parties are still under an obligation to take
      reasonable measures to perform this Contract, so far as is practical. The
      prevented Party shall send notice to the other Parties as soon as possible
      of the elimination of the Force Majeure Event, and confirm receipt of such
      notice.

18.4  Consultations and Termination. Should the Force Majeure Event continue to
      delay implementation of this Contract for a period of more than three (3)
      months, the Parties shall, through consultations, decide whether to
      terminate or modify this Contract. Should the Force Majeure Event continue
      for a period of six (6) months or longer, any Party may terminate this
      Contract by giving notice to the other Parties in accordance with Article
      16.2.

                          CHAPTER 19 DISPUTE RESOLUTION

19.1  Consultations and Arbitration. Any and all disputes, controversies or
      claims (the "DISPUTE") arising out of or relating to the formation,
      validity, interpretation,

                                       26

<PAGE>

      implementation or termination of this Contract, 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.

19.2  Arbitration Proceedings and Award. 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 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 arbitrators 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
      Contract, to the extent practical, with the exception of those parts of
      this Contract 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.

19.3  Injunctive Relief. Notwithstanding any other provision of this Contract,
      each Party acknowledges that a breach of provisions on confidentiality as
      provided in Article 15.1 or non-competition in Article 15.2 or other
      obligations under this Contract may result in irreparable harm and damage
      to the affected Party and its Affiliates in an amount that is difficult to
      ascertain and that cannot be adequately compensated by a monetary award.
      Accordingly, in addition to any other relief to which the affected Party
      and its Affiliates may be entitled, such Party shall be entitled to
      temporary and/or permanent injunctive relief from any breach or threatened
      breach by the relevant Party without proof of actual damages that have
      been or may be caused to such Parties by such breach or threatened breach.

                    CHAPTER 20 GOVERNING LAW & CHANGE OF LAW

20.1  Applicable Law. The formation of this Contract, its validity,
      interpretation, execution and any performance of this Contract, 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 the 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.

20.2  Change of Law. If any Party's economic benefits as a shareholder in the
      Joint Venture is adversely and materially affected by the promulgation of
      any new PRC laws, rules or regulations or the amendment or interpretation
      of any existing PRC laws, rules or regulations after the Effective Date,
      the Parties shall promptly consult with each other and use their best
      endeavors to implement any adjustments necessary to maintain each

                                       27

<PAGE>

      Party's economic benefits derived from this Contract on a basis no less
      favorable than the economic benefits it would have derived if such laws,
      rules or regulations had not been promulgated or amended or so
      interpreted.

                    CHAPTER 21 EFFECTIVE DATE OF THE CONTRACT

21.1  Effective Date. This Contract and the Articles of Association shall become
      effective on the date on which this Contract and the Articles of
      Association are approved by the Examination and Approval Authority as
      evidenced by the issuance of the Certificate of Approval (referred to as
      the "EFFECTIVE DATE"). In case of conflict between the provisions of this
      Contract and the provisions of the Articles of Association or any
      Supplementary Contracts, the terms of this Contract shall prevail.

21.2  Delivery. Party A shall promptly deliver to Party B and Party C copies of
      all approval certificates and registration documents issued by, and
      written confirmation of all communications with, the relevant Examination
      and Approval Authority and Registration Authority and all other relevant
      government authorities, in respect of this Contract, the Articles of
      Association, the Asset Purchase Agreement and the other Supplemental
      Contracts, and the operation of the Joint Venture.

                      CHAPTER 22 MISCELLANEOUS PROVISIONS

22.1  Language. This Contract is written and executed in a Chinese version and
      in an English version. Both language versions of this Contract are of
      equal validity and effect. In case of any discrepancy between the Chinese
      version and the English version, the Chinese version approved by the
      Examination and Approval Authority shall prevail.

22.2  Waiver and Preservation of Remedies. No delay on the part of any Party in
      exercising any right, power or privilege under this Contract 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.

22.3  Notices. All notices or other communications under this Contract 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.

      Party A    Address:   No. 98, Nanshan Road North, Rongcheng
                            City, Shandong Province, PRC
                 Tel:       ( 86-631) 7523-205
                 Fax:       (86-631) 7523-888

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<PAGE>

                 Attn:      Zhang Jun-quan

      Party B    Address:   Whitepark House, White Park Road, Bridgetown,
                            Barbados
                 Tel:       (1-246) 4310-070
                 Fax:       (1-246) 4310-076
                 Attn:      Keisha N. Hgde

      Party C    Address:   P.O. Box 957, Offshore Incorporations Center,
                            Road Town, Tortola, British Virgin Islands
                 Tel:       (852) 2526-8111
                 Fax:       (852) 2526-5322
                 Attn:      Iris Yeung

22.4  Severability. If any provision of this Contract 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 Contract shall not in any way be affected or
      impaired thereby.

22.5  Entire Agreement. This Contract, together with its Appendices which are
      hereby incorporated by reference as an inseparable and integral part of
      this Contract, constitutes the entire agreement among the Parties with
      reference to the subject matter hereof, and supersede any agreements,
      contracts, representations and understandings, oral or written, made prior
      to the signing of this Contract.

22.6  Modification and Amendment. No amendment or modification of this Contract,
      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 and approved
      by the Examination and Approval Authority.

22.7  Successors. The Parties agree and procure that this Contract shall inure
      to the benefit of and be binding upon each of the Parties and their
      respective permitted successors and permissible assignees.

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

22.9  Costs and Expenses. Except as otherwise provided herein, each Party shall
      be responsible for the costs and expenses it incurred in connection with
      the negotiation and execution of this Contract, the Articles of
      Association, and the Supplementary Contracts.

                                       29

<PAGE>

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

                                 PARTY A: SHANDONG CHENGSHAN TIRE COMPANY
                                 LIMITED BY SHARES

                                 By:
                                     -----------------------------------------
                                 Name:        Che Hong-Zhi
                                 Title:       Chairman of Board
                                 Nationality: Chinese

                                 PARTY B: COOPER TIRE INVESTMENT HOLDING
                                 (BARBADOS) CO., LTD.

                                 By:
                                     -----------------------------------------
                                 Name:        Harold C. Miller
                                 Title:       Authorized representative
                                 Nationality: U.S.A.

                                 PARTY C: JOY THRIVE INVESTMENTS LIMITED

                                 By:
                                     -----------------------------------------
                                 Name:        Stacey Wong
                                 Title:       Authorized representative
                                 Nationality: Hong Kong, China

                                       30

<PAGE>

                             JOINT VENTURE CONTRACT

                                   APPENDIX 1

                         DEFINITIONS AND INTERPRETATION

1.1   "AFFILIATE" means, with respect to any Person, any other Person
      controlling or controlled by or under common control with such specified
      Person. For purposes of this definition, "control" when used with respect
      to any specified Person means the power to direct the management and
      policies of such Person, directly or indirectly, whether through the
      ownership of shares, registered capital or voting securities, by contract
      or otherwise, and the terms "controlling" and "controlled" have meanings
      correlative to the foregoing.

1.2   "ASSET PURCHASE AGREEMENT" shall have the meaning ascribed to such term in
      Article 5.10.

1.3   "ARTICLES OF ASSOCIATION" means the articles of association of the Joint
      Venture executed by the Parties simultaneously with this Contract, as such
      articles of association may be amended from time to time by the Parties.

1.4   "AUDITOR" means an accounting firm registered in the PRC, engaged at the
      Joint Venture's own expense upon resolution of the Board, which shall be
      the auditor of the Joint Venture and which firm shall be independent of
      the Parties and independent of the Joint Venture.

1.5   "BIG FOUR" means four internationally reputable accounting firms, such as,
      Price Water Coopers, Deloitte, Ernst & Young, and KPMG.

1.6   "BOARD OF DIRECTORS" or "BOARD" means the board of directors of the Joint
      Venture established in accordance with this Contract.

1.7   "BOOK VALUE" means the historic accounting value of the equity of the
      Joint Venture based on Chinese generally accepted accounting principles
      (GAAP).

1.8   "BREACHING PARTY" shall have the meaning ascribed to such term in Article
      5.8 hereof.

1.9   "BUSINESS LICENSE" means the business license of the Joint Venture as
      issued, amended and replaced, as the case may be, from time to time by the
      Registration Authority.

1.10  "CAPITAL CONTRIBUTION SCHEDULE" means a schedule set forth in Appendix 2
      to this Contract, which schedule specifies the time and amount of
      contribution by the Parties to the Registered Capital of the Joint
      Venture.

1.11  "CHENGSHAN GROUP" means Chengshan Group Company LTD., a limited liability
      company duly organized and existing under the laws of the PRC in Rongcheng
      City, Shandong Province, which owns 73.76% equity interests of Party A.

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1.12  "CERTIFICATE OF APPROVAL" means the certificate of approval issued by the
      Examination and Approval Authority approving this Contract and the
      Articles of Association.

1.13  "CONFIDENTIAL INFORMATION" means the terms of this Contract and all
      technical, financial, business, commercial, operational and strategic
      information and data, know-how, trade secrets and any analysis,
      amalgamation, market studies or compilation, whether written or unwritten
      and in any format or media, concerning, directly or indirectly, the
      business of the Joint Venture or a Party, which has been prior to the
      Establishment Date, or which may be during the Joint Venture Term,
      delivered or furnished by a Party, the Joint Venture, or any of their
      respective Representatives, to another Party, the Joint Venture, or any of
      their respective Representatives, but shall not include any information
      that: (a) at the time of disclosure is (or thereafter becomes) generally
      available to the public through no act of any Person in violation of a
      confidentiality obligation or applicable law; or (b) the receiving Party
      has obtained lawfully from an independent source not subject to a
      confidentiality obligation; or (c) the receiving Party can prove was known
      to it or to its Representatives prior to the receipt of such information
      from the disclosing Party; or (d) is independently developed by the
      receiving Party without any access to or knowledge of such information.

1.14  "COOPER" means Cooper Tire & Rubber Company or its relevant Affiliate,
      which may license or cause to be licensed to the Joint Venture, the
      technology in respect of the Products and Processes after duly
      establishment of the Joint Venture.

1.15  "DAY" refers to a calendar day.

1.16  "DEFAULT CAPITAL CONTRIBUTION" shall have the meaning ascribed to such
      term in Article 5.8(1).

1.17  "DIRECTOR" or "DIRECTOR OF THE JOINT VENTURE" means any member of the
      Board.

1.18  "DISPUTE" shall have the meaning ascribed to such term in Article 19.1.

1.19  "EFFECTIVE DATE" means the date on which this Contract comes into effect
      in accordance with Article 21.1.

1.20  "EQUITY JOINT VENTURE LAW" means the PRC, Sino-foreign Equity Joint
      Venture Law (adopted by the National People's Congress on July 1, 1979 and
      revised on March 15, 2001), as such law may from time to time be amended,
      or its successor laws.

1.21  "EQUITY JOINT VENTURE REGULATIONS" means the PRC, Sino-foreign Equity
      Joint Venture Law Implementing Regulations (promulgated by the State
      Council on September 20, 1983 and revised on July 22, 2001), as such
      regulations may from time to time be amended, or any successor
      regulations.

1.22  "ESTABLISHMENT DATE" means the date on which the Joint Venture's first
      Business License is issued by the Registration Authority.

1.23  "EXAMINATION AND APPROVAL AUTHORITY" means the Ministry of Commerce, or
      its authorized local division or any successor government institution or
      agency empowered to approve the Asset Purchase Agreement, this Contract,
      the Articles of Association, and any amendments, supplements,
      modifications or termination hereof or thereof.

                                       32

<PAGE>

1.24  "FAIR VALUE" means the transfer price of the equity interest of the Joint
      Venture calculated by an internationally recognized accounting firm
      jointly appointed by the Parties.

1.25  "FREE CASHFLOW" means the after-tax income less: (i) reserves provided for
      the reserve, expansion, and bonus and welfare fund, (ii) capital spending,
      (iii) working capital funding, and (iv) debt payment, and increased by:
      (i) depreciation and amortization expenses, and (ii) any other non-cash
      expenses included in the after-tax income.

1.26  "JOINT VENTURE" means Cooper Chengshan (Shandong) Passenger Tire Company
      Ltd., the Sino-foreign equity joint venture limited liability company
      established and operated by the Parties pursuant to this Contract.

1.27  "JOINT VENTURE TERM" shall have the meaning ascribed to such term in
      Article 16.1 hereof.

1.28  "NET PASSENGER TIRE AND MIXING ASSETS" means the price agreed by the
      Parties to pay for the passenger tire and mixing assets, net of allocated
      debts and liabilities, of Party A.

1.29  "NON-BREACHING PARTY" shall have the meaning ascribed to such term in
      Article 5.8(1) hereof.

1.30  "NON-DISCLOSURE AND NON-COMPETE CONTRACT" means the contract between the
      Joint Venture and each of its key employees (including, without
      limitation, the General Manager, all other management personnel, and all
      technical personnel), whereby such key employees undertake to keep
      confidential the confidential information of the Joint Venture and to
      refrain from engaging in any business or activities that directly or
      indirectly compete with any business of the Joint Venture.

1.31  "NOTIFYING PARTY" shall have the meaning ascribed to such term in Article
      16.2(3).

1.32  "PERCENTAGE INTEREST" means, with respect to each Party, such Party's
      percentage interest in the equity of the Joint Venture, as set forth in
      Article 5.2.

1.33  "PERSON" means any individual, company, legal person enterprise, non-legal
      person enterprise, joint venture, partnership, wholly owned entity, unit,
      trust or other entity or organization, including, without limitation, any
      government or political subdivision or any agency or instrumentality of a
      government or political subdivision and other body corporate or
      unincorporated; Person also includes a reference to that Person's legal
      representatives, assignees, successors or heirs.

1.34  "PRC" or "CHINA" means the People's Republic of China.

1.35  "PROCESSES" means the technical and working processes in respect of
      producing and/or processing the Products.

1.36  "PRODUCTS" means half-steel radial passenger tires and half-steel radial
      light truck tires.

1.37  "PROTECTED PARTY" shall have the meaning ascribed to such term in Article
      15.1(1) hereof.

                                       33

<PAGE>

1.38  "REGISTERED CAPITAL" means the total amount of equity of the Joint Venture
      pursuant to Chapter 5 as such equity amount may be adjusted according to
      the relevant provisions of this Contract and relevant PRC law.

1.39  "REGISTRATION AUTHORITY" means the State Administration of Industry and
      Commerce, or its local division or any successor government institution or
      agency empowered to issue a Business License to the Joint Venture.

1.40  "RENMINBI" or "RMB" means the lawful currency of the PRC.

1.41  "REPRESENTATIVES" shall have the meaning ascribed to such term in Article
      15.1(1) hereof.

1.42  "SUPPLEMENTARY CONTRACTS" shall mean the following: Asset Purchase
      Agreement; Technical Assistance and Technology License Agreement; Real
      Estate Lease Agreement.

1.43  "TERMINATION NOTICE" shall have the meaning ascribed to such term in
      Article 16.2(3).

1.44  "TOTAL INVESTMENT" means the total amount of funds required to establish
      and operate the Joint Venture in accordance with its business scope set
      forth herein, as provided in Article 5.1 and as may be adjusted according
      to the relevant provisions of this Contract and relevant PRC law.

1.45  "UNITED STATES DOLLARS" or "US$" means the lawful currency of the United
      States of America.

1.46  "AND/OR" means that both cases apply, or either the first or the second
      case applies.

1.47  Words used in any gender in this Contract shall include references to all
      other genders; and words used in the singular in this Contract shall
      include references to the plural, and vice versa.

1.48  Descriptive headings in this Contract are for convenience only and shall
      not control or affect the meaning or construction of any of the provisions
      of this Contract or any of the Appendices.

                                       34

<PAGE>

                             JOINT VENTURE CONTRACT

                                   APPENDIX 2

                          CAPITAL CONTRIBUTION SCHEDULE

1.    The Total Investment of the Joint Venture shall be US$99,000,000.

2.    The Registered Capital of the Joint Venture shall be US$33,000,000.

3.    Immediately upon the satisfaction of the conditions specified in Article
      5.4 herein:

      (a)   Party A will contribute land use rights and buildings valued at 35%
            of the Registered Capital of the Joint Venture, payable to the Joint
            Venture in exchange for a 35% ownership interest in the Joint
            Venture.

      (b)   Party B will sign a promissory note for an amount equal to 51% of
            the Registered Capital of the Joint Venture, payable to the Joint
            Venture, in exchange for a 51% ownership interest in the Joint
            Venture.

      (c)   Party C will sign a promissory note for an amount equal to 14% of
            the Registered Capital of the Joint Venture, payable to the Joint
            Venture, in exchange for a 14% ownership interest in the Joint
            Venture.

4.    As specified in Article 5.10 hereof, on the date of this Contract Party A
      and the Joint Venture shall enter into the Asset Purchase Agreement
      transferring certain identified assets to the Joint Venture from Party A
      for the consideration as detailed in Article 3 of the Asset Purchase
      Agreement..

5.    Within ten (10) working days upon satisfaction of the conditions specified
      in Article 5.4 hereof, Party B will contribute US$16,830,000 to the Joint
      Venture satisfying the promissory note issued in step 3.(b) above.

6.    Within ten (10) working days upon satisfaction of the conditions specified
      in Article 5.4 hereof, Party C will contribute US$4,620,000 to the Joint
      Venture satisfying the promissory note issued in step 3.(c) above.

                                       35

<PAGE>

                             JOINT VENTURE CONTRACT

                                   APPENDIX 3

          ASSET PURCHASE AGREEMENT (FOR THE ASSETS TO BE PURCHASED BY
                        THE JOINT VENTURE FROM PARTY A)

                                       36

<PAGE>

                             JOINT VENTURE CONTRACT

                                   APPENDIX 4

                       AGREEMENT ON LABOR/PERSONNEL ISSUES

                                       37

<PAGE>

                             JOINT VENTURE CONTRACT

                                   APPENDIX 5

     OFFICE, SINGLE-WORKER DORMITORY AND EMPLOYEE CAFETERIA LEASE AGREEMENT
         (TO BE ENTERED INTO BETWEEN CHENGSHAN GROUP AND JOINT VENTURE)

                                       38

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