TITAN INTERNATIONAL, INC. FORM 10-Q 6-30-06

0000899751-06-000047.txt : 20060728 0000899751-06-000047.hdr.sgml : 20060728 20060727193809 ACCESSION NUMBER: 0000899751-06-000047 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20060630 FILED AS OF DATE: 20060728 DATE AS OF CHANGE: 20060727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TITAN INTERNATIONAL INC CENTRAL INDEX KEY: 0000899751 STANDARD INDUSTRIAL CLASSIFICATION: STEEL WORKS, BLAST FURNACES ROLLING MILLS (COKE OVENS) [3312] IRS NUMBER: 363228472 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12936 FILM NUMBER: 06985697 BUSINESS ADDRESS: STREET 1: 2701 SPRUCE ST CITY: QUINCY STATE: IL ZIP: 62301 BUSINESS PHONE: 2172286011 MAIL ADDRESS: STREET 1: 2701 SPRUCE ST CITY: QUINCY STATE: IL ZIP: 62301 FORMER COMPANY: FORMER CONFORMED NAME: TITAN WHEEL INTERNATIONAL INC DATE OF NAME CHANGE: 19930403 10-Q 1 form10q.htm TITAN INTERNATIONAL, INC. FORM 10-Q 6-30-06 TITAN INTERNATIONAL, INC. FORM 10-Q 6-30-06

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For Quarterly Period Ended: June 30, 2006

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 1-12936

TITAN INTERNATIONAL, INC.

(Exact name of Registrant as specified in its Charter)

Illinois		36-3228472
(State of Incorporation)		(I.R.S. Employer Identification No.)

2701 Spruce Street, Quincy, IL 62301

(Address of principal executive offices, including Zip Code)

(217) 228-6011

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.

Large accelerated filer o Accelerated filer x Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No x

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

		Shares Outstanding at
Class		July 26, 2006

Common stock, no par value per share		19,731,332

TITAN INTERNATIONAL, INC.

TABLE OF CONTENTS

		Page
Part I.	Financial Information

Item 1.	Financial Statements (Unaudited)

	Consolidated Condensed Statements of Operations for the Three and Six Months Ended June 30, 2006 and 2005	1

	Consolidated Condensed Balance Sheets as of June 30, 2006, and December 31, 2005	2

	Consolidated Condensed Statement of Changes in Stockholders’ Equity for the Six Months Ended June 30, 2006	3

	Consolidated Condensed Statements of Cash Flows for the Six Months Ended June 30, 2006 and 2005	4

	Notes to Consolidated Condensed Financial Statements	5-15

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	16-24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

Part II.	Other Information

Item 1.	Legal Proceedings	25

Item 4.	Submission of Matters to a Vote of Security Holders	25

Item 6.	Exhibits	26

	Signatures	26

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED)

(Amounts in thousands, except earnings per share data)

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Net sales	$	175,194		$	134,709		$	357,771		$	270,838
Cost of sales		152,752			112,207			304,215			224,255
Gross profit		22,442			22,502			53,556			46,583
Selling, general & administrative expenses		8,589			8,228			19,954			16,838
Royalty expense		1,214			0			2,839			0
Idled assets marketed for sale depreciation		904			1,334			1,820			2,680
Income from operations		11,735			12,940			28,943			27,065
Interest expense		(3,709	)		(2,353	)		(7,432	)		(4,942	)
Noncash convertible debt conversion charge		0			(7,225	)		0			(7,225	)
Other income		1,313			404			2,149			1,314
Income before income taxes		9,339			3,766			23,660			16,212
Provision (benefit) for income taxes		3,736			(434	)		9,464			811
Net income	$	5,603		$	4,200		$	14,196		$	15,401

Earnings per common share:
Basic	$	.28		$	.25		$	.72		$	.93
Diluted		.24			.23			.60			.74
Average common shares outstanding:
Basic		19,695			16,900			19,639			16,628
Diluted		26,081			25,186			26,003			25,128

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED)

(Amounts in thousands, except share data)

	June 30,			December 31,
Assets		2006			2005
Current assets
Cash and cash equivalents	$	239		$	592
Accounts receivable (net allowance of $6,195 and $5,654, respectively)		98,231			47,112
Inventories		147,895			122,692
Deferred income taxes		11,604			20,141
Prepaid and other current assets		16,848			15,630
Total current assets		274,817			206,167

Property, plant and equipment, net		133,989			140,382
Idled assets marketed for sale		16,121			18,267
Investment in Titan Europe Plc		52,177			48,467
Goodwill		11,702			11,702
Other assets		15,247			15,771

Total assets	$	504,053		$	440,756

Liabilities and Stockholders’ Equity
Current liabilities
Short-term debt (including current portion of long-term debt)	$	5,501		$	11,995
Accounts payable		62,680			24,435
Other current liabilities		24,200			11,753
Total current liabilities		92,381			48,183

Long-term debt		189,615			190,464
Deferred income taxes		14,880			13,581
Other long-term liabilities		19,468			20,715
Total liabilities		316,344			272,943

Stockholders’ equity
Common stock (no par, 60,000,000 shares authorized, 30,577,356 issued)		30			30
Additional paid-in capital		256,831			255,299
Retained earnings		46,052			32,053
Treasury stock (at cost, 10,856,592 and 11,074,150 shares, respectively)		(97,864	)		(99,817	)
Accumulated other comprehensive loss		(17,340	)		(19,752	)
Total stockholders’ equity		187,709			167,813

Total liabilities and stockholders’ equity	$	504,053		$	440,756

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)

(All amounts in thousands, except share data)

	Number of common shares		Common Stock		Additional paid-in capital		Retained earnings			Treasury stock			Accumulated other comprehensive income (loss)			Total

Balance January 1, 2006		19,503,206	$	30	$	255,299	$	32,053		$	(99,817	)	$	(19,752	)	$	167,813

Comprehensive income:
Net income								14,196									14,196
Unrealized gain on investment, net of tax														2,412			2,412
Comprehensive income								14,196						2,412			16,608
Dividends paid on common stock								(197	)								(197	)
Exercise of stock options		214,800				1,508					1,928						3,436
Issuance of treasury stock
under 401(k) plan		2,758				24					25						49

Balance June 30, 2006		19,720,764	$	30	$	256,831	$	46,052		$	(97,864	)	$	(17,340	)	$	187,709

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED)

(Amounts in thousands)

	Six months ended
	June 30,
	2006			2005
Cash flows from operating activities:
Net income	$	14,196		$	15,401
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		12,488			10,915
Noncash convertible debt conversion charge		0			7,225
Deferred income tax provision		8,816			0
Excess tax benefit from stock options exercised		(279	)		0
(Increase) decrease in current assets:
Accounts receivable		(51,119	)		(17,195	)
Inventories		(25,203	)		5,980
Prepaid and other current assets		(1,218	)		(30	)
Increase in current liabilities:
Accounts payable		38,245			3,042
Other current liabilities		12,446			2,906
Other, net		(1,714	)		(1,755	)
Net cash provided by operating activities		6,658			26,489

Cash flows from investing activities:
Capital expenditures, net		(2,967	)		(1,929	)
Other		36			39
Net cash used for investing activities		(2,931	)		(1,890	)

Cash flows from financing activities:
Payment on revolving credit facility, net		(800	)		(24,900	)
Payment on debt		(6,543	)		(117	)
Proceeds from exercise of stock options		3,131			400
Excess tax benefit from stock options exercised		279			0
Payment of financing fees		0			(500	)
Dividends paid		(196	)		(164	)
Other, net		49			94
Net cash used for financing activities		(4,080	)		(25,187	)

Net decrease in cash and cash equivalents		(353	)		(588	)

Cash and cash equivalents at beginning of period		592			1,130

Cash and cash equivalents at end of period	$	239		$	542

See accompanying Notes to Consolidated Condensed Financial Statements.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

1. ACCOUNTING POLICIES

In the opinion of Titan International, Inc. (“Titan” or the “Company”), the accompanying unaudited consolidated condensed financial statements contain all adjustments, which are normal and recurring in nature and necessary to present fairly the Company’s financial position as of June 30, 2006, the results of operations for the three and six months ended June 30, 2006 and 2005, and cash flows for the six months ended June 30, 2006 and 2005.

Accounting policies have continued without significant change and are described in the Summary of Significant Accounting Policies contained in the Company’s 2005 Annual Report on Form 10-K. These interim financial statements have been prepared pursuant to the Securities and Exchange Commission’s rules for Form 10-Q’s and, therefore, certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2005 Annual Report on Form 10-K.

Reclassification

Certain amounts from prior years have been reclassified to conform to the current year’s presentation.

2. ACQUISITION OF GOODYEAR’S NORTH AMERICAN FARM TIRE ASSETS

On December 28, 2005, Titan Tire Corporation, a subsidiary of Titan International, Inc., acquired The Goodyear Tire & Rubber Company’s North American farm tire assets. Titan Tire purchased the assets of Goodyear’s North American farm tire business for approximately $100 million in cash proceeds. The assets purchased include Goodyear’s North American plant, property and equipment located in Freeport, Illinois, and Goodyear’s North American farm tire inventory.

The following unaudited pro forma financial information gives effect to the acquisition of the Goodyear North American farm tire assets as if the acquisition had taken place on January 1, 2005. The pro forma information for the Freeport, Illinois, facility was derived from a carve-out of The Goodyear Tire & Rubber Company’s historical accounting records.

Pro forma information for the three months and six months ended is as follows (in thousands, except per share data):

	Three months ended				Six months ended
	June 30,				June 30,
	2006 (Actual)		2005 (Pro forma)		2006 (Actual)		2005 (Pro forma)
Net sales	$	175,194	$	198,403	$	357,771	$	398,226
Income before income taxes		9,339		3,747		23,660		16,174
Net income		5,603		4,181		14,196		15,363
Diluted earnings per share		.24		.23		.60		.74

The pro forma information is presented for illustrative purposes only and may not be indicative of the results that would have been obtained had the acquisition of assets actually occurred on January 1, 2005, nor is it necessarily indicative of Titan’s future consolidated results of operations or financial position.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

3. INVENTORIES

Inventories consisted of the following (in thousands):

	June 30,			December 31,
	2006			2005
Raw materials	$	45,442		$	42,511
Work-in-process		10,391			10,939
Finished goods		95,261			74,793
		151,094			128,243
Reduction to LIFO basis		(3,199	)		(5,551	)
	$	147,895		$	122,692

Inventories were $147.9 million and $122.7 million at June 30, 2006, and December 31, 2005, respectively. The LIFO reduction changed primarily as a result of fluctuations within the composition of LIFO inventory layers. Included in the inventory balances were reserves for slow-moving and obsolete inventory of $2.9 million and $2.8 million at June 30, 2006, and December 31, 2005, respectively.

4. PROPERTY, PLANT AND EQUIPMENT, NET

Property, plant and equipment, net consisted of the following (in thousands):

	June 30,			December 31,
	2006			2005
Land and improvements	$	2,521		$	2,521
Buildings and improvements		63,693			63,572
Machinery and equipment		203,889			202,598
Tools, dies and molds		52,109			51,859
Construction-in-process		4,103			2,284
		326,315			322,834
Less accumulated depreciation		(192,326	)		(182,452	)
	$	133,989		$	140,382

Property, plant and equipment, net was $134.0 million and $140.4 million at June 30, 2006, and December 31, 2005, respectively. The property, plant and equipment balances do not include idled assets marketed for sale of $16.1 million at June 30, 2006, and $18.3 million at December 31, 2005. Depreciation on fixed assets for the six months ended June 30, 2006 and 2005, totaled $9.7 million and $7.4 million, respectively. In addition, depreciation on idled assets marketed for sale was $1.8 million and $2.7 million for the six months ended June 30, 2006 and 2005, respectively.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

5. IDLED ASSETS MARKETED FOR SALE

Idled assets marketed for sale consisted of the following (in thousands):

	June 30,		December 31,
	2006		2005
Carrying value of idled assets	$	16,121	$	18,267

The idled assets marketed for sale are being depreciated in accordance with SFAS No. 144. Depreciation on these idled assets was $1.8 million and $2.7 million for the six months ended June 30, 2006 and 2005, respectively.

During the first six months of 2006, approximately $0.3 million of idled assets were placed back into service. The idled assets balance at June 30, 2006, was $16.1 million. Included in the June 30, 2006, balance are land and a building at the Company’s idled facility in Greenwood, South Carolina, totaling $1.8 million. Machinery and equipment located at the Company’s idled facilities in Brownsville, Texas, and Natchez, Mississippi, totaling $14.3 million, are also included in idled assets marketed for sale at June 30, 2006. With the assistance of independent appraisals, the Company has concluded that the fair market values of the machinery and equipment at these facilities exceed their respective carrying values. The Company has had inquiries regarding these assets and continues the marketing process for sale of these assets. Also, as a result of the Goodyear North American farm tire asset acquisition, the Company is considering placing certain assets of the idled machinery and equipment back into service at the Des Moines, Iowa, or Freeport, Illinois, facilities.

6. INVESTMENT IN TITAN EUROPE PLC

Investment in unconsolidated affiliate consisted of the following (in thousands):

	June 30,		December 31,
	2006		2005
Investment in Titan Europe Plc	$	52,177	$	48,467

As of June 30, 2006, the Company owns a 15.4% stock ownership interest in Titan Europe Plc. In accordance with SFAS No. 115, the Company records the Titan Europe Plc investment as an available-for-sale security and reports the investment at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of stockholders’ equity. The fair value of the Company’s investment in Titan Europe Plc was $52.2 million at June 30, 2006, and $48.5 million at December 31, 2005. Titan Europe Plc is publicly traded on the AIM market in London, England.

7. GOODWILL

The carrying amount of goodwill by segment consisted of the following (in thousands):

	June 30,		December 31,
	2006		2005
Agricultural segment	$	6,912	$	6,912
Earthmoving/construction segment		3,552		3,552
Consumer segment		1,238		1,238
	$	11,702	$	11,702

Goodwill reflects accumulated amortization of $2.9 million at June 30, 2006, and December 31, 2005. The Company reviews goodwill to assess recoverability from future operations during the fourth quarter of each annual reporting period, and whenever events and circumstances indicate that the carrying values may not be recoverable. No goodwill charges were recorded in the first half of 2006 or 2005. There can be no assurance that future goodwill tests will not result in a charge to earnings.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

8. REVOLVING CREDIT FACILITY AND LONG-TERM DEBT

Long-term debt consisted of the following (in thousands):

	June 30,		December 31,
	2006		2005
Revolving credit facility	$	98,300	$	99,100
Senior unsecured convertible notes		81,200		81,200
Industrial revenue bonds and other		15,616		22,159
		195,116		202,459
Less: Amounts due within one year		5,501		11,995
	$	189,615	$	190,464

Aggregate maturities of long-term debt at June 30, 2006, were as follows (in thousands):

July 1 - December 31, 2006	$	5,453
2007		98
2008		98,865
2009		81,200
2010		9,500
Thereafter		0
	$	195,116

Revolving credit facility

The Company’s $200 million revolving credit facility with agent LaSalle Bank National Association has a 2008 termination date and is collateralized by a first priority security interest in certain assets of Titan and its domestic subsidiaries. The borrowings under the facility bear interest at a floating rate of either prime rate plus 1.5% or LIBOR plus 3.0%. Interest rates at June 30, 2006, range from approximately an 8% to 10% rate. The facility contains certain financial covenants, restrictions and other customary affirmative and negative covenants. The Company was in compliance with these covenants and restrictions as of June 30, 2006.

Credit Facility Amendment

On June 28, 2006, the Company entered into a contingent amendment to its revolving credit facility with LaSalle Bank National Association. The amendment will increase the revolving loan availability from $200 million to $250 million. The amendment will not be effective until the closing of Titan’s acquisition of the assets of the off-the-road (OTR) tire manufacturing facility in Bryan, Ohio, from Continental Tire North America.

Senior unsecured convertible notes

The $81.2 million of 5.25% senior unsecured convertible notes are due 2009. These notes are convertible by the holders into shares of the Company’s stock at any time on or before maturity at a conversion rate of 74.0741 shares per $1,000 principal amount of notes ($13.50 per common share), subject to adjustment. This conversion rate would convert all of the notes into approximately 6.0 million shares of the Company’s common stock.

Industrial revenue bonds and other

Other debt primarily consists of industrial revenue bonds, loans from local and state entities, and other long-term notes. Maturity dates on this debt range from one to four years and interest rates ranged from a 3% to 9% rate. Other debt includes the balance due on the Brownsville building of $5.4 million and $11.9 million at June 30, 2006, and December 31, 2005, respectively. The entire debt on the Brownsville building is classified as short-term debt.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

9. WARRANTY COSTS

The Company provides limited warranties on workmanship on its products in all market segments. The Company’s products have a limited warranty that ranges from zero to ten years, with certain products being prorated after the first year. The Company calculates a provision for warranty expense based on past warranty experience. The warranty amount increases in the first half of 2006 were related to the Company’s significantly higher sales levels. Warranty accruals are included as a component of other current liabilities on the Consolidated Condensed Balance Sheets. Changes in the warranty liability consisted of the following (in thousands):

	2006			2005
Warranty liability, January 1	$	1,838		$	1,762
Provision for warranty liabilities		2,747			1,150
Warranty payments made		(1,814	)		(946	)
Warranty liability, June 30	$	2,771		$	1,966

10. EMPLOYEE BENEFIT PLANS

The Company has two frozen defined benefit pension plans and one defined benefit plan that purchased a final annuity settlement in 2002. The components of net periodic pension cost consisted of the following (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Interest cost	$	983		$	1,039		$	1,966		$	2,078
Expected return on assets		(1,168	)		(1,202	)		(2,336	)		(2,404	)
Amortization of unrecognized prior service cost		34			34			68			68
Amortization of unrecognized deferred taxes		(14	)		(14	)		(28	)		(28	)
Amortization of net unrecognized loss		462			439			924			878
Net periodic pension cost	$	297		$	296		$	594		$	592

During the first half of 2006, the Company contributed $1.7 million to the frozen defined benefit pension plans. The Company expects to contribute approximately $2.3 million to the pension plans during the remainder of 2006.

11. LEASE COMMITMENTS

The Company leases certain buildings and equipment under operating leases. Certain lease agreements provide for renewal options, fair value purchase options, and payment of property taxes, maintenance and insurance by the Company.

At June 30, 2006, future minimum commitments under noncancellable operating leases with initial or remaining terms of one year were as follows (in thousands):

July 1 - December 31, 2006	$	1,587
2007		2,277
2008		1,247
2009		695
2010		421
Thereafter		187
Total future minimum lease payments	$	6,414

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

12. SEGMENT INFORMATION

The table below presents information about certain revenues and income from operations used by the chief operating decision maker of the Company for the three and six months ended June 30, 2006 and 2005 (in thousands):

	Revenues					Income (loss)
Three months ended	from external			Intersegment		from
June 30, 2006	customers			revenues		operations
Agricultural	$	116,267		$	45,474	$	12,660
Earthmoving/construction		29,005			11,999		4,474
Consumer		29,922	^(a)		2,970		655
Reconciling items ^(b)		0			0		(6,054	)
Consolidated totals	$	175,194		$	60,443	$	11,735

Three months ended
June 30, 2005
Agricultural	$	90,819		$	10,889	$	11,605
Earthmoving/construction		35,721			6,129		6,370
Consumer		8,169			507		701
Reconciling items ^(b)		0			0		(5,736	)
Consolidated totals	$	134,709		$	17,525	$	12,940

	Revenues					Income (loss)
Six months ended	from external			Intersegment		from
June 30, 2006	customers			revenues		operations
Agricultural	$	240,694		$	100,711	$	31,967
Earthmoving/construction		60,806			24,967		9,701
Consumer		56,271	^(c)		6,045		1,675
Reconciling items ^(b)		0			0		(14,400	)
Consolidated totals	$	357,771		$	131,723	$	28,943

Six months ended
June 30, 2005
Agricultural	$	180,278		$	26,587	$	25,273
Earthmoving/construction		74,862			13,141		12,508
Consumer		15,698			1,434		1,556
Reconciling items ^(b)		0			0		(12,272	)
Consolidated totals	$	270,838		$	41,162	$	27,065

(a)	Sales to the Goodyear Tire & Rubber Company for the three months ended June 30, 2006, the majority of which are included in the consumer segment, were approximately $20 million.

(b)	Represents corporate expenses and depreciation and amortization expense related to property, plant and equipment carried at the corporate level.

(c)	Sales to the Goodyear Tire & Rubber Company for the six months ended June 30, 2006, the majority of which are included in the consumer segment, were approximately $38 million.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

Assets by segment were as follows (in thousands):

	June 30,		December 31,
Total assets		2006		2005
Agricultural segment	$	321,119	$	239,581
Earthmoving/construction segment		91,088		89,241
Consumer segment		23,870		22,963
Reconciling items ^(a)		67,976		88,971
Consolidated totals	$	504,053	$	440,756

(a)	Represents property, plant and equipment and other corporate assets.

13. ROYALTY EXPENSE

The December 2005 Goodyear North American farm tire asset acquisition included a license agreement with The Goodyear Tire & Rubber Company to manufacture and sell certain off-highway tires in North America. Royalty expenses recorded for the three and six months ended June 30, 2006, were $1.2 million and $2.8 million, respectively. No royalty expense was recorded in the three and six months ended June 30, 2005, as this license agreement was not yet in place.

14. NONCASH CONVERTIBLE DEBT CONVERSION CHARGE

In June 2005, Titan finalized a private transaction in which the Company issued 3,022,275 shares of common stock in exchange for the cancellation of $33.8 million principal amount of the Company’s outstanding 5.25% senior convertible notes due 2009, as proposed to the Company by certain note holders. The Company recognized a noncash charge of $7.2 million in connection with this exchange in accordance with SFAS No. 84, “Induced Conversions of Convertible Debt,” during the second quarter of 2005. This charge does not reflect $0.8 million of interest previously accrued on the notes. The exchange resulted in an increase to additional paid-in capital of approximately $41.0 million.

15. OTHER INCOME

Other income consisted of the following (in thousands):

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Interest income	$	223		$	80		$	1,356		$	139
Dividend income - Titan Europe Plc		811			0			811			0
Foreign exchange gain (loss)		331			(528	)		408			(900	)
Equity income - Titan Europe Plc		0			846			0			2,038
Other (expense) income		(52	)		6			(426	)		37
	$	1,313		$	404		$	2,149		$	1,314

Interest income for the six months ended June 30, 2006, includes $1.1 million of interest income received in March of 2006 regarding the final calculation of interest earned associated with restricted cash previously on deposit for the Dyneer legal case. As a result of decreased ownership percentage in Titan Europe Plc, effective December 2005, the Company no longer uses the equity method to account for its interest in Titan Europe Plc.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

16. INCOME TAXES

The Company recorded income tax expense of $3.7 million and $9.5 million for the three and six months ended June 30, 2006, respectively, as compared to an income tax benefit of $0.4 million and income tax expense of $0.8 million for the three and six months ended June 30, 2005. During the first half of 2005, the Company’s income tax expense differs from the amount of income tax determined by applying the statutory U.S. federal income tax rate to income before income taxes primarily as a result of the partial reversal of the valuation allowance recorded against the Company’s domestic net deferred tax asset balance. As a result of several years of previous losses, the Company had recorded a valuation allowance against its net deferred income tax asset, consistent with the Company’s accounting policies. During the fourth quarter of 2005, based upon anticipated utilization of net operating loss carryforwards in connection with its future federal income tax filings, the Company reversed the remainder of this valuation allowance. As a result of this reversal, the Company’s effective income tax rate was 40% in the first half of 2006 as compared to a 5% effective tax rate in the first half of 2005.

17. EARNINGS PER SHARE

Earnings per share (EPS) are as follows (amounts in thousands, except per share data):

	Three months ended,
	June 30, 2006						June 30, 2005
	Net Income		Weighted average shares		Per share amount		Net Income		Weighted average shares		Per share amount
Basic EPS	$	5,603		19,695	$	.28	$	4,200		16,900	$	.25
Effect of stock options		0		371				0		207
Effect of convertible notes		719		6,015				1,614		8,079
Diluted EPS	$	6,322		26,081	$	.24	$	5,814		25,186	$	.23

	Six months ended,
	June 30, 2006						June 30, 2005
	Net Income		Weighted average shares		Per share amount		Net Income		Weighted average shares		Per share amount
Basic EPS	$	14,196		19,639	$	.72	$	15,401		16,628	$	.93
Effect of stock options		0		349				0		203
Effect of convertible notes		1,438		6,015				3,140		8,297
Diluted EPS	$	15,634		26,003	$	.60	$	18,541		25,128	$	.74

The impact of stock options with exercise prices greater than the average market price of the Company’s common shares has been excluded, as the effect would have been antidilutive.

18. COMPREHENSIVE INCOME

Comprehensive income for the second quarter of 2006 totaled $4.8 million compared to $3.0 million in the second quarter of 2005. Comprehensive income for the second quarter of 2006 included net income of $5.6 million and unrealized loss on investments of $0.8 million, while comprehensive income for the second quarter of 2005 included net income of $4.2 million and the effect of foreign currency translation adjustments of $(1.2) million. Comprehensive income for the six months ended June 30, 2006, was $16.6 million compared to $13.4 million in 2005. Comprehensive income for the six months ended June 30, 2006, included net income of $14.2 million and unrealized gain on investments of $2.4 million, while comprehensive income for the six months ended June 30, 2005, included net income of $15.4 million and the effect of foreign currency translations of $(2.0) million.

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

19. STOCK OPTION PLANS

Stock Incentive Plan

The Company adopted the 1993 Stock Incentive Plan to provide grants of stock options as a means of attracting and retaining qualified employees for the Company. There will be no additional issuance of stock options under this plan, as it has expired. Options previously granted are fully vested and expire 10 years from the grant date of the option.

Non-Employee Director Stock Option Plan

The Company adopted the 1994 Non-Employee Director Stock Option Plan to provide for grants of stock options as a means of attracting and retaining qualified independent directors for the Company. There will be no additional issuance of stock options under this plan, as it has expired. Options previously granted are fully vested and expire 10 years from the grant date of the option.

2005 Equity Incentive Plan

The Company adopted the 2005 Equity Incentive Plan (the Plan) to provide stock options as a means of attracting and retaining qualified independent directors and employees for the Company. A total of 2.1 million shares are reserved for issuance under the Plan. The exercise price of stock options may not be less than the fair market value of the common stock on the date of the grant. The vesting and term of each option is set by the Board of Directors. In 2005, a total of 890,380 options were granted under this plan. Options granted are fully vested and expire 10 years from the grant date of the option.

On January 1, 2006, the Company adopted the provisions of Statement of Financial Accounting Standards (SFAS) No. 123(R), “Share-Based Payment.” Prior to adopting the provisions of SFAS No. 123(R), the Company applied the recognition and measurement principles of Accounting Principles Board (APB) Opinion No. 25, “Accounting for Stock Issued to Employees,” and related Interpretations in accounting for the plans.

The Company implemented SFAS No. 123(R) using the modified prospective transition method. Under this method, Titan is to recognize share-based compensation for all current awards and for the unvested portion of previous awards based on grant date fair values. No new awards were issued during the first six months of 2006 and all previous awards were fully vested as of the end of the prior period, December 31, 2005. Therefore, no share-based compensation expense has been recorded in the first six months of 2006.

The following table illustrates the effect on net income and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” to stock-based compensation for periods prior to adopting SFAS No. 123(R) (amounts in thousands, except earnings per share data):

	Three months ended			Six months ended
	June 30,			June 30,
	2005			2005
Net income - as reported	$	4,200		$	15,401
Deduct: Total stock-based compensation
expense determined under fair value method
for all awards, net of related tax effects		(262	)		(262	)
Pro forma net income	$	3,938		$	15,139
Earnings per share:
Basic - as reported	$	.25		$	.93
Basic - pro forma		.23			.91
Diluted - as reported	$	.23		$	.74
Diluted - pro forma		.22			.73

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

The following is a summary of activity in the stock option plans during the first six months of 2006:

	Shares Subject to Option			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value (a) (in 000’s)
Outstanding, December 31, 2005		1,547,510		$	13.53
Granted		0			-
Exercised		(214,800	)		14.57
Canceled/Expired		(15,260	)		16.00
Outstanding, June 30, 2006		1,317,450		$	13.33		6.4 years	$	7,088
Exercisable, June 30, 2006		1,317,450		$	13.33		6.4 years	$	7,088

(a)	The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option.

The total intrinsic value of options exercised during the first six months of 2006 was $0.7 million. Cash received from the exercise of options was $3.1 million for the first six months of 2006. The tax benefit realized for the tax deductions from options exercised was $0.3 million for the first six months of 2006.

The Company currently uses treasury stock shares to satisfy share option exercises. At June 30, 2006, the Company had 10.9 million shares in treasury stock.

20. RECENT DEVELOPMENTS

Termination of Cash Merger Discussions

On October 11, 2005, the Company received an offer from One Equity Partners LLC (One Equity), a private equity affiliate of JPMorgan Chase & Co., indicating One Equity’s interest in acquiring Titan International, Inc. in a cash merger for $18.00 per share of Titan common stock. On April 12, 2006, Titan and One Equity announced the termination of discussions regarding the proposed cash merger. On April 17, 2006, the Company’s Board of Directors met and thanked the Special Committee, which had been formed to pursue discussions regarding One Equity’s proposed cash merger, for all their efforts expended and agreed that their Special Committee responsibilities have been completed.

Negotiations with Continental Tire North America to Purchase Bryan, Ohio, Assets

On April 24, 2006, the Company announced that it is in negotiations with Continental Tire North America (CTNA) to acquire the assets of its off-the-road (OTR) tire manufacturing facility in Bryan, Ohio. The asset purchase, if completed, will be subject to approval of the Board of Directors of Titan and CTNA, CTNA’s shareholders and government regulations. In addition, the asset purchase is contingent upon negotiation of an agreement between Titan and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) and its Local Union No. 890L.

Credit Facility Amendment

TITAN INTERNATIONAL, INC.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

21. LITIGATION

The Company is a party to routine legal proceedings arising out of the normal course of business. Although it is not possible to predict with certainty the outcome of these unresolved legal actions or the range of possible loss, the Company believes at this time that none of these actions, individually or in the aggregate, will have a material adverse affect on the financial condition, results of operations or cash flows of the Company. However, due to the difficult nature of predicting future legal claims, the Company cannot anticipate or predict the material adverse effect on its financial condition, results of operations or cash flows as a result of efforts to comply with or its liabilities pertaining to legal judgments.

22. RECENTLY ISSUED ACCOUNTING STANDARDS

Financial Accounting Standards Board Interpretation Number 48

In July 2006, Financial Accounting Standards Board Interpretation (FIN) No. 48, “Accounting for Uncertainty in Income Taxes-an Interpretation of FASB Statement No. 109,” was issued. FIN No. 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, and disclosure requirements for uncertain tax positions. FIN No. 48 is effective for fiscal years beginning after December 15, 2006. The Company is evaluating the effect the adoption of this interpretation will have on its financial position, cash flows and results of operations.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s discussion and analysis of financial condition and results of operations (MD&A) is designed to provide a reader of these financial statements with a narrative from the perspective of the management of Titan International, Inc. (Titan or the Company) on Titan’s financial condition, results of operations, liquidity and other factors which may affect the Company’s future results. The MD&A in this quarterly report should be read in conjunction with the MD&A in Titan’s 2005 annual report on Form 10-K filed with the Securities and Exchange Commission on February 24, 2006.

FORWARD-LOOKING STATEMENTS

This Form 10-Q contains forward-looking statements, including statements regarding, among other items, (i) anticipated trends in the Company’s business, (ii) future expenditures for capital projects, (iii) the Company’s ability to continue to control costs and maintain quality, (iv) ability to meet financial covenants and conditions of loan agreements, (v) the Company’s business strategies, including its intention to introduce new products, (vi) expectations concerning the performance and commercial success of the Company’s existing and new products and (vii) the Company’s intention to consider and pursue acquisitions and divestitures. Readers of this Form 10-Q should understand that these forward-looking statements are based on the Company’s expectations and are subject to a number of risks and uncertainties, certain of which are beyond the Company’s control.

Actual results could differ materially from these forward-looking statements as a result of certain factors, including, (i) changes in the Company’s end-user markets as a result of world economic or regulatory influences, (ii) fluctuations in currency translations, (iii) changes in the competitive marketplace, including new products and pricing changes by the Company’s competitors, (iv) availability and price of raw materials, (v) levels of operating efficiencies, (vi) actions of domestic and foreign governments, (vii) results of investments, and (viii) ability to secure financing at reasonable terms. Any changes in such factors could lead to significantly different results. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In light of these risks and uncertainties, there can be no assurance that the forward-looking information contained in this document will in fact transpire.

OVERVIEW

Titan International, Inc. and its subsidiaries (Titan or the Company) are leading manufacturers of wheels, tires and assemblies for off-highway vehicles used in the agricultural, earthmoving/construction and consumer markets. Titan’s earthmoving/construction market also includes products supplied to the U.S. government, while the consumer market includes products for all-terrain vehicles (ATVs) and recreational/utility trailer applications. Titan manufactures both wheels and tires for the majority of these market applications, allowing the Company to provide the value-added service of delivering complete wheel and tire assemblies. The Company offers a broad range of products that are manufactured in relatively short production runs to meet the specifications of original equipment manufacturers (OEMs) and/or the requirements of aftermarket customers.

The Company’s major OEM customers include large manufacturers of off-highway equipment such as Deere & Company, CNH Global N.V., Caterpillar Inc., AGCO Corporation, and Kubota Corporation, in addition to many other off-highway equipment manufacturers. The Company distributes products to OEMs, independent and OEM-affiliated dealers, and through a network of distribution facilities.

The Company recorded sales of $175.2 million for the second quarter of 2006, which were 30% higher than the second quarter 2005 sales of $134.7 million. The significantly higher sales level was attributed to the expanded agricultural product offering of the Goodyear brand for farm tires, along with added manufacturing capacity from the Freeport, Illinois, facility, which was acquired in December 2005.

Income from operations was $11.7 million for the second quarter of 2006 as compared to $12.9 million in 2005. Titan’s net income was $5.6 million for the second quarter of 2006, compared to $4.2 million in 2005. Basic earnings per share were $.28 in the second quarter of 2006, compared to $.25 in 2005. The Company’s net income was higher as the result of a noncash convertible debt conversion charge of $7.2 million taken in 2005 offset by a higher effective tax rate of 40% in the second quarter of 2006 as compared to a tax benefit recorded in the second quarter of 2005, resulting in higher income taxes of $4.2 million in 2006.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

ACQUISITION OF GOODYEAR’S NORTH AMERICAN FARM TIRE ASSETS

The productivity obtained during the first half of 2006 associated with the Freeport facility is meeting Titan’s current expectations. The Freeport facility achieved a production level of approximately $61 million and $126 million of manufacturing output during the three and six months ended June 30, 2006, respectively.

RECENT DEVELOPMENTS

Termination of Cash Merger Discussions

Negotiations with Continental Tire North America to Purchase Bryan, Ohio, Assets

On April 24, 2006, the Company announced that it is in negotiations with Continental Tire North America (CTNA) to acquire the assets of its off-the-road tire manufacturing facility in Bryan, Ohio. The asset purchase, if completed, will be subject to approval of the Board of Directors of Titan and CTNA, CTNA’s shareholders and government regulations. In addition, the asset purchase is contingent upon negotiation of an agreement between Titan and the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union (USW) and its Local Union No. 890L. Sales at CTNA’s Bryan facility are approximately $125 million per year.

It is anticipated that the United Steelworkers (USW) Local 890L of Bryan, Ohio, will vote on a new collective bargaining agreement with Titan Tire Corporation of Bryan on Saturday, July 29, 2006. As of July 27, 2006, CTNA, current owner of the OTR manufacturing facility, has agreed on substantially all of the terms of the Asset Purchase Agreement and related agreements with Titan, but under CTNA’s existing labor agreement with USW Local 890L, an agreement must be reached between Titan and the union to close the transaction. The transaction is also subject to the consent of all shareholders of CTNA. If USW Local 890L ratifies the contract on Saturday, July 29, and CTNA obtains shareholder consent by July 31, Titan and CTNA will tentatively close the transaction on Monday, July 31, 2006.

Credit Facility Amendment

CRITICAL ACCOUNTING POLICIES

Preparation of the financial statements and related disclosures in compliance with generally accepted accounting principles accepted in the United States requires the application of appropriate technical accounting rules and guidance, as well as the use of estimates. The Company’s application of these policies involves assumptions that require difficult subjective judgments regarding many factors, which, in and of themselves, could materially impact the financial statements and disclosures. A future change in the estimates, assumptions or judgments applied in determining the following matters, among others, could have a material impact on future financial statements and disclosures.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Revenue Recognition

The Company records sales revenue when products are shipped to customers and both title and the risks and rewards of ownership are transferred. Provisions are established for sales returns and uncollectible accounts based on historical experience. Should these trends change, adjustments to the estimated provisions would be necessary.

Inventories

Inventories are valued at the lower of cost or market. Cost is determined using the first-in, first-out (FIFO) method for approximately 77% of inventories and the last-in, first-out (LIFO) method for approximately 23% of inventories. The major rubber material inventory and related work-in-process and their finished goods are accounted for under the FIFO method. The major steel material inventory and related work-in-process and their finished goods are accounted for under the LIFO method. Market value is estimated based on current selling prices. Estimated provisions are established for excess and obsolete inventory, as well as inventory carried above market price based on historical experience. Should this experience change, adjustments to the estimated provisions would be necessary.

Impairment of Goodwill

The Company reviews goodwill to assess recoverability from future operations during the fourth quarter of each annual reporting period, and whenever events and circumstances indicate that the carrying values may not be recoverable. The Company had goodwill of $11.7 million at June 30, 2006. Significant assumptions relating to future operations must be made when estimating future cash flows in analyzing goodwill for impairment. Should unforeseen events occur or operating trends change significantly, impairment losses could occur.

Impairment of Fixed Assets

The Company reviews fixed assets to assess recoverability from future operations whenever events and circumstances indicate that the carrying values may not be recoverable. Impairment losses are recognized in operating results when expected undiscounted future cash flows are less than the carrying value of the asset. Impairment losses are measured as the excess of the carrying value of the asset over the discounted expected future cash flows, or the fair value of the asset. The Company had idled assets marketed for sale of $16.1 million at June 30, 2006. Appraisals from third-party valuation firms indicate that the fair market values of the machinery and equipment at these facilities exceed their respective carrying values. Significant assumptions relating to future operations must be made when estimating future cash flows. Should unforeseen events occur or operating trends change significantly, impairment losses could occur.

Retirement Benefit Obligations

Pension benefit obligations are based on various assumptions used by third-party actuaries in calculating these amounts. These assumptions include discount rates, expected return on plan assets, mortality rates and other factors. Revisions in assumptions and actual results that differ from the assumptions affect future expenses, cash funding requirements and obligations. The Company has two frozen defined benefit pension plans and one defined benefit plan that purchased a final annuity settlement in 2002. During the first half of 2006, the Company contributed $1.7 million to its frozen pension plans. The Company expects to contribute approximately $2.3 million to these frozen defined benefit pension plans during the remainder of 2006. For more information concerning these costs and obligations, see the discussion of the “Pensions” and Note 23 to the Company’s financial statements on Form 10-K for the fiscal year ended December 31, 2005.

Valuation of Investment Accounted for as Available-for-Sale Security

The Company had an investment in Titan Europe Plc of $52.2 million as of June 30, 2006, representing a 15.4% ownership position. This investment is recorded as “Investment in Titan Europe Plc” on the consolidated balance sheet. The Company reports this investment at fair value, with unrealized gains and losses excluded from earnings and reported in a separate component of stockholders’ equity. Should the fair value decline below the cost basis, the Company would be required to determine if this decline is other than temporary. If the decline in fair value is judged to be other than temporary, an impairment charge would be recorded. Should unforeseen events occur or investment trends change significantly, impairment losses could occur. Declared dividends on this investment are recorded in income as a component of other income.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

RESULTS OF OPERATIONS

The following table provides highlights for the three and six months ended June 30, 2006, compared to 2005 (amounts in millions, except per share data):

	Three months ended						Six months ended
	June 30,						June 30,
	2006			2005			2006			2005
Net sales	$	175.2		$	134.7		$	357.8		$	270.8
Gross profit		22.4			22.5			53.6			46.6
Gross profit margin		12.8	%		16.7	%		15.0	%		17.2	%

Income from operations	$	11.7		$	12.9		$	28.9		$	27.1

Net income	$	5.6		$	4.2		$	14.2		$	15.4
Earnings per share - Basic		.28			.25			.72			.93
Earnings per share - Diluted		.24			.23			.60			.74

Net Sales

Net sales for the quarter ended June 30, 2006, were $175.2 million, compared to $134.7 million in 2005. Net sales for the six months ended June 30, 2006, were $357.8 million, compared to 2005 net sales of $270.8 million. The large sales improvement of $40.5 million, or 30% for the quarter ended June 30, 2006, and $87.0 million, or 32% for the six months ended June 30, 2006, was attributed to the expanded agricultural product offering of the Goodyear brand for farm tires, along with added manufacturing capacity from the Freeport, Illinois, facility, which was acquired in December 2005.

Cost of Sales and Gross Profit

Cost of sales were $152.8 and $304.2 million for the three and six months ended June 30, 2006, respectively, as compared to $112.2 and $224.3 million in 2005. Gross profit for the second quarter of 2006 was $22.4 million or 12.8% of net sales, compared to $22.5 million or 16.7% of net sales for the second quarter of 2005. Raw material costs increased by approximately $5 million in the second quarter of 2006 over 2005, accounting for a gross profit decrease of approximately 3% of net sales. Titan will continue to responsibly evaluate pricing in relation to these rising raw material costs. Gross profit for the six months ended June 30, 2006, was $53.6 million or 15.0% of net sales, compared to $46.6 million or 17.2% of net sales for 2005. The year-to-date gross profit margin was affected by the raw material cost increases previously discussed.

Administrative Expenses

Selling, general and administrative (SG&A) expenses for the second quarter of 2006 were $8.6 million or 4.9% of net sales, compared to $8.2 million or 6.1% of net sales for 2005. Expenses for SG&A for the six months ended June 30, 2006, were $20.0 million or 5.6% of net sales, compared to $16.8 million or 6.2% of net sales in 2005. Research & development (R&D) expenses, which were previously shown separately, have been combined with the SG&A expenses due to the reduced level of R&D expenditures. R&D expenses were $0.6 million and $0.4 million for the six months ended June 30, 2006 and 2005, respectively.

Royalty Expense

The December 2005 Goodyear North American farm tire asset acquisition included a license agreement with The Goodyear Tire & Rubber Company to manufacture and sell certain off-highway tires in North America. Royalty expenses recorded for the three and six months ended June 30, 2006 were $1.2 million and $2.8 million, respectively. No royalty expense was recorded in the three and six months ended June 30, 2005, as this license agreement was not yet in place.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Idled Assets Marketed for Sale

The Company’s profit margins have been negatively affected by the depreciation associated with the idled assets marketed for sale. The idled assets balance at June 30, 2006, was $16.1 million. Included in the June 30, 2006, balance is land and a building at the Company’s idled facility in Greenwood, South Carolina, totaling $1.8 million. Machinery and equipment located at the Company’s idled facilities in Brownsville, Texas, and Natchez, Mississippi, totaling $14.3 million are also included in idled assets at June 30, 2006. The Company incurred $1.8 million and $2.7 million in depreciation related to the idled assets for the six months ended June 30, 2006 and 2005, respectively.

Income from Operations

Income from operations for the second quarter of 2006 was $11.7 million or 6.7% of net sales, compared to $12.9 million or 9.6% in 2005. Income from operations for the six months ended June 30, 2006, was $28.9 million or 8.1% of net sales, compared to $27.1 million or 10.0% in 2005. The primary factors responsible for the reduction in income from operations are discussed in the “Cost of Sales and Gross Profit” and “Royalty” sections above.

Interest Expense

Interest expense was $3.7 million and $7.4 million for the three and six months ended June 30, 2006, respectively, compared to $2.4 million and $4.9 million in 2005. The Company’s average debt balance was approximately $39 million and $38 million higher for the three and six months ended June 30, 2006, resulting in an increase in interest expense of $0.6 million and $1.2 million, respectively. The Company’s average interest rates were 7.5% and 7.4% in the three and six months ended June 30, 2006, compared to 6.0% and 6.1% in 2005, resulting in an increase in interest expense of $0.7 million and $1.3 million, respectively.

Noncash Convertible Debt Conversion Charge

In June of 2005, Titan finalized a private transaction in which the Company issued 3,022,275 shares of common stock in exchange for the cancellation of $33.8 million principal amount of the Company’s outstanding 5.25% senior convertible notes due 2009, as proposed to the Company by certain note holders. The Company recognized a noncash charge of $7.2 million in connection with this exchange in accordance with Statement of Financial Accounting Standards (SFAS) No. 84, “Induced Conversions of Convertible Debt.”

Other Income

Other income was $1.3 million and $2.1 million for the three and six months ended June 30, 2006, respectively, compared to $0.4 million and $1.3 million in 2005. The $2.1 million for the six months ended June 30, 2006, included $1.1 million of interest income received in March 2006 regarding the final calculation of interest earned associated with restricted cash previously on deposit for the Dyneer legal case. In addition, dividend income of $0.8 million from the Titan Europe Plc investment was recorded in the second quarter of 2006. Included in other income for the three and six months ended June 30, 2005, was $0.8 million and $2.0 million of equity income on the Titan Europe Plc investment. As a result of decreased ownership percentage in Titan Europe Plc, effective December 2005, the Company no longer uses the equity method to account for its interest in Titan Europe Plc.

Income Taxes

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Net Income

Net income for the three and six months ended June 30, 2006, was $5.6 million and $14.2 million, respectively, compared to $4.2 million and $15.4 million in 2005. Basic earnings per share was $.28 and $.72 for the three and six months ended June 30, 2006, respectively, compared to $.25 and $.93 in 2005. Diluted earnings per share was $.24 and $.60 for the three and six months ended June 30, 2006, respectively, compared to $.23 and $.74 in 2005. The Company’s net income and earnings per share for the three and six months ended June 30, 2006, as compared to 2005 were affected primarily by the noncash convertible debt conversion charge in 2005 and the higher effective income tax rate of 40% in the first half of 2006 as compared to a 5% tax rate in the first half of 2005.

Agricultural Segment Results

Net sales in the agricultural market were $116.3 million and $240.7 million for the three and six months ended June 30, 2006, respectively, as compared to $90.8 million and $180.3 million in 2005. The expanded product offering of the Goodyear brand for farm tires, along with added manufacturing capacity from the Freeport, Illinois, facility accounted for the majority of the agricultural market sales increase. Income from operations in the agricultural market was $12.7 million and $32.0 million for the three and six months ended June 30, 2006, respectively, as compared to $11.6 million and $25.3 million in 2005. The increase in income from operations in the agricultural market was attributed to the higher production levels.

Earthmoving/Construction Segment Results

The Company’s earthmoving/construction market net sales were $29.0 million and $60.8 million for the three and six months ended June 30, 2006, respectively, as compared to $35.7 million and $74.9 million for 2005. Income from operations in the earthmoving/construction market was $4.5 million and $9.7 million for the three and six months ended June 30, 2006, respectively, as compared to $6.4 million and $12.5 million in 2005. The decrease in sales and income from operations in the earthmoving/construction market was due to decreased sales to the United States government, which were approximately $6 million and $14 million lower in the three and six months ended June 30, 2006, respectively, as compared to 2005. Sales to the United States government are dependent on government appropriations and have a tendency for significant fluctuations.

Consumer Segment Results

Consumer market net sales were $29.9 million and $56.3 million for the three and six months ended June 30, 2006, respectively, as compared to $8.2 million and $15.7 million for 2005. The Goodyear farm tire acquisition agreement included an off-take/mixing agreement for certain product sales to Goodyear, the majority of which are included in the consumer segment. Sales to The Goodyear Tire & Rubber Company under this agreement were approximately $20 million and $38 million in the three and six months ended June 30, 2006. Consumer market income from operations was $0.7 million and $1.7 million for the three and six months ended June 30, 2006, respectively, as compared to $0.7 million and $1.6 million in 2005.

Corporate Expenses

Income from operations on a segment basis does not include corporate expenses or depreciation and amortization expense related to property, plant and equipment carried at the corporate level totaling $6.1 million and $14.4 million for the three and six months ended June 30, 2006, respectively, as compared to $5.7 million and $12.3 million for comparable periods in 2005. The increase in corporate expenses related primarily to higher sales and marketing expenses of $0.2 million and $0.8 million for the three and six months ended June 30, 2006 as compared to 2005.

MARKET RISK SENSITIVE INSTRUMENTS

The Company’s risks related to foreign currencies, commodity prices and interest rates are consistent with those for 2005. For more information, see the “Market Risk Sensitive Instruments” discussion in the Company’s Form 10-K for the fiscal year ended December 31, 2005.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

As of June 30, 2006, the Company had $0.2 million of cash deposited within various bank accounts. The unrestricted cash balance decreased by $0.4 million from December 31, 2005, due to the cash flow items discussed in the following paragraphs.

Operating cash flows

In the first six months of 2006, positive cash flows from operating activities of $6.7 million resulted primarily from net income of $14.2 million, depreciation and amortization of $12.5 million, and increases in accounts payable and other current liabilities of $38.2 million and $12.4 million, offset by accounts receivable and inventory increases of $51.1 million and $25.2 million. The significant increase in accounts payable, accounts receivable and inventory in the first six months of 2006 related to the higher first half sales levels. In comparison, for the first six months of 2005, positive cash flows from operating activities of $26.5 million resulted primarily from net income of $15.4 million, depreciation and amortization of $10.9 million, a noncash convertible debt conversion charge of $7.2 million, and inventory decreases of $6.0 million, offset by accounts receivable increases of $17.2 million.

Investing cash flows

The Company invested $3.0 million in capital expenditures in the first six months of 2006, compared to $1.9 million in the first six months of 2005. The expenditures represent various equipment purchases and improvements to enhance production capabilities. The Company estimates that its total capital expenditures for the remainder of 2006 will be approximately $8 million.

Financing cash flows

In the six months ended June 30, 2006, cash of $4.1 million was used for financing activities. This use of cash was primarily the result of net debt payments of $7.3 million, offset by $3.1 million in proceeds from the exercise of stock options. In comparison, in the first six months of 2005, cash of $25.2 million was used for financing activities, primarily the result of net revolver payments of $24.9 million.

Debt Covenants

The Company’s revolving credit facility contains various covenants and restrictions. The financial covenants in this agreement require that the (i) Company’s minimum book value of eligible accounts receivable and eligible inventory be equal to or greater than $75 million (or equal to or greater than $100 million when the 30-day average of the outstanding revolver balance exceeds $100 million), (ii) collateral coverage be equal to or greater than 1.25 times the outstanding revolver balance, and (iii) if the 30-day average of the outstanding revolver balance exceeds $175 million, the fixed charge coverage ratio be equal to or greater than a 1.0 to 1.0 ratio. Restrictions include (i) limits on payments of dividends and repurchases of the Company’s stock, (ii) restrictions on the ability of the Company to make additional borrowings, or to consolidate, merge or otherwise fundamentally change the ownership of the Company, (iii) limitations on investments, dispositions of assets and guarantees of indebtedness, and (iv) other customary affirmative and negative covenants. These covenants and restrictions could limit the Company’s ability to respond to market conditions, to provide for unanticipated capital investments, to raise additional debt or equity capital, to pay dividends or to take advantage of business opportunities, including future acquisitions. If the Company were unable to meet these covenants, the Company would be in default on these loan agreements.

The Company is in compliance with these covenants and restrictions as of June 30, 2006. The Company’s minimum book value of eligible accounts receivable and eligible inventory is required to be equal to or greater than $100 million and the Company computed it to be $245.2 million at June 30, 2006. The collateral coverage is required to be equal to or greater than 1.25 times the outstanding revolver balance and was calculated to be 2.8 times this balance at June 30, 2006. The fixed charge coverage ratio must be equal to or greater than a 1.0 to 1.0 ratio if the 30-day average of the outstanding revolver balance exceeds $175 million. This covenant did not apply for the quarter ended June 30, 2006. The outstanding revolver balance was $114.0 million at June 30, 2006, including cash borrowings of $98.3 million and letters of credit of $15.7 million.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Other Issues

The Company’s business is subject to seasonal variations in sales that affect inventory levels and accounts receivable balances. Historically, the Company tends to experience higher sales demand in the first and second quarters.

Liquidity Outlook

At June 30, 2006, the Company had cash and cash equivalents of $0.2 million and $86 million of unused availability under the terms of its revolving credit facility. The availability under the Company’s $200 million revolving credit facility is reduced by $98.3 million of borrowings and $15.7 million for outstanding letters of credit. The Company had scheduled debt principal payments amounting to $5.5 million due for the remainder of 2006. Titan expects to contribute approximately $2.3 million to its frozen defined benefit pension plans during the remainder of 2006. The Company estimates that its total capital expenditures for the remainder of 2006 will be approximately $8 million.

Cash on hand, anticipated internal cash flows from operations and utilization of remaining available borrowings are expected to provide sufficient liquidity for working capital needs, capital expenditures, and payments required on short-term debt. However, if the Company were to exhaust all currently available working capital sources or were not to meet the financial covenants and conditions of its loan agreements, the Company’s ability to secure additional funding may be negatively impacted.

MARKET CONDITIONS AND OUTLOOK

In the first half of 2006, the Company experienced a softening in demand from original equipment manufacturers for Company products. In December of 2005, the Company acquired the Goodyear North American farm tire assets, which included a manufacturing facility in Freeport, Illinois. The transaction also included a license agreement with Goodyear for Titan to manufacture and sell Goodyear branded farm tires in North America. Titan is using the expanded agricultural product offering of the Goodyear brand for farm tires, along with added manufacturing capacity from the Freeport facility to expand market share. Therefore, although markets are expected to be slightly lower, the Company expects its sales to continue to be significantly higher through the remainder of 2006 due to the Freeport facility acquisition. Higher energy, raw material and petroleum-based product costs may continue to negatively impact the Company’s margins. Many of Titan’s overhead expenses are fixed; therefore, lower seasonal trends may cause negative fluctuations in quarterly profit margins and affect the financial condition of the Company.

Agricultural Market Outlook

Agricultural market sales for the industry are expected to remain slightly lower in 2006. Although the farm economy is forecasted to remain stable, the high cost of fuel and fertilizer is negatively affecting the farm sector. Increasing use of grain-based ethanol and soybean-based biodiesel fuel should support commodity prices and farm income levels in the long-term. Titan’s capacity in the agricultural market has increased significantly as a result of the Freeport facility acquisition and, therefore, Titan’s agricultural sales should remain higher for the remainder of 2006 when compared to 2005. Many variables, including weather, grain prices, export markets, and future government policies and payments can greatly influence the overall health of the agricultural economy.

TITAN INTERNATIONAL, INC.

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

Earthmoving/Construction Market Outlook

Sales for the earthmoving/construction market are expected to be slightly lower for the remainder of 2006. Mining sales are expected to remain stable as the result of higher commodity prices. However, products supplied to the U.S. government (i.e., military) included in this segment, are expected to be lower in the near term. Military sales can fluctuate significantly from quarter to quarter due to the governmental appropriation process and demand levels. The earthmoving/construction segment is affected by many variables including commodity prices, road construction, infrastructure, government appropriations and housing starts. Many of these factors are very sensitive to interest rate fluctuations.

Consumer Market Outlook

Titan’s sales in the consumer market should be higher for the remainder of 2006 as compared to 2005 due to the Goodyear farm tire acquisition agreement, which included an off-take/mixing agreement for certain product sales to Goodyear that are included in this segment. Sales to Goodyear will fluctuate significantly based upon their future product requirements. The all-terrain vehicle (ATV) wheel and tire market is expected to offer future long-term opportunities for Titan within the consumer market. Many factors affect the consumer market including weather, competitive pricing, energy prices, interest rates and consumer attitude.

NEW ACCOUNTING STANDARDS

Financial Accounting Standards Board Interpretation Number 48

PENSIONS

The Company has two frozen defined benefit pension plans and one defined benefit plan that purchased a final annuity settlement in 2002. These plans are described in Note 23 of the Company’s Notes to Consolidated Financial Statements in the 2005 Annual Report on Form 10-K. The Company’s recorded liability for pensions is based on a number of assumptions, including discount rates, rates of return on investments, mortality rates and other factors. Certain of these assumptions are determined with the assistance of outside actuaries. Assumptions are based on past experience and anticipated future trends. These assumptions are reviewed annually at a minimum and revised when appropriate. Revisions in assumptions and actual results that differ from the assumptions affect future expenses, cash funding requirements and the carrying value of the related obligations. During the first half of 2006, the Company contributed $1.7 million to the frozen defined benefit pension plans. The Company expects to contribute approximately $2.3 million to these frozen defined benefit pension plans during the remainder of 2006.

TITAN INTERNATIONAL, INC.

PART I. FINANCIAL INFORMATION

Item 3. Quantitative and Qualitative Disclosures About Market Risk

See the Company’s 2005 Annual Report filed on Form 10-K (Item 7A). There has been no material change in this information.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The Company’s principal executive officer and principal financial officer believe the Company’s disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) are effective as of the end of the period covered by this Form 10-Q based on an evaluation of the effectiveness of disclosure controls and procedures.

Changes in Internal Controls

There were no material changes in internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) that occurred during the second quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

Item 4. Submission of Matters to a Vote of Security Holders

The Company held its Annual Meeting of Stockholders on May 18, 2006, for the purposes of electing two directors to serve for three-year terms and ratifying the appointment of the independent registered public accounting firm.

The nominees for directors as listed in the proxy statement were elected with the following vote:

	Shares		Shares
	Voted For		Withheld
Erwin H. Billig		16,919,481		365,897
Anthony L. Soave		16,775,138		510,240

The appointment of PricewaterhouseCoopers LLP as the independent registered public accounting firm was ratified by the following vote:

	Shares		Shares		Shares
	Voted For		Against		Abstaining
PricewaterhouseCoopers LLP		17,263,500		18,708		3,170

TITAN INTERNATIONAL, INC.

PART II. OTHER INFORMATION

Item 6. Exhibits

10.1	Maurice M. Taylor, Jr. Employment Agreement

10.2	Kent W. Hackamack Employment Agreement

10.3	Cheri T. Holley Employment Agreement

10.4	Asset purchase agreement by and among The Goodyear Tire & Rubber Company, Goodyear Canada Inc., Goodyear Servicos Comerciales de R.L. de C.V., The Kelly-Springfield Tire Corporation and Titan Tire Corporation

31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TITAN INTERNATIONAL, INC.
	(Registrant)

Date:	July 27, 2006	By:	/s/ MAURICE M. TAYLOR JR.
			Maurice M. Taylor Jr.
			Chief Executive Officer and Chairman (Principal Executive Officer)

	By:	/s/ KENT W. HACKAMACK
		Kent W. Hackamack
		Vice President of Finance and Treasurer
		(Principal Financial Officer)

EX-10.1 2 ex10_1.htm MAURICE M. TAYLOR, JR. EMPLOYMENT AGREEMENT MAURICE M. TAYLOR, JR. EMPLOYMENT AGREEMENT

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of April 28, 2006, between Titan International, Inc., a Illinois corporation (“Titan and/or Company”), and Maurice M. Taylor, Jr. (“Executive”) (hereinafter, as amended or modified and in effect called “Agreement”). The effective date of this Agreement (the “Effective Date”) shall be April 28, 2006.

INTENDING TO BE LEGALLY BOUND HEREBY, the parties agree as follows:

1. Position. Titan agrees to employ Executive and Executive agrees to accept employment as CEO and Chairman of Titan pursuant to the terms of this Agreement. Executive will perform such services in the capacity of CEO and Chairman as may be assigned to him by the By-laws and, from time to time by the Board of Directors of Titan during the Employment Term and, if applicable, during the Extended Employment Term, (as such terms are defined in Section 2). Executive also will serve as a Director of Titan during the Employment Term, and if applicable, during the Extended Employment Term. Executive will devote such of his business skill, time and effort to his employment hereunder as shall be reasonably necessary to discharge his obligations hereunder.

2. Employment Term. Executive’s term of employment by Titan under this Agreement will begin on the Effective Date and will terminate on the date four years after the Effective Date (the “Employment Term”), unless terminated earlier as provided in Sections 6 and 7 hereof.

Subject to the provisions of Sections 6 and 7 of this Agreement, this Agreement shall automatically and without requirement for action by either party be extended for an additional one year period, and similarly shall be automatically extended by successive one-year periods from year to year thereafter (collectively, such one-year renewal periods are hereinafter referred to as the “Extended Employment Term”), unless notice of nonrenewal is given in accordance with the provisions of the following three sentences. If either party desires not to continue the employment of Executive under this Agreement beyond the Employment Term, or, if applicable, beyond the Extended Employment Term (the last day of the Employment Term, or the last day of the Extended Employment Term, if applicable, is hereinafter referred to as the “Termination Date”), that party shall at least twelve (12) months but not more than sixteen (16) months prior to the Termination Date give written notice to such effect to the other party. Unless the notice of nonrenewal is thereafter revoked prior to the Termination Date by the party giving notice, and the party receiving notice of such nonrenewal consents in writing to the revocation thereof, the employment of Executive under this Agreement shall terminate effective on the Termination Date. Any notice of nonrenewal, revocation of nonrenewal or consent to revocation of nonrenewal given by Titan shall be authorized by its Board of Directors as then constituted by majority vote.

3. Direct Compensation. For his service hereunder during the Employment Term and, if applicable, during the Extended Employment Term, Executive will receive a base salary payable at an annual rate of $ 750,000.00 (the “Base Salary”), to be paid in accordance with the normal practices for remunerating Titan executive management. Nothing in this Agreement will be deemed to prohibit an increase at any time in the Base Salary if Titan’s Board of Directors approves. (The Base Salary, if so adjusted, is herein called the “Adjusted Base Salary”). In addition to salary, each calendar year, the Executive shall be entitled to receive a minimum bonus of one hundred percent (100%) up to a maximum of one hundred and fifty percent (150%) of his salary based on performance with specified criteria. The Board of Directors will establish the bonus and performance standards at the beginning of each year. The Executive shall receive stock options of up to a minimum of two hundred percent (200%) of his base salary and in shares of the Company stock under the Company Stock Incentive Plan that shall vest and become exercisable as prescribed by the Plan. The Executive shall be entitled to a special performance cash award if at the end of four years, the stock price has increased above $19.05 per share, the difference above $19.05 per share, if any, shall be multiplied by 1,000,000 and paid to the Executive as he instructs or equally over the next four years. The Executive during the Employment term shall be entitled to six weeks of vacation plus Titan designated holidays in each year and shall, during such periods, be entitled to remuneration as hereinbefore provided and car allowance.

4. Standard Executive Benefits. In addition to the benefits described in Sections 4, 6 and 7, Executive and, as applicable, Executive’s family, shall be entitled to participate during the Employment Term, and if applicable, during the Extended Employment Term in all of Titan’s then prevailing Executive benefit plans and programs which are generally available to Titan executive management, including without limitation, any group life, hospitalization, surgical, major medical and accidental death and dismemberment insurance plans and/or benefits, dental, 401k and any pension or other capital accumulation plans (collectively, the “Standard Executive Benefits”).

5. Life Insurance. During the Employment Term, and, if applicable, during the Extended Employment Term, Titan shall also have the right, from time to time, at its election, to insure the life of Executive for the sole benefit of Titan. In such event, the amount of insurance and type of policy shall be determined by Titan and all premiums incurred thereon shall be the obligation of Titan. Executive shall have no interest in any such policy, but shall cooperate with Titan in obtaining such insurance by submitting to physical examination, by supplying all information reasonably required by the insurance company, and by executing all necessary documents, provided that no financial obligation is imposed on Executive by such requirement.

6. Death or Disability. In the event of Executive’s death or disability (as hereinafter defined) during the Employment Term, or, if applicable, during the Extended Employment Term, Titan shall pay Executive, his designated beneficiary or estate, in addition to all payments due under Section 4, 6 and 7, the Supplemental Death or Disability Benefits, as the case may be, as described below.

6.1 Supplemental Death Benefit. In the event of Executive’s death during the Employment Term, or if applicable, during the Extended Employment Term, Titan shall pay Executive’s estate a lump sum equal to all earned yet unpaid Base Salary or Adjusted Base Salary, if any, in effect as at such date of death plus the full amount of such Base Salary or Adjusted Base Salary for a period ending six (6) months following the month during which the date of such death occurred (even if such six month period extends beyond the Termination Date), and thereafter during the remainder of the Employment Term, or, if applicable, the Extended Employment Term, fifty percent (50%) of Executive’s Base Salary. In addition, Titan shall continue to provide Executive’s family with the Standard Executive Benefits from the date of Executive’s death until the later of (1) the expiration of the Employment Term or, if applicable, the Extended Employment Term or (2) six months.

6.2 Supplemental Disability Benefits. In the event of Disability of Executive (as hereinafter defined), the majority of Titan’s Board of Directors as then constituted, at its election and upon 30 days written notice to Executive, may terminate the employment of Executive under this Agreement effective as of the last day of the month within which the end of such 30-day period occurs (the “Disability Termination Date”). For purposes of this Agreement the term “Disability” shall mean the inability of Executive to engage in his regular occupation as a senior executive officer of a corporation generally comparable to Titan at a level of compensation commensurate with his education, training and experience for a substantially continue period which has extended or will foreseeable extend beyond six months in duration as a result of sickness, bodily injury, or mental or emotional disease or disorder of any type, excluding attempted suicide or intentionally self-inflicted injury. Upon termination of the employment of Executive by reason of Disability, the liabilities of Titan will be as follows:

(a) During the periods referred to in (i) and (ii) below, Titan shall continue to provide the Executive with the following direct compensation: (i) commencing with the first day of the month next succeeding the Disability Termination Date, a lump sum equal to all earned yet unpaid Base Salary or Adjusted Base Salary, if any, in effect as of such Disability Termination Date plus a monthly amount which shall be equal to one-twelfth of Executive’s Base Salary or Adjusted Base Salary, in effect as at such Disability Termination Date, for a period of 24 months following such Disability Termination Date (the “Disability Benefit Continuation Period”); and (ii) for the period, if any, of Disability that extends beyond the Disability Benefit Continuation Period referred to in (i) above, and until the date the Executive attains age 60 or, if sooner, his death, a monthly amount which shall be equal to one-twelfth of fifty percent (50%) of Executive’s Base Salary; provided, however, that the monthly amounts payable under (i) and (ii) above shall be reduced by an amount equal to the sum of the amount of monthly benefits then actually received by Executive pursuant to (A) any long-term disability insurance plan then generally provided to executive management by Titan, and (B) any supplemental disability insurance program then provided to Executive by Titan.

(b) During the Disability Benefit Continuation Period, Titan shall continue to provide Executive with full participation in the benefits described in Sections 4, 6.1. and 6.2.

If there should be any dispute between the parties as to Executive’s incapacity or physical or mental disability at any time, such dispute shall be determined by the written opinion of an impartial reputable physician agreed upon for this purpose by the parties or their representatives or, failing agreement by the parties within twenty (20) business days of the request by either party to the other, by a panel of three impartial reputable physicians to be selected within twenty (20) business day of request by either party to the other, one by Executive and one by Titan, respectively, and one by the two physicians so selected. If the physician selected by Titan and Executive should fail to select the third physician within ten (10) business days of their appointment, or if either Titan or Executive should fail to select a physician, the remaining member(s) of the panel shall be appointed by Director of Mayo Clinic of Rochester, MN. The opinion of the majority of the panel as to the matter in dispute shall be final and binding on the parties. Executive shall submit to such examination(s) as may be necessary for the purposes herein.

7. Termination. Executive’s employment under this Agreement may be terminated by Titan upon the occurrence of any of the following events:

7.1 Termination for Cause. Titan’s Board of Directors as then constituted may by a majority vote at any time terminate Executive’s employment for cause. For this purpose, “Termination for Cause” shall mean (i) termination of the Executive’s employment for willful or gross neglect of duties hereunder, or willful or gross misconduct in the performance of such duties, so as to cause material harm to Titan and its subsidiaries considered as a whole, determined in good faith by its Board of Directors, (ii) termination following a judicial determination that Executive has committed fraud, misappropriation or embezzlement against Titan or (iii) termination due to Executive’s having committed any felony for which he is convicted and which, as determined in good faith by the Board of Directors, and results in material harm to Titan and its subsidiaries considered as a whole. Upon the occurrence of a Termination for Cause, Titan’s obligations under this Agreement shall terminate, except that in the event of Termination for Cause pursuant to clause (i) of the first sentence of this Section 7.1, Titan shall remain obligated to pay Executive fifty percent (50%) of his Base Salary and to continue for Executive and/or his family the full benefits described in Section 4 during the Employment Term.

7.2 Termination Without Cause. Titan’s Board of Directors, as then constituted may, at any time terminate Executive’s employment by majority vote and thereupon, unless such termination shall be pursuant to Section 6 or 7.1, such termination shall, in all cases, constitute “Termination Without Cause” with effect from the date of action by Titan’s Board of Directors. Any demotion from the position of CEO set forth in Section 1, any material reduction in the authorities inherent to such position, or any non-election as a Director of Titan, in each instance unless made with Executive’s prior written consent, or upon a termination pursuant to Sections 6 or 7.1, or any non-payment or reduction in the Base Salary or Adjusted Base Salary then in effect or any other breach by Titan of this Agreement shall be deemed to constitute Termination Without Cause. In the event of Executive’s Termination Without Cause, Titan shall remain obligated to pay Executive 100% of his Base Salary or Adjusted Base Salary then in

effect for three (3) years from the effective date of the Termination Without Cause, but in no event beyond the Employment Term or, if applicable, the Extended Employment Term, and 50% of his Base Salary or Adjusted Base Salary then in effect for the balance of the Employment Term remaining beyond the three year period, if any, plus all benefits described in Sections 4, 6 and 7 during the Employment Term.

7.3 Termination for Change of Control by Executive. The executive shall have sufficient reason to terminate this agreement if: (i) there is a change of control of the company (as defined below); (ii) there is a failure by the company to comply with any material provision of this agreement and such failure has continued for a period of ten days after notice of such failure has been given by the executive to the company; or (iii) there is a purported termination of the executive’s employment which is not effected pursuant to the provisions of this agreement relating to termination of the executive’s employment by the company;

For the purposes of this agreement, a “change of control of the company” means

(i)

any Person (meaning individual, corporation, general partnership, limited partnership, syndicate or other group of persons) or two or more Persons acting in concert shall have acquired after the date hereof beneficial ownership (within the meaning of Rule13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly of securities of the Company (or other securities convertible into such securities) representing 20% or more of the combined voting power of securities of the company entitled to vote in the election of directors; or

(ii)

any Person or two or more Persons acting in concert shall have acquired after the date hereof by contract or otherwise, or shall have entered into a contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of control over securities of the company (or other securities convertible into such securities) representing 20% or more of the combined voting power of all securities of the company entitled to vote in the election of directors; or

(iii)

consummation of any merger or consolidation with respect to which the Company or any Parent is a constituent corporation (other than a transaction for the purpose of changing the Company’s corporate domicile) any liquidation or dissolution of the Company or any sale of substantially all of the assets of Company to another corporation;

(a) If the Executive terminates this agreement because of a change of control of the company, Titan simultaneously and concurrently with the change of control, Titan and/or successor shall pay Executive 100% of his Base Salary or Adjusted Base Salary for the remaining Employment term;

(b) If the Executive terminates this agreement because of a change of control of the company, Titan agrees to provide fully vested supplemental retirement benefits (“Supplemental Retirement Benefit Payments”) to Executive pursuant to the following terms: (i) commencing on the first day of the calendar month which next succeeds or coincides with Executive’s having attained 60 and on the first of each calendar month thereafter for and during his natural life, Titan and/or successor shall pay to Executive the sum of $37,500.00 (the “Normal Supplemental Retirement Benefit Payments”); (ii) alternatively, and in lieu of the Normal Supplemental Retirement Benefits Payments, Executive, at any time after attaining the age of 55, shall be entitled, at his election, to receive an early supplemental retirement benefit, payable monthly, commencing on the first day of the month following such election and on the first day of each month thereafter during his lifetime, equal to the actuarial equivalent of the Normal Supplemental Retirement Benefit Payments as determined at the time of such election (the “Early Supplemental Retirement Benefits Payment”); (iii) if Executive is married on the date of his benefit payment commence hereunder, he may elect by notice to Titan and as an alternative to either the Normal Supplemental Retirement Benefit Payments or Early Supplemental Retirement Benefit Payments, a reduced pension benefit at age 60 or at such earlier date after obtaining the age of 55 in the form of a standard joint and survivor annuity based on the life expectancies of Executive and his spouse to be paid to Executive and his spouse during their natural lifetimes; and (iv) at Titan’s election, the Supplemental Retirement Benefits Payments, as elected by Executive pursuant to (i) through (iii) above, may be made at any time in the form of a single life annuity of which Executive is the annuitant and owner. At the time of termination because of a change of control, Titan shall fund the amount of money determined by the actuaries necessary to purchase a single life annuity of which the Executive shall be the annuitant and owner;

(c) If the Executive terminates this agreement because of a change of control of the company, Titan agrees to provide for and during their natural lifetimes Executive and his spouse and dependents which live in the household shall receive, at no cost and expense to them, fully vested group medical (including hospitalization, surgical, and major medical) and dental insurance benefits provided or furnished or made available under Titan’s Plan (at Executive, or in the event of Executive death, at Executive’s spouse’s election with respect to which plan) then prevailing Executive benefit plans to the then employed highest level executive officers’ of either of them from time to time. Titan shall pay the full premiums for all such benefits furnished through group insurance plans as well as all other charges and expenses for providing such benefits;

(d) In the event of a change of control of the Company, all outstanding stock options and the Employer match under Titan’s 401k Plan for the Executive shall vest 100% immediately;

(e) In the event of a change of control of the Company, at the time of the change of control the Executive shall be entitled to his special performance cash award, the stock price has increased above $19.05 per share, the difference above $19.05, if any, shall be multiplied by 1,000,000 and paid to the Executive as he instructs; and

(f) In the event of a change of control of the Company, Titan shall provide, as a condition of such sale, that the acquiring Person shall assume this Agreement and become obligated to perform all of the terms and conditions hereof.

8. Successors and Assigns This Agreement shall be binding upon any successor or assigns of Titan and a successor or assigns shall be any surviving corporation under which it might be merged or consolidated or the purchaser of substantially all of the assets of Titan.

9. Termination. This Agreement shall terminate upon the death of both Executive and his spouse or earlier if mutually agreed upon by the Executive and Titan.

10. Expenses. Titan will pay or reimburse Executive for any expenses reasonably incurred by him in furtherance of his duties hereunder, including, without limitation expenses for entertainment, travel (including automobile operating expenses), meals, hotel accommodations and other ordinary and necessary activities incurred on behalf of the company, subject to reasonable documentation of such expenses by Executive.

11. Supplemental Retirement Benefits. Titan agrees to provide fully vested supplemental retirement benefits (“Supplemental Retirement Benefit Payments”) to Executive pursuant to the following terms: (i) commencing on the first day of the calendar month which next succeeds or coincides with Executive’s having attained 60 and on the first of each calendar month thereafter for and during his natural life, Titan and/or successor shall pay to Executive the sum of $37,500.00 (the “Normal Supplemental Retirement Benefit Payments”); (ii) alternatively, and in lieu of the Normal Supplemental Retirement Benefits Payments, Executive, at any time after attaining the age of 55, shall be entitled, at his election, to receive an early supplemental retirement benefit, payable monthly, commencing on the first day of the month following such election and on the first day of each month thereafter during his lifetime, equal to the actuarial equivalent of the Normal Supplemental Retirement Benefit Payments as determined at the time of such election (the “Early Supplemental Retirement Benefits Payment”); (iii) if Executive is married on the date of his benefit payment commence hereunder, he may elect by notice to Titan and as an alternative to either the Normal Supplemental Retirement Benefit Payments or Early Supplemental Retirement Benefit Payments, a reduced pension benefit at age 60 or at such earlier date after obtaining the age of 55 in the form of a standard joint and survivor annuity based on the life expectancies of Executive and his spouse to be paid to Executive and his spouse during their natural lifetimes; and (iv) at Titan’s election, the Supplemental Retirement Benefits Payments, as elected by Executive pursuant to (i) through (iii) above, may be made at any time in the form of a single life annuity of which Executive is the annuitant and owner. At the time of retirement, Titan shall have funded the amount of money determined by the actuaries necessary over the four years of this Agreement. The Executive at the time of retirement can elect to have Titan purchase, with the funded monies, a single life annuity of which the Executive is the annuitant and owner.

12. Retirement Medical Benefits. Titan agrees to provide for and during their natural lifetimes Executive and his spouse and dependents which live in the household shall receive, at no cost and expense to them, fully vested group medical (including hospitalization, surgical, and major medical) and dental insurance benefits provided or furnished or made available under Titan’s Plan (at Executive, or in the event of Executive death, at Executive’s spouse’s election with respect to which plan) then prevailing Executive benefit plans to the then employed highest level executive officers’ of either of them from time to time. Titan shall pay the full premiums for all such benefits furnished through group insurance plans as well as all other charges and expenses for providing such benefits.

13. Stock Options. In the event of retirement by the executive, all outstanding stock options and the Employer match under Titan’s 401k Plan for the Executive shall vest 100% immediately.

14. Inventions and Improvements. Any invention or development of any kind related to Titan’s business made or conceived by Executive (solely, jointly or in conjunction with anyone else) while he is employed by Titan pursuant to this Agreement shall be promptly disclosed by Executive to Titan and shall be the sole property of Titan. Executive shall execute an assignment to Titan, or to another designated by it, of his entire claim to and interest in each such invention or development. Executive undertakes to sign all lawful papers and, at Titan’s expense, to assist it in every lawful way to obtain and sustain patents or copyrights for its benefit in any such inventions or developments when requested by Titan. Executive shall not be entitled to compensation beyond his Base Salary or Adjusted Base Salary for the performance of any such acts.

15. Confidential Information. Executive acknowledges that by reason of his employment with Titan he has and will hereafter, from time to time during his Employment Term, and, if applicable, during the Extended Employment Term, become exposed to and/or become knowledgeable about proposals, plans, inventions, practices, systems, programs, formulas, customer lists, and other forms of business information which are not known to Titan’s competitors and which are not recognized as being encompassed within standard business management practices and which are kept secret and confidential by Executive (the “Confidential Information”). Executive therefore agrees that at no time during or after the period of his employment by Titan will he disclose or use the Confidential Information except as may be required in the prudent course of business for the benefit of Titan, provided, that no payment required to be made by Titan under the terms of this Agreement including the Exhibits hereto after termination of the employment of Executive shall be subject to any right of set-off, counterclaim, defense, abatement, suspension, deferment or reduction by reason of any claim against Executive based upon breach of the covenant in this Section 15 other than execution of an unsatisfied final judgment rendered by a court of competent jurisdiction.

16. Competition. Executive hereby agrees that until the termination of his employment under this Agreement, and for a period of three (3) years thereafter, he will not, unless authorized in writing to do so by Titan, directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed or otherwise connected in any substantial manner with any business which directly competes to a material extent with line of business of Titan or its subsidiaries that is material to the businesses, financial condition or prospects of Titan and its subsidiaries considered as a whole; provided that nothing in this paragraph shall prohibit Executive from acquiring up to 5% of any class of outstanding equity securities of any corporation whose equity securities are regularly traded on a national securities exchange or in the “over-the-counter market”.

17. Relocation. Executive shall not be required to relocate his residence during the Employment Term or, if applicable, during the Extended Employment Term, without his consent. If the Board of Directors of Titan approves or requires relocation of its Executive from Grosse Pointe Farms, Michigan and if such relocation reasonably would require Executive to move and thereby sell his present residence and purchase a different one and if Executive consents to relocate his residence to such new location, then Titan shall pay all reasonably requested moving and relocation expenses including but not limited to real estate commissions, legal fees and costs, appraisals, title insurance, surveys and inspections directly related to such sale and closing and financing costs directly related to the purchase or construction of a new residence. In addition, Titan will indemnify Executive for any net loss (measured by the difference between (a) the average of two current appraisals by recognized appraisers mutually agreed upon by the parties, and (b) the actual selling price of the residence) arising from the sale of his residence (caused by such required relocation): provided, however, that Titan shall alternatively have a right of first refusal to acquire the residence at the average appraisal price giving rise to such loss. Notwithstanding the foregoing, Executive shall have the right to relocate his residence and perform his services hereunder at a location other than Titan’s corporate executive headquarters in Quincy, Illinois, or the successor location thereto, so long as such relocation and performance of services does not prevent the fulfillment of his duties and obligations hereunder. The Executive shall have the right to have a bedroom assigned to him exclusively at the Titan House at all times.

18. Arbitration. Any controversy or claim arising out of or relating to this Agreement, or any breach thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association and judgment upon such award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The arbitration shall be held in Illinois unless another location shall be mutually agreed to by the parties at the time of the arbitration. In any dispute between the parties as to which Executive is sustained on the claim(s) by or against him, Titan shall pay all legal fees incurred by Executive in connection with the dispute over such claim(s). If more than one is involved in any dispute and if Executive is sustained as to one or more of such claims but not as to all of such claims, there shall be a reasonable allocation of applicable legal expenses. Titan will reimburse Executive for those legal expenses determined by the arbitrator(s) or by the consent of the parties to be allocable to the claim or claims as to which Executive is upheld.

19. Binding Effect: Amendments. The Executive’s undertakings hereunder will be binding regardless of (i) the duration of his employment with Titan; or (ii) the reasons for or manner of termination of his employment. This Agreement will bind and inure to the benefit of the heirs, personal representatives, successors and assigns of the parties, will supersede any prior understanding between the parties relating to the same subject matter and may be modified and amended only in writing signed by the parties hereto.

20. Notices. All notices hereunder shall be given in writing by personal delivery or by registered mail addressed to Titan at is principal place of business and to Executive at his residence address as then listed in Titan’s records.

21. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois and jurisdiction of the State of Illinois.

22. Survival. Termination of the Executive’s employment whether voluntary or involuntary, whether with or without cause, shall not relieve the Company and/or its successor from their obligations hereunder. All of Sections 6, 7, 11, 12, 13, 15 and 16 shall survive the termination of this agreement and shall not relieve the Company and/or successor from their obligations under these Sections.

23. Miscellaneous. (a) the failure of a party to insist on any occasion upon strict adherence to any term of this Agreement shall not be considered to be a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Agreement. Any waiver must be in writing signed by the party waiving any right; (b) the underlined captions in this Agreement at the beginning of Sections are for reference only and shall not be deemed to define or limit the provisions hereof or to affect their construction and application; (c) the parties agree that this Agreement may be executed in any number of counterparts, and in the event, each counterpart shall be deemed a complete original and be enforceable without reference to any other counterpart and (d) the invalidity or unenforceability of any one or more sections or provisions hereof shall not affect the validity or enforceability of any one or more of the other sections or provisions hereof.

EX-10.2 3 ex10_2.htm KENT W. HACKAMACK EMPLOYMENT AGREEMENT KENT W. HACKAMACK EMPLOYMENT AGREEMENT

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of April 28, 2006, between Titan International, Inc., a Illinois corporation (“Titan and/or Company”), and Kent W. Hackamack. (“Executive”) (hereinafter, as amended or modified and in effect called “Agreement”). The effective date of this Agreement (the “Effective Date”) shall be April 28, 2006.

INTENDING TO BE LEGALLY BOUND HEREBY, the parties agree as follows:

1. Position. Titan agrees to employ Executive and Executive agrees to accept employment as Executive Vice President and Treasurer of Titan pursuant to the terms of this Agreement. Executive will perform such services in the capacity of Executive Vice President and Treasurer as may be assigned to him by the By-laws and, from time to time by the Board of Directors of Titan or the CEO during the Employment Term and, if applicable, during the Extended Employment Term, (as such terms are defined in Section 2). Executive will devote such of his business skill, time and effort to his employment hereunder as shall be reasonably necessary to discharge his obligations hereunder.

Subject to the provisions of Sections 6 and 7 of this Agreement, this Agreement shall automatically and without requirement for action by either party be extended for an additional one year period, and similarly shall be automatically extended by successive one-year periods from year to year thereafter (collectively, such one-year renewal periods are hereinafter referred to as the “Extended Employment Term”), unless notice of nonrenewal is given in accordance with the provisions of the following three sentences. If either party desires not to continue the employment of Executive under this Agreement beyond the Employment Term, or, if applicable, beyond the Extended Employment Term (the last day of the Employment Term, or the last day of the Extended Employment Term, if applicable, is hereinafter referred to as the “Termination Date”), that party shall at least twelve (12) months but not more than sixteen (16) months prior to the Termination Date give written notice to such effect to the other party. Unless the notice of nonrenewal is thereafter revoked prior to the Termination Date by the party giving notice, and the party receiving notice of such nonrenewal consents in writing to the revocation thereof, the employment of Executive under this Agreement shall terminate effective on the Termination Date. Any notice of nonrenewal, revocation of nonrenewal or consent to revocation of nonrenewal given by Titan shall be authorized by its CEO or Board of Directors as then constituted by majority vote.

3. Direct Compensation. For his service hereunder during the Employment Term and, if applicable, during the Extended Employment Term, Executive will receive a base salary payable at an annual rate of $ 225,000.00 (the “Base Salary”), to be paid in accordance with the normal practices for remunerating Titan executive management. Nothing in this Agreement will be deemed to prohibit an increase at any time in the Base Salary if Titan’s Board of Directors approves. (The Base Salary, if so adjusted, is herein called the “Adjusted Base Salary”). In addition to salary, each calendar year, the Executive shall be entitled to receive a bonus from zero (0%) up to a maximum of seventy-five percent (75%) of his salary based on performance with specified criteria. The Board of Directors will establish the bonus and performance standards at the beginning of each year. The Executive shall receive stock options of up to a minimum of fifty percent (50%) of his base salary and in shares of the Company stock under the Company Stock Incentive Plan that shall vest and become exercisable as prescribed by the Plan. The Executive during the Employment term shall be entitled to four weeks of vacation plus Titan designated holidays in each year and shall, during such periods, be entitled to remuneration as hereinbefore provided and car allowance.

(b) During the Disability Benefit Continuation Period, Titan shall continue to provide Executive with full participation in the benefits described in Sections 4, 6.1. and 6.2.

7. Termination. Executive’s employment under this Agreement may be terminated by Titan upon the occurrence of any of the following events:

7.2 Termination Without Cause. Titan’s Board of Directors, as then constituted may, at any time terminate Executive’s employment by majority vote and thereupon, unless such termination shall be pursuant to Section 6 or 7.1, such termination shall, in all cases, constitute “Termination Without Cause” with effect from the date of action by Titan’s Board of Directors. Any demotion from the position of Executive Vice President and Treasurer set forth in Section 1, any material reduction in the authorities inherent to such position, or any non-election as a Director of Titan, in each instance unless made with Executive’s prior written consent, or upon a termination pursuant to Sections 6 or 7.1, or any non-payment or reduction in

the Base Salary or Adjusted Base Salary then in effect or any other breach by Titan of this Agreement shall be deemed to constitute Termination Without Cause. In the event of Executive’s Termination Without Cause, Titan shall remain obligated to pay Executive 100% of his Base Salary or Adjusted Base Salary then in effect for three (3) years from the effective date of the Termination Without Cause, but in no event beyond the Employment Term or, if applicable, the Extended Employment Term, and 50% of his Base Salary or Adjusted Base Salary then in effect for the balance of the Employment Term remaining beyond the three year period, if any, plus all benefits described in Sections 4, 6 and 7 during the Employment Term.

For the purposes of this agreement, a “change of control of the company” means

(i)

(ii)

(iii)

(b) If the Executive terminates this agreement because of a change of control of the company, Titan agrees to provide fully vested supplemental retirement benefits (“Supplemental Retirement Benefit Payments”) to Executive pursuant to the following terms: (i) commencing on the first day of the calendar month which next succeeds or coincides with Executive’s having attained 60 and on the first of each calendar month thereafter for and during his natural life, Titan and/or successor shall pay to Executive the sum of $9,000.00 (the “Normal Supplemental Retirement Benefit Payments”); (ii) alternatively, and in lieu of the Normal Supplemental Retirement Benefits Payments, Executive, at any time after attaining the age of 55, shall be entitled, at his election, to receive an early supplemental retirement benefit, payable monthly, commencing on the first day of the month following such election and on the first day of each month thereafter during his lifetime, equal to the actuarial equivalent of the Normal Supplemental Retirement Benefit Payments as determined at the time of such election (the “Early Supplemental Retirement Benefits Payment”); (iii) if Executive is married on the date of his benefit payment commence hereunder, he may elect by notice to Titan and as an alternative to either the Normal Supplemental Retirement Benefit Payments or Early Supplemental Retirement Benefit Payments, a reduced pension benefit at age 60 or at such earlier date after obtaining the age of 55 in the form of a standard joint and survivor annuity based on the life expectancies of Executive and his spouse to be paid to Executive and his spouse during their natural lifetimes; and (iv) at Titan’s election, the Supplemental Retirement Benefits Payments, as elected by Executive pursuant to (i) through (iii) above, may be made at any time in the form of a single life annuity of which Executive is the annuitant and owner. At the time of retirement, Titan will fund the Rabbi Trust with the amount of money determined by the actuaries and the Executive at that time can elect to have the Rabbi Trust purchase a single life annuity of which the Executive is the annuitant and owner. At the time of termination because of a change of control, Titan shall fund the amount of money determined by the actuaries necessary at the time of the change of control to purchase a single life annuity of which the Executive is the annuitant and owner;

(d) In the event of a change of control of the Company, all outstanding stock options and the Employer match under Titan’s 401k Plan for the Executive shall vest 100% immediately; and

(e) In the event of a change of control of the Company, Titan shall provide, as a condition of such sale, that the acquiring Person shall assume this Agreement and become obligated to perform all of the terms and conditions hereof.

8. Successors and Assigns This Agreement shall be binding upon any successor or assigns of Titan and a successor or assigns shall be any surviving corporation underwhich it might be merged or consolidated or the purchaser of substantially all of the assets of Titan.

9. Termination. This Agreement shall terminate upon the death of both Executive and his spouse or earlier if mutually agreed upon by the Executive and Titan.

11. Supplemental Retirement Benefits. Titan agrees to provide fully vested supplemental retirement benefits (“Supplemental Retirement Benefit Payments”) to Executive pursuant to the following terms: (i) commencing on the first day of the calendar month which next succeeds or coincides with Executive’s having attained 60 and on the first of each calendar month thereafter for and during his natural life, Titan and/or successor shall pay to Executive the sum of $9,000.00 (the “Normal Supplemental Retirement Benefit Payments”); (ii) alternatively, and in lieu of the Normal Supplemental Retirement Benefits Payments, Executive, at any time after attaining the age of 55, shall be entitled, at his election, to receive an early supplemental retirement benefit, payable monthly, commencing on the first day of the month following such election and on the first day of each month thereafter during his lifetime, equal to the actuarial equivalent of the Normal Supplemental Retirement Benefit Payments as determined at the time of such election (the “Early Supplemental Retirement Benefits Payment”); (iii) if Executive is married on the date of his benefit payment commence hereunder, he may elect by notice to Titan and as an alternative to either the Normal Supplemental Retirement Benefit Payments or Early Supplemental Retirement Benefit Payments, a reduced pension benefit at age 60 or at such earlier date after obtaining the age of 55 in the form of a standard joint and survivor annuity based on the life expectancies of Executive and his spouse to be paid to Executive and his spouse during their natural lifetimes; and (iv) at Titan’s election, the Supplemental Retirement Benefits Payments, as elected by Executive pursuant to (i) through (iii) above, may be made at any time in the form of a single life annuity of which Executive is the annuitant and owner. At the time of retirement, Titan shall have funded the amount of money determined by the actuaries necessary over the four years of this Agreement. The Executive at that time can elect to have Titan purchase, with funded monies, a single life annuity of which the Executive is the annuitant and owner.

13. Stock Options. In the event of retirement by the executive, all outstanding stock options and the Employer match under Titan’s 401k Plan for the Executive shall vest 100% immediately.

17. Relocation. Executive shall not be required to relocate his residence during the Employment Term or, if applicable, during the Extended Employment Term, without his consent. If the Board of Directors of Titan approves or requires relocation of its Executive from Hannibal, Missouri and if such relocation reasonably would require Executive to move and thereby sell his present residence and purchase a different one and if Executive consents to relocate his residence to such new location, then Titan shall pay all reasonably requested moving and relocation expenses including but not limited to real estate commissions, legal fees and costs, appraisals, title insurance, surveys and inspections directly related to such sale and closing and financing costs directly related to the purchase or construction of a new residence. In addition, Titan will indemnify Executive for any net loss (measured by the difference between (a) the average of two current appraisals by recognized appraisers mutually agreed upon by the parties, and (b) the actual selling price of the residence) arising from the sale of his residence (caused by such required relocation): provided, however, that Titan shall alternatively have a right of first refusal to acquire the residence at the average appraisal price giving rise to such loss. Notwithstanding the foregoing, Executive shall have the right to relocate his residence and perform his services hereunder at a location other than Titan’s corporate executive headquarters in Quincy, Illinois, or the successor location thereto, so long as such relocation and performance of services does not prevent the fulfillment of his duties and obligations hereunder.

21. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Illinois and jurisdiction of the State of Illinois.

EX-10.3 4 ex10_3.htm CHERI T. HOLLEY EMPLOYMENT AGREEMENT

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT, dated as of April 28, 2006, between Titan International, Inc., a Illinois corporation (“Titan and/or Company”), and Cheri T. Holley (“Executive”) (thereinafter, as amended or modified and in effect called “Agreement”). The effective date of this Agreement (the “Effective Date”) shall be April 28, 2006.

INTENDING TO BE LEGALLY BOUND THEREBY, the parties agree as follows:

1. Position. Titan agrees to employ Executive and Executive agrees to accept employment as Vice President and Secretary of Titan pursuant to the terms of this Agreement. Executive will perform such services in the capacity of Vice President and Secretary as may be assigned to the by the By-laws and, from time to time by the Board of Directors of Titan and the CEO during the Employment Term and, if applicable, during the Extended Employment Term, (as such terms are defined in Section 2). Executive will devote such of the business skill, time and effort to the employment hereunder as shall be reasonably necessary to discharge the obligations hereunder.

2. Employment Term. Executive’s term of employment by Titan under the Agreement will begin on the Effective Date and will terminate on the date four years after the Effective Date (the “Employment Term”), unless terminated earlier as provided in Sections 6 and 7 thereof.

Subject to the provisions of Sections 6 and 7 of the Agreement, the Agreement shall automatically and without requirement for action by either party be extended for an additional one year period, and similarly shall be automatically extended by successive one-year periods from year to year thereafter (collectively, such one-year renewal periods are thereinafter referred to as the “Extended Employment Term”), unless notice of nonrenewal is given in accordance with the provisions of the following three sentences. If either party desires not to continue the employment of Executive under the Agreement beyond the Employment Term, or, if applicable, beyond the Extended Employment Term (the last day of the Employment Term, or the last day of the Extended Employment Term, if applicable, is thereinafter referred to as the “Termination Date”), that party shall at least twelve (12) months but not more than sixteen (16) months prior to the Termination Date give written notice to such effect to the other party. Unless the notice of nonrenewal is thereafter revoked prior to the Termination Date by the party giving notice, and the party receiving notice of such nonrenewal consents in writing to the revocation thereof, the employment of Executive under the Agreement shall terminate effective on the Termination Date. Any notice of nonrenewal, revocation of nonrenewal or consent to revocation of nonrenewal given by Titan shall be authorized by its CEO or Board of Directors as then constituted by majority vote.

3. Direct Compensation. For the service thereunder during the Employment Term and, if applicable, during the Extended Employment Term, Executive will receive a base salary payable at an annual rate of $225,000.00 (the “Base Salary”), to be paid in accordance with the normal practices for remunerating Titan executive management. Nothing in the Agreement will be deemed to prohibit an increase at any time in the Base Salary if Titan’s Board of Directors approves. (The Base Salary, if so adjusted, is therein called the “Adjusted Base Salary”). In addition to salary, each calendar year, the Executive shall be entitled to receive a bonus from (0%) to of seventy-five percent (75%) of her salary based on performance with specified criteria. The Board of Directors will establish the bonus and performance standards at the beginning of each year. The Executive shall receive stock options of up to a minimum of fifty percent (50%) of her base salary and in shares of the Company stock under the Company Stock Incentive Plan that shall vest and become exercisable as prescribed by the Plan. The Executive during the Employment term shall be entitled to four weeks of vacation plus Titan designated holidays in each year and shall, during such periods, be entitled to remuneration as hereinbefore provided and car allowance.

5. Life Insurance. During the Employment Term, and, if applicable, during the Extended Employment Term, Titan shall also have the right, from time to time, at its election, to insure the life of Executive for the sole benefit of Titan. In such event, the amount of insurance and type of policy shall be determined by Titan and all premiums incurred therein shall be the obligation of Titan. Executive shall have no interest in any such policy, but shall cooperate with Titan in obtaining such insurance by submitting to physical examination, by supplying all information reasonably required by the insurance company, and by executing all necessary documents, provided that no financial obligation is imposed on Executive by such requirement.

6. Death or Disability. In the event of Executive’s death or disability (as thereinafter defined) during the Employment Term, or, if applicable, during the Extended Employment Term, Titan shall pay Executive, the designated beneficiary or estate, in addition to all payments due under Section 4, 6 and 7, the Supplemental Death or Disability Benefits, as the case may be, as described below.

6.2 Supplemental Disability Benefits. In the event of Disability of Executive (as thereinafter defined), the majority of Titan’s Board of Directors as then constituted, at its election and upon 30 days written notice to Executive, may terminate the employment of Executive under the Agreement effective as of the last day of the month within which the end of such 30-day period occurs (the “Disability Termination Date”). For purposes of the Agreement the term “Disability” shall mean the inability of Executive to engage in the regular occupation as a senior executive officer of a corporation generally comparable to Titan at a level of compensation commensurate with the education, training and experience for a substantially continue period which has extended or will foreseeable extend beyond six months in duration as a result of sickness, bodily injury, or mental or emotional disease or disorder of any type, excluding attempted suicide or intentionally self-inflicted injury. Upon termination of the employment of Executive by reason of Disability, the liabilities of Titan will be as follows:

(a) During the periods referred to in (i) and (ii) below, Titan shall continue to provide the Executive with the following direct compensation: (i) commencing with the first day of the month next succeeding the Disability Termination Date, a lump sum equal to all earned yet unpaid Base Salary or Adjusted Base Salary, if any, in effect as of such Disability Termination Date plus a monthly amount which shall be equal to one-twelfth of Executive’s Base Salary or Adjusted Base Salary, in effect as at such Disability Termination Date, for a period of 24 months following such Disability Termination Date (the “Disability Benefit Continuation Period”); and (ii) for the period, if any, of Disability that extends beyond the Disability Benefit Continuation Period referred to in (i) above, and until the date the Executive attains age 60 or, if sooner, her death, a monthly amount which shall be equal to one-twelfth of fifty percent (50%) of Executive’s Base Salary; provided, however, that the monthly amounts payable under (i) and (ii) above shall be reduced by an amount equal to the sum of the amount of monthly benefits then actually received by Executive pursuant to (A) any long-term disability insurance plan then generally provided to executive management by Titan, and (B) any supplemental disability insurance program then provided to Executive by Titan.

(b) During the Disability Benefit Continuation Period, Titan shall continue to provide Executive with full participation in the benefits described in Sections 4, 6.1. and 6.2.

If there should be any dispute between the parties as to Executive’s incapacity or physical or mental disability at any time, such dispute shall be determined by the written opinion of an impartial reputable physician agreed upon for the purpose by the parties or their representatives or, failing agreement by the parties within twenty (20) business days of the request by either party to the other, by a panel of three impartial reputable physicians to be selected within twenty (20) business day of request by either party to the other, one by Executive and one by Titan, respectively, and one by the two physicians so selected. If the physician selected by Titan and Executive should fail to select the third physician within ten (10) business days of their appointment, or if either Titan or Executive should fail to select a physician, the remaining member(s) of the panel shall be appointed by Director of Mayo Clinic of Rochester, MN. The opinion of the majority of the panel as to the matter in dispute shall be final and binding on the parties. Executive shall submit to such examination(s) as may be necessary for the purposes therein.

7. Termination. Executive’s employment under the Agreement may be terminated by Titan upon the occurrence of any of the following events:

7.1 Termination for Cause. Titan’s Board of Directors as then constituted may by a majority vote at any time terminate Executive’s employment for cause. For the purpose, “Termination for Cause” shall mean (i) termination of the Executive’s employment for willful or gross neglect of duties thereunder, or willful or gross misconduct in the performance of such duties, so as to cause material harm to Titan and its subsidiaries considered as a whole, determined in good faith by its Board of Directors, (ii) termination following a judicial determination that Executive has committed fraud, misappropriation or embezzlement against Titan or (iii) termination due to Executive’s having committed any felony for which she is convicted and which, as determined in good faith by the Board of Directors, and results in material harm to Titan and its subsidiaries considered as a whole. Upon the occurrence of a Termination for Cause, Titan’s obligations under the Agreement shall terminate, except that in the event of Termination for Cause pursuant to clause (i) of the first sentence of the Section 7.1, Titan shall remain obligated to pay Executive fifty percent (50%) of the Base Salary and to continue for Executive and/or her family the full benefits described in Section 4 during the Employment Term.

7.2 Termination Without Cause. Titan’s Board of Directors, as then constituted may, at any time terminate Executive’s employment by majority vote and thereupon, unless such termination shall be pursuant to Section 6 or 7.1, such termination shall, in all cases, constitute “Termination Without Cause” with effect from the date of action by Titan’s Board of Directors. Any demotion from the position of Vice President and Secretary set forth in Section 1, any material reduction in the authorities inherent to such position, in each instance unless made with Executive’s prior written consent, or upon a termination pursuant to Sections 6 or 7.1, or any non-payment or reduction in the Base Salary or Adjusted Base Salary then in effect or any

other breach by Titan of the Agreement shall be deemed to constitute Termination Without Cause. In the event of Executive’s Termination Without Cause, Titan shall remain obligated to pay Executive 100% of the Base Salary or Adjusted Base Salary then in effect for three (3) years from the effective date of the Termination Without Cause, but in no event beyond the Employment Term or, if applicable, the Extended Employment Term, and 50% of the Base Salary or Adjusted Base Salary then in effect for the balance of the Employment Term remaining beyond the three year period, if any, plus all benefits described in Sections 4, 6 and 7 during the Employment Term.

7.3 Termination for Change of Control by Executive. The executive shall have sufficient reason to terminate the agreement if: (i) there is a change of control of the company (as defined below); (ii) there is a failure by the company to comply with any material provision of the agreement and such failure has continued for a period of ten days after notice of such failure has been given by the executive to the company; or (iii) there is a purported termination of the executive’s employment which is not effected pursuant to the provisions of the agreement relating to termination of the executive’s employment by the company;

For the purposes of the agreement, a “change of control of the company” means

(i)

any Person (meaning individual, corporation, general partnership, limited partnership, syndicate or other group of persons) or two or more Persons acting in concert shall have acquired after the date thereof beneficial ownership (within the meaning of Rule13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934), directly or indirectly of securities of the Company (or other securities convertible into such securities) representing 20% or more of the combined voting power of securities of the company entitled to vote in the election of directors; or

(ii)

any Person or two or more Persons acting in concert shall have acquired after the date thereof by contract or otherwise, or shall have entered into a contract or otherwise, or shall have entered into a contract or arrangement that, upon consummation, will result in its or their acquisition of control over securities of the company (or other securities convertible into such securities) representing 20% or more of the combined voting power of all Securities of the company entitled to vote in the election of directors; or

(iii)

(a) If the Executive terminates the agreement because of a change of control of the company, Titan simultaneously and concurrently with the change of control, Titan and/or successor shall pay Executive 100% of her Base Salary or Adjusted Base Salary for the remaining Employment term;

(b) If the Executive terminates the agreement because of a change of control of the company, Titan agrees to provide fully vested supplemental retirement benefits (“Supplemental Retirement Benefit Payments”) to Executive pursuant to the following terms: (i) commencing on the first day of the calendar month which next succeeds or coincides with Executive’s having attained 60 and on the first of each calendar month thereafter for and during the natural life, Titan and/or successor shall pay to Executive the sum of $9,000.00 (the “Normal Supplemental Retirement Benefit Payments”); (ii) alternatively, and in lieu of the Normal Supplemental Retirement Benefits Payments, Executive, at any time after attaining the age of 55, shall be entitled, at the election, to receive an early supplemental retirement benefit, payable monthly, commencing on the first day of the month following such election and on the first day of each month thereafter during her lifetime, equal to the actuarial equivalent of the Normal Supplemental Retirement Benefit Payments as determined at the time of such election (the “Early Supplemental Retirement Benefits Payment”); (iii) if Executive is married on the date of the benefit payment commence hereunder, she may elect by notice to Titan and as an alternative to either the Normal Supplemental Retirement Benefit Payments or Early Supplemental Retirement Benefit Payments, a reduced pension benefit at age 60 or at such earlier date after obtaining the age of 55 in the form of a standard joint and survivor annuity based on the life expectancies of Executive and the spouse to be paid to Executive and the spouse during their natural lifetimes; and (iv) at Titan’s election, the Supplemental Retirement Benefits Payments, as elected by Executive pursuant to (i) though (iii) above, may be made at any time in the form of a single life annuity of which Executive is the annuitant and owner. At the time of termination because of a change of control, Titan shall fund the amount of money determined by the actuaries necessary at the time of change of control, Titan shall fund the amount of money determined by the actuaries necessary at the time of change of control to purchase a single life annuity of which the Executive shall be the annuitant and owner;

(c) If the Executive terminates the agreement because of a change of control of the company, Titan agrees to provide for and during their natural lifetimes Executive and the spouse and dependents which live in the household shall receive, at no cost and expense to them, fully vested group medical (including hospitalization, surgical, and major medical) and dental insurance benefits provided or furnished or made available under Titan’s Plan (at Executive, or in the event of Executive death, at Executive’s spouse’s election with respect to which plan) then prevailing Executive benefit plans to the then employed highest level executive officers’ of either of them from time to time. Titan shall pay the full premiums for all such benefits furnished though group insurance plans as well as all other charges and expenses for providing such benefits;

(d) In the event of a change of control of the Company, all outstanding stock options and the Employer match under Titan’s 401k Plan for the Executive shall vest 100% immediately; and

(e) In the event of a change of control of the Company, Titan shall provide, as a condition of such sale, that the acquiring Person shall assume the Agreement and become obligated to perform all of the terms and conditions thereof.

8. Successors and Assigns The Agreement shall be binding upon any successor or assigns of Titan and a successor or assigns shall be any surviving corporation under which it might be merged or consolidated or the purchaser of substantially all of the assets of Titan.

9. Termination. The Agreement shall terminate upon the death of both Executive and her spouse or earlier if mutually agreed upon by the Executive and Titan.

10. Expenses. Titan will pay or reimburse Executive for any expenses reasonably incurred by her in furtherance of her duties hereunder, including, without limitation expenses for entertainment, travel (including automobile operating expenses), meals, hotel accommodations and other ordinary and necessary activities incurred on behalf of the company, subject to reasonable documentation of such expenses by Executive.

11. Supplemental Retirement Benefits. Titan agrees to provide fully vested supplemental retirement benefits (“Supplemental Retirement Benefit Payments”) to Executive pursuant to the following terms: (i) commencing on the first day of the calendar month which next succeeds or coincides with Executive’s having attained 60 and on the first of each calendar month thereafter for and during her natural life, Titan and/or successor shall pay to Executive the sum of $9,000.00 (the “Normal Supplemental Retirement Benefit Payments”); (ii) alternatively, and in lieu of the Normal Supplemental Retirement Benefits Payments, Executive, at any time after attaining the age of 55, shall be entitled, at the election, to receive an early supplemental retirement benefit, payable monthly, commencing on the first day of the month following such election and on the first day of each month thereafter during her lifetime, equal to the actuarial equivalent of the Normal Supplemental Retirement Benefit Payments as determined at the time of such election (the “Early Supplemental Retirement Benefits Payment”); (iii) if Executive is married on the date of the benefit payment commence hereunder, she may elect by notice to Titan and as an alternative to either the Normal Supplemental Retirement Benefit Payments or Early Supplemental Retirement Benefit Payments, a reduced pension benefit at age 60 or at such earlier date after obtaining the age of 55 in the form of a standard joint and survivor annuity based on the life expectancies of Executive and her spouse to be paid to Executive and her spouse during their natural lifetimes; and (iv) at Titan’s election, the Supplemental Retirement Benefits Payments, as elected by Executive pursuant to (i) though (iii) above, may be made at any time in the form of a single life annuity of which Executive is the annuitant and owner. At the time of retirement, Titan shall have funded the amount of money determined by actuaries over the four years of this Agreement. The Executive at that time can elect to have Titan purchase, with the funded monies, a single life annuity of which the Executive is the annuitant and owner.

12. Retirement Medical Benefits. Titan agrees to provide for and during their natural lifetimes Executive and her spouse and dependents which live in the household shall receive, at no cost and expense to them, fully vested group medical (including hospitalization, surgical, and major medical) and dental insurance benefits provided or furnished or made available under Titan’s Plan (at Executive, or in the event of Executive death, at Executive’s spouse’s election with respect to which plan) then prevailing Executive benefit plans to the then employed highest level executive officers’ of either of them from time to time. Titan shall pay the full premiums for all such benefits furnished though group insurance plans as well as all other charges and expenses for providing such benefits.

13. Stock Options. In the event of retirement by the executive, all outstanding stock options and the Employer match under Titan’s 401k Plan for the Executive shall vest 100% immediately.

14. Inventions and Improvements. Any invention or development of any kind related to Titan’s business made or conceived by Executive (solely, jointly or in conjunction with anyone else) while she is employed by Titan pursuant to the Agreement shall be promptly disclosed by Executive to Titan and shall be the sole property of Titan. Executive shall execute an assignment to Titan, or to another designated by it, of her entire claim to and interest in each such invention or development. Executive undertakes to sign all lawful papers and, at Titan’s expense, to assist it in every lawful way to obtain and sustain patents or copyrights for its benefit in any such inventions or developments when requested by Titan. Executive shall not be entitled to compensation beyond her Base Salary or Adjusted Base Salary for the performance of any such acts.

15. Confidential Information. Executive acknowledges that by reason of her employment with Titan she has and will thereafter, from time to time during the Employment Term, and, if applicable, during the Extended Employment Term, become exposed to and/or become knowledgeable about proposals, plans, inventions, practices, systems, programs, formulas, customer lists, and other forms of business information which are not known to Titan’s competitors and which are not recognized as being encompassed within standard business management practices and which are kept secret and confidential by Executive (the “Confidential Information”). Executive therefore agrees that at no time during or after the period of her employment by Titan will she disclose or use the Confidential Information except as may be required in the prudent course of business for the benefit of Titan, provided, that no payment required to be made by Titan under the terms of the Agreement including the Exhibits thereto after termination of the employment of Executive shall be subject to any right of set-off, counterclaim, defense, abatement, suspension, deferment or reduction by reason of any claim against Executive based upon breach of the covenant in the Section 15 other than execution of an unsatisfied final judgment rendered by a court of competent jurisdiction.

16. Competition. Executive thereby agrees that until the termination of her employment under the Agreement, and for a period of three (3) years thereafter, she will not, unless authorized in writing to do so by Titan, directly or indirectly own, manage, operate, join, control or participate in the ownership, management, operation or control of, or be employed or otherwise connected in any substantial manner with any business which directly competes to a material extent with line of business of Titan or its subsidiaries that is material to the businesses, financial condition or prospects of Titan and its subsidiaries considered as a whole; provided that nothing in the paragraph shall prohibit Executive from acquiring up to 5% of any class of outstanding equity securities of any corporation whose equity securities are regularly traded on a national securities exchange or in the “over-the-counter market”.

17. Relocation. Executive shall not be required to relocate her residence during the Employment Term or, if applicable, during the Extended Employment Term, without her consent. If the Board of Directors of Titan approves or requires relocation of its Executive from Quincy, Illinois and if such relocation reasonably would require Executive to move and thereby sell her present residence and purchase a different one and if Executive consents to relocate her residence to such new location, then Titan shall pay all reasonably requested moving and relocation expenses including but not limited to real estate commissions, legal fees and costs, appraisals, title insurance, surveys and inspections directly related to such sale and closing and financing costs directly related to the purchase or construction of a new residence. In addition, Titan will indemnify Executive for any net loss (measured by the difference between (a) the average of two current appraisals by recognized appraisers mutually agreed upon by the parties, and (b) the actual selling price of the residence) arising from the sale of her residence (caused by such required relocation): provided, however, that Titan shall alternatively have a right of first refusal to acquire the residence at the average appraisal price giving rise to such loss. Notwithstanding the foregoing, Executive shall have the right to relocate her residence and perform the services hereunder at a location other than Titan’s corporate executive headquarters in Quincy, Illinois, or the successor location thereto, so long as such relocation and performance of services does not prevent the fulfillment of her duties and obligations hereunder.

18. Arbitration. Any controversy or claim arising out of or relating to the Agreement, or any breach thereof, shall be settled by arbitration in accordance with the rules of the American Arbitration Association and judgment upon such award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. The arbitration shall be held in Illinois unless another location shall be mutually agreed to by the parties at the time of the arbitration. In any dispute between the parties as to which Executive is sustained on the claim(s) by or against her, Titan shall pay all legal fees incurred by Executive in connection with the dispute over such claim(s). If more than one is involved in any dispute and if Executive is sustained as to one or more of such claims but not as to all of such claims, there shall be a reasonable allocation of applicable legal expenses. Titan will reimburse Executive for those legal expenses determined by the arbitrator(s) or by the consent of the parties to be allocable to the claim or claims as to which Executive is upheld.

19. Binding Effect: Amendments. The Executive’s undertakings hereunder will be binding regardless of (i) the duration of her employment with Titan; or (ii) the reasons for or manner of termination of her employment. The Agreement will bind and inure to the benefit of the heirs, personal representatives, successors and assigns of the parties, will supersede any prior understanding between the parties relating to the same subject matter and may be modified and amended only in writing signed by the parties thereto.

20. Notices. All notices hereunder shall be given in writing by personal delivery or by registered mail addressed to Titan at is principal place of business and to Executive at her residence address as then listed in Titan’s records.

21. Governing Law. The Agreement shall be governed by and construed in accordance with the laws of the State of Illinois and jurisdiction of the State of Illinois.

22. Survival. Termination of the Executive’s employment whether voluntary or involuntary, whether with or without cause, shall not relieve the Company and/or its successor from their obligations thereunder. All of Sections 6, 7, 11, 12, 13, 15 and 16 shall survive the termination of the agreement and shall not relieve the Company and/or successor from their obligations under these Sections.

23. Miscellaneous. (a) the failure of a party to insist on any occasion upon strict adherence to any term of the Agreement shall not be considered to be a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of the Agreement. Any waiver must be in writing signed by the party waiving any right; (b) the underlined captions in the Agreement at the beginning of Sections are for reference only and shall not be deemed to define or limit the provisions thereof or to affect their construction and application; (c) the parties agree that the Agreement may be executed in any number of counterparts, and in the event, each counterpart shall be deemed a complete original and be enforceable without reference to any other counterpart and (d) the invalidity or unenforceability of any one or more sections or provisions thereof shall not affect the validity or enforceability of any one or more of the other sections or provisions thereof.

EX-10.4 5 ex10_4.htm ASSET PURCHASE AGREEMENT ASSET PURCHASE AGREEMENT

EXHIBIT 10.4

ASSET PURCHASE AGREEMENT

BY AND AMONG

THE GOODYEAR TIRE & RUBBER COMPANY,

GOODYEAR CANADA INC.,

GOODYEAR SERVICIOS COMERCIALES, S. DE R.L. DE C.V.,

THE KELLY-SPRINGFIELD TIRE CORPORATION

AND

TITAN TIRE CORPORATION

_______________________________________________________

DATED FEBRUARY 28, 2005

_______________________________________________________

TABLE OF CONTENTS

Article 1	CERTAIN DEFINITIONS; RELATED MATTERS	2
Section 1.1	Definitions	2
Section 1.2	Definitions can be substantive	13
Section 1.3	Definitions Not in Article I	13
Section 1.4	Non-Business Day Performance	13
Section 1.5	Calculation Of Day Periods	13

ARTICLE 2	PURCHASE AND SALE OF ASSETS	13
Section 2.1	Purchase and Sale	13
Section 2.2	Excluded Assets	16
Section 2.3	Consideration to Be Paid by Purchaser	19
Section 2.4	Preliminary Purchase price; Determination of Purchase Price	19
Section 2.5	Assumption of Liabilities	21
Section 2.6	Excluded Liabilities	22
Section 2.7	Assignment and Transfer of Contracts and Permits	23
Section 2.8	Allocation of the Purchase Price	24

ARTICLE 3	THE CLOSING	24
Section 3.1	The Closing	24
Section 3.2	Closing Deilveries	25
Section 3.3	Further Assurances	28
Section 3.4	Administration of Accounts	28
Section 3.5	Bulk Sales Laws	29

ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF SELLER	29
Section 4.1	Incorporation; Authorization; Etc.	29
Section 4.2	No Conflict	30
Section 4.3	Real and Tangible Personal Property	30
Section 4.4	Financial Reports	32
Section 4.5	Absence of Certain Changes	32
Section 4.6	Inventories	33
Section 4.7	Litigation	33
Section 4.8	Intellectual Property	33
Section 4.9	Employee Benefits	34
Section 4.10	Employment and Labor Matters	34
Section 4.11	Compliance with Laws	34
Section 4.12	Contracts	34
Section 4.13	Licenses and Permits	34
Section 4.14	Taxes	35
Section 4.15	Insurance	35
Section 4.16	Product Warranty	35

Section 4.17	Customers and Suppliers	35
Section 4.18	Environmental Matters	36
Section 4.19	Brokers, Finders, Etc.	37
Section 4.20	Accuracy of Information; Full Disclosure	37

ARTICLE 5	REPRESENTATIONS AND WARRANTIES OF PURCHASER	37
Section 5.1	Organization and Good Standing	37
Section 5.2	Authorization; Etc.	37
Section 5.3	No Conflict	38
Section 5.4	Independent Analysis	38
Section 5.5	Litigation	38
Section 5.6	Finders, Brokers	38

ARTICLE 6	COVENANTS OF SELLER AND PURCHASER	38
Section 6.1	Access to Information; Confidentiality	38
Section 6.2	Conduct of the Business	39
Section 6.3	Notification of Certain Matters	39
Section 6.4	Efforts Concerning Closing Conditions;
	Regulatory and Other Authorizations; Notices and Consents	40
Section 6.5	Public Statements	41
Section 6.6	Cooperation	41
Section 6.7	Transfer Taxes and Fees	41
Section 6.8	Expenses	42
Section 6.9	Access to Former Business Records; Cooperation Concerning Tax Issues	42
Section 6.10	Corporate Names and Trademarks	43
Section 6.11	Transfer of Permits	43
Section 6.12	Restrictive Covenants	43
Section 6.13	Real Estate	47
Section 6.14	Unaudited Financial Statements	49
Section 6.15	Certain Government Contracts	49
Section 6.16	Transfer of Inventories	50

ARTICLE 7	EMPLOYMENT MATTERS	50
Section 7.1	Employment	50
Section 7.2	Employee Retirement benefits	51
Section 7.3	Scope of this Article	51

ARTICLE 8	ENVIRONMENTAL MATTERS	52
Section 8.1	Environmental matters	52
Section 8.2	Other environmental Matters	54

ARTICLE 9	CONDITIONS TO CLOSING	54
Section 9.1	Conditions to Obligations of all Parties	54

Section 9.2	Conditions to Obligations of Sellers	55
Section 9.3	Conditions to Obligations of Purchaser	56

ARTICLE 10	REMEDIES	57
Section 10.1	Survival	57
Section 10.2	Indemnification By Seller	58
Section 10.3	Indemnification by Purchaser	58
Section 10.4	Procedure for Establishment of Claim	58
Section 10.5	Limitations and Remedies	60
Section 10.6	Exclusive Remedy	61

ARTICLE 11	TERMINATION	61
Section 11.1	Termination	61
Section 11.2	Procedure and Effect of Termination	62

ARTICLE 12	MISCELLANEOUS	62
Section 12.1	Interpretation.	62
Section 12.2	Notices.	62
Section 12.3	Waiver	63
Section 12.4	Entire Agreement	64
Section 12.5	Titan International Guaranty	64
Section 12.6	Amendment	64
Section 12.7	Parties in Interest; Assignment	64
Section 12.8	No Partnership	64
Section 12.9	Governing Law; Disputes	64
Section 12.10	Counterparts	65
Section 12.11	Severability	65
Section 12.12	Times of the Essence	65

iii

LIST OF SCHEDULES

Schedule A	Knowledge Officers of Sellers
Schedule B	Knowledge Officers of Buyer
Schedule 2.1(a)(i)	Tangible Personal Property
Schedule 2.1(a)(iii)	Assumed Contracts
Schedule 2.1(a)(iv)	IT/Personal Property Leases
Schedule 2.1(a)(vi)	Utility Contracts
Schedule 2.1(a)(vii)	Freeport Permits
Schedule 2.1(a)(ix)	Leases between Goodyear and Larry Frey
Schedule 2.2(c)	Excluded Tangible Assets and Equipment
Schedule 2.2(j)	Excluded Contracts
Schedule 2.2(l)i	Excluded Computer Hardware and Equipment
Schedule 2.2(l)(ii)	Excluded Computer Software
Schedule 2.2(n)	Freeport Auto Leases
Schedule 2.2(p)(i)	Farm Tires Omitted from Sale
Schedule 2.2(p)(ii)	Contracts for Tires
Schedule 2.2(p)(iii)	Molds and Drums
Schedule 2.2(v)	Other Excluded Assets
Schedule 2.3(a)	Wire Transfer Instructions
Schedule 2.5(e)	Other Assumed Liabilities
Schedule 2.8	Allocation of Purchase Price
Schedule 3.3	Custom Label Contract Assets
Schedule 4.2(a)	Defaults Created by Sale
Schedule 4.2(b)	Seller Required Approvals
Schedule 4.3(a)	Owned Property; Liens
Schedule 4.3(b)	Exceptions to Leased Real Property
Schedule 4.3(c)	Permit Exceptions
Schedule 4.3(e)	Liens on PPE
Schedule 4.3(f)	IT Personal Property Leases
Schedule 4.3(g)	Permitted Liens
Schedule 4.4	Income and Loss Reports
Schedule 4.5	Absence of Material Changes
Schedule 4.6	Inventories
Schedule 4.7	Litigation and Orders
Schedule 4.9	Employee Benefits
Schedule 4.10	Employment & Labor
Schedule 4.12	Issues Affecting Assumed Contracts
Schedule 4.13	Material Permit Exceptions
Schedule 4.14	Taxes

Schedule 4.16	Product Warranty
Schedule 4.17	Top 10 Customers/Top 10 Suppliers
Schedule 4.18	Environmental
Schedule 6.2	Exceptions to Operating Covenants
Schedule 6.13(b)	Title Objections
Schedule 6.15	Government Contracts
Schedule 7.1(c)	Retained Employees
Schedule 9.1(d)	Lien Discharges
Schedule 9.3(d)	Consents and Approvals
Schedule 9.3(h)	USWA Agreement

LIST OF EXHIBITS

Exhibit A	Assignment and Bill of Sale
Exhibit B	Assumption Agreement
Exhibit C	Special Warranty Deed
Exhibit D	Sublease
Exhibit E	Personal Property Lease Assignments
Exhibit F	Farm Lease Assignments
Exhibit G	Offtake Agreement
Exhibit H	Mixing Agreement
Exhibit I	Service Agreement
Exhibit J	Supply Agreement
Exhibit K	Raw Materials Agreement
Exhibit L	Trademark License Agreement
Exhibit M	Technology Agreement
Exhibit N	Employee Leasing Contract
Exhibit O	Bailment Agreement
Exhibit P	Software License Agreement
Exhibit Q	Estoppel Certificate
Exhibit R	Guaranty - Titan International, Inc.

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT (this “Agreement”), dated as of February 28, 2005 is made by and among Titan Tire Corporation, a corporation organized under the laws of the State of Illinois (“Purchaser”) and The Goodyear Tire & Rubber Company (“Goodyear”), a corporation organized under the laws of the State of Ohio, Goodyear Canada Inc., an Ontario corporation (“Goodyear Canada”), Goodyear Servicios Comerciales, S. de R.L. de C.V., a Mexican sociedad de responsabilidad limitada (“Goodyear Mexico”) and The Kelly-Springfield Tire Corporation, a Delaware corporation (“Kelly,” and, collectively with Goodyear, Goodyear Canada and Goodyear Mexico, “Sellers”, and each individually, a “Seller”).

R E C I T A L S:

A. Goodyear is involved, as of the date hereof, in the manufacture of Farm Tires (as herein defined) using assets of Goodyear and Kelly located at Goodyear’s manufacturing facility at Freeport, Illinois. “Farm Tires” means the tires described in Goodyear’s Farm Tire Handbook 2003 (the “Farm Tire Handbook”), excluding therefrom the tires described in Schedule 2.2(p)(i) hereto.

B. Goodyear, Goodyear Canada and Goodyear Mexico are involved, as of the date hereof, in the manufacture, distribution and/or sale, in the United States, Canada and Mexico, respectively, of Farm Tires (the business described in Recitals A and B hereto, as currently conducted, including the goodwill associated therewith, and except in respect of (i) any assets that constitute Excluded Assets hereunder and (ii) retail sales to end users other than original equipment manufacturers, the “Business”).

C. Kelly is the owner of the Owned Real Property (as defined herein) used in connection with the Business.

D. On the terms and subject to the conditions set forth herein, the parties hereto wish to effect the following transactions: (i) Goodyear desires to sell to Purchaser, and Purchaser desires to purchase from Goodyear, Goodyear’s plant, property and equipment located at the Freeport Facility (as defined herein) and used in the conduct of the Business and such other assets related to the Business at the Freeport Facility or elsewhere as are defined and described herein; (ii) Kelly desires to sell to Purchaser and Purchaser desires to purchase from Kelly the Owned Real Property; (iii) Goodyear, Goodyear Canada (subject to Section 6.16 below) and Goodyear Mexico desire to sell to Purchaser and Purchaser desires to purchase from Goodyear, Goodyear Canada and Goodyear Mexico, the Inventories (as defined herein) owned by such Sellers as of the Closing Date (as defined herein); (iv) Sellers and Purchasers desire to effect certain related assignments, transfers and other transactions, each as further described herein and (v) Purchaser has agreed to assume certain liabilities of Sellers related to the Business.

E. In connection with the foregoing transactions, on the terms and subject to the conditions set forth herein and in the Ancillary Agreements (as defined herein), following the Closing (as defined herein), (i) Goodyear has agreed to grant to Purchaser licenses with respect to certain Intellectual Property (as defined herein) related to the Business, (ii) Goodyear and Purchaser have agreed to enter into (a) offtake and reciprocal supply and warranty service obligations and (b) raw materials arrangements, (iii) Purchaser has agreed to perform certain contract mixing and manufacturing services for Goodyear, (iv) Goodyear has agreed to provide the services of certain Goodyear personnel to Purchaser for a limited period following the Closing and (v) Goodyear and, if necessary, Goodyear Canada have agreed to provide certain warehousing services for a limited period following the Closing.

NOW, THEREFORE, in consideration of the premises, the respective covenants and commitments of Goodyear, Goodyear Canada, Goodyear Mexico, Kelly and Purchaser set forth in this Agreement, and other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE I

CERTAIN DEFINITIONS; RELATED MATTERS

Section 1.1 Definitions. As used in this Agreement, the following terms shall have the following respective meanings:

“Accounts Payable” shall mean all of Sellers’ trade accounts payable (including all trade accounts payable with respect to goods and services received by Sellers but for which invoices have not yet been received by Sellers).

“Accounts Receivable” shall mean all of Sellers’ trade accounts receivable and other rights to payment from third parties, including, without limitation, customers and employees, and all security interests or rights associated with such accounts and rights, all notes payable to Sellers and all security interests or rights associated therewith and any claim, remedy or other right related to any of the foregoing, in each case whenever accrued, including those that arise from the conduct of the Business and relate to the period prior to the Closing Date.

“Action” shall mean any action, suit, arbitration or proceeding by or before any Governmental Authority.

“Affiliate” (and, with a correlative meaning, “Affiliated”) shall mean, with respect to any Person, either (i) any other Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such Person, or (ii) the ownership of 50% or more of the voting securities or interest of or in a Person.

“Agreement” shall have the meaning set forth in the Preamble.

“Ancillary Agreements” shall mean, collectively, the Trademark License Agreement, the Technology Agreement, the Software License Agreement, the Offtake Agreement, the Mixing Agreement, the Supply Agreement, the Raw Materials Agreement, the Service Agreement, the Employee Leasing Contract, the Sublease, the Bill of Sale, the Assumption Agreement, the Special Warranty Deed, the Personal Property Lease Assignment, the Farm Lease Assignment, the Sublease, the Estoppel Certificate (when and to the extent executed by the lessor of the Lamm Road Lease), and the Bailment Agreement.

“Assumed Contracts” shall have the meaning assigned to such term in Section 2.1(a)(iii) hereof.

“Assumed Leases” shall have the meaning assigned to such term in Section 2.1(a)(ix) hereof.

“Assumed Liabilities” shall have the meaning assigned to such term in Section 2.5 hereof.

“Assumption Agreement” shall have the meaning assigned to such term in Section 3.2(a)(ii) hereof.

“Bailment Agreement” shall have the meaning assigned to such term in Section 3.2(a)(xv) hereof.

“Base Closing Inventory Value” shall mean the sum of the Finished Goods Amount, the In-Process Amount and the Raw Materials Amount.

“Bill of Sale” shall have the meaning assigned to such term in Section 3.2(a)(i) hereof.

“Business” shall have the meaning set forth in the Recitals.

“Business Day” shall mean any day that is not a Saturday, Sunday or other day on which banks are required or authorized by Law to be closed in Akron, Ohio or Chicago, Illinois.

“Canadian Inventory Transfer” shall have the meaning assigned to such term in Section 6.16 hereof.

“Cash” shall mean all cash, time deposits, bank accounts (including, without limitation, all collection accounts and any balances therein), certificates of deposit, marketable securities, short-term investments and other cash equivalents of any Seller.

“CERCLA” shall have the meaning assigned to such term in the definition of Environmental Laws set forth in this Section 1.1.

“Closing” shall have the meaning assigned to such term in Section 3.1 hereof.

“Closing Date” shall have the meaning assigned to such term in Section 3.1 hereof.

“COBRA” shall have the meaning assigned to such term in Section 7.1(g) hereof.

“Code” shall mean the Internal Revenue Code of 1986, as amended, and any successor, including rules issued and regulations promulgated thereunder.

“Collateral Agreements” shall mean, collectively (i) the Master Guarantee and Collateral Agreement, dated as of March 31, 2003, as Amended and Restated as of February 19, 2004, among Goodyear, certain Affiliates of Goodyear, the Lenders party thereto and JP Morgan Chase Bank, as Collateral Agent, (ii) the Guarantee and Collateral Agreement, dated as of August 17, 2004, among Goodyear, the Subsidiaries of Goodyear identified as Grantors and Guarantors therein, the Lenders party thereto and JP Morgan Chase Bank, as Collateral Agent, (iii) the Collateral Agreement, dated as of March 12, 2004, among Goodyear, certain subsidiary guarantors of Goodyear and Wilmington Trust Company, as Collateral Agent, (iv) the Canadian Guarantee and Collateral Agreement, dated as of March 31, 2003, between Goodyear Canada Inc., as Canadian Guarantor, and JP Morgan Chase Bank, as Collateral Agent, (v) the Canadian Guarantee and Collateral Agreement, dated as of March 12, 2004, between Goodyear Canada Inc., as a Canadian Guarantor and Wilmington Trust Company, as Collateral Agent and (vi) Guarantee and Collateral Agreement [Canada], dated as of August 17, 2004, between Goodyear Canada Inc. and JP Morgan Chase Bank, in its capacity as Collateral Agent under a Deposit-Funded Credit Agreement, dated as of August 17, 2004.

“Collective Bargaining Agreement” shall mean Agreement between The Kelly-Springfield Tire Company Freeport Plant and Local No. 745, United Steelworkers of America, AFL-CIO, effective April 7, 2004, and all memoranda of agreement, letters of understanding and other documents appended thereto, executed in connection therewith or incorporated or referred to therein.

“Confidentiality Agreement” shall mean the Confidentiality Agreement, dated as of October 22, 2003, by and between Goodyear and Purchaser.

“Consent” shall mean any consent, approval, authorization, waiver, Permit, grant, franchise, concession, agreement, license, exemption or order of, registration, certificate, declaration or filing with, or report or notice to any Person.

“Contract” shall mean any written contract, agreement, license, lease or other commitment, in each case to the extent legally binding.

“Custom Label Contracts” shall mean, collectively, the Assumed Contracts to which TBC Corporation and Universal Cooperatives, Inc. are parties.

“Damages” shall have the meaning assigned to such term in Section 10.2 hereof.

“Dollars” or “$” shall mean United States Dollars.

“Employees” shall have the meaning assigned to such term in Section 4.10 hereof.

“Employee Benefit Plans” shall have the meaning assigned to such term in Section 4.9 hereof.

“Employee Leasing Contract” shall have the meaning assigned to such term in Section 3.2(a)(xiv) hereof.

“Environmental Law” or “Environmental Laws” shall mean all applicable Laws (a) of the United States of America, and (b) the State of Illinois relating to: (i) pollution, protection of the environment or environmental contamination, (ii) the manufacture, use, storage, treatment, generation, transportation, distribution, processing, handling, release or disposal of Hazardous Substances, (iii) public health and safety, or (iv) employee health and safety. Without limiting the generality of the foregoing, such Environmental Laws include, but are not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (“CERCLA”), the Resource Conservation and Recovery Act of 1976, and the Occupational Safety and Health Act of 1970, each as amended.

“Environmental Permits” shall mean any and all Permits required under any and all applicable Environmental Laws to operate the Freeport Facility and to use the Purchased Assets located at the Freeport Facility in connection with the Business.

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as amended as of the date hereof.

“Estoppel Certificate” shall have the meaning assigned to such term in Section 6.13(a) hereof.

“Excluded Assets” shall have the meaning assigned to such term in Section 2.2 hereof.

“Excluded Contracts” shall have the meaning assigned to such term in Section 2.2(j) hereof.

“Excluded Design Defect Claim” shall have the meaning assigned to such term in Section 2.6(i) hereof.

“Excluded Liabilities” shall have the meaning assigned to such term in Section 2.6 hereof.

“Farm Lease Assignment” shall have the meaning assigned to such term in Section 3.2(a)(vi) hereof.

“Farm Leases” shall mean, collectively, the leases by and between Goodyear and Larry Frey listed in Schedule 2.1(a)(ix) hereto, with respect to the unimproved portions of Owned Real Property described therein.

“Farm Tires” shall have the meaning assigned such term in the Recitals.

“Farm Tire Handbook” shall have the meaning assigned such term in the Recitals.

“Federal WARN Act” shall mean the Worker Adjustment and Retraining Notification Act, 29 U.S.C. § 2101, et. seq.

“Finished Goods Amount” shall mean the sum of (i) the sum of the Finished Goods Standard Cost Amounts of all finished goods inventories of tires included in the Inventories and (ii) valuation allowances, determined as of the Closing Date in accordance with the past practices of Goodyear, for variances, freight and scrap related thereto.

“Finished Goods Standard Cost Amount” shall mean, as to any finished tire included in the Inventories, the product of (A) the number of finished goods inventories of such tire included in the Inventories and (B) the Standard Cost assigned by Goodyear to such tire as of the Closing Date.

“Freeport Facility” shall mean, collectively, the Owned Real Property and the Leased Real Property.

“GAAP” shall mean United States generally accepted accounting principles.

“Goodyear Names and Marks” shall mean, collectively, the corporate name of any Seller or any of the Affiliates of any Seller in any jurisdiction, or any trademark, trade name, trade dress, logo, symbol, device, URL, service mark or copyright, whether or not registered, including all common law rights, and registrations and applications for registration thereof, including, but not limited to, all marks registered in the United States Patent and Trademark Office, the Trademark Offices of the States and Territories of the United States of America, and the trademark offices of other nations throughout the world, and all rights therein provided by multinational treaties or conventions, or any application or registration therefor, owned, licensed or used by any Seller or any of the Affiliates of any Seller, which includes, without limitation and in any form, the name “Kelly,” or “Kelly-Springfield”, the word “Powermark”, the word “Goodyear” or the term “Goodyear (and winged foot design),” the winged foot design, the blimp design or any other identification that suggests, simulates or is confusing by similarity to any of any Seller’s or its Affiliates’ identification.

“Governmental Authority” shall mean any federal state or local, or any foreign, government, governmental, regulatory or administrative authority, agency or commission or any court, tribunal or arbitral or judicial body.

“Hazardous Substance” or “Hazardous Material” shall mean any substance, compound, mixture, waste or material that is defined to be, or is listed as, hazardous or toxic under any applicable Environmental Law, or any substance, compound, mixture, waste or material that is regulated or requires reporting, investigation, removal or remediation, under any applicable Environmental Law.

“HSR Act” shall mean the Hart Scott Rodino Antitrust Improvements Act of 1976, and the rules and regulations thereunder, in each case as amended.

“Illinois WARN Act” shall mean the Illinois Worker Adjustment and Retraining Notification Act, 820 ILCS 65/1.

“Indemnifiable Claim” shall have the meaning assigned to such term in Section 10.4(a) hereof.

“Indemnified Party” shall have the meaning assigned to such term in Section 10.4(a) hereof.

“Indemnifying Party” shall have the meaning assigned to such term in Section 10.4(a) hereof.

“Indemnity Notice” shall have the meaning assigned to such term in Section 10.4(a) hereof.

“Initial Study” shall have the meaning assigned to such term in Section 8.1(b)(ii)(A) hereof.

“In-Process Amount” shall mean, as to all in process Inventories, (A) the product of (i) the inventory item count of such Inventories and (ii) the Standard Cost assigned by Goodyear to each such item as of the Closing Date, plus (B) valuations, determined as of the Closing Date in accordance with the past practices of Goodyear, for variances related thereto.

“Intellectual Property” shall mean, collectively, (i) the Know How and the Patents (as such terms are defined in the Technology Agreement) and (ii) the Licensed Marks.

“Inventories” shall mean, collectively, (i) all finished goods inventories with respect to Farm Tires, and any finished goods inventories of tires in such categories comprised by Farm Tires and bearing any of the Goodyear Names and Marks, including, without limitation, the name “Kelly” or the word “Powermark” (other than in respect of any Farm Tires (A) that constitute Excluded Assets, (B) that are not located in the United States, Canada or Mexico or (C) that have been transferred to or are located at any Seller’s, or any Seller’s Affiliate’s, retail outlets), (ii) all work-in process inventories of Farm Tires and tires covered by the Offtake Agreement and the Custom Label Contracts located at the Freeport Facility, (iii) all packaging materials with respect to any Inventories and located at the Freeport Facility and (iv) all raw materials, supplies and consumables located at the Freeport Facility.

“IRS” shall mean the United States Internal Revenue Service.

“Knowledge” shall mean, (i) as to Sellers, the actual knowledge of any of the officers of the respective Sellers set forth on Schedule A hereto and the current Human Resource Manager and Plant Manager at the Freeport Facility and (ii) as to Purchaser, the actual knowledge of any of the officers of Purchaser set forth on Schedule B hereto.

“Lamm Road Lease” shall mean the Lease, dated February 14, 1989 between Goodyear and Ivy Corporation, relating to certain property situated at 611 West Lamm Road, Freeport, Illinois.

“Law” shall mean any statute, law, ordinance, regulation, rule, code, order or requirement of or issued by any Governmental Authority, as in effect on the date hereof.

“Lease Assignments” shall have the meaning assigned to such term in Section 3.2(a)(vi) hereof.

“Leased Real Property” shall mean the real property and improvements leased to Goodyear under the Lamm Road Lease.

“Leased Salaried Employees” shall have the meaning assigned to such term in Section 7.1(a) hereof.

“License Agreements” shall mean, collectively, the Trademark License Agreement, the Technology Agreement and the Software License Agreement.

“Licensed Marks” shall have the meaning assigned to such term in the Trademark License Agreement.

“Licensed Products” shall have the meaning assigned to such term in the Trademark License Agreement.

“Lien” shall mean any security interest, pledge, mortgage, lien, charge, restriction or other encumbrance, including any Tax lien, but other than any Permitted Lien.

“Local Union” shall have the meaning assigned to such term under Section 7.1(d) hereof.

“Material Adverse Effect” or “Material Adverse Change” shall mean any effect, change, event, or development that is or would be materially adverse to the purchased assets, operations, or business prospects of the Business or on the ability of Sellers to consummate timely the transactions contemplated hereby other than any effect, change, event or development relating to the announcement or performance of this Agreement or any of the Ancillary Agreements including, in each case, the impact thereof on relationships with customers, suppliers or competitors.

“Material Permits” shall have the meaning assigned such term in Section 4.13 hereof.

“Mixing Agreement” shall have the meaning assigned to such term in Section 3.2(a)(viii) hereof.

“Nitrogen Storage Tank” shall mean the machinery, fixtures, equipment and improvements installed at the Owned Real Property pursuant to the Bulk Product Agreement, dated as of May 7, 1999, by and between Goodyear and Air Liquide America Corporation.

“Non-Competition Covenants” shall mean, collectively, the covenants of Sellers set forth in Section 6.12 hereof.

“Neutral Auditor” shall have the meaning assigned to such term in Section 2.4(d) hereof.

“Offtake Agreement” shall have the meaning assigned to such term in Section 3.2(a)(vii) hereof.

“Ordinary Course of Business” shall mean, with respect to any Person, the ordinary course of business consistent with such Person’s past custom and practice (including with respect to quantity and frequency), taking into account all relevant circumstances, including, without limitation, the season in which such action is taken, and shall include, without limitation, all actions of such Person that do not require approval from the board of directors, shareholders or Persons exercising similar authority in respect of such Person.

“Owned Real Property” shall mean those certain parcels of real estate owned by Kelly and generally situated at 3769 Route 20 East, City of Freeport, Stephenson County, State of Illinois, containing approximately 260 acres of land, including the existing building of approximately 1,201,890 square feet, together with all appurtenant easements, improvements, mineral rights and fixtures, as described in Schedule 4.3 hereto and in the Title Commitment, excluding the Nitrogen Storage Tank and any and all other fixtures owned by any third party, but including the land which is the subject of the Farm Leases.

“OSHA” shall mean the Occupational Safety and Health Act of 1970.

“PCBs” shall have the meaning assigned to such term in Section 6.13(d) hereof.

“Permits” shall mean permits, approvals, consents, variances and other similar authorizations of Governmental Authorities.

“Permitted Liens” shall mean all Liens that (a) arise out of Taxes or general or special assessments not yet due and payable without penalty or interest or the validity of which is being contested in good faith by appropriate proceedings, or (b) of carriers, warehousemen, mechanics, materialmen and other similar persons or otherwise imposed by law which are incurred in the Ordinary Course of Business for sums not yet due and payable or are being contested in good faith and (c) in respect of the Freeport Facility that constitute any of the following (unless Purchaser’s review of the Survey discloses a material issue): (A) building and use restrictions and easements of record, (B) present or future zoning or building codes, regulations or restrictions, (C) liens for real property or ad valorem taxes and assessments, which are not yet due and (d) in addition, in respect of the Freeport Facility matters that are disclosed by the Title Commitment (other than, solely for the purposes of Section 9.3(i) for Title Objections).

“Person” shall mean any individual, firm, corporation, partnership, limited liability company, joint venture, association, estate, trust, governmental agency or body or other entity.

“Personal Property Lease Assignment” shall have the meaning assigned to such term in Section 3.2(a)(v) hereof.

“Personal Property Leases” shall have the meaning assigned to such term in Section 2.1(a)(iv) hereof.

“Phase II Report” shall have the meaning assigned to such term in Section 8.1(a) hereof.

“Phase II Report Due Date” shall have the meaning assigned to such term in Section 8.1(a) hereof.

“Prepaid Royalty” shall have the meaning assigned to such term in Section 2.3 hereof.

“Purchase Price” shall have the meaning assigned to such term in Section 2.3 hereof.

“Purchased Assets” shall have the meaning assigned to such term in Section 2.1(a) hereof.

“Purchaser” shall have the meaning set forth in the Preamble.

“Purchaser’s Representative” shall have the meaning assigned to such term in Section 2.4(d) hereof.

“Purchaser New Hires” shall have the meaning assigned to such term in Section 7.1(a) hereof.

“Raw Materials Agreement” shall have the meaning assigned to such term in Section 3.2(a)(xi) hereof.

“Raw Materials Amount” shall mean, as to all Inventories other than finished goods inventories of tires and in-process inventories, (A) the product of (i) the inventory item (or, as applicable, volume) count of such Inventories and (ii) the Raw Materials Standard Cost assigned by Goodyear to each such item as of the Closing Date, plus (B) valuations, determined as of the Closing Date in accordance with the past practices of Goodyear, for variances related thereto.

“Raw Material Standard Cost” shall mean, as to any Inventories other than in-process and finished goods Inventories, the acquisition cost thereof, determined in accordance with the past practices of Goodyear.

“Remedial Action” shall mean any action to investigate, evaluate, assess, including without limitation, risk assessment of, test, monitor, remove, respond to, treat, abate, remedy, correct, clean-up or otherwise remediate the release or presence of any Hazardous Substance under this Agreement and includes any period of post-closure or remediation monitoring and any operation and maintenance relating to such remedial activities.

“Remedial Problems” shall have the meaning assigned to such term in Section 8.1(b)(iii).

“Reports” shall have the meaning assigned to such term in Section 4.4 hereof.

“Resolution Period” shall have the meaning assigned to such term in Section 2.4(c) hereof.

“Seller” and “Sellers” shall have the meanings set forth in the Preamble.

“Seller Required Approvals” shall have the meaning assigned to such term in Section 4.2(b) hereof.

“Sellers’ Representative” shall have the meaning assigned to such term in Section 2.4(d) hereof.

“Service Agreement” shall have the meaning assigned to such term in Section 3.2(a)(ix) hereof.

“Settlement Date” shall have the meaning assigned to such term in Section 8.1(b) hereof.

“Software License Agreement” shall have the meaning assigned to such term in Section 3.2(a)(xvi) hereof.

“Special Warranty Deed” shall have the meaning assigned to such term in Section 3.2(a)(iii) hereof.

“Standard Cost” shall mean, as to any in process or finished goods inventories, the standard cost assigned thereto by Goodyear in accordance with the past practices of Goodyear, and shall include, without limitation, estimates for direct labor, direct materials, and overhead required to produce the product.

“Sublease” shall have the meaning assigned to such term in Section 3.2(a)(iv) hereof.

“Supply Agreement” shall have the meaning assigned to such term in Section 3.2(a)(x) hereof.

“Survey” shall have the meaning assigned to such term in Section 6.13(c) hereof.

“Tax” or “Taxes” shall mean all taxes, levies, imposts, fees, duties and other like charges of any nature whatsoever imposed by a Governmental Authority responsible for the imposition of any such Tax (each a “Taxing Authority”), including, without limiting the generality of the foregoing, all income, sales, use, ad valorem, stamp, transfer, payroll, franchise and intangible Taxes and fees of any nature upon properties or assets, whether tangible or intangible, or upon the income, receipts, payrolls, transactions, net worth, capital, investment or franchise of a Person (including all sales, use, withholding and other taxes which a Person is required by Law to collect and pay over to, or to pay to, any Taxing Authority), together with any and all additions thereto and penalties and interest payable with respect thereto or to any assessment or collection thereof.

“Tax Return” means any return (including any information return), report, statement, schedule, notice, form or other document or information filed with or submitted to, or required to be filed with or submitted to, any Governmental Authority in connection with the determination, assessment, collection or payment of any Tax or in connection with the administration, implementation or enforcement of, or compliance with, any Law relating to any Tax.

“Taxing Authority” shall have the meaning assigned to such term in the definition of “Tax”.

“Technology Agreement” shall have the meaning assigned to such term in Section 3.2(a)(xiii) hereof.

“Third Party Claim” shall have the meaning set forth in Section 10.4(b) hereof.

“Titan International Guaranty” shall mean the Guaranty of Titan International, Inc. as set forth in Exhibit R.

“Title Commitment” shall have the meaning assigned to such term in Section 6.13(b) hereof.

“Title Company” shall have the meaning assigned to such term in Section 6.13(b) hereof.

“Trademark License Agreement” shall have the meaning assigned to such term in Section 3.2(a)(xii) hereof.

“Type I Remedial Problems” shall have the meaning assigned to such term in Section 8.1(b)(i) hereof.

“Type II Remedial Problems” shall have the meaning assigned to such term in Section 8.1(b)(ii) hereof.

“Warranty Claim” shall have the meaning assigned to such term in Section 10.5(a) hereof.

Section 1.2 Definitions Can be Substantive. If any provision in a definition is a substantive provision conferring rights or imposing obligations on any party hereto, notwithstanding that it appears only in Article I hereof, effect shall be given to it as if it were a substantive provision of this Agreement.

Section 1.3 Definitions Not in Article I. Where any term is defined within the context of any particular Section or Clause in this Agreement, the term so defined, unless it is clear from the Section or Clause in question that the term so defined has limited application to the relevant Section or Clause, shall bear the meaning ascribed to it for all purposes in terms of this Agreement, notwithstanding that that term has not been defined in this Article I.

Section 1.4 Non-Business Day Performance. Where any payment falls due or any other obligation is to be performed on a day, that is not a Business Day in the jurisdiction where such payment is to be made or such obligation is to be performed, then such payment shall be made or such obligation performed on the next succeeding Business Day.

Section 1.5 Calculation of Day Periods. Except as otherwise specifically provided in this Agreement, where in this Agreement any number of days is prescribed in relation to the doing of a particular thing or in respect of a period of time, those days will be calculated exclusive of the first day and inclusive of the last day.

ARTICLE II

PURCHASE AND SALE OF ASSETS

Section 2.1 Purchase and Sale. (a) On the terms and subject to the conditions set forth herein, at the Closing, Goodyear shall sell, convey, transfer, assign and deliver to Purchaser and Purchaser shall purchase and accept from Goodyear, all of Goodyear’s right, title and interest in and to all of the following assets, except to the extent any of the following constitute Excluded Assets (the following assets, collectively with the assets described in Sections 2.1(b) and 2.1(c) hereof, the “Purchased Assets”):

(i) all vehicles and rolling stock, and all furniture, fixtures, molds, building drums, equipment, office supplies, tools, machinery and other tangible personal property owned by Goodyear on the Closing Date and used in the manufacture of Farm Tires, including those (A) located at the Freeport Facility or in transit thereto or (B) described in Schedule 2.1(a)(i) hereto;

(ii) all Inventories owned by Goodyear on the Closing Date; provided, that, in the event either of the Custom Label Contracts cannot be assigned prior to the Closing despite compliance with Section 6.4 hereof, the work-in-process and finished goods Inventories manufactured thereunder shall constitute Excluded Assets;

(iii) the rights of Goodyear in respect of the period following the Closing under (A) the Contracts listed in Schedule 2.1(a)(iii) hereof and (B) any other Contract that (y) amends, supplements, restates or replaces any such Contract and that is entered into by Goodyear in the Ordinary Course of Business with respect to the Business between the date hereof and the Closing Date or (z) Goodyear and Purchaser hereafter agree in writing shall be transferred hereunder (collectively, the “Assumed Contracts”);

(iv) the rights of Goodyear in respect of the period following the Closing under the leases of tangible personal property listed in Schedule 2.1(a)(iv) hereof (the “Personal Property Leases”);

(v) all books, records, files, plans, studies, reports, manuals, handbooks, catalogs, brochures, correspondence and other materials, whether in hard copy, electronic or any other form or media, including, without limitation, all books, records, files, plans, studies, reports, manuals, handbooks, catalogs, brochures, correspondence and other materials pertaining to accounting, real and personal property taxes on the Purchased Assets, Assumed Leases, sales, farm tire dealers, pricing, costs, financial performance, marketing, advertising, promotions, suppliers, customers, human resources, inventory, engineering, manufacturing, business plans and strategies and product development located at the Freeport Facility (except any of the above that constitute Intellectual Property, software or the website URL “www.goodyearag.com”) (collectively, “Books and Records”) and owned by Goodyear at the Closing Date, to the extent relating to the Business or the Purchased Assets;

(vi) the rights of Goodyear in respect of the period following the Closing under the utility service agreements listed on Schedule 2.1(a)(vi) hereto;

(vii) the rights of Goodyear in respect of the period following the Closing under all Permits, and Environmental Permits if any, and all pending applications therefor, if any, in each case to the extent (A) related exclusively to the Purchased Assets or (B) related to the operation of the Freeport Facility, and held by Goodyear as of the Closing Date, a complete

list of which (and which identifies such of the foregoing Permits as are not, by their terms, transferable), as of the date hereof, is set forth on Schedule 2.1(a) (vii) hereto;

(viii) molds and, as to each mold, an associated building drum relating to the Skid Steer and Large Terra tires, and to the extent of unique building drums relating to the Skid Steer and Large Terra tires, the unique building drums; provided that, as to 32” Large Terra tires, the existing drum at Goodyear’s Topeka, Kansas manufacturing facility shall be retained by Sellers and shall constitute an Excluded Asset hereunder; and

(ix) all rights of Goodyear in respect of the period following the Closing under the Farm Leases listed in Schedule 2.1(a)(ix) hereof (collectively with the Personal Property Leases, the “Assumed Leases”).

(b) On the terms and subject to conditions set forth herein, at the Closing, Kelly shall sell, convey, transfer, assign and deliver to Purchaser and Purchaser shall purchase and accept from Kelly, all of Kelly’s right, title and interest in and to all of the following assets, except to the extent any of the following constitute Excluded Assets:

(i)	the Owned Real Property; and

(ii) all Books and Records owned by Kelly at the Closing Date, to the extent relating to the Freeport Facility.

(c) On the terms and subject to conditions set forth herein, at the Closing, Goodyear Canada and Goodyear Mexico shall sell, convey, transfer, assign and deliver to Purchaser and Purchaser shall purchase and accept from Goodyear Canada and Goodyear Mexico, all of the right, title and interest of each of Goodyear Canada and Goodyear Mexico in and to the following assets, except to the extent any of the following constitute Excluded Assets:

(i) all of the Inventories owned by Goodyear Canada or Goodyear Mexico as of the Closing Date; provided, however, that, in the event Goodyear Canada effects the Canadian Inventory Transfer, Goodyear Canada shall, subject to Section 6.16 hereof, transfer to Purchaser, in addition to the Inventories owned by Goodyear Canada as of the Closing Date (or in lieu of such Inventories in the event Goodyear Canada sells all such Inventories pursuant to the Canadian Inventory Transfer) all Accounts Receivable of Goodyear Canada arising directly out of, and relating exclusively to, the Canadian Inventory Transfer; and

(ii) all Books and Records owned by Goodyear Canada or Goodyear Mexico at the Closing Date, to the extent relating to the Inventories described in Clause (i) of this Section 2.1(c).

Section 2.2 Excluded Assets. Notwithstanding the provisions of Section 2.1 hereof, the following assets, properties and rights, to the extent owned by or inuring to the benefit of any one or more Sellers (collectively, the “Excluded Assets”) are expressly excluded from the purchase and sale contemplated hereby and from the definition of the term “Purchased Assets” hereunder, in each case whether or not related to or used or held for use in connection with the Purchased Assets, the Freeport Facility or the Business:

(a) all Cash;

(b) all Accounts Receivable, other than the Accounts Receivable, if any, to be transferred by Goodyear Canada pursuant to Section 2.1(c) hereof, which will not constitute Excluded Assets, except for the portion thereof that constitute Excluded Assets under Section 6.16. hereof;

(c) all assets not owned by Sellers as of the Closing, including, without limitation, all raw materials held under consignment agreements or arrangements with third parties, all property owned by any third party and leased or held by any Seller under any of the Assumed Leases or Assumed Contracts (including, without limitation, the Nitrogen Storage Tank and all the equipment owned by TBC Corporation or Universal Cooperatives, Inc. or held under either of the Custom Label Contracts) in each case identified in Schedule 2.2(c) hereof;

(d) subject to the Trademark License Agreement, all of the Goodyear Names and Marks, including, without limitation, the Licensed Marks;

(e) all rights and obligations under any and all employee benefit plans of each Seller, including, without limitation, the Employee Benefit Plans, and all assets, records and vendor arrangements associated with any such plan, whether held by one or more Sellers, in trust or otherwise;

(f) all casualty, liability or other insurance policies owned by or obtained on behalf of any Seller and all claims or rights under any such insurance policies;

(g) any federal, state or local, or any foreign, claim, cause of action, right of recovery or refund with respect to any Tax including, without limitation, income Tax refunds, franchise Tax refunds, duty draw backs on export sales; sales and use Tax refunds; real property Tax refunds; and personal property Tax refunds (except in respect of any refunds of Taxes, in respect of and relating to periods following the Closing) and all other claims and rights in respect of the foregoing;

(h) other than the Owned Real Property, all owned real property, all leased real property and any other interest in real property along with all appurtenant rights, easements and privileges appertaining or relating thereto;

(i) (A) all of each Seller’s finished goods, work-in process inventories, raw materials, consumables and supplies that are not Inventories; and (B) any Inventories that constitute Excluded Assets under Section 2.1(a)(ii) hereof;

(j) all rights under the Contracts pertaining to the Purchased Assets or the Business listed on Schedule 2.2(j) or Schedule 6.15 hereto (collectively, the “Excluded Contracts”);

(k) subject to the Technology Agreement, all Intellectual Property, and all (i) inventions, whether or not patentable, whether or not reduced to practice or whether or not yet made the subject of a pending patent application or applications, (ii) ideas and conceptions of potentially patentable subject matter, including, without limitation, any patent disclosures, whether or not reduced to practice and whether or not yet made the subject of a pending patent application or applications, (iii) national (including the United States) and multinational statutory invention registrations, patents, patent registrations and patent applications (including all reissues, divisions, continuations, continuations-in-part, extensions and reexaminations) and all rights therein provided by multinational treaties or conventions and all improvements to the inventions disclosed in each such registration, patent or application, (iv) copyrights (registered or otherwise) and registrations and applications for registration thereof, and all rights therein provided by multinational treaties or conventions, (v) moral rights (including, without limitation, rights of paternity and integrity), and waivers of such rights by others, (vi) trade secrets and confidential, technical or business information (including ideas, formulas, compositions, inventions, and conceptions of inventions whether patentable or unpatentable and whether or not reduced to practice), (vii) whether or not confidential, technology (including know-how and show-how), manufacturing and production processes and techniques, research and development information, drawings, specifications, designs, plans, proposals, technical data, copyrightable works, financial, marketing and business data, pricing and cost information, business and marketing plans and customer and supplier lists and information, (viii) copies and tangible embodiments of all the foregoing, in whatever form or medium and (ix) rights to obtain and rights to apply for patents, and to register trademarks and copyrights;

(l) except in respect of the Assumed Leases, all leases in respect of any computer hardware or equipment located at the Freeport Facility and listed on Schedule 2.2(l)(i), all computer hardware and leased equipment not located at the Freeport Facility, and, subject to the Software License Agreement, all computer software (located at or used on the computer equipment located at the Freeport Facility or otherwise), including, without limitation, source code, operating systems and specifications, applications and configurations, data, data bases, files, documentation and other materials related thereto, data and documentation, including, without limitation, those described on Schedule 2.2(l)(ii), and all licenses and sublicenses in respect of any such computer software, data and documentation as well as all Internet addresses, websites and URLs, including, without limitation, “www.goodyearag.com”;

(m) all prepaid expenses, advances and deposits of each Seller, whether or not related to the Business, and all rights of each Seller under or in respect thereof, in each case whether recorded or unrecorded;

(n) the automobile leases listed in Schedule 2.2(n) hereto, and the automobiles leased thereunder;

(o) all inter-company receivables and inter-company prepaid expenses of any Seller or any Affiliate, division or business sector or unit thereof, including the Business;

(p) all Contracts identified on Schedule 2.2(p)(ii) and all molds and all unique drums identified in Schedule 2.2(p)(iii) (each as defined in the Offtake Agreement), used or held for use by any Seller in connection with, the manufacture, distribution or sale of the categories of tires listed in Schedule 2.2(p)(i) hereto;

(q) all of the Books and Records (including all books of account and all supporting vouchers, invoices and other records and materials) of each Seller, (i) relating to any Taxes of such Seller (subject to the rights of Purchaser under Section 6.9 hereof), (ii) constituting personnel records, (subject to the rights of Purchaser under Article VII) corporate records, articles of incorporation, by-laws, minute books, stock or stock transfer records or other organizational documents or records of such Seller, (iii) which such Seller is required by Law to retain in its possession or (iv) which are subject to or protected by any privilege from disclosure under applicable Law;

(r) all telephone, telecopy and e-mail addresses and listings of each Seller;

(s) all claims, causes of action, choses in action, rights of recovery and rights to set off or compensation of any kind (including rights under and pursuant to all warranties, representations and guarantees made by suppliers) against third parties, but excluding all such assets (including rights under and pursuant to all warranties, representations and guarantees made by suppliers) relating to or arising out of the Purchased Assets or the Business or related to any raw materials or contracts in respect thereof;

(t) all of each Seller’s rights under this Agreement and each of the agreements, documents and instruments contemplated to be executed or delivered hereunder or in connection herewith, including, without limitation, each of the Ancillary Agreements;

(u) all of each Seller’s assets not used in connection with the manufacture of Farm Tires at the Freeport Facility and not located at the Freeport Facility;

(v) all of each Seller’s rights and assets under or related to any and all agreements, contracts, instruments and/or arrangements between such Seller and any utility service provider, including, without limitation, any provider of electricity, gas, water, sewerage, telephone or internet access services other than those that relate to the Freeport Facility or that constitute Purchased Assets under Section 2.1(a)(vi) hereof; and

(w) all of the other property and assets described on Schedule 2.2(w) hereto.

Section 2.3 Consideration To Be Paid by Purchaser. As consideration for the sale, transfer and assignment of the Purchased Assets, and for the Non-Competition Covenants, Purchaser shall, (a) pay to Sellers the purchase price as defined and determined pursuant to Section 2.4 hereof (the “Purchase Price”) and (b) assume the Assumed Liabilities (as hereinafter defined). At the Closing, Purchaser shall pay to Sellers One Hundred Million and No/100 ($100,000,000.00) Dollars (the “Preliminary Purchase Price”) by wire transfer of immediately available U.S. denominated funds in accordance with the wire transfer instructions set forth on Schedule 2.3(a) hereto. The parties acknowledge and agree that the Purchase Price payable hereunder includes payment in full by Purchaser for a non-refundable prepaid royalty, which prepaid royalty is payable in addition to all amounts due or to become due under the Technology Agreement for the rights granted under the Technology Agreement, including, without limitation, the rights granted to Purchaser in respect of the Licensed Patents and the Know How (each as defined in the Technology Agreement) (the “Prepaid Royalty”), in an amount equal to the amount allocated to such Prepaid Royalty under Section 2.8 hereof.

Section 2.4 Preliminary Purchase Price; Determination of Purchase Price The Preliminary Purchase Price is based on the net book value of property and equipment of the Purchased Assets (other than Inventories) of Forty-four Million Six Hundred Thousand and No/100 ($44,600,000) Dollars (the “Property and Equipment Value”) and an estimated Inventory value of Forty-six Million Three Hundred Thousand and No/100 $46,300,000 Dollars (the “Estimated Inventory Value”). The Purchase Price shall be determined as follows:

(a) As soon as practicable, but in no event later than sixty (60) days following the Closing Date, Purchaser shall prepare a calculation of the value of the Inventory as of the Closing Date (the “Closing Inventory Value”). The Closing Inventory Value shall be (i) the Base Closing Inventory Value, (ii) plus the amount of the Accounts Receivable of Goodyear Canada, if any, less the adjustment set forth in Section 6.16, if any, arising from the Canadian Inventory Transfer pursuant to Section 6.16 hereof.

(b) During the calculation of the Closing Inventory Value and the period of any dispute within the contemplation of this Section 2.4, Sellers shall (i) provide Purchaser and Purchaser’s authorized representatives with reasonable access during normal business hours to the books, records, facilities and employees of Sellers concerning the Inventories, and (ii) cooperate with Purchaser’s and Purchaser’s authorized representatives’ reasonable requests with respect to the

calculation of the Closing Inventory Value, including by providing on a timely basis all information necessary or useful in calculating the Closing Inventory Value.

(c) Purchaser shall deliver a written statement of the Closing Inventory Value (the “Closing Inventory Value Statement”) to Sellers promptly after it has been prepared. After receipt of the Closing Inventory Value Statement, Sellers shall have sixty (60) days to review the Closing Inventory Value Statement. Sellers and their authorized representatives shall have reasonable access during normal business hours to all relevant books and records, facilities and employees of Purchaser and Purchaser shall cooperate with Sellers’ and Sellers’ representatives’ reasonable requests with respect to their review of the Closing Inventory Value Statement. Unless Sellers deliver written notice to Purchaser on or prior to the sixtieth (60^th) day after Sellers’ receipt of the Closing Inventory Value Statement specifying in reasonable detail the amount, nature and basis of all disputed items, Sellers shall be deemed to have accepted and agreed to the calculation of the Closing Inventory Value. If Sellers timely notify Purchaser of their objection to the calculation of the Closing Inventory Value, Purchaser and Sellers shall, following such notice attempt to resolve their differences pursuant to Section 12.9(b) hereof within the period set forth in Section 12.9(b) (the “Resolution Period”). Any resolution by them as to any disputed amounts shall be final, binding and conclusive.

(d) If, at the conclusion of the Resolution Period, there are any amounts remaining in dispute, then such amounts remaining in dispute shall be resolved in the following manner: (i) Sellers shall, at their expense, select as their representative a person from Pricewaterhouse Coopers LLP (the “Sellers’ Representative”) and Purchaser, at its expense, shall select as its representative a person from Pricewaterhouse Coopers LLP (the “Purchaser’s Representative”) within ten (10) days after the expiration of the Resolution Period. Within ten (10) days thereafter, the Sellers’ Representative and the Purchaser’s Representative shall select one other person from Pricewaterhouse Coopers LLP who shall act as a neutral arbitrator (the “Neutral Auditor”) who shall resolve any and all amounts remaining in dispute. The fees and disbursements of the Neutral Auditor shall be allocated between the Sellers and the Purchaser in the same proportion that the aggregate amount of such remaining disputed items so submitted to the Neutral Auditor that is unsuccessfully disputed by each party (as finally determined by the Neutral Auditor) bears to the total amount of such remaining disputed items so submitted. The Neutral Auditor shall act as an arbitrator to determine, based solely on the provisions of this Section 2.4 and the presentations by Sellers and Purchaser, and not by independent review, only those issues still in dispute. The Neutral Auditor’s determination shall be made within thirty (30) days of his or her selection, shall be set forth in a written statement delivered to Sellers and Purchaser and shall be deemed a final, binding and conclusive arbitration award. A judgment of a court of competent jurisdiction may be entered upon the Neutral Auditor’s determination. The term “Final Closing Inventory Value” shall mean the definitive Closing Inventory Value agreed to (or deemed to be agreed to) by Purchaser and Sellers in accordance with Section 2.4(c) or resulting from the determinations made by the Neutral Auditor in accordance with this Section 2.4(d) (in addition to those items theretofore agreed to by Sellers and Purchaser).

(e) If the aggregate amount of the Property and Equipment Value plus Final Closing Inventory Value is not less than $92,000,000 nor more than $100,000,000, there shall be no adjustment to the Preliminary Purchase Price and the Preliminary Purchase Price shall be the Purchase Price. The Preliminary Purchase Price shall be (i) increased dollar for dollar to the extent that the aggregate amount of the Property and Equipment Value plus the Final Closing Inventory Value exceeds $100,000,000, or (ii) decreased dollar for dollar to the extent that the aggregate amount of the Property and Equipment Value plus the Final Closing Inventory Value is less than $92,000,000. Any adjustments to the Preliminary Purchase Price made under this Section 2.4(e) shall bear interest from the Closing Date through the date of payment at the rate of interest publicly announced by Citibank, N.A., in New York, New York, from time to time as its prime rate, for the period from the Closing Date to the date of such payment. Any adjustments to the Preliminary Purchase Price made pursuant to this Section 2.4(e) shall be paid by wire transfer of immediately available funds to the account specified by Sellers, if Sellers are owed payment, or by Purchaser, if Purchaser is owed payment, within five (5) business days after the Final Closing Inventory Value is agreed to by Purchaser and Sellers or any remaining disputed items are ultimately determined by the Neutral Auditor. The Preliminary Purchase Price as adjusted pursuant to this Section 2.4 is referred to herein as the “Purchase Price.”

Section 2.5 Assumption of Liabilities. On the terms and subject to the conditions set forth in this Agreement, at the Closing, Purchaser shall assume and, thereafter, shall pay, perform and discharge when due, all liabilities, other than any Excluded Liability, set forth below (collectively, the “Assumed Liabilities”):

(a) all obligations and liabilities related to or in respect of each of the Purchased Assets, each of the Assumed Contracts and each of the Assumed Leases, and that arise, accrue or relate to the period following the Closing;

(b) all obligations and liabilities in respect of (i) returns, recalls, retrofits and warranty and adjustment claims (other than any Action) and relating to any products manufactured by Purchaser after the Closing Date (other than tires manufactured under the Offtake Agreement) that constitute Farm Tires, Licensed Products or other products in categories similar thereto or manufactured using any of the Purchased Assets or any rights granted under the Technology Agreement and (ii) any Action relating to any such products manufactured by Purchaser after the Closing Date other than any Excluded Design Defect Claim;

(d) the obligations and liabilities for environmental matters to the extent expressly set forth in Section 8.1 hereof; and

(e) all obligations and liabilities described on Schedule 2.5(e) hereto.

Section 2.6 Excluded Liabilities. Purchaser shall not be liable or obligated for any of Sellers’ past, present or future liabilities and nothing in this Agreement shall be construed in any manner to constitute an assumption by Purchaser of any such liability of Sellers. Sellers shall retain and pay and perform when due all of their liabilities, secured or unsecured, whether known or unknown, asserted or unasserted, absolute, accrued, contingent or otherwise, and whether due to or to become due (collectively, the “Excluded Liabilities”). Other than as specifically set forth in Section 2.5, the Excluded Liabilities shall include the following liabilities:

(a) any of Sellers’ obligations and liabilities, to the extent accrued or arising prior to the Closing including, without limitation, all Accounts Payable;

(b) any of Sellers’ liabilities and obligations under any Environmental Law or related to the use, transportation, handling, discharge or release of any Hazardous Material, except for the liabilities and obligations of Purchaser to the extent expressly set forth in Section 8.1 hereof;

(c) any of Sellers’ obligations and liabilities under or related to any Employee Benefit Plan or related to or in favor of any employee, former employee, retiree or job applicant of any Seller;

(d) any of Sellers’ obligations and liabilities arising out of or relating to any Action to which any Seller is a party pending as of the Closing;

(e) except as otherwise set forth herein or in any of the Ancillary Agreements, any of Sellers’ obligations and liabilities under any contract, agreement, obligation or commitment of any Seller not included in the Purchased Assets, or otherwise in respect of any Excluded Asset.

(f) any of Sellers’ obligations and liabilities under this Agreement and the Ancillary Agreements;

(g) any of Sellers’ obligations and liabilities in respect of the Excluded Contracts, Permitted Liens (except with respect to matters falling within the description set forth in Clauses (c) (A), (B) and (C) (subject to proration as described in Section 6.13(f)) and (d) (subject to proration as described in Section 6.13(f)) of the definition of Permitted Liens set forth in Section 1.1 of this Agreement), the borrowing of money or issuance of any note, bond, indenture, loan, credit agreement or other evidence of indebtedness, whether or not disclosed in this Agreement;

(h) except as otherwise set forth herein, including, without limitation, as set forth in Sections 2.7 and 6.4 hereof, any of Sellers’ liabilities and obligations resulting from the acts or omissions of Sellers following the Closing Date; and

(i) any of Sellers’ obligations and liabilities in respect of (i) returns, recalls, retrofits and warranty and adjustment claims (other than any Action) and relating to any products manufactured, sold or distributed by Sellers prior to the Closing Date that constitute Farm Tires, Licensed Products or other products in categories similar thereto or manufactured using any of the Purchased Assets or any rights granted under the Technology Agreement, (ii) all Actions related to any such products, and (iii) all Actions (each an “Excluded Design Defect Claim”) constituting or including claims for injuries or damages, but only to the extent of such damages, caused by a design defect in any Farm Tire if and to the extent that: (A) such claims allege that such design defect in such Farm Tire proximately caused such damages or injuries, (B) Farm Tires of the same size and type as such Farm Tire are in commercial production, but have been in commercial production for less than 24 months, as of the Closing Date, (C) such Farm Tire was manufactured by Purchaser at Freeport within 18 months after the Closing Date, and (D) with respect to, and measured using data available as of the expiration of, the 18 month period following the Closing Date, Farm Tires of the same size and type as such Farm Tire have an adjustment rate of 2% or more of units sold.

Section 2.7 Assignment and Transfer of Contracts and Permits. Nothing in this Agreement shall be construed as an assignment of, or an attempt or commitment to assign to Purchaser, any Assumed Contract, Assumed Lease or Permit (including any Environmental Permit) which, as a matter of law or by its terms, is (i) not assignable, or (ii) not assignable without the approval or consent of the issuer thereof or the other party or parties thereto (A) without first obtaining such approval or consent or (B) if, despite compliance with Sections 6.4 and 6.11 hereof, consent to assignment cannot be obtained, or (iii) not assignable without continuing liability to any Seller following the Closing (collectively, the “Nonassignable Rights”). Except in respect of any Permit or Environmental Permit (in respect of which the parties shall comply with Section 6.11 hereof), in connection with the Nonassignable Rights, and, in particular, should any consent or approval not be available on the Closing Date, Sellers shall, for a reasonable period, to be agreed upon by the parties:

(a) as to consents and approvals described above in Clause (ii) of this Section 2.7, use reasonable efforts to obtain, subject to the limitations contemplated by Section 6.4 hereof, such consents or approvals in a form reasonably satisfactory to Purchaser as promptly thereafter as practicable; provided, however, that no Seller shall have any obligation to give any guarantee or other consideration of any nature, or to consent to any material amendment of any of the Nonassignable Rights, in connection with performance of the foregoing obligation.

(b) use reasonable efforts to obtain the benefits accruing after, and in respect of the period after, the Closing, of the Nonassignable Rights to Purchaser; provided, however, that no Seller shall have any obligation to give any guarantee or other consideration of any nature, or to consent to any material amendment of any of the Nonassignable Rights, in connection with performance of the foregoing obligation and provided further that, if a Seller provides the benefits of any Nonassignable Right held by such Seller to Purchaser pursuant to this Clause (b), Purchaser shall, and hereby does, assume, indemnify Sellers against and hold Sellers harmless from, the liabilities and obligations of Sellers (or any of them) thereunder arising during, relating to or accruing in respect of the period of such compliance (all of which liabilities and obligations shall constitute, notwithstanding anything to the contrary set forth herein, Assumed Liabilities) and, to the greatest extent possible, pay, perform and discharge when due, as subcontractor for Sellers (or any of them) or otherwise, all of the terms, covenants and provisions thereof during such period.

(c) cooperate with the Purchaser, at the expense of Purchaser, in taking such commercially reasonable actions (not including the initiation of, or participation in, any Action) as Purchaser may from time to time request to enforce, and to preserve for the benefit of Purchaser, the Nonassignable Rights; and

(d) pay over to the Purchaser, all monies collected by or paid to the Sellers in respect of the Nonassignable Rights due after the Closing, to the extent due in respect of, and in respect of obligations accruing during, the period after the Closing.

Section 2.8 Allocation of the Purchase Price. The sum of the Purchase Price and the value of the Assumed Liabilities shall be allocated among the Sellers, and, as to each Seller, among the Purchased Assets, the Non-Competition Covenants and the Prepaid Royalty, for Tax purposes (including, without limitation, U.S. federal income Tax purposes) as set forth on Schedule 2.8. Purchaser shall prepare Form 8594 under Section 1060 of the Code relating to this transaction based on this agreed allocation. Purchaser and Sellers agree to file such Form, and such other documents as may be required in respect of such allocation by any Taxing Authority, with each relevant Taxing Authority. Purchaser and Sellers each agree to file all income, franchise and other Tax Returns, and execute such other documents as may be required by any Taxing Authority, in a manner consistent with the agreed allocation and such Form and to refrain from taking any position inconsistent with such Form or agreed allocation with any Taxing Authority unless otherwise required by applicable Law; provided however, that the amounts set forth on Schedule 2.8 shall be ratably adjusted to reflect any differences between the Preliminary Purchase Price and the Purchase Price.

ARTICLE III

THE CLOSING

Section 3.1 The Closing. The closing of the purchase and sale of the Purchased Assets and the assumption of the Assumed Liabilities pursuant to Sections 2.1 and 2.5 hereof (the “Closing”) shall take place either at the offices of Goodyear at 1144 East Market Street, Akron, Ohio, 44316 or the office of Bodman LLP, Detroit, Michigan (or at such location to be agreed upon by the parties) at 10:00 a.m. Eastern Standard Time on April 1, 2005, or, if later, on the fifth (5^th) Business Day following the satisfaction or waiver of the conditions set forth in Article IX hereof (other than those conditions intended to be satisfied substantially simultaneously with the Closing), or at such other date, place or time as may be agreed upon by the parties (the “Closing Date”).

Section 3.2 Closing Deliveries. At the Closing, the parties shall make the deliveries described below, provided that the obligation of Purchaser and Sellers to do so shall depend on the performance by Purchaser and Sellers of their respective obligations under this Section 3.2.

(a) Sellers shall deliver or cause to be delivered to Purchaser the following:

(i) an Assignment and Bill of Sale substantially in the form attached as Exhibit A hereto (the “Bill of Sale”), duly executed on behalf of Goodyear, Goodyear Canada and Goodyear Mexico;

(ii) an Assumption Agreement substantially in the form attached as Exhibit B hereto (the “Assumption Agreement”), duly executed on behalf of each Seller;

(iii) a Special Warranty Deed, with respect to the Owned Real Property, substantially in the form attached as Exhibit C hereto (the “Special Warranty Deed”), duly executed on behalf of Kelly;

(iv) a Sublease Agreement, with respect to the Lamm Road Lease, substantially in the form attached as Exhibit D hereto (the “Sublease”), duly executed on behalf of Goodyear;

(v) one or more Leasehold Assignments substantially in the form attached as Exhibit E hereto (collectively, the “Personal Property Lease Assignments”), duly executed on behalf of Goodyear and the lessors under the Personal Property Leases;

(vi) one or more Leasehold Assignments substantially in the forms attached as Exhibit F hereto (collectively, the “Farm Lease Assignments,” and, together with the Personal Property Lease Assignments, the “Lease Assignments”), duly executed on behalf of Goodyear;

(vii) an Offtake Agreement substantially in the form attached as Exhibit G hereto (the “Offtake Agreement”), duly executed on behalf of Goodyear;

(viii) a Compound Mixing Agreement substantially in the form attached as Exhibit H hereto (the “Mixing Agreement”), duly executed on behalf of Goodyear;

(ix) a Warranty Service Agreement substantially in the form attached as Exhibit I hereto (the “Service Agreement”), duly executed on behalf of Goodyear;

(x) a Bilateral Supply Agreement substantially in the form attached as Exhibit J hereto (the “Supply Agreement”), duly executed on behalf of Goodyear;

(xi) a Raw Materials Agreement substantially in the form attached as Exhibit K hereto (the “Raw Materials Agreement”), duly executed on behalf of Goodyear;

(xii) a Trademark License Agreement substantially in the form attached as Exhibit L hereto (the “Trademark License Agreement”), duly executed on behalf of Goodyear;

(xiii) a Patent and Know How Transfer and License Agreement substantially in the form attached as Exhibit M hereto (the “Technology Agreement”), duly executed on behalf of Goodyear;

(xiv) an Employee Leasing Contract substantially in the form attached as Exhibit N hereto (the “Employee Leasing Contract”), duly executed on behalf of Goodyear;

(xv) a Bailment Agreement substantially in the form attached as Exhibit O hereto (the “Bailment Agreement”), duly executed on behalf of Goodyear;

(xvi) a Software License Agreement substantially in the form attached as Exhibit P hereto (the “Software License Agreement”), duly executed on behalf of Goodyear;

(xvii) the certificates and other documents required to be delivered by Sellers pursuant to Article IX hereof, including, without limitation, the certified copies of resolutions described in Section 9.3(b) hereof;

(xviii) The Estoppel Certificate if obtained pursuant to Section 6.13(a) hereof, (the “Estoppel Certificate”), duly executed by the lessor of the Leased Real Property;

(xix) a certificate from Kelly (which complies with Section 1445 of the Code) of non-foreign status executed in accordance with the provisions of the Foreign Investment in Real Property Tax Act;

(xx) such other documents as may be necessary to be delivered at the Closing in order to consummate the transactions contemplated hereby to be effected at the Closing.

(b) Purchaser shall deliver or cause to be delivered to Sellers the following:

(i) a wire transfer of immediately available U.S. denominated funds in the amount of the Purchase Price;

(ii) the Bill of Sale, duly accepted on behalf of Purchaser;

(iii) the Assumption Agreement, duly executed on behalf of Purchaser;

(iv) the Special Warranty Deed, duly accepted on behalf of Purchaser;

(v) the Sublease Agreement, duly executed on behalf of Purchaser;

(vi) the Lease Assignments, duly executed on behalf of Purchaser;

(vii) the Offtake Agreement, duly executed on behalf of Purchaser;

(viii) the Mixing Agreement, duly executed on behalf of Purchaser;

(ix) the Service Agreement, duly executed on behalf of Purchaser;

(x) the Supply Agreement, duly executed on behalf of Purchaser;

(xi) the Raw Materials Agreement, duly executed on behalf of Purchaser;

(xii) the Trademark License Agreement, duly executed on behalf of Purchaser;

(xiii) the Technology Agreement, duly executed on behalf of Purchaser;

(xiv) the Employee Leasing Contract, duly executed on behalf of Purchaser;

(xv) the Bailment Agreement, duly executed on behalf of Purchaser;

(xvi) the Software License Agreement, duly executed on behalf of Purchaser;

(xvii) the certificates and other documents required to be delivered by Purchasers pursuant to Article IX hereof, including, without limitation, the certified copies of resolutions described in Section 9.2(d) hereof; and

(xviii) such other documents as may be necessary to be delivered at the Closing in order to consummate the transactions contemplated hereby to be affected at the Closing.

Section 3.3 Further Assurances. From time to time following the Closing, Purchaser, on the one hand, and Sellers, on the other, shall, at the reasonable request of the other party or parties, execute, acknowledge and deliver, at the sole cost of the requesting party or parties, such assignments, conveyances, consents, assurances, instruments of transfer or assumption and other instruments, and shall take such other actions consistent with the terms of this Agreement, as may be reasonably necessary to vest in Purchaser all right, title and interest of each Seller in and to the Purchased Assets transferred by such Seller hereunder and otherwise to consummate the transactions contemplated hereby. Without limiting the generality of the foregoing, in the event either of the Custom Label Contracts cannot be assigned prior to the Closing despite compliance with Section 6.4 hereof, and cannot be assigned following the Closing during the period referred to in, and despite compliance with, Section 2.7 hereof, Purchaser shall cooperate with Sellers to remove and ship all Inventories manufactured thereunder and the molds and other property and assets located at, installed in or affixed to the Freeport Facility set forth in Schedule 3.3 hereof, to or as directed by Sellers. Between the Closing and the expiration of the period referred to in Section 2.7 hereof, or, if later, the date on which all such assets and Inventories have been removed and shipped in accordance herewith, (i) Purchaser shall hold such Inventories and assets for the account of Goodyear, and (ii) Purchaser shall from time to time ship such Inventories to or as directed by Sellers.

Section 3.4 Administration of Accounts (a) All payments and reimbursements made by any third party in the name of or to any Seller that are received after the Closing, to the extent in connection with or arising out of the Purchased Assets or the Assumed Liabilities shall be held by such Seller in trust for the benefit of Purchaser and, immediately upon receipt by such Seller of any such payment or reimbursement, such Seller shall pay over to Purchaser the amount of such payment or reimbursement without right of set-off; provided, however, that nothing herein is intended to or shall confer any right or interest to Purchaser in or to any Excluded Asset or any payment or reimbursement related thereto.

(b) All payments and reimbursements made by any third party in the name of or to Purchaser that are received after the Closing, to the extent in connection with or arising out of Excluded Assets or the Excluded Liabilities, shall be held by Purchaser in trust for the benefit of the relevant Seller and, immediately upon receipt by Purchaser of any such payment or reimbursement, Purchaser shall pay over to the relevant Seller the amount of such payment or reimbursement without right of set-off provided, however, that nothing herein is intended to or shall confer any right or interest to Sellers in or to any Purchased Assets or any payment or reimbursement related thereto.

(c) Subject to Article X and the limitations set forth therein, if Purchaser pays any of the Excluded Liabilities, then Goodyear shall reimburse the amount of such Payment to Purchaser within thirty (30) days of receipt by Goodyear of a demand for reimbursement, together with corresponding documentation of such payment.

(d) Subject to Article X and the limitations set forth therein, if Sellers pay any of the Assumed Liabilities, then Purchaser shall reimburse the amount of such Payment to Sellers within thirty (30) days of receipt by Purchaser of a demand for reimbursement, together with corresponding documentation of such payment.

Section 3.5 Bulk Sales Laws. Notwithstanding any other provision of this Agreement, Purchaser hereby waives compliance by Sellers with the provisions of any bulk transfer or bulk sales Law of any jurisdiction in connection with the transactions contemplated hereby. Sellers hereby indemnifiy and agree to hold Purchaser harmless from and against any and all liabilities, losses, damages, costs and expenses, including reasonable attorneys’ fees, incurred or sustained by Purchaser due to such non-compliance.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF SELLER

Sellers hereby represent and warrant to Purchaser that the following representations and warranties are true and correct as of the date hereof:

Section 4.1 Incorporation; Authorization; Etc.Each of Goodyear and Kelly is a corporation duly organized, validly existing and in good standing under the Laws of its state of incorporation. Goodyear Mexico is a sociedad de responsabilidad limitada, duly organized, validly existing and in good standing under the Laws of Mexico. Goodyear Canada is a corporation, duly organized, validly existing and in good standing under the Laws of Ontario. Each Seller is duly authorized to conduct business as a foreign corporation and is in good standing in each jurisdiction in which the ownership of the Purchased Assets owned by it or the performance of the Assumed Contracts or the Assumed Leases to which it is a party makes such qualification necessary. Each Seller has all requisite corporate or organizational power and authority to own Purchased Assets owned by it, to perform the Assumed Contracts and the Assumed Leases to which it is a party. Each Seller has all requisite corporate or organizational power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party and to perform its obligations hereunder and thereunder. The execution, delivery and performance of this Agreement and the Ancillary Agreements to which it is a party have been duly and validly authorized by all necessary corporate or organizational proceedings on the part of each Seller. This Agreement has been and when executed and delivered the Ancillary Agreements to which each of them is a party, will be duly and validly executed and delivered by each Seller and, assuming the due authorization, execution and delivery hereof by Purchaser, constitutes a valid and binding obligation of each Seller, enforceable against such Seller in accordance with its terms, except as such enforcement may be limited by (i) bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or other similar Laws affecting or relating to enforcement of creditors’ rights generally and (ii) general equitable principles and limitations on the availability of equitable relief (whether invoked in a proceeding at law or in equity).

Section 4.2 No Conflict. (a) Except as set forth on Schedule 4.2(a), and subject to obtaining the Seller Required Approvals, the execution and delivery by each Seller of this Agreement do not, and, when executed and delivered, such execution and delivery of the Ancillary Agreements to which it is a party will not, and the consummation by such Seller of the transactions contemplated hereby and thereby will not, violate, conflict with or result in a breach of any provision of, or constitute a default under, or result in a right of notice, termination, or acceleration under, or result in the creation of any Lien upon any of the Purchased Assets under, any of the terms, conditions or provisions of (i) such Seller’s articles of incorporation or by-laws, (ii) any Law applicable to such Seller, the Assumed Leases, the Assumed Contracts or any of the Purchased Assets or (iii) any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, contract, lease or other instrument, obligation or agreement of any kind to which such Seller is a party and by which any of the Purchased Assets is bound.

(b) Except for the Permits, filings, declarations, notices, Consents, registrations, approvals and other matters described on Schedule 4.2(b) (the “Seller Required Approvals”), no declaration, filing or registration with, or notice to, or authorization, consent or approval of, any Governmental Authority or other Person is necessary for the execution and delivery by any Seller of this Agreement and the Ancillary Documents to which it is a party or the consummation by any Seller of the transactions contemplated hereby or thereby.

Section 4.3 Real and Tangible Personal Property. (a) Schedule 4.3(a) sets forth a legal description of the Owned Real Property. Except as set forth on Schedule 4.3(a) hereto, Kelly has good and marketable title to the Owned Real Property, free and clear of all Liens. Except as set forth on Schedule 4.3(a) hereto, (i) the buildings, structures, fixtures, building systems and equipment included in the Owned Real Property (collectively, the “Improvements”) are, taken as a whole, in good condition and repair, normal wear and tear excepted, except to the extent the failure to be in such condition or repair does not materially impair the operation of the Owned Real Property as currently conducted and (ii) there are no material structural deficiencies affecting the Improvements. For purposes of the preceding sentence, “material” or “materially” means that the cost to repair or remedy any deficiency or condition would exceed the sum of $10,000. The classification of each parcel of Owned Real Property under applicable zoning laws, ordinances and regulations expressly permits the use and occupancy of such parcel and the operation of the Business as currently conducted thereon (and not merely as a prior non-conforming use or similar designation), and permits the Improvements located thereon as currently constructed, used and occupied. There is no condemnation, expropriation or other proceeding in eminent domain, pending or, to the Knowledge of Sellers, threatened, affecting any parcel of Owned Real Property or any portion thereof or interest therein.

(b) Sellers have previously provided or made available to Purchaser a true and correct copy of the Lamm Road Lease and each of the Farm Leases, each as amended as of the date hereof. Except as set forth on Schedule 4.3(b) hereto, with respect to each of the Lamm Road Lease and each of the Farm Leases: (i) such lease is valid and enforceable, subject only to bankruptcy, reorganization, receivership and other laws affecting creditors’ rights generally and to general principals of equity, whether invoked in a proceeding in equity or at law; (ii) the transactions contemplated by this Agreement (including the Sublease) do not require the consent of any other party to such lease (other than the Seller Required Approvals), will not result in a breach of or default under such lease, and will not otherwise cause such lease to cease to be so valid and enforceable on terms substantially identical in all material respects following the Closing; (iii) Goodyear’s possession and quiet enjoyment of the Leased Real Property under the Lamm Road Lease is not presently disturbed and there are currently no disputes with respect to such lease; (iv) neither Goodyear nor the other party to the Lamm Road Lease, is in material breach or default under such lease; (v) Goodyear has not subleased, licensed or otherwise granted any Person the right to use or occupy the Leased Real Property or any portion thereof; and (vi) Goodyear has not collaterally assigned or granted any Lien in the Lamm Road Lease or any interest therein.

(c) Except as set forth on Schedule 4.3(c) hereto, Kelly or Goodyear has obtained all Permits (other than Environmental Permits that are addressed in Section 4.18) required to be obtained by Kelly or Goodyear with respect to the Owned Real Property.

(d) Except as otherwise set forth herein, the Purchased Assets constitute all of the assets, rights and properties (other than any Excluded Assets) used or held for use by Sellers in connection with the manufacture of Farm Tires at and necessary for the operation of the Freeport Facility as presently operated.

(e) Schedule 2.1(a)(i) hereto sets forth a listing of all capital assets owned by Goodyear included in the Purchased Assets, other than Inventories, as of December 31, 2004. Except as set forth on Schedule 4.3(e)(i) hereto, and except with respect to such Purchased Assets as Goodyear has disposed of in the Ordinary Course of Business since December 31, 2004, Goodyear has good title to or an enforceable right to use all such Purchased Assets, free and clear of all Liens. All assets listed on Schedule 2.1(a)(i) are in good operating condition and repair (subject to normal wear and tear), are free from manufacturing flaws and have been maintained in accordance with Goodyear’s normal practices.

(f) Goodyear has previously provided or made available to Purchaser a true and correct copy of each of the Personal Property Leases, each as amended as of the date hereof. Except as set forth in Schedule 4.3(f) hereto, each of the Personal Property Leases are, assuming due execution and delivery by the counterparties thereto, legal, valid and binding in all material respects, enforceable in all material respects in accordance with their terms, subject only to bankruptcy, reorganization, receivership and other laws affecting creditors’ rights generally and to general principals of equity, whether invoked in a proceeding in equity or at law. All such Personal Property Leases are free of any material default or breach thereof by Goodyear.

(g) Schedule 4.3(g) lists all Permitted Liens as of January 31, 2005 to Sellers’ Knowledge.

Section 4.4 Financial Reports. Attached as Schedule 4.4 hereto are copies of certain management measurements of income and losses with respect to the Business (collectively, the “Reports”). The Reports (a) were prepared in all material respects in accordance with, and reflect, in all material respects, the books of account and other financial records of Goodyear and (b) were prepared in all material respects consistent with the past practices of Goodyear for measuring income and loss for unincorporated business units, except that (i) the Reports exclude information relating to rubber track and (ii) the Reports disaggregate or eliminate certain items of expense deemed by Goodyear not to be directly related to the Business.

Section 4.5 Absence of Certain Changes. Except as set forth on Schedule 4.5 hereto, between December 31, 2004 and the date hereof, there has not been:

(a) any Material Adverse Change;

(b) any material increase made or promised in the compensation or other remuneration or rate thereof payable or to become payable by Goodyear to its Employees generally;

(c) except as set forth on Schedules 4.3(a), (b), (c) or (e)(i) any Lien with respect to the Business other than Liens that do not individually or in the aggregate, exceed $25,000, imposed upon or attached to any of the Purchased Assets;

(d) except as set forth on Schedules 4.3(a), (b), (c) or (f) or Schedule 4.12, any material amendment to, consent by any Seller to the termination of or material breach by any Seller of any Assumed Contract or Assumed Lease;

(e) any material commitment to any labor organization by Goodyear with respect to the Employees;

(f) except as set forth on Schedule 4.5(f), any sale, transfer, lease, sublease, license or other disposal by any Seller of any of the Purchased Assets which individually or in the aggregate have a value in excess of $10,000 other than Inventories sold in the Ordinary Course of Business with respect to the Business;

(g) any material changes in the customary methods of operation of the Business, including, without limitation, policies and practices relating to Inventories;

(h) any casualty or loss with respect to any of the tangible personal or real property comprised by the Purchased Assets and that, in the aggregate, have a replacement cost of more than $10,000; or

(i) any agreement by any Seller to take any of the actions listed in this Section 4.5 except, in each case, as contemplated or permitted by this Agreement or any of the Ancillary Agreements.

Section 4.6 Inventories. Except as set forth on Schedule 4.6 hereto, and except to the extent reflected in the Reports, the Inventories comprised by the Purchased Assets consist in all material respects of products which are of a quality and quantity usable and saleable in the Ordinary Course of Business with respect to the Business and none of the Inventories is obsolete or damaged, except for obsolete items which have been written off or written down to net realized value. Subject to Section 6.16, the amount of Inventories presently on hand is consistent with historical levels. The amounts at which the Inventories have been valued by Goodyear have been determined in accordance with Goodyear’s existing inventory practices in respect of the Business. Goodyear has consistently used the first-in, first-out method of accounting for the Inventories. Except as set forth on Schedule 4.6, all of the Inventories are free and clear of all Liens.

Section 4.7 Litigation. Except as set forth on Schedule 4.7 hereto, there is no Action pending, nor, to Sellers’ Knowledge, threatened, against Sellers with respect to any of the Purchased Assets or the Business, before any Governmental Authority that would, if determined adversely to Sellers, have a Material Adverse Effect on the Purchased Assets or the Business. Except as disclosed on Schedule 4.7, and except to the extent related to the Consent of any Governmental Authority necessary in connection with the transactions contemplated hereby, there are no judgments or outstanding orders, injunctions, decrees, stipulations or awards rendered by a Governmental Authority against Sellers that would interfere with the use of the Purchased Assets in connection with the Business as presently conducted or prevent or delay the transactions contemplated in this Agreement.

Section 4.8 Intellectual Property. The Intellectual Property includes all of the patents, patent applications, inventions, and registered and unregistered trademarks, and all Know How (as defined in the Technology Agreement) material to the conduct of the Business on the terms contemplated by this Agreement and the License Agreements. Sellers represent and warrant that: (i) Goodyear owns or has a valid right to use all such Intellectual Property; (ii) to Sellers’ Knowledge, the conduct of the Business does not infringe the rights of any Person in any of such Intellectual Property; (iii) to Sellers’ Knowledge, no Person is currently infringing any of Goodyear’s rights in the Intellectual Property; and (iv) where not restricted otherwise, Goodyear has previously provided or made available to Purchaser correct and complete copies of all patents, registrations, applications, licenses and sublicenses, (as amended to date) with respect to each such item of Intellectual Property

that constitutes a Licensed Mark (as defined in the Trademark License Agreement) or a Licensed Patent (as defined in the Technology Agreement).

Section 4.9 Employee Benefits. Schedule 4.9 hereto lists all benefit plans sponsored or participated in by Sellers or any of their Affiliates in connection with the Business and in effect as of the date hereof which are employee pension benefit plans, as defined in Section 3(2) of ERISA, medical and life insurance plans and employee welfare benefit plans as defined in Section 3(1) of ERISA and, in each case, in which any Employees participate (collectively, the “Employee Benefit Plans”). As to the Employee Benefit Plans sponsored by Sellers or their Affiliates which are “employee pension benefit plans” as defined in Section 3(2) of ERISA, such plans (i) if they are defined benefit plans, are subject to the minimum funding standards of Code Section 412 and (ii) are in material compliance with and have been administered in accordance with their terms and in material compliance with all applicable requirements of Law. Neither Sellers nor their Affiliates have incurred any liability under Title IV of ERISA that has or would, after the Closing Date, become a Lien upon any of the Purchased Assets pursuant to ERISA Section 4068.

Section 4.10 Employment and Labor Matters. Schedule 4.10 hereto sets forth a list of all employees of Goodyear employed exclusively in connection with the Business as of February 17, 2005 (collectively, the “Employees”). Except for the Collective Bargaining Agreement, there are no collective bargaining agreements or other similar labor union contracts to which any Seller is a party in respect of the Employees paid on an hourly basis. Sellers have previously provided or made available to Purchaser a true and correct copy of the Collective Bargaining Agreement.

Section 4.11 Compliance with Laws. Each Seller has, with respect to the Business and the Purchased Assets, complied in all material respects with all applicable Laws.

Section 4.12 Contracts. Schedule 4.12 sets forth all Assumed Contracts that involve aggregate annual consideration in excess of $50,000 and that are exclusively related to the Business and/or the Purchased Assets. Except as set forth on Schedule 4.12, and assuming due execution and delivery by the counterparties thereto, each Assumed Contract is in full force and effect and is, in all material respects, a valid and binding obligation, enforceable in all material respects in accordance with its terms, subject only to bankruptcy, reorganization, receivership and other laws affecting creditors’ rights generally and to general principals of equity, whether invoked in a proceeding in equity or at law. Except as set forth on Schedule 4.12, no Seller, and, to the Knowledge of Sellers, no other party is in material breach of, or material default under, any of the Assumed Contracts.

Section 4.13 Licenses and Permits. Goodyear has obtained and is in all material respects in compliance with all Permits and, except to the extent covered by the provisions of Section 4.3 (with respect to real estate permits) and Section 4.18 (with respect to certain Environmental Permits), necessary to conduct and carry on the Business using the Purchased Assets, except for Permits, the absence of which would not have a Material Adverse Effect (collectively, the “Material Permits”).

All such Material Permits are listed on Schedule 2.1(a)(vii) and are assignable and transferable except as set forth on Schedule 2.1(a)(vii). Except as set forth on Schedule 4.13, all such Material Permits are in full force and effect in all material respects and no Actions are pending or, to Sellers’ Knowledge, threatened that seek the revocation, termination, suspension, non-renewal or any material limitation thereof.

Section 4.14 Taxes. Each Seller has timely filed all Tax Returns required to be filed by it on or before the date hereof with respect to Taxes relating to the Purchased Assets and the Employees for each period ending on or before the date hereof, other than any Tax returns the failure to file which would not have a Material Adverse Effect. Except as set forth on Schedule 4.14 hereto, all Taxes shown as due on such Tax Returns have been or will be timely paid in all material respects, except with respect to any Taxes being contested by any Seller. There is no material unassessed Tax deficiency proposed in a writing delivered to Sellers or, to Sellers’ Knowledge, threatened against any Seller relating to the Purchased Assets and the Employees, nor is any Action pending or, to Sellers’ Knowledge, threatened by any Governmental Authority for assessment, reassessment or collection of any material Taxes relating to the Purchased Assets and the Employees. Kelly is not a “foreign person” within the meaning of Code Section 1445(f)(3).

Section 4.15 Insurance. Purchaser may access Goodyear’s insurance program via Goodyear’s website (www.goodyearinsurance.com).

Section 4.16 Product Warranty. Schedule 4.16 hereto includes true and complete copies of each Seller’s warranty agreements with Farm Tire customers, if any, and each Seller’s standard terms and conditions of sale, if any (containing standard guaranty, warranty, and indemnity provisions) in respect of the finished goods Inventories included in the Purchased Assets. Such Inventories are not subject to any material guaranty, warranty, or other indemnity (except any of the foregoing arising or implied under applicable Law) beyond the applicable warranty agreement or the standard terms and conditions of sale set forth or described in Schedule 4.16.

Section 4.17 Customers and Suppliers. Schedule 4.17 sets forth the names of the ten (10) most significant (i) customers (by revenue, including percentages of total revenues) of the Business and (ii) suppliers (by expense) exclusively to the Freeport Facility, in each case for the twelve (12) month period ended December 31, 2004. Sellers have previously supplied to Purchaser a list of all customers of the Business during calendar year 2004. Except as disclosed in Schedule 4.17, Sellers have no Knowledge that any customer of the Business listed on Schedule 4.17 will cease to use the products, goods or services of the Business, or will substantially reduce the use of such products, goods or services, at any time after the Closing Date. Except with respect to Sellers and their respective Affiliates and except as described in Schedule 4.17, Sellers have no Knowledge that any supplier listed on Schedule 4.17 will cease, or materially decrease the rate of, supplying material, products or services to the Freeport Facility at any time after the Closing Date.

Section 4.18 Environmental Matters. Except as set forth in Schedule 4.18 hereto:

(a) The Business has been conducted by Goodyear and the condition of the Purchased Assets and the Freeport Facility is and at all times has been in material compliance with all requirements of all applicable Environmental Laws;

(b) Sellers have obtained, currently possess and are and have been in material compliance with, all terms and conditions of all Environmental Permits, which Environmental Permits are (i) transferable as described in Schedule 2.1(a)(vii) and (ii) are listed on Schedule 2.1(a)(vii);

(c) Sellers have not during the past three years, or, if unresolved, any previous years, received any written or oral notice, report or other information suggesting that the operation of the Business or condition of the Purchased Assets or the Freeport Facility is in actual or alleged violation of any of the Environmental Laws, or that any of them have in connection with the Business any liabilities or potential liabilities, including any investigatory, remedial or corrective obligations, relating to any of them or their facilities arising under Environmental Laws;

(d) Except as set forth in Schedule 4.18 or the Phase I Environmental Assessment identified in Section 6.13(d), none of the following exists at, on, in or under any portion of the Freeport Facility: (i) underground storage tanks, (ii) asbestos-containing material in any form or condition, (iii) PCBs, (iv) naphtha or (v) landfills, surface impoundments, or disposal areas;

(e) Goodyear has not in connection with the operation of the Freeport Facility treated, stored, disposed of, arranged for or permitted the disposal of, transported, handled, or released any substance, including without limitation any Hazardous Substance, exposed any employee or other individual to any substance or condition, or owned or operated any property or facility (and no such property or facility is contaminated by any such substance) in a manner that has given or would give rise to liabilities, including any liability for response costs, corrective action costs, personal injury, property damage, natural resources damages or attorney fees, pursuant to any Environmental Laws;

(f) Goodyear has not, in connection with the operation of the Freeport Facility, either expressly or by operation of law, assumed or undertaken any liability, including without limitation any obligation for corrective or remedial action, of any other Person relating to Environmental Laws; and

(g) No facts, events or conditions relating to the Freeport Facility will prevent, hinder or limit continued compliance with Environmental Laws, give rise to any investigatory, remedial or corrective obligations pursuant to Environmental Laws, or give rise to any other liabilities pursuant to Environmental Laws, including without limitation any relating to onsite or offsite releases or threatened releases of hazardous materials, substances or wastes, personal injury, property damage or natural resources damage.

Section 4.19 Brokers, Finders, Etc. Sellers have not employed any broker or finder, or incurred any Liability for a brokerage fee, commission or finder’s fee in connection with the transactions contemplated by this Agreement.

Section 4.20 Accuracy of Information; Full Disclosure. All documents delivered by or on behalf of Sellers in connection with this Agreement are complete and accurate in all material respects. No representation or warranty of Sellers contained in this Agreement or in any Schedule hereto or in any Ancillary Agreement delivered to Purchaser pursuant hereto or in connection herewith and none of the written data or information furnished or made available to Purchaser by Sellers contains an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements made, in the context in which made, not false or misleading. To the Knowledge of Sellers, there is no fact that has not been disclosed to Purchaser that has or could reasonably be expected to have a Material Adverse Effect.

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF PURCHASER

Purchaser hereby represents and warrants to Sellers that the following representations and warranties are true and correct as of the date hereof.

Section 5.1 Organization and Good Standing. Purchaser is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois. Purchaser has all requisite power and authority to own, lease and operate its property and otherwise conduct its business as it is now being conducted. Purchaser is duly qualified to do business and in good standing in each jurisdiction where failure to do so would have a Material Adverse Effect.

Section 5.2 Authorization; Etc. Purchaser has full power and authority to execute and deliver this Agreement and the Ancillary Agreements to which it is a party, to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the Ancillary Agreements to which it is a party, the performance of Purchaser’s obligations hereunder and thereunder and the consummation of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate proceedings on the part of Purchaser. This Agreement has been, and when executed and delivered the Ancillary Agreements to which it is a party will be, duly executed and delivered by Purchaser and constitute and will constitute the legal, valid and binding obligations of Purchaser, enforceable against Purchaser in accordance with their terms.

Section 5.3 No Conflict. (a) The execution and delivery by Purchaser of this Agreement and the Ancillary Agreements to which Purchaser is a party do not, and the consummation of the transactions contemplated hereby and thereby will not, violate, conflict with or result in a breach of any provision of, constitute a default under, or result in a right of notice, termination or acceleration under, or result in the creation of any Lien under, any of the terms, conditions or provisions of (i) any note, bond, mortgage, indenture, deed of trust, license, franchise, permit, concession, lease, agreement, commitment, understanding, arrangement or restriction of any kind to which Purchaser is a party or by which Purchaser or any of its property is bound; (ii) any Law to which Purchaser or any of its property is subject; (iii) Purchaser’s articles of incorporation or bylaws or any resolutions adopted by the board of directors or shareholders of Purchaser.

(b) No declaration, filing or registration with, or notice to, or authorization, consent or approval of, and Governmental Authority or other Person is necessary for the execution by Purchaser of this Agreement and the Ancillary Agreements to which it is a party or the consummation by Purchaser of the transactions contemplated hereby and thereby.

Section 5.4 Independent Analysis. Purchaser acknowledges and agrees that except as expressly set forth in this Agreement, no Seller has made any representation or warranty upon which Purchaser is relying with respect to the Purchased Assets, the Assumed Liabilities or otherwise. Purchaser has performed, and will perform, and is purchasing the Purchased Assets and assuming the Assumed Liabilities based only (except in respect of the representations and warranties of Sellers expressly set forth herein) upon, its own due diligence and investigations with respect to the Business, the Purchased Assets and the Assumed Liabilities and has formed its own conclusions regarding the condition (financial and otherwise), value, property, liabilities, contracts, contingencies, prospects, risks and other incidents thereof.

Section 5.5 Litigation. There is no Action, at law or in equity, pending nor, to the Knowledge of Purchaser, threatened against Purchaser which in any manner challenges or seeks to prevent, enjoin, alter or delay the transactions contemplated by this Agreement or any of the Ancillary Agreements.

Section 5.6 Finders, Brokers. Purchaser is not a party to any agreement with any finder or broker, or in any way obligated to any finder or broker, for any commissions, fees or expenses incurred in connection with the origin, negotiation, execution or performance of this Agreement.

ARTICLE VI

COVENANTS OF SELLER AND PURCHASER

Section 6.1 Access to Information; Confidentiality. (a) On the terms and subject to the Conditions set forth in the Confidentiality Agreement, between the date of this Agreement and the Closing Date, each Seller will, on reasonable notice and during ordinary business hours, subject to the requirements of applicable Law, including, without limitation, all applicable competition Laws, (i) give to Purchaser and its authorized representatives reasonable access to all books, records (including, without limitation, all work papers and other documents of such Seller and its accountants who have knowledge of the Business), plants, offices and other facilities and properties of such Seller to the extent related to the Purchased Assets or the Assumed Liabilities, including, without limitation, such books and records of Sellers as Purchaser or such representatives may reasonably request in connection with Purchaser’s compliance with applicable securities laws in connection with the consummation of the transactions contemplated hereby, (ii) permit Purchaser to make such inspections thereof as Purchaser may reasonably request and (iii) cause such Seller’s officers, employees and advisors with knowledge of the Business and the Purchased Assets to furnish Purchaser with such financial and operating data and other information with respect to the Business and the Purchased Assets as Purchaser may from time to time reasonably request. Any such inspection or investigation shall be conducted in such a manner as not to interfere unreasonably with the operation of the Business or the Purchased Assets.

(b) The Confidentiality Agreement shall remain in full force and effect and shall survive the execution and delivery of this Agreement and the termination of this Agreement for any reason whatsoever, subject to its stated expiration date.

Section 6.2 Conduct of the Business. Except as set forth on Schedule 6.2 hereto or as contemplated or permitted hereby or otherwise consented to by Purchaser (such consent not to be unreasonably withheld or delayed by Purchaser), from the date hereof through the Closing, Goodyear shall operate the Business and the Purchased Assets in the Ordinary Course of Business and shall not take any action of the type represented not to have occurred in Section 4.5 hereof. All molds and drums relating to Skid Steer and Large Terra tires presently located at Goodyear’s Topeka, Kansas manufacturing facility shall be moved to the Owned Real Property, at Goodyear’s expense, prior to the Closing.

Section 6.3 Notification of Certain Matters. (a) Each Seller may, from time to time prior to the Closing, deliver to Purchaser a supplement (each a “Supplemental Schedule”) to Sellers’ disclosure Schedules attached hereto that may disclose any fact, circumstance or development that has occurred or been discovered after the date hereof and that would constitute a breach of the representations and warranties of Sellers (or any of them) contained in this Agreement (as of the date of this Agreement or as of the date of such fact, circumstance or development, applying such representations to such date if made on and as of such date) if not disclosed. In the event (i) the Closing occurs in accordance herewith, as to each item or items in the aggregate set forth in any Supplemental Schedule or Schedules for which Purchaser would have been entitled to refuse to consummate the Closing under Section 9.3(a) hereof, or (ii) Purchaser would have the right to terminate this Agreement pursuant to Section 11.1(d) hereof, by

reason of any item or items in the aggregate on any Supplemental Schedule or Schedules and does not or cannot exercise such right within the time permitted thereby, as to each item set forth in any such Supplemental Schedule, then, in such case, the Supplemental Schedule or Schedules shall be deemed to have amended such disclosure Schedules, to have qualified the representations and warranties of Sellers (or any of them) contained in this Agreement and to have corrected any misrepresentation or breach of warranty that otherwise might have existed hereunder by reason of the fact, circumstance or development (with the result that no misrepresentation or breach shall be deemed to have occurred), in each case to the extent of the disclosure contained in such Supplemental Schedule or Schedules.

(b) If prior to the Closing, Purchaser discovers any fact, circumstance or development that would or would reasonably be expected to constitute a breach of the representations or warranties of Sellers (or any of them) contained in this Agreement (as of the date of this Agreement or as of the date of such fact, circumstance or development, applying such representations to such date if made on and as of such date) and that could result in a right of claim against Sellers in an amount in excess of $50,000, then in such case, Purchaser shall forthwith notify Sellers of such discovery and shall provide Sellers with the details of such discovery.

Section 6.4 Efforts Concerning Closing Conditions; Regulatory and Other Authorizations; Notices and Consents. (a) Subject to Sections 2.7 and 6.11 hereof, Purchaser and Sellers shall use their reasonable best efforts to cause the satisfaction of the conditions to the obligations of each party at the Closing set forth in Section 9.1 hereof and the satisfaction of the conditions to the obligations of the other party at the Closing set forth in Section 9.2 or Section 9.3 hereof, as the case may be, to the extent the satisfaction of such conditions is within such party’s control except in respect of Section 9.3(g) hereof, as to which neither Sellers nor Purchaser shall be subject to the foregoing obligations, and Sections 9.3(f) and (h) hereof, as to which Purchaser, rather than Seller, shall be subject to foregoing obligations.

(b) Subject to Sections 2.7 and 6.11 hereof, each party shall use its reasonable efforts to obtain all authorizations, Consents, orders and approvals of all Governmental Authorities and third parties that may be or become necessary for its execution and delivery of, and the performance of its obligations pursuant to, this Agreement and the Ancillary Agreements, and will cooperate fully with the other parties in promptly seeking to obtain all such authorizations, Consents, orders and approvals; provided, however, that neither Sellers nor Purchaser shall have any obligation to give or agree to any guarantee or other consideration or obligation of any nature, or to consent to any material amendment of any of the Assumed Leases or any of the Assumed Contracts, in connection therewith. Each party hereto agrees to make an appropriate filing, if necessary, pursuant to the HSR Act with respect to the transactions contemplated by this Agreement within five (5) Business Days of the date hereof, and to supply, as promptly as practicable to the appropriate Governmental Authorities any additional information and documentary material that may be requested pursuant to the HSR Act.

Section 6.5 Public Statements. Subject to the terms of, and in addition to the requirements imposed by, the Confidentiality Agreement, the parties hereto shall (i) issue, on the date hereof, a joint press release in the form previously agreed upon by the parties hereto, to the exclusion of any other press release or written public statement in respect of the execution hereof, (ii) consult with each other prior to issuing any other press release or any written public statement with respect to this Agreement or any of the Ancillary Agreements or the transactions contemplated hereby or thereby, and (iii) not issue any such press release or written public statement prior to review and approval by the other party or parties, as the case may be; provided, however, that prior review and approval shall not be required if (a) in the reasonable judgment of the party seeking to issue such release or public statement, prior review and approval would prevent the timely dissemination of such release or announcement in violation of any applicable Law or any rule, regulation or policy of any securities exchange on which the securities of such party are traded and (b) the party seeking to issue such press release or public statement provides notice of the content and proposed timing thereof to the other party or parties, as applicable, as promptly as practicable.

Section 6.6 Cooperation. Except in respect of any Indemnifiable Claim after the Closing, in the event and for so long as any party hereto is contesting or defending any Action, charge, complaint, claim or demand described in this sentence, Sellers and Purchaser will reasonably cooperate with each other and cause their respective directors, officers and employees to cooperate with those of Purchaser or Sellers, as applicable, in furnishing information, evidence, testimony and other assistance as may be reasonably requested by Purchaser or Sellers, as applicable, in connection with any pending or threatened Action resulting or arising from the transactions contemplated by this Agreement or any of the Ancillary Agreements, or any fact, situation, circumstance, status, condition, activity, practice, failure to act or transaction relating to the Business. Subject to the indemnification provisions of Article X, the party requesting such assistance will pay or reimburse the other party for (i) all reasonable out-of-pocket expenses incurred by the party providing such assistance in connection therewith including, without limitation, all travel, lodging and meal expenses and (ii) the reasonable value of the time of any such director, officer or employee.

Section 6.7 Transfer Taxes and Fees. (a) Purchaser and Sellers shall cooperate in preparing, executing and filing use, sales, real estate, transfer and similar Tax Returns relating to any and all federal, state, county or local, and any and all foreign, excise, stamp, transfer, registration and other Taxes, fees and duties (including any interest, additions to Tax and penalties with respect thereto) and any and all transfer, registration, recording or similar fees and charges imposed in connection with the consummation of the transactions contemplated by this Agreement. At the Closing, Purchaser and Sellers each shall pay one-half of any such Taxes other than (i) any such Taxes relating to the transfer of the Owned Real Property, all of which shall be borne by Sellers and shall be an Excluded Liability that Sellers shall pay at the time the Special Warranty Deed is recorded (or, if later, when required under applicable Law) and (ii) any such Taxes relating to the transfer (other than pursuant to the Canadian Inventory Transfer) of the Inventories located in Canada and Mexico as of the Closing and included in the Purchased Assets, all of which shall be borne one half by Purchaser and one half by Sellers. All such Tax Returns shall be prepared in a manner that is consistent with the allocation of the Purchase Price and Assumed Liabilities contemplated by Section 2.8 hereof.

(b) Purchaser and Sellers shall reimburse each other for payments of Taxes made for the other party’s benefit pursuant to the provisions of this Section 6.7 or Section 6.13 hereof. All such reimbursements shall be paid within fifteen (15) days of receiving a written request from the other party.

Section 6.8 Expenses. Except as otherwise provided in this Agreement, each party shall pay the expenses incurred by it incident to this Agreement, the Ancillary Agreements and the closing of the transactions contemplated hereby and thereby including, without limitation, any legal, accounting, brokerage, investment banking, financial advisory, finders or similar fees or commissions, and all related expenses of any such Person who was engaged by it in connection with this Agreement or the transactions contemplated hereby.

Section 6.9 Access to Former Business Records; Cooperation Concerning Tax Issues. (a) As soon as reasonably practicable following the Closing Date, each Seller shall deliver to Purchaser all Books and Records that constitute Purchased Assets hereunder. For a period of seven (7) years after the Closing, Sellers and Purchaser will afford each other and their respective duly authorized representatives reasonable access to financial, Tax and other books and records of the Business or that relate to the Purchased Assets or the Assumed Liabilities for any reasonable purpose, including, without limitation, litigation, financial and Tax reporting purposes, and will permit such representatives, at the expense of the reviewing party, to make abstracts from, or to take copies of, any of such books and records, or to obtain temporary possession thereof as may be reasonably required. Each party shall preserve and keep such books and records for a period of seven (7) years following the Closing or for any longer period that may be required by any Governmental Authority or ongoing litigation; provided, however, that either party may dispose of any such books and records retained by it at the end of such seven (7) year period or at any earlier time if and to the extent that, prior to any such disposition, such party gives advance notice to Purchaser or Sellers, as the case may be, and affords Purchaser or Sellers, as applicable, the opportunity to take possession or copy such books and records as it may select. Notwithstanding anything to the contrary set forth herein, Sellers may retain copies of any Books and Records transferred to Purchaser hereunder.

(b) In addition to the foregoing, Sellers and Purchaser shall provide each other with such cooperation and information as any of them reasonably may request in filing any Tax Return, amended Tax Return or claim for refund, determining a liability for Taxes or a right to a refund of Taxes, participating in or conducting any audit or other proceeding in respect of Taxes. Such cooperation and information shall include providing copies of relevant Tax Returns or portions thereof, together with accompanying schedules, related work papers and documents relating to rulings or other determinations by Taxing Authorities. Sellers and Purchaser shall make their respective employees available on a basis mutually convenient to provide explanations of any documents or information provided hereunder. Sellers and Purchaser shall retain all Tax Returns, schedules and work papers, records and other documents in their possession relating to Tax matters of the Business, the Purchased Assets and the Assumed Liabilities for each taxable period first ending after the Closing Date and for all prior taxable periods until the later of (i) the expiration of the statute of limitations of the taxable periods to which such Tax Returns and other documents relate, without regard to extensions except to the extent notified by the other party in writing of such extensions for the respective Tax periods, or (ii) six years following the due date (without extension) for such Tax Returns. Any information obtained under this Section 6.9(b) shall be kept confidential except as may be otherwise necessary in connection with the filing of Tax Returns or claims for refund or in conducting an audit or other proceeding.

Section 6.10 Corporate Names and Trademarks. Except as expressly set forth in the Trademark License Agreement, notwithstanding any inference or prior course of conduct to the contrary, and except as provided in the immediately following sentence, in no event shall Purchaser, any subsidiary or other Affiliate of Purchaser or any other Person, acquire or have any right to use or any other right, title or interest in or to any of the Goodyear Names and Marks, all rights to which, and the goodwill represented thereby, shall be retained by Sellers. Notwithstanding the foregoing, in the event the Closing occurs in accordance herewith, Goodyear shall execute, deliver and perform in accordance with the Trademark License Agreement. As to each mold included in the Purchased Assets and bearing any of the Goodyear Names and Marks, on the earlier of (i) the date immediately prior to which such mold (or, as applicable, any interest therein) is used, transferred, sold, encumbered or otherwise disposed of by Purchaser following the Closing and (ii) 12 months after the Closing Date, Purchaser shall permanently remove or replate all portions of such mold bearing any of the Goodyear Names and Marks, including, without limitation, the name “Kelly,” and the word “Powermark” other than any of the Licensed Marks.

Section 6.11 Transfer of Permits. Sellers will cooperate to transfer or help Purchaser obtain any Permits, including, without limitation, Environmental Permits, held by Sellers and necessary for the use of the Purchased Assets in connection with operation of the Business by Purchaser following the Closing Date. Sellers or Purchaser, as appropriate, shall notify the appropriate Governmental Authorities in writing that Purchaser has entered into an agreement with Sellers to purchase the Purchased Assets and Sellers or Purchaser, as appropriate, will request that all such Permits, including, without limitation, any operational Environmental Permits relating to the Purchased Assets, be transferred to or issued, as the case may be, in the name of Purchaser with substantially the same terms and conditions as such Permits following the Closing Date.

Section 6.12 Restrictive Covenants. (a) In partial consideration of the payment of the Purchase Price, as set forth in Section 2.3, Sellers and Purchaser agree as follows:

(i) Except as contemplated or permitted under this Agreement or any of the Ancillary Agreements, for a period of seven (7) years after (and subject to the occurrence of) the Closing (the “Restricted Period”), Sellers and their respective Affiliates shall not engage, directly or indirectly, in any business in Canada, the United States or Mexico (“Purchaser’s Territory”) that designs, engineers, manufactures, distributes, sells, markets and/or services any Farm Tires, or any tires substantially similar to Farm Tires (collectively, “Competing Products”), or, without the prior written consent of the Purchaser, directly or indirectly, own an interest in, manage, license, operate, join, control, lend money or render financial or other assistance to or participate in or be connected with, as a partner, stockholder, consultant or otherwise, any Person that designs, engineers, manufactures, sells, markets and/or services Competing Products in Purchaser’s Territory; provided, however, that Sellers and their respective Affiliates may engage in such design and engineering activities in Purchaser’s Territory necessary to support the production of Competing Products manufactured outside Purchaser’s Territory, and provided further that, (A) for the purposes of this Section 6.12(a), ownership of securities having no more than two percent of the outstanding voting power of any competitor which are listed on any national securities exchange or traded actively in the national over-the-counter market shall not be deemed to be in violation of this Section 6.12(a) so long as the Person owning such securities has no other connection or relationship with such competitor and (B) nothing herein or in any of the Ancillary Agreements shall be deemed to or shall prohibit Sellers or any of their respective Affiliates from (w) effecting any purchase or sale contemplated by Section 6.15 hereof (or any related service), (x) purchasing, selling or servicing Competing Products to or for end users (other than original equipment manufacturers) in Purchaser’s Territory, provided, in respect of purchases and sales, of any Licensed Products that those Licensed Products were either purchased from Purchaser or constituted finished goods transferred to, located at, or owned by Sellers and/or their Affiliates retail outlets as of the Closing Date, (y) selling tires mounted on original equipment vehicles in any location other than Purchaser’s Territory, even with the understanding that such tires will be shipped to Purchaser’s Territory or (z) taking any of the foregoing actions in respect of (including, without limitation, owning or acquiring an interest in, lending money to and rendering financial or other assistance to) dealers, distributors and other Persons that sell or service Competing Products to or for dealers or end users, other than original equipment manufacturers.

(ii) As a separate and independent covenant, Sellers agree with the Purchaser that, for a period of two (2) years following the Closing, Sellers and their respective Affiliates will not, except as required or permitted under the Employee Leasing Contract or the Consulting Agreement dated as of September 2, 2004, by and between Goodyear and Ernest Rodia, in any way, directly or indirectly, (A) solicit or attempt to solicit for employment any employees of Purchaser with whom Sellers came in contact during the negotiation, drafting or performance hereof other than pursuant to one or more general advertisements not targeted at employees of Purchaser, (B) initiate or maintain contact, or attempt to initiate or maintain contact with any officer-level employee of Purchaser regarding employment or (C) induce or attempt to induce any of them to violate the terms of their contracts, or any employment arrangements, with Purchaser; provided, however, that nothing herein shall prohibit any Seller or any of Sellers’ respective Affiliates from soliciting or hiring any employee of Purchaser after the shorter of six (6) months from the date such employee’s employment with Purchaser terminates for reasons not associated with a prohibited solicitation or contact or eighteen (18) months from the date hereof.

(iii) The Restricted Period shall be extended by the length of any period during which any one of the Sellers or any one of their Affiliates is in breach of the terms of this Section 6.12(a).

(iv) Sellers acknowledge that the covenants of Sellers set forth in this Section 6.12(a) are an essential element of this Agreement and that, but for the agreement of the Sellers to comply with these covenants, Purchaser would not have entered into this Agreement. Sellers acknowledge that this Section 6.12(a) constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement by Purchaser. Sellers have independently consulted with their counsel and after such consultation agree that the covenants set forth in this Section 6.12(a) are reasonable and proper.

(v) The non-compete provisions of Section 6.12(a) shall terminate if (i) Purchaser commences a voluntary Chapter 7 petition in bankruptcy or has such a petition filed against it, unless Purchaser contests such petition and obtains its dismissal or conversion to Chapter 11, or (ii) Purchaser is the subject of a Chapter 11 case and said case is converted to Chapter 7, or (iii) Purchaser discontinues all or substantially all of its tire business. If Purchaser sells all or substantially all of its tire business then the prohibition against licensing shall terminate unless the purchaser is a Goodyear approved assignee of the Trademark License Agreement.

(b) In partial consideration of the transfer of the Purchased Assets, Sellers and Purchaser agree as follows:

(i) Except as contemplated or permitted under this Agreement or any of the Ancillary Agreements, during the Restricted Period, Purchaser and its Affiliates shall not engage, directly or indirectly, in any business anywhere other than in Purchaser’s Territory, that designs, engineers, manufactures, sells, markets and/or services tires that from time to time constitute Licensed Products, or, without the prior written consent of the Sellers, directly or indirectly, own an interest in, manage, operate, join, control, lend money or render financial or other assistance to or participate in or be connected with, as a partner, stockholder, consultant or otherwise, any Person that designs, engineers, manufactures, distributes, sells, markets and/or services tires that from time to time constitute Licensed Products other than in Purchaser’s Territory; provided, however, that (i) for the purposes of this Section 6.12(b), ownership of securities having no more than two percent of the outstanding voting power of any competitor which are listed on any national securities exchange or traded actively in the national over-the-counter market shall not be deemed to be in violation of this Section 6.12(b) so long as the Person owning such securities has no other connection or relationship with such competitor and (ii) nothing herein or in the Ancillary Agreements shall be deemed to or prohibit Purchaser or any of its Affiliates from selling or servicing Competing Products which are not Licensed Products to or for end users outside of Purchaser’s Territory.

(ii) As a separate and independent covenant, Purchaser agrees with Sellers that, for a period of two (2) years following the Closing, Purchaser and its Affiliates will not, except as required or permitted under the Employee Leasing Contract, or Section 7.1 hereof, in any way, directly or indirectly (i) solicit or attempt to solicit for employment any employees of any Seller with whom it came in contact during the negotiation, drafting or performance hereof other than pursuant to one or more general advertisements not targeted at employees of any Seller, (ii) initiate or maintain contact, or attempt to initiate or maintain contact with any officer-level employee of any Seller regarding employment or (iii) induce or attempt to induce any of them to violate the terms of their contracts, or any employment arrangements, with any Seller; provided, however, that nothing herein shall prohibit Purchaser or any of its Affiliates from soliciting or hiring any employee of any Seller after the shorter of six (6) months from the date such employee’s employment with such Seller terminates for reasons not associated with a prohibited solicitation or contact or eighteen (18) months from the date hereof; provided, however, that Purchaser shall have the right to hire Ernest Rodia.

(iii) The Restricted Period, as to Purchaser or any of its Affiliates, shall be extended by the length of any period during which Purchaser or its Affiliates are in breach of the terms of this Section 6.12(b).

(iv) Purchaser acknowledges that the covenants of Purchaser and its Affiliates set forth in this Section 6.12(b) are an essential element of this Agreement and that, but for the agreement of Purchaser to comply with these covenants, Sellers would not have entered into this Agreement. Purchaser acknowledges that this Section 6.12(b) constitutes an independent covenant and shall not be affected by performance or nonperformance of any other provision of this Agreement by any Seller. Purchaser has independently consulted with its counsel and after such consultation agrees that the covenants set forth in this Section 6.12(b) are reasonable and proper.

(c) Sellers and Purchaser agree that the remedy at law for any breach by Sellers or Purchaser, as the case may be, of this Section 6.12 will be inadequate and, notwithstanding any other provision herein, that Purchaser or any Seller, as the case may be, shall be entitled to injunctive relief. The parties intend that the unenforceability or invalidity of any term or provision of this Section 6.12 shall not render any other term or provision contained herein unenforceable or invalid. If the activities described in this Section 6.12 should be deemed by a court of competent jurisdiction to be too extensive, then the parties intend that this Section 6.12 be construed to cover the maximum scope of business activities, period of time and geographic area as may be permissible under applicable Law.

Section 6.13 Real Estate.

(a) Purchaser understands and agrees that Goodyear will not extend the Lamm Road Lease beyond its current termination date and that if Purchaser desires to continue in occupation of the Leased Real Property thereafter, Purchaser will need to acquire rights directly from the underlying owner of such property. Between the date hereof and the Closing, Goodyear will use reasonable efforts to obtain the execution, by the lessor of the Leased Real Property, of an estoppel certificate in substantially the form attached as Exhibit Q hereto (the “Estoppel Certificate”).

(b) Goodyear has previously provided or made available to Purchaser a copy of the Title Commitment (the “Title Commitment”), dated December 6, 2004, in respect of the Owned Real Property prepared by Commonwealth Land Title Insurance Company (the “Title Company”), together with legible copies of all underlying documents included in the Title Commitment for any exceptions to title referred to in the Title Commitment. Sellers will use reasonable efforts to (i) cure each of the exceptions to title as to the Owned Real Property appearing in the Title Commitment and listed on Schedule 6.13(b) hereto (such exceptions, collectively, the “Title Objections”) and (ii) cause the Title Company to remove from the Title Commitment all exceptions to title with respect to the Owned Real Property that constitute Title Objections, other than, in each case, any Title Objections that the Title Company agrees to insure over (collectively, the “Insured Exceptions”); provided, however, that in no event will Sellers be required to incur or pay any fees, expenses or liabilities, in an aggregate amount, as to all Sellers, in excess of $10,000, or to agree to any material amendment of, or commitment in, any document, instrument or agreement to which any Seller is, or is or would be proposed to be, a party, in connection with such efforts. In the event that the Closing occurs hereunder, Sellers shall thereafter, within thirty (30) days after their receipt of a written request therefor from Purchaser, together with supporting information in reasonable detail, pay to Purchaser an amount equal to 100% of the premium billed to Purchaser for a single policy of title insurance with respect to the Owned Real Property issued by the Title Company and based upon the Title Commitment (in the form most recently issued by the Title Company as of the Closing), provided that Purchaser has ordered such policy on or before 30 Days after the Closing Date.

(c) Sellers have retained Gastel & Associates, a licensed surveyor in the State of Illinois acceptable to Purchaser, to complete a survey of the Owned Real Property (the “Survey”), which Survey shall, when issued, (i) be provided to the Title Company for review and be sufficient for the Title Company to remove the exception to title listed in Schedule B, Section II(a) of the Title Commitment, as such exception currently appears in the Title Commitment (expressly excluding, however, any additional exceptions, if any, included by the Title Company in any reissuance of the Title Commitment following its review of the Survey), (ii) show the location of all easements, building lines and areas affected by the underlying documents included in the Title Commitment and (iii) certify that such Survey was completed in accordance with “Minimum Standard Detail Requirements for ALTA/ASCM Land Title Surveys” jointly issued by ALTA and ASCM in 1992, and includes Items 1,2,3,4,6,7(a), 7(b)(1), 7(c), 8, 9, 10, 11(a) and 13 of Table A thereof. Sellers shall use reasonable efforts to cause the Survey to be completed as promptly as practicable. Sellers and Purchaser shall each bear 50% of all fees and expenses paid or incurred by Sellers (or any of them) in connection with the Survey. Purchaser shall remit such expenses to the relevant Seller or Sellers from time to time within 10 Business Days of its receipt of any written request therefor, together with supporting information in reasonable detail, from Sellers (or any of them).

(d) Pursuant to Section 4.18 hereof and Schedule 4.18, Purchaser has been advised that certain portions of the Owned Real Property are constructed with materials containing asbestos and that underground storage tanks and a firing range have heretofore been located at the Owned Real Property. Purchaser has also been advised that certain electric transformers and capacitors containing polychlorinated biphenyl fluids (“PCBs”) are affixed to the Owned Real Property or the manufacturing equipment in the Owned Real Property and are related to the lighting and other electric functions. Purchaser has heretofore been provided with a true and correct copy of the Phase I Environmental Assessment, dated September, 2004, prepared by Fehr-Graham & Associates in respect of the Owned Real Property.

(e) Purchaser confirms that, except as expressly set forth herein, neither Kelly, nor any other Seller, nor any Person purporting to act for Kelly or any other Seller, has made or now makes any representations as to the physical condition of the Owned Real Property. Accordingly, except as otherwise set forth in this Agreement, including without limitation Article VIII, Purchaser acknowledges and agrees that it is purchasing the Owned Real Property in its “As Is” “Where Is” condition, with all faults accepted.

(f) The liability for Illinois real property taxes (other than transfer taxes) relating to the Owned Real Property and the Leased Real Property shall be pro-rated between Purchaser and Kelly or Goodyear, as applicable, based upon the number of days that each entity owns the Owned Real Property or is the lessee in respect of the Leased Real Property, as applicable, during the calendar year in which the Closing takes place. The parties acknowledge and agree that (i) Illinois real property Taxes are paid in arrears, (ii) Illinois real property taxes for 2004 are payable in equal installments in July and September, 2005 and (iii) Illinois real property taxes for 2005 are payable in

equal installments in July and September, 2006. Kelly and Goodyear shall bear and pay all such real property taxes for calendar year 2004 as and when the same become due and payable. Subject to Clause (b) of Section 6.7 hereof, Purchaser shall pay all such real property taxes for calendar year 2005 when and as the same become due and payable; provided, that the liability of Kelly and Goodyear, on the one hand, and Purchaser, on the other, for 2005 real property taxes shall be prorated as provided above.

Section 6.14 Unaudited Financial Statements.

(a) As soon as reasonably practicable following the Closing Date, Sellers shall deliver to Purchaser (i) unaudited balance sheets of the Business as of the end of the years ended December 31, 2002, 2003 and 2004, and (ii) unaudited statements of operations and cash flows for the Business for the years ended December 31, 2002, 2003 and 2004 (collectively, the “Unaudited Financial Statements”).

(b) The Unaudited Financial Statements will (i) be prepared in accordance with GAAP, consistently applied, (ii) be prepared by Sellers with the assistance of Deloitte & Touche LLP or such other independent public accounting firm as shall be reasonably acceptable to Purchaser (the “Accounting Firm”) and (iii) present fairly, in all material respects, the financial condition of the Business at the dates thereof and the results of operations of the Business for the periods then ended, in each case in accordance with GAAP.

(c) Purchaser will provide Sellers with such assistance as may reasonably be requested by Sellers (or any of them) in connection with the preparation of the Unaudited Financial Statements, including, without limitation, access at all reasonable times to the personnel, properties, books and records of the Business. Purchaser will reimburse Sellers for up to fifty percent (50%) of all cost and expense incurred by Sellers (or any of them) in connection with the preparation of the Unaudited Financial Statements, including, without limitation, all cost and expense of the Accounting Firm; provided, however, that in no event shall Purchaser’s reimbursement obligation hereunder exceed one hundred thousand dollars ($100,000). Purchaser will provide such reimbursement from time to time within thirty (30) days of receipt of any invoice from Sellers (or any of them).

(d) Sellers will provide Purchaser with such assistance as may reasonably be requested by Purchaser in connection with the first audit of the Unaudited Financial Statements conducted by or on behalf of Purchaser, including, without limitation, access at all reasonable times to the personnel, properties, books and records of or related to the Business and in the employ or possession, as applicable, of Sellers (or any of them).

Section 6.15 Certain Government Contracts. Purchaser acknowledges and agrees that (i) Goodyear is a party to the contracts relating to the sale and distribution of Farm Tires to state and local governments listed on Schedule 6.15 hereto, (ii) Goodyear effects distribution of Farm Tires under such contracts through deliveries by dealers and distributors of Goodyear, or Goodyear’s own or affiliated retail locations, (iii) such agreements are Excluded Assets hereunder and (iv) Goodyear must assure an adequate supply of Farm Tires to such dealers, distributors and locations following the Closing in order to perform in accordance with such contracts. Accordingly, Purchaser agrees, from time to time following the Closing, to provide an adequate supply of Farm Tires to such dealers, distributors and locations to enable such dealers, distributors and locations to meet the obligations of Goodyear under such contracts, at the prices from time to time established by Purchaser with notice to such dealers, distributors and locations, and that, notwithstanding anything in the Supply Agreement to the contrary (including, without limitation, any volume limitations set forth therein) Goodyear may purchase such Farm Tires under the Supply Agreement.

Section 6.16 Transfer of Inventories. Between the date hereof and the Closing Date, Goodyear Canada shall use reasonable efforts to sell all or substantially all of the Inventories described in Section 2.1(c)(i) hereof to Fountain Tire Ltd. and/or Coast Tire & Auto Service Ltd. (such sale, the “Canadian Inventory Transfer”). Notwithstanding anything to the contrary set forth herein, (i) in no event shall Goodyear Canada be required to sell such Inventories other than in the Ordinary Course of Business, (ii) the Canadian Inventory Transfer shall constitute a permitted transaction for purposes of Section 6.2 hereof and (iii) in the event the Canadian Inventory Transfer is consummated prior to the Closing, (A) the Accounts Receivable of Goodyear Canada arising exclusively therefrom and relating directly thereto shall constitute a Purchased Asset and shall be transferred in accordance with Section 2.1(c) hereof, except in respect of an amount equal to the amount of any and all Taxes, duties or expenses incurred or paid by, or due from, Goodyear Canada in respect of the Canadian Inventory Transfer (which amount shall constitute an Excluded Asset) and (B) all liabilities and obligations of Goodyear Canada (whether accrued or arising prior to, on or after the Closing) relating to the Canadian Inventory Transfer (except in respect of amounts that constitute Excluded Assets under the foregoing clause (A)) shall constitute Assumed Liabilities of, and shall be paid, performed and discharged when due by, Purchaser. Purchaser and Goodyear Mexico shall arrange for the Inventories sold by Goodyear Mexico hereunder and not transferred to any customer of Titan during the Bailment Period (as defined in the Bailment Agreement) with respect of such Inventories to be shipped to Purchaser at Purchaser’s expense on or promptly following the Closing Date, FOB border at Brownsville, Texas.

ARTICLE VII

EMPLOYMENT MATTERS

Section 7.1 Employment

(a) Except with respect to Jeff Vasichek and those salaried Employees listed on Schedule 7.1(c) hereto (the “Leased Salaried Employees”) salaried Employees shall have the opportunity to apply for employment with Purchaser prior to the Closing including Employees not presently working and off work on leave. All of Purchaser’s standard employment application procedures, including a medical exam and drug test, will be applicable. With respect to any such Employee who applies for employment, Sellers agree to provide Purchaser access to such Employee for such purpose. Purchaser agrees employment will be “at will” to salaried Employees (other than the Leased Salaried Employees and Jeff Vasichek) who meet Purchaser’s employment standards. With respect to the Employees who are offered and who accept Purchaser’s offer of employment at will (the “Purchaser New Hires”), Sellers will terminate their employment effective as of the Closing or, if applicable, the date an Employee returns from leave and begins work for Purchaser. Purchaser does not contemplate reducing the salary of Purchaser New Hires below the salary as set forth on Schedule 4.10. Purchaser New Hires will participate in employee benefit plans substantially similar to those maintained by Purchaser for its present salaried employees. Years of service with Goodyear will be counted only under Purchaser’s vacation benefit plan for all Purchaser New Hires. Purchaser shall prepare and timely deliver to Sellers the following information: (i) the names of all Employees to whom offers of employment have been made, (ii) the location of employment, (iii) the job title, and (iv) whether such offer of employment was accepted or rejected. Purchaser represents that it has no benefit plans that provide benefits based on seniority or length or service other than Purchaser’s vacation benefit plan and medical plan.

(b) (i) Goodyear shall, except in respect of the obligations and liabilities described in clause (ii) of this sentence, be responsible for and shall assume all liabilities and obligations for any severance or layoff benefits for any Employee that is triggered as a result of the transactions contemplated by this Agreement, and (ii) Purchaser shall be responsible for and shall assume all liabilities and obligations for any layoff benefits triggered for any Purchaser’s New Hires which Purchaser terminates after the Closing.

(c) The Leased Salaried Employees listed on Schedule 7.1(c) are designated by Sellers as employees who shall, subject to the Employee Leasing Contract, remain in the employ of Goodyear immediately following the Closing.

(d) Purchaser’s only obligations with respect to hourly Employees will be as set forth in Purchaser’s collective bargaining agreement with Local Union No. 745L, United Steelworkers of America, AFL-CIO/CLC (the “Local Union”) covering the hourly Employees.

(e) Sellers represent that (i) as of February 17, 2005, the total number of Employees at the Freeport Facility was 832 and (ii) no such Employees were terminated by Sellers in the ninety (90) day period prior to the date hereof. Purchaser agrees that it will offer employment to at least 682 such Employees at Closing. Purchaser agrees to pay, and be responsible for, and to indemnify and hold the Sellers harmless from, any liability under the Illinois WARN Act and/or the Federal WARN Act if Purchaser fails to comply with the foregoing obligation or otherwise causes any Seller to be subject to any liability thereunder as a result of the actions of Purchaser on or after the Closing Date.

(f) Purchaser shall be solely responsible for all liability, costs and expenses (including reasonable attorneys’ fees) for all employment claims filed by any Purchaser New Hires with respect to events or circumstances occurring after the Closing relating to arbitrations, unfair labor practice charges, employment discrimination charges, wrongful termination claims, workers’ compensation claims, any employment-related tort claim or other similar claims or charges of or by any Purchaser New Hires. Goodyear shall be solely responsible for all liability, costs and expenses (including reasonable attorneys’ fees) for all employment claims relating to arbitrations, unfair labor practice charges, employment discrimination charges, wrongful termination claims, workers’ compensation claims, any employment-related tort claim or other similar claims or charges filed by any Purchaser New Hires with respect to and to the extent of events or circumstances occurring before the Closing. Purchaser shall be solely responsible for all liability, costs and expenses (including reasonable attorneys’ fees) for all employment claims arising from or relating to Purchaser’s hiring practices and hiring decisions of salaried Employees under Section 7.1.

(g) Goodyear shall be solely responsible for (i) the payment of all salaries and wages due to the Employees prior to the Closing, (ii) claims made or incurred by any Employee under the Employee Benefit Plans prior to the Closing and (iii) compliance with the requirements of COBRA (as hereinafter defined), including, without limitation, the provision of continuation coverage, with respect to all Employees, other than any Purchaser New Hires, and their qualified beneficiaries for whom a qualifying event occurs before the Closing Date. For purposes of this Section 7.1, “COBRA” means Section 4980B of the Internal Revenue Code of 1986, as amended, and part 6 of subtitle B of Title I of the Employment Retirement Income Security Act of 1974, 29 U.S.C. § 1001 et seq., and “qualified beneficiary” and “qualifying event” shall have the meanings given such terms in COBRA. Purchaser shall be solely responsible for the payment or provision of all salaries, wages, benefits and other incidents of employment due to any of the Purchaser New Hires and, if applicable, for any of their respective dependents following the Closing or, if later, the effective date of hire.

Section 7.2 Employee Retirement Benefits. All Employees who are participants in the retirement plans comprised by the Employee Benefit Plans shall retain their accrued benefits thereunder and Goodyear (or such plans) shall retain sole responsibility for the payment of such benefits as and when such Employees become eligible to receive such benefits thereunder.

Section 7.3 Scope of this Article. No provision of this Article VII is intended to or shall inure to the benefit of, be enforceable by or create any rights or remedies in favor of, any Employee or any dependent or beneficiary thereof, including, without limitation, in respect of employment, compensation or benefits with, provided by, or under any plan, policy, practice or arrangement of or sponsored by, Purchaser or any Seller.

ARTICLE VIII

ENVIRONMENTAL MATTERS

Section 8.1 Environmental Matters.

(a) Preparation of Phase II Report. Sellers and Purchaser shall cause to be prepared a Phase II Environmental Assessment in respect of the Freeport Facility (the “Phase II Report”). The Phase II Report shall be prepared by an expert selected by Purchaser from three (3) firms previously identified by Sellers. The cost of the Phase II Report shall be paid one-half by Purchaser and one-half by Sellers. The Phase II Report shall be completed by October 15, 2005 (the “Phase II Report Due Date”).

(b) Classification of Remedial Problems. All Hazardous Substances and other remedial problems related to the Freeport Facility shall be classified as follows:

(i) “Type I Remedial Problems”, defined as any condition or circumstance that (A) requires immediate removal, replacement or remediation or (B) does not require immediate removal, replacement or remediation and does not constitute a Type II Remedial Problem;

(ii) “Type II Remedial Problems”, defined as any condition or circumstance, that does not require immediate removal, replacement or remediation and that:

(A)	include all PCBs, asbestos, and asbestos-containing materials identified in reasonable detail in the Phase I Environmental Study described in Section 6.13(d) hereof (the “Initial Study”);

(B)	is identified in the Phase II report and would not reasonably be expected to result in remediation costs in excess of $250,000; or

(C)	is identified in the Phase II report and would reasonably be expected to result in remediation costs in excess of $250,000, and the parties agree that such condition or circumstance should constitute a Type II Remedial Problem hereunder; and

(iii) “Remedial Problems” defined as, collectively, Type I Remedial Problems and Type II Remedial Problems.

Within sixty (60) days after the Phase II Report Due Date (the “Settlement Date”), Purchaser and Sellers shall, acting reasonably and in good faith, (y) identify any and all facts and circumstances that constitute Remedial Problems other than Type II Remedial Problems under Clause (ii)(C) of this Section 8.1(b) and (z) mutually agree on and identify all facts and circumstances that constitute Type II Remedial Problems under Clause (ii)(C) of this Section 8.1(b).

(c) Remediation Action and Responsibility for Type I Remedial Problems. As to items identified as Type I Remedial Problems, by the Settlement Date, Purchaser and Sellers shall, acting reasonably and in good faith, agree on a plan, including the commencement date, to remove, replace or remediate such Type I Remedial Problems. Seller shall have responsibility for one hundred percent (100%) of the direct costs, including Purchaser’s support facilities (e.g., utilities and manpower) at Purchaser’s actual costs, associated with remediation of Type I Remedial Problems.

(d) Remediation Action and Responsibility for Type II Remedial Problems. As to Type II Remedial Problems, removal, replacement or remediation will occur as needed or required, but not immediately, and will follow the procedures set out in this Section 8.1(d).

(i) During the thirty (30) day period following the Settlement Date, Sellers and Purchaser shall analyze the Phase II Report with respect to the Type II Remedial Problems identified therein, and shall otherwise analyze the nature of the Type II Remedial Problems theretofore identified. Not later than the date thirty (30) days after the Settlement Date, the parties shall, acting reasonably and in good faith, agree on a cap, reasonable under the circumstances, for all Type II Remedial Problems that Sellers are responsible for hereunder.

(ii) Unless the parties agree otherwise, Sellers will perform or direct performance of all Remedial Action with respect to Type II Remedial Problems beginning in the three (3) year period commencing with the Settlement Date. Thereafter, Purchaser will perform or direct performance of all Remedial Action in respect of such Type II Remedial Problems. Responsibility for costs for Type II Remedial Problems will be as set forth in Section 8.1(d)(iii).

(iii) Subject to the cap set forth in Section 8.1(d)(i), (A) for the first two years after the Settlement Date, Sellers shall have responsibility for one hundred percent (100%) of the direct costs, including Purchaser’s support facilities (e.g., utilities and manpower) at Purchaser’s actual costs, associated with remediation of Type II Remedial Problems and (B) for the period commencing on the second anniversary of the Settlement Date and ending on the sixth anniversary of the Settlement Date, Sellers’ responsibility for the direct costs, including Purchaser’s support facilities (e.g., utilities and manpower) at Purchaser’s actual costs, associated with remediation of Type II Remedial Problems shall be reduced by twenty-five (25%) annually, i.e., Seller’s share of eligible remediation costs for Type II Remedial Problems after the Settlement Date shall be as set forth below:

		Sellers Share	Purchaser Share
		of Responsibility	of Responsibility
(A)	Years 1 and 2 after the
	Settlement Date	100%	0%
(B)	Year 3	75%	25%
(C)	Year 4	50%	50%
(D)	Year 5	25%	75%
(E)	Year 6 and after	0%	100%

The respective share of responsibility of Sellers or Purchaser shall be determined as of the date that remedial work is first commenced, i.e., if remedial work is commenced in Year 3, Sellers will pay 75% and Purchaser 25% of all such costs even though some of the work is not completed until Year 4. The party that initially performs or directs the performance of Remedial Action in respect of a Type II Remedial Problem shall continue to direct such Remedial Action until the completion of the remediation of the Remedial Problem.

Section 8.2 Other Environmental Matters. Notwithstanding anything to the contrary set forth herein, and except as set forth in Section 8.1 hereof, Sellers shall have the sole responsibility and obligation for the direct costs, including Purchaser’s support facilities (e.g., utilities and manpower) for all Remedial Action required for any violation of any Environmental Law existing on, at, or in respect of the Owned Real Property prior to the Closing Date.

ARTICLE IX

CONDITIONS TO CLOSING

Section 9.1 Conditions to Obligations of all Parties. The obligations of all parties hereto to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(a) No Legal Prohibition. No Law shall be enacted, promulgated, issued or enforced by any Governmental Authority that would prohibit the consummation by either party of the transactions contemplated by this Agreement and the Ancillary Agreements.

(b) Approvals Under Competition Laws. All notices and filings to or with any Governmental Authority required under the HSR Act and any and all similar competition Laws of any jurisdiction applicable to the purchase of the Purchased Assets contemplated by this Agreement shall have been made, any and all waiting periods (and any extensions thereof) under the HSR Act and all such Laws shall have expired or shall have been terminated, and all consents and Permits, if any, required thereunder shall have been issued by the relevant Governmental Authorities.

(c) No Injunction. No preliminary or permanent injunction or other order or decree by any Governmental Authority that prevents the consummation of the transactions contemplated by this Agreement and the Ancillary Agreements shall have been issued and remain in effect.

(d) Lien Discharges. Such UCC-3 lien termination statements and other instruments, (A) to be executed by JP Morgan Chase Bank and Wilmington Trust Company in their respective capacities as Collateral Agents under the Collateral Agreements, as are necessary to release and discharge all Liens subject to discharge by the Collateral Agents thereunder with respect to the Purchased Assets and (B) to be executed by the Persons described in, and as are necessary to release and discharge all Liens subject to discharge by such Persons described in, Schedule 9.1(d) hereto with respect to the Purchased Assets.

Section 9.2 Conditions to Obligations of Sellers. The obligations of each Seller to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following additional conditions:

(a) Representations, Warranties and Covenants. The representations and warranties of Purchaser contained in this Agreement shall be true and correct in all material respects as of the Closing, with the same force and effect as if made as of the Closing Date, other than such representations and warranties as are made as of another date, the covenants and agreements contained in this Agreement to be complied with by Purchaser on or before the Closing shall have been complied with in all material respects, and Sellers shall have received a certificate from Purchaser to such effect signed by a duly authorized officer thereof;

(b) USWA Agreement. Purchaser shall have executed an agreement with the Local Union in form and substance reasonably satisfactory to Sellers;

(c) Certain Approvals. Sellers shall have received the consent, in form and substance satisfactory to each, and without additional liability to or the need to modify any document, instrument or agreement heretofore executed by any, Seller, the approval of TACOM of the Department of Defense to the manufacture of bias Hummer tires in the manner contemplated by the Offtake Agreement;

(d) Resolutions. Sellers shall have received a true and complete copy, certified by the Secretary or an Assistant Secretary of Purchaser, of the resolutions duly and validly adopted by the Board of Directors of Purchaser evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements to which it is a party and the consummation of the transactions contemplated hereby and thereby;

(e) Incumbency Certificate. Sellers shall have received a certificate of the Secretary or an Assistant Secretary of Purchaser certifying the names and signatures of the officers of the Purchaser authorized to sign this Agreement and the Ancillary Agreements to which it is a party and the other documents to be delivered hereunder and thereunder; and

(f) Ancillary Agreements. Purchaser shall have executed and delivered to Sellers each of the Ancillary Agreements to which it is a party.

Section 9.3 Conditions to Obligations of Purchaser. The obligations of the Purchaser to consummate the transactions contemplated by this Agreement shall be subject to the fulfillment, at or prior to the Closing, of each of the following conditions:

(a) Representations, Warranties and Covenants. The representations and warranties of Sellers contained in this Agreement shall be true and correct in all material respects as of the Closing with the same force and effect as if made as of the Closing, other than such representations and warranties as are made as of another date, the covenants and agreements contained in this Agreement to be complied with by Sellers on or before the Closing shall have been complied with in all material respects, and Purchaser shall have received a certificate of each Seller to such effect signed by a duly authorized officer thereof;

(b) Resolutions of Sellers. Purchaser shall have received a true and complete copy, certified by the Secretary or an Assistant Secretary of each Seller (or, with respect to Goodyear Mexico, Persons exercising similar responsibilities), of the resolutions duly and validly adopted by the Board of Directors of such Seller evidencing its authorization of the execution and delivery of this Agreement and the Ancillary Agreements and the consummation of the transactions contemplated hereby and thereby;

(c) Incumbency Certificate of Sellers. The Purchaser shall have received a certificate of the Secretary or an Assistant Secretary of each Seller (or, with respect to Goodyear Mexico, Persons exercising similar responsibilities), certifying the names and signatures of the officers of such Seller authorized to sign this Agreement and the Ancillary Agreements and the other documents to be delivered hereunder and thereunder;

(d) Consents and Approvals. Purchaser and Sellers shall have received all material Permits and Consents of any Governmental Authority or third party listed on Schedule 9.3(d) hereto;

(e) Ancillary Agreements. Each Seller shall have executed and delivered to the Purchaser each of the Ancillary Agreements to which it is a party;

(f) Due Diligence. Purchaser shall have completed its due diligence investigation of the Purchased Assets and shall not have discovered any fact, circumstance, transaction or event of which Purchaser did not have notice as of the date hereof and that constitutes a material breach of the representations and warranties of Sellers set forth herein; provided, however, that Purchaser shall not be entitled to rely on the condition set forth in this Section 9.3(f) at any time after the earlier of the date on which Purchaser completes such investigation and April 1, 2005; provided, however, that the foregoing limitations shall not apply to the extent that (i) Sellers have not complied with their obligations under Section 6.1 hereof and (ii) Purchaser has provided Sellers with prior written notice of, and a reasonable opportunity to cure, such non-compliance. For purposes of the preceding sentence “material breach” shall mean facts, circumstances, transactions or events which alone or in the aggregate would, or would reasonably be expect to equal or exceed One Million and No/100 ($1,000,000) Dollars. Sellers agree to fully cooperate with Purchaser and to provide, in a timely manner, all documents and information requested in respect of Purchaser’s due diligence investigation of the Purchased Assets. If prior to Closing, Purchaser delivers written notice to Sellers claiming that Sellers have failed to cooperate with Purchaser, (which notice shall set forth in detail the claimed failure to cooperate), and if Sellers shall fail or refuse to cure such claim within five (5) Business Days of receipt of such notice, then Purchaser may deliver a second written notice to Sellers terminating this Agreement effective upon delivery of said second notice, and thereupon, Purchaser shall have no obligation or liability under this Agreement for said termination;

(g) Material Adverse Change. There shall not, at any time after the date hereof, have been any Material Adverse Change affecting the Purchased Assets;

(h) USWA Agreement. Purchaser shall have executed an agreement with the Local Union substantially on the terms described in Schedule 9.3(h) hereto, and otherwise in form and substance reasonably satisfactory to Purchaser;

(i) Title Commitment. The Title Company shall have received the Survey and shall have reissued the Title Commitment, dated as of the Closing Date, in an aggregate insurable amount equal to $9,300,000, deleting, in such reissued Title Commitment, all of the Title Objections other than the Insured Exceptions, and, except in respect of the Title Objections and the Insured Exceptions, reflecting no Liens.

ARTICLE X

REMEDIES

Section 10.1 Survival. Unless otherwise expressly provided herein, all of the representations and warranties set forth in this Agreement shall survive a period of 24 months from the Closing Date and, upon such expiration, each party shall have no further right to indemnification under this Article X except that in the case of representations and warranties contained in Section 4.18 herein, survival of the representations and warranties shall be limited to seven (7) years, or if longer, the term of any agreement, consent order or order entered into or binding upon Sellers with respect to any matters which are the subject of any representations or warranties contained in Section 4.18 herein. Following the termination of such periods, neither Purchaser nor Sellers, as the case may be, shall have any other indemnification obligations under this Article X relating to representations or warranties.

Section 10.2 Indemnification by Seller. Subject to the limitations set forth in Article VIII and in this Article X and unless otherwise provided herein, Sellers shall defend and hold harmless Purchaser and its Affiliates from and against any and all actions, suits, Actions, charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages, dues, penalties, fines, deficiencies, costs, amounts paid in settlement, liabilities, obligations, losses, expenses and fees, including court costs and reasonable attorneys’ fees and expenses (collectively, “Damages”), and shall indemnify and hold Purchaser and its Affiliates harmless for, and will pay to Purchaser or such Affiliates the amount of, any Damages incurred or suffered, directly or indirectly, by Purchaser related to or as a result of (a) any inaccuracy or misrepresentation in any representation or warranty made by Sellers in this Agreement, or in any certificate of Sellers delivered pursuant hereto, (b) any failure to perform or the breach of any covenant or agreement made by Sellers in this Agreement, (c) any Excluded Liability or any Excluded Asset or (d) except in respect of any Assumed Liability, any Tax liability of Sellers or any Tax liability attributable to the Purchased Assets or the operation of the Business with respect to any Tax year or portion thereof for any period ending on or prior to the Closing Date (or, for any Tax year beginning before and ending after the Closing Date, to the extent allocable to the portion of such period beginning before and ending immediately prior to the Closing Date).

Section 10.3 Indemnification by Purchaser. Subject to the limitations set forth in this Article X, Purchaser shall defend and hold harmless Sellers and their respective Affiliates from and against any and all Damages and shall indemnify and hold Sellers and their respective Affiliates harmless for, and will pay to the relevant Seller or such Affiliate the amount of, any Damages incurred or suffered, directly or indirectly, by such Seller or Affiliate related to or as a result of (a) any inaccuracy or misrepresentation in any representation or warranty made by Purchaser in this Agreement, or in any certificate of Purchaser delivered pursuant hereto, (b) any failure to perform or the breach of any covenant or agreement made by Purchaser in this Agreement or any Ancillary Agreement, (c) any Assumed Liability or (d) except in respect of any Excluded Liability, any Tax liability of Purchaser or any Tax liability attributable to the Purchased Assets or the operation of the Business with respect to any Tax year or portion thereof for any period beginning on or after the Closing Date (or, for any Tax year beginning before and ending after the Closing Date, to the extent allocable to the portion of such period beginning on the Closing Date).

Section 10.4 Procedure for Establishment of Claim. (a) If any claims are asserted by any party which is entitled to indemnification hereunder (the “Indemnified Party”), which, if sustained, could result in an indemnifiable claim by a party (an “Indemnifiable Claim”), the Indemnified Party shall promptly provide written notice (an “Indemnity Notice”) to the party responsible for such indemnification hereunder (the “Indemnifying Party”) of such claim giving the particulars thereof. The Indemnified Party shall give the Indemnity Notice to the Indemnifying Party as promptly as practicable and before expiration of the indemnification survival periods set forth in Section 10.1 hereof, as the case may be, so that the Indemnifying Party may investigate and respond to such claim; provided, however, that the failure of the Indemnified Party to give timely notice hereunder shall not relieve the Indemnifying Party of its obligations hereunder unless and only to the extent that such failure caused the Damages for which the Indemnifying Party is obligated to be greater than they would have been had the Indemnified Party given timely notice.

(b) If an Indemnified Party receives notice of the assertion of a claim from a third party in respect of which the Indemnified Party may have a claim under Section 10.2 or 10.3, as the case may be (a “Third Party Claim”), then the following shall apply:

(i) The Indemnified Party shall promptly (and in any event within ten (10) calendar days after the service of the citation or summons or similar legal process) provide an Indemnity Notice of such Third Party Claim to the Indemnifying Party; provided, however, that the failure of the Indemnified Party to give timely notice hereunder shall not relieve the indemnifying party of its obligations hereunder unless and only to the extent that such failure caused the Damages for which the Indemnifying Party is obligated to be greater than they would have been had the Indemnified Party given timely notice. Such Indemnity Notice shall describe in reasonable detail the nature of the Third Party Claim and the basis for the Indemnified Party’s claim under Section 10.2 or 10.3, as the case may be.

(ii) Upon receipt of an Indemnity Notice, the Indemnifying Party shall have the right, but not the obligation, to assume the defense of such Third Party Claim. If the Indemnifying Party fails to assume the defense of such Third Party Claim within thirty (30) calendar days after receipt of the Indemnity Notice in respect thereof, the Indemnified Party against which such Third Party Claim has been asserted shall (upon delivering written notice to such effect to the Indemnifying Party) have the right to undertake the defense, compromise or settlement of such Third Party Claim (which undertaking shall, to the extent the Indemnified Party is entitled to indemnification under Section 10.2 or 10.3, as applicable, in respect of such Third Party Claim, be at the Indemnifying Party’s cost and expense, and on behalf of, and for the account and risk of, the Indemnifying Party), subject to the right of the Indemnifying Party to assume the defense of such Third Party Claim at any time prior to settlement, compromise or final determination thereof; provided, however, that the Indemnified Party shall not enter into any such compromise or settlement without the written consent of the Indemnifying Party, such consent not to be unreasonably withheld or delayed. In the event the Indemnified Party assumes the defense of the Third Party Claim, the Indemnified Party will keep the Indemnifying Party reasonably informed of the progress of any such defense, compromise or settlement. The Indemnifying Party shall not be liable for any settlement of any action effected without its consent, but if settled with the consent of the Indemnifying Party, or if there be a final judgment beyond review or appeal, for the claimant in any such Third Party Claim, the Indemnifying Party agrees to indemnify and hold harmless the Indemnified Party from and against any loss or liability by reason of such settlement or judgment. Any party which does not undertake the defense of a Third Party Claim may, at its own expense, retain such additional attorneys and other advisors as it shall deem necessary, which attorneys and advisors shall be permitted by the party undertaking such defense, and its attorneys, to observe and participate in the defense of such Third Party Claim.

Section 10.5 Limitations and Remedies. (a) No amount shall be payable in indemnification under this Article X in respect of any claim based on the representations and warranties of Sellers or Purchaser, as the case may be, set forth herein (each a “Warranty Claim”), unless the aggregate amount of Damages in respect of which Sellers or Purchaser, respectively, would be liable under this Article X, in each case in respect of all Warranty Claims against Sellers or Purchaser, as the case may be, exceeds, in the aggregate, One Million and No/100 ($1,000,000) Dollars, and then only to the extent such Damages exceed such amount. In addition, (i) no claim for indemnification shall be asserted with respect to any single Warranty Claim for Damages in an amount less than Ten Thousand and No/100 ($10,000) Dollars (it being understood that all Damages arising from the same operative facts and circumstances shall be deemed a single aggregate claim and that no such claim shall be considered for the purpose of determining the amount set forth in the first sentence of this Section 10.5(a)); and (ii) no claim for indemnification under this Article X in respect of any Warranty Claim shall first be asserted after the expiration of the applicable survival period referred to in Section 10.1 hereof. Notwithstanding the foregoing, the limitations set forth in this Section 10.5(a) shall not apply to any claim based on the representations and warranties set forth in Sections 4.19 or 5.6 hereof or any claim based on breaches of representations and warranties of which a party had Knowledge or claims based on any intentional breach of any covenant or warranty.

(b) The maximum amount of Damages for which Sellers may be liable under this Article X shall be an amount equal to $30,000,000.

(c) In any case where an Indemnified Party recovers from third parties all or any part of any amount paid to it by an Indemnifying Party pursuant to this Article X, such Indemnified Party shall promptly pay over to the Indemnifying Party the amount so recovered, but not in excess of any amount previously so paid by the Indemnifying Party.

(d) The Indemnified Party shall be obligated to use its reasonable best efforts to mitigate its Damages prior to collecting an indemnification payment under this Article X.

(e) No party shall have any obligation to indemnify or hold harmless any Person for any consequential Damages arising out of any interruption of business, loss of profits, loss of use of facilities or loss of goodwill.

Section 10.6 Exclusive Remedy. Except for (a) the equitable remedies contemplated under Section 6.12 and (b) claims based on actual fraud of one of the parties hereto, this Article X sets forth the exclusive remedy owing from Purchaser or Sellers for claims that arise from or are related to this Agreement. Each of the parties hereby waives any other claim, cause of action, or remedy that it might assert against the other, with respect to the matters that arise from or are related to this Agreement, whether under statutory or common Law, any Environmental Law, or securities, trade regulation or other Law.

ARTICLE XI

TERMINATION

Section 11.1 Termination. This Agreement may be terminated at any time prior to the Closing by:

(a) the mutual written consent of Sellers and Purchaser;

(b) either Sellers or Purchaser, by written notice to the other, if the Closing has not occurred by the close of business on June 30, 2005, and (i) the failure to consummate the transactions contemplated hereby on or before such date did not result from the failure by the party seeking termination of this Agreement to fulfill any undertaking or commitment provided for herein that is required to be fulfilled prior to the Closing and (ii) the party seeking termination is not otherwise in material breach of its obligations hereunder;

(c) either Sellers or Purchaser, by written notice to the other, if any Governmental Authority shall have issued an order, decree or ruling or taken any other action restraining, enjoining or otherwise prohibiting the transactions contemplated hereby and such order, decree, ruling or other action shall have become final and non-appealable; provided, however, that the party seeking to terminate this Agreement pursuant to this Section 11.1(c) shall have complied with Sections 3.3 and 6.4(b) hereof, and with respect to other matters not covered thereby, shall have used commercially reasonable efforts to remove such injunction order or decree;

(d) Purchaser, by written notice to Sellers, at any time on or before 10:00 a.m. Eastern Standard Time on April 1, 2005, or if earlier, the date which Purchaser has completed its due diligence investigation of the Purchased Assets, in the event that Purchaser in connection with such investigation, shall have discovered any fact, circumstance, transaction or occurrence of which Purchaser had no notice as of the date hereof and as a result of which Purchaser would be entitled (and Purchaser would otherwise have the right) to decline to consummate the transactions contemplated hereby based solely upon Section 9.3(f) hereof; provided, however, that Purchaser may not terminate this Agreement pursuant to this Section 11.1(d) unless Purchaser shall have provided Sellers with written notice of, and a reasonable opportunity to cure the breach (or deemed breach) of any representation or warranty as a result of which Purchaser would be entitled to rely on such Section 9.3(f) in declining to consummate such transactions, or is not satisfied with its findings; or

(e) Purchaser or Sellers, by written notice to the other party (or parties, as applicable), at any time after June 30, 2005, in the event that Purchaser has not executed an agreement with the Local Union meeting the description set forth in Section 9.3(h) hereof on or before such date; provided, however, that Purchaser shall not be entitled to terminate this Agreement pursuant to this Section 11.1(e) if Purchaser fails to use all reasonable efforts, acting as promptly as practicable and in good faith, to enter into an agreement with the Local Union on the terms contemplated by Section 9.3(h) hereof.

Section 11.2 Procedure and Effect of Termination. In the event of termination of this Agreement pursuant to Section 11.1 hereof, all obligations of the parties under this Agreement shall thereupon terminate and become void and have no effect, and the transactions contemplated hereby shall be abandoned without further action by the parties, in each case without liability to any party, except that (i) the obligations set forth in Section 6.1(b) hereof, this Section 11.2 and Article XII shall survive the termination of this Agreement and (ii) nothing herein shall relieve any party from liability for any breach occurring prior to termination.

ARTICLE XII

MISCELLANEOUS

Section 12.1 Interpretation. In interpreting this Agreement, the following principles will apply: (a) all words that are singular include the plural, and a word in any one gender includes the other genders, as the context may require; and (b) the headings and captions that appear in this Agreement have been inserted for the convenience of the reader and do not limit or in any other way affect the meaning of its terms and conditions.

Section 12.2 Notices. All notices, demands and other communications which may or are required to be given or made by any party to the others in connection with this Agreement shall be in writing (including telex, fax or other similar writing) and shall be deemed to have been duly given or made: (a) if sent by registered or certified mail, three (3) days after the posting thereof with first class postage attached; (b) if sent by hand or overnight delivery, upon the delivery thereof; and (c) if sent by telex or fax, upon confirmation of receipt of such telex or fax, in each case addressed to the respective parties as follows:

If to Sellers:

The Goodyear Tire & Rubber Company

1144 East Market Street

Akron OH 44316

United States of America

Attention: Corporate Secretary

Fax Number: 1 (330) 796-8836

If to Purchaser:

Maurice M. Taylor, Jr.

Titan Tire Corporation

2701 Spruce Street

Quincy, IL 62301

Fax: 217.228.3166

with a copy to:

Cheri T. Holley

General Counsel

Titan International, Inc.

2701 Spruce Street

Quincy, IL 62301

Fax: 217.228.3040

with a second copy to:

Robert J. Diehl, Jr.

Bodman LLP

100 Renaissance Center, 34^th Floor

Detroit, MI 48243

Fax: 313.393.7579

or to such other address and to the attention of such other persons as may be designated from time to time by such other party hereto by notice given in the manner provided in this Section 12.2.

Section 12.3 Waiver. (a) The failure of any party hereto to enforce, at any time, any provision of this Agreement, or to exercise any option or privilege that is herein provided, shall not be construed to be a waiver of that provision, option or privilege, nor in any way to affect the validity of this Agreement or any party’s right to enforce thereafter every provision strictly in accordance with its terms, or to exercise any option or privilege given to it hereunder.

(b) No waiver by any party of any default by any other party of any term or provision contained herein will be deemed valid unless the waiver is in writing and signed by the waiving party. No such waiver will in any event be deemed a waiver of any subsequent default under the same or any other term or provision contained herein.

Section 12.4 Entire Agreement. This Agreement, and the Exhibits and Schedules hereto and the documents and instruments referred to herein, contains the entire agreement made by the parties hereto with respect to the subject matter hereof, superseding any and all prior or contemporaneous representations, warranties and agreements, whether oral or written, with respect thereto.

Section 12.5 Titan International Guaranty. On the date hereof, Purchaser has caused to be delivered to Sellers the duly executed Titan International Guaranty.

Section 12.6 Amendment. This Agreement may be amended or varied only by a written instrument signed by duly authorized representatives of all parties and expressly providing that this Agreement is being amended thereby.

Section 12.7 Parties in Interest; Assignment. This Agreement will be binding upon, and inure to the benefit of, the parties hereto and their permitted successors and assigns, and nothing herein is intended to or shall confer any right, benefit or remedy on any other person or entity under or by reason hereof. No party may assign its rights under this Agreement or delegate performance hereunder to another person or entity without the written consent of the other party.

Section 12.8 No Partnership. Nothing contained in this Agreement or any of the Ancillary Agreements will be deemed or construed by the parties hereto, or by any other person or entity, to create the relationship of principal and agent, or of partnership, strategic alliance or joint venture. Should the parties have any discussion regarding the formation of an alliance or joint venture, no such alliance or joint venture will come to exist unless all parties have signed a formal agreement approved by their boards of directors and any and all necessary consents of, filings with or waiting or notice periods imposed by, any and all Governmental Authorities have been obtained or made, or have expired, as the case may be.

Section 12.9 Governing Law; Disputes. (a) The terms and provisions of this Agreement shall be construed under and governed by the Laws of the State of Illinois without giving effect to the principles of conflict of laws thereof. The parties will comply with all applicable Laws in performing their obligations under this Agreement.

(b) In the event of a dispute between or among the parties arising out of or in connection with this Agreement, the parties to the dispute will make every effort to resolve, promptly and in good faith, such dispute. In the event that the dispute cannot be resolved, any party may notify any other of the existence of a possible deadlock by sending a letter signed by management responsible for the operation of this Agreement to management of the other party. Within 15 business days after receipt of

that notice, management of the parties shall arrange to meet at a mutually agreeable time and place, and thereafter as often as they reasonably deem necessary for a period of 90 days from the date of that first meeting, to exchange relevant information and to attempt to resolve the dispute. In the event that responsible management have not been successful in resolving the dispute within 90 days from the date of the first meeting, any party may initiate an action or take such other action as is permitted under this Agreement in accordance with the time periods set out elsewhere in this Agreement, or, in each case, under any of the Ancillary Agreements. Except as otherwise set forth herein or therein, each party shall be responsible for its own legal fees and expenses.

(c) Notwithstanding the requirement for mutual consultation, any party may at any time initiate an action in respect of any of the equitable remedies to which such party is entitled hereunder.

Section 12.10 Counterparts. This Agreement may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same agreement.

Section 12.11 Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any rule of law or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect, so long as the economic and legal substance of the transactions contemplated hereby are not affected in a manner materially adverse to either party. Upon any determination that any such term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in a mutually acceptable manner in order that the transactions contemplated hereby be consummated as originally contemplated to the fullest extent possible.

Section 12.12 Time of the Essence. Time is of the essence of this Agreement.

EX-31.1 6 ex31_1.htm CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302 CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO SECTION 302

Exhibit 31.1

CERTIFICATION

I, Maurice M. Taylor Jr., certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Titan International, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)	Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	July 27, 2006	By:	/s/ MAURICE M. TAYLOR JR.
			Maurice M. Taylor Jr.
			Chief Executive Officer and Chairman (Principal Executive Officer)

EX-31.2 7 ex31_2.htm CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302 CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO SECTION 302

Exhibit 31.2

CERTIFICATION

I, Kent W. Hackamack, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of Titan International, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent function):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:	July 27, 2006	By:	/s/ KENT W. HACKAMACK
			Kent W. Hackamack
			Vice President of Finance and Treasurer
			(Principal Financial Officer)

EX-32 8 ex32.htm CERTIFICATION PURSUANT TO SECTION 906 CERTIFICATION PURSUANT TO SECTION 906

Exhibit 32

CERTIFICATION

In connection with the Quarterly Report of Titan International, Inc. on Form 10-Q for the period ended June 30, 2006, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), each of the undersigned hereby certifies that, to the best of their knowledge, this Report fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 and that information contained in this report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

	TITAN INTERNATIONAL, INC.
	(Registrant)

Date:	July 27, 2006	By:	/s/ MAURICE M. TAYLOR JR.
			Maurice M. Taylor Jr.
			Chief Executive Officer and Chairman (Principal Executive Officer)

		By:	/s/ KENT W. HACKAMACK
			Kent W. Hackamack
			Vice President of Finance and Treasurer
			(Principal Financial Officer)

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