STRATEGIC SUBSCRIPTION AGREEMENT

 

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                                                             EXHIBIT (10)(xxvii)

 

                                                                [EXECUTION COPY]

 

            THIS STRATEGIC SUBSCRIPTION AGREEMENT (this "AGREEMENT") is dated

January 7, 2005 and is made by and between KUMHO TIRE CO., INC., a limited

liability company established under the laws of the Republic of Korea (the

"COMPANY"), and COOPER TIRE & RUBBER COMPANY, a Delaware corporation (the

"INVESTOR").

 

            WHEREAS, the Company proposes to offer and sell its common shares,

par value Won 5,000 per share (the "SHARES") and global depositary shares

representing Shares (the "GDSS") by way of a global offering of Shares and GDSs,

which may include a secondary offering (the "OFFERING"), comprising:

 

                        (i) an initial public offering of Shares in Korea (the

            "KOREAN OFFERING"), and

 

                        (ii) an international offering of GDSs without being

            registered under the U.S. Securities Act of 1933, as amended (the

            "SECURITIES ACT"), to (x) qualified institutional buyers in

            compliance with the exemption from registration provided by Rule

            144A under the Securities Act, (y) an institutional accredited

            investor (within the meaning of Rule 501(a)(1), (2), (3) or (7)

            under the Securities Act) that is not a qualified institutional

            buyer and that is purchasing for its own account or for the account

            of another institutional accredited investor and (z) non-U.S.

            persons in offshore transactions in reliance on Regulation S under

            the Securities Act (the "INTERNATIONAL OFFERING");

 

            and to list the Shares and the GDSs for trading simultaneously on

the Korea Stock Exchange and the London Stock Exchange, respectively; and

 

            WHEREAS, the Company and the Investor wish to cooperate to promote

their mutual interests and build a lasting and mutually beneficial strategic

relationship and, consistent with this, the Investor is now willing to make an

equity investment in the Company on the basis and terms set out in this

Agreement.

 

            NOW, THEREFORE, in consideration of the mutual promises and

agreements set forth herein and for other valuable consideration, the receipt

and sufficiency of which are hereby acknowledged, the parties hereto hereby

agree as follows:

 

            SECTION 1. Investment. The Investor agrees that, if the Offering of

the Shares occurs as contemplated and described in this Agreement, the Company

will use its best endeavors to enable the Investor to participate in the

Offering to purchase the Investor Shares (as hereinafter defined) in the

Offering at the aggregate Initial Price to Public (as hereinafter defined), and

the Investor will purchase the Investor Shares at the aggregate Initial Price to

Public under and as part of the Offering (the "TRANSACTION"), provided that the

Investor's obligation to purchase the Investor Shares is conditioned upon the

Initial Price to Public being at or below Won 19,000 per Share (the "PRICE

CAP"). In the case that the Initial Price to Public is likely to be higher than

the Price Cap in the judgment of the Company, then the Company will notify the

Investor and the Investor will reconsider the Price Cap.

 

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            "INVESTOR SHARES" means 7,500,000 Shares (in the form of GDSs at the

time of Closing (as hereinafter defined)) to be purchased by the Investor

pursuant to the provisions of this Agreement at the Initial Price to Public per

Share to be determined by the Company and J.P. Morgan Securities Ltd., as sole

global coordinator and international bookrunner for the Offering ("JPMORGAN").

The Investor Shares will represent at least 10.7% of the Company's issued Shares

on a fully diluted basis after the completion of the Offering.

 

            "INITIAL PRICE TO PUBLIC" means the price per Investor Share at

which Shares (in the form of GDSs) are acquired by investors under the

International Offering and determined as referred to in Section 8(a)(ii).

 

            SECTION 2. Agreement Conditional upon Completion of Offering. The

Investor's agreements in Sections 1 and 3 hereof (and the right of the Investor

to acquire the Investor Shares) are conditional upon underwriting agreements for

each of the Korean Offering and the International Offering being entered into

and the completion of the Offering (in accordance with their respective original

terms or as subsequently varied by agreement of the relevant parties) by June

30, 2005. The Company intends to use its best efforts to ensure that the

Offering is completed by June 30, 2005. No liability to the Investor or the

Company will arise if the Offering is not completed by June 30, 2005.

 

            SECTION 3. Closing. (a) Subject to Sections 1 and 2, the Investor

will acquire the Investor Shares pursuant to this Agreement, as part of the

International Offering and through JPMorgan in its capacity as underwriter of

the International Offering. Accordingly, subject to this Section 3(a), the

Investor Shares will be acquired simultaneously with settlement of the

International Offering. The closing of the Transaction (the "CLOSING") shall

occur simultaneously with the closing date of the Offering (the "CLOSING DATE"),

and the Company shall use reasonable endeavors to notify the Investor promptly

as to the expected Closing Date. Payment for and delivery of the Investor Shares

shall be made on the date notified to the Investor by JPMorgan which shall not

be later than 31 days after the date of pricing of the International Offering as

referred to in Section 8(a)(ii), but otherwise on the same basis on which GDSs

are delivered to other investors which acquire GDSs in the International

Offering through JPMorgan, as underwriter of the International Offering (or in

any other manner which the Company, JPMorgan and the Investor may agree).

 

            (b) In the event that any over-allotment Shares (the "OVER-ALLOTMENT

SHARES") (in the form of GDSs) are issued upon exercise of any over-allotment

option granted to the underwriters in connection with the Offering (the

"OVER-ALLOTMENT OPTION"), the Investor shall not subscribe for any such

Over-allotment Shares.

 

            SECTION 4. Restrictions on Disposals by the Investor. The Investor

agrees that it will not Dispose (as hereinafter defined) of any of the Investor

Shares at any time without the prior written consent of the Company, except on

or after the third anniversary of the Closing Date, the Investor may exercise

the Put Option as defined in Section 5(a) (subject to the approval of the Bank

of Korea as set forth in Section 5(a)). The Investor and the Company confirms

that, if the Company fails to (x) deliver the Put Acceptance Notice (as defined

in Section 5(a)) or (y) purchase the Investor Shares pursuant to Section 5(a)

following the due exercise of the Put Option by the Investor pursuant to Section

5(a), the Investor shall have the right and discretion to sell the Investor

Shares in any manner. Such right of the Investor shall not affect any of the

Investor's

 

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claims against the Company under this Agreement as a result of such failure on

the part of the Company.

 

            The Investor hereby acknowledges and agrees that the Investor Shares

have not been registered under the Securities Act and may not be offered or sold

in the United States except pursuant to an exemption from, or in a transaction

not subject to, the registration requirements of the Securities Act, and it

represents, warrants and agrees that it will comply with the securities laws of

the United States, Korea and other jurisdictions that prohibit, inter alia, any

investor who has received from the Company or any of the directors, officers,

employees, representatives, agents or advisers of the Company material,

non-public information relating to the Company or any of its subsidiaries from

Disposing of any Investor Shares.

 

            "DISPOSE," "DISPOSAL" or "DISPOSING" means (i) offering, pledging,

selling, contracting to sell, selling any option or contracting to purchase any

option, purchasing any option or contracting to sell any option, granting any

option, right or warrant to purchase, or otherwise transferring or disposing of

(including, without limitation, pursuant to the creation of a derivative

security such as a hedge), directly or indirectly, any Shares, global, American

or similar depositary shares representing the Company's capital stock or any

securities convertible into or exercisable or exchangeable for, or representing

interests in such securities, or other instruments, warrants or options or (ii)

entering into any swap or other arrangement that transfers all or a portion of

the economic consequences associated with the ownership of any Investor Shares

(regardless of whether any of the transactions described in clause (i) or (ii)

is to be settled by the delivery of Investor Shares or such other securities, in

cash or otherwise).

 

            SECTION 5. Put Option/Call Option; Right of First Refusal. The

Investor and the Company agrees that, subject to the approval of the Bank of

Korea, on or after the day following the third anniversary of the Closing Date

(the "POST-LOCKUP PERIOD"), (i) the Investor shall have the right to sell the

Investor Shares to the Company (or any party or parties designated by the

Company) (the "PUT OPTION") and (ii) the Company shall have the right to

purchase (or cause any party or parties designated by the Company to purchase)

the Investor Shares from the Investor (the "CALL OPTION"), subject to applicable

laws and regulations. The Company shall use its commercially reasonable efforts

to obtain the approval of the Bank of Korea in respect of the Put Option and the

Call Option as promptly as practicable. Neither the Put Option nor the Call

Option shall become effective unless and until the approval of the Bank of Korea

shall have been obtained and, if the Company fails to obtain such approval,

Section 5(a) and Section 5(b) will become null and void. The Company shall make

the application to the Bank of Korea for such approval within 90 days of the

date of this Agreement and shall use its best efforts to secure such approval.

 

            (a) (i) To exercise the Put Option, the Investor shall deliver a

written notice to the Company (the "PUT NOTICE"), which shall be irrevocable, at

any time during the Post-Lockup Period, stating that the Investor intends to

exercise the Put Option pursuant to this Section 5(a), to sell to the Company

(or such other party or parties designated by the Company) and to cause the

Company (or such other party or parties designated by the Company) to purchase

from the Investor, all of the Investor Shares held by the Investor for a per

Share purchase price equal to the higher of (x) Initial Price to Public per

Share and (y) the Average Market Price (as hereinafter defined).

 

            (ii) The Company shall deliver a written notice to the Investor (the

"PUT ACCEPTANCE NOTICE") within 21 calendar days from the date when it receives

the Put Notice,

 

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stating that it (or such other party or parties designated by the Company) will

purchase all of the Investor Shares then held by the Investor and specifying the

date on which the closing of such purchase shall take place, which shall be no

later than 45 calendar days from the date of the Put Acceptance Notice.

 

            (b) (i) To exercise the Call Option, the Company shall deliver a

written notice to the Investor (the "CALL NOTICE"), which shall be irrevocable,

at any time during the Post-Lockup Period, stating that the Company intends to

exercise the Call Option pursuant to this Section 5(b) and specifying the date

for the closing of the purchase of the Investor Shares pursuant to the Call

Option (the "CALL CLOSING DATE"), which shall be no earlier than 15 calendar

days and no later than 45 calendar days from the date of the Call Notice.

 

            (ii) On the Call Closing Date, the Company shall purchase from the

Investor and the Investor shall sell to the Company, all of the Investor Shares

for a per Share purchase price equal to the higher of (x) the Initial Price to

Public per Share and (y) the Average Market Price.

 

            (c) (i) In the event that the Put Option and the Call Option fail to

become effective as a result of failure to obtain approval of the Bank of Korea,

if at any time during the Post-Lockup Period, subject to Section 5(d), the

Investor receives from any party a bona fide offer to purchase any of the

Investor Shares (the "DISPOSED SHARES") that the Investor is willing to accept,

the Investor shall provide written notice thereof (each, a "DISPOSITION NOTICE")

to the Company in advance to provide reasonable time for the Company to take

actions set out in this Section 5(c). Each Disposition Notice shall include the

identity of the prospective buyer, the price per Share offered, the terms of the

prospective buyer's financing and the other material terms of the offer.

 

            (ii) Upon receipt of a Disposition Notice, the Company shall have

the right to elect to acquire, or cause any party or parties designated by the

Company to acquire, all but not less than all of the Disposed Shares to which

such Disposition Notice relates by delivering to the Investor a written notice

(an "EXERCISE NOTICE") within 21 calendar days from the date the Company

received such Disposition Notice. In the event that the Company delivers an

Exercise Notice with respect to such Disposed Shares as provided herein, the

Company shall have the right to acquire, or cause any party or parties

designated by the Company to acquire, all but not less than all of such Disposed

Shares on terms no less favorable to the Investor than those set forth in the

applicable Disposition Notice, to the extent permitted under applicable laws and

regulations.

 

            (iii) In the event that the Company does not deliver an Exercise

Notice as provided in Section 5(c)(i), then the Investor, subject to Section

5(d), shall be entitled to:

 

                   (A) Dispose of all but not less than all of such Disposition

            Shares to the party and on the terms set forth in the Disposition

            Notice related to such Disposition Shares; provided, however, that

            if such Disposition is not consummated within 90 calendar days

            following the date of such Disposition Notice pursuant to such

            terms, such Disposed Shares shall be again subject to the Company's

            right of first refusal pursuant to this Section 5(c); or

 

                  (B) retain such Disposed Shares, in which case such Disposed

            Shares shall be again subject to the Company's right of first

            refusal pursuant to this Section 5(c).

 

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            (iv) The closing of a purchase by the Company (or such party or

parties designated by the Company) of Disposed Shares in accordance with this

Section 5(c) shall be on the 45th calendar day following delivery of such

applicable Exercise Notice, unless otherwise agreed by the Company and the

Investor. At each such closing, the Investor shall deliver written instruments

in form satisfactory to the Company, duly executed by the Investor, that such

Disposed Shares have been delivered free and clear of any pledge, encumbrance,

security interest, purchase option, call, lien or similar right under any

applicable law arising by, through or under such Disposed Shares against payment

of the purchase price therefor, subject to the applicable laws and regulations.

 

            (d) In the event that the Put Option and the Call Option fail to

become effective as a result of failure to obtain approval of the Bank of Korea,

at any time during the Post-Lockup Period, the Investor agrees that:

 

                   (i) without the prior written consent of the Company, it will

      not Dispose of any Investor Shares to any Tire Company (as defined below)

      and will use its best endeavors to ensure that any purchaser of Investor

      Shares from it in such period does not Dispose of such Investor Shares to

      a Tire Company; and

 

                  (ii) it will not Dispose of any of the Investor Shares held by

      it other than (A) in one or more transactions in which no person or Group

      acquires more than 2% of the Voting Power of the outstanding Voting

      Securities of the Company, except with the prior written consent of the

      Company, or (B) in ordinary market transactions through a broker or

      directly with a market maker in the Investor Shares; provided that the

      amount of Investor Shares sold, together with all sales of any Investor

      Shares made within the preceding three-month period, shall not exceed the

      greater of (x) 1% of the Shares outstanding as shown by the most recent

      report or statement published by the Company, or (y) the average weekly

      reported volume of trading in the Shares on the Korea Stock Exchange

      during the four-week period preceding the date of receipt of the order to

      execute the transaction by the broker or the date of execution of the

      transaction directly with a market maker.

 

            "AVERAGE MARKET PRICE" means the volume-weighted average Market

Price of the Shares over the 20 Trading Day period ending on the Trading Day

preceding the date of the Put Notice (in the case of Section 5(a)) or the Call

Notice (in the case of Section 5(b)).

 

            "MARKET PRICE" of a Share for any Trading Day means the closing

sales price of a Share on the Korea Stock Exchange on such day as quoted on

Bloomberg or, if no reported sales take place on such day, the arithmetic

average of the reported closing bid and offered prices, in either case as

reported by the Korea Stock Exchange for such day or, if Shares are not on such

day listed or admitted to trading on the Korea Stock Exchange, the arithmetic

average of the closing bid and offered prices of Shares for such day as

furnished by a leading independent member firm of the Korea Stock Exchange

selected from time to time by the Company.

 

            "TRADING DAY" means when the Korea Stock Exchange (or, if

applicable, with respect to another stock exchange, a day when such stock

exchange) is open for business; provided, however, that if no transaction price

or closing bid and offered prices are reported on Korea Stock Exchange or such

other exchange in respect of the relevant securities for one or more Trading

Days, such day or days will be disregarded in the relevant calculation relating

to a period of consecutive Trading Days.

 

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            "TIRE COMPANY" means a company which is itself, or is a holding

company or a subsidiary or an affiliate of a company which