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 ▇▇▇▇▇▇ 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 ▇.▇. ▇▇▇▇▇▇ 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 is, engaged in tire
manufacturing and/or sales of tires or tire-related products.
SECTION 6. Standstill Agreement.
(a) The Investor covenants and agrees with the Company that, without
the prior written approval of the Company, it will not:
(i) directly or indirectly, acquire, or offer, propose
or agree to acquire, whether by purchase, tender or exchange offer,
through the acquisition of control of another person, by joining a
Group (as hereinafter defined), or otherwise, beneficial ownership
of any Voting Securities (as hereinafter defined) of the Company if,
upon completion of such acquisition, the number of Voting Securities
beneficially owned by the Investor would exceed the maximum number
of Voting Securities beneficially owned by the Investor immediately
following the Closing;
(ii) propose or seek to effect, or request permission to
propose or seek to effect, or initiate any other action with respect
to, a Company Business Combination (as hereinafter defined)
involving, or a tender or exchange offer for securities of, the
Company or any of its subsidiaries or any material portion of their
respective businesses or any other type of transaction that would
result in a Company Control Transaction (as hereinafter defined);
(iii) become a member of or participate in a Group
formed for the purpose of exercising joint influence with respect to
the Voting Securities of the Company, other than a Group composed
solely of itself;
(iv) solicit any proxies or stockholder consents, or
become a participant (other than by voting), or encourage any person
to become a participant, in a proxy or consent solicitation with
respect to any of the Company's Voting Securities; or
(v) publicly suggest or announce its willingness or
desire to engage in a transaction or series of transactions that
could reasonably be expected to result in a Company Control
Transaction.
(b) The Company covenants and agrees with the Investor that, without
the prior written approval of the Investor, it will not:
(i) directly or indirectly, acquire, or offer, propose
or agree to acquire, whether by purchase, tender or exchange offer,
through the acquisition of control of another person, by joining a
Group, or otherwise, beneficial ownership of any Voting Securities
of the Investor if, upon completion of such acquisition, the number
of Voting Securities beneficially owned by the Company would exceed
the maximum number of Voting Securities beneficially owned by the
Company immediately following the Closing;
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(ii) propose or seek to effect, or request permission to
propose or seek to effect, or initiate any other action with respect
to, a Investor Business Combination (as hereinafter defined)
involving, or a tender or exchange offer for securities of, the
Investor or any of its subsidiaries or any material portion of their
respective businesses or any other type of transaction that would
result in a Investor Control Transaction (as hereinafter defined);
(iii) become a member of or participate in a Group
formed for the purpose of exercising joint influence with respect to
the Voting Securities of the Investor, other than a Group composed
solely of itself;
(iv) solicit any proxies or stockholder consents, or
become a participant (other than by voting), or encourage any person
to become a participant, in a proxy or consent solicitation with
respect to any of the Investor's Voting Securities; or
(v) publicly suggest or announce its willingness or
desire to engage in a transaction or series of transactions that
could reasonably be expected to result in an Investor Control
Transaction.
"GROUP" means any "group" within the meaning of Section 13(d) of the
U.S. Securities Exchange Act of 1934, as amended.
"VOTING SECURITIES" means, (i) with respect to the Company, the
equity securities of the Company entitled to vote generally for the election of
directors of the Company, (ii) with respect to the Investor, the equity
securities of the Investor entitled to vote generally for the election of
directors of the Investor, an (iii) with respect to any other person, any
securities of or interests in such person entitled to vote generally for the
election of directors or any similar managing person of such person or entitled
to direct the management and policies of such person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise.
"VOTING POWER" means, with respect to any Voting Securities, the
aggregate number of votes attributable to such Voting Securities that could
generally be cast by the holders of such Voting Securities for the election of
directors or any similar managing person at the time of determination (assuming
such election were then being held).
"COMPANY BUSINESS COMBINATION" means (i) a merger, amalgamation,
share exchange or consolidation in which the Company is a constituent
corporation or (ii) a sale of all or substantially all of the assets of the
Company and its subsidiaries taken as a whole, provided that, in each case, a
"Company Business Combination" shall not include any transaction or series of
transactions following which the stockholders of the Company immediately prior
to such transaction or series of transactions continue to hold, by reason of
their prior holdings of Voting Securities, an aggregate number of Voting
Securities of the Company (or the surviving entity, as the case may be)
representing at least two-thirds of the Voting Power (as hereinafter defined) of
the Voting Securities of the Company (or the surviving entity).
"COMPANY CONTROL TRANSACTION" means any transaction or series of
transactions that involves (i) a Company Business Combination or (ii) the sale
or issuance of Company Voting Securities to any person or Group formed for the
purpose of exercising joint influence with respect
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thereto or (iii) the acquisition of equity securities of the Company by any
person or Group formed for the purpose of exercising joint influence with
respect thereto, other than, in each case a transaction or series of
transactions following which the stockholders of the Company immediately prior
to such transaction or series of transactions continue to hold, by reason of
their prior holdings of Voting Securities, an aggregate number of Voting
Securities of the Company (or the surviving entity, as the case may be)
representing at least two-thirds of the Voting Power of the Voting Securities of
the Company (or the surviving entity).
"INVESTOR BUSINESS COMBINATION" means (i) a merger, amalgamation,
share exchange or consolidation in which the Investor is a constituent
corporation or (ii) a sale of all or substantially all of the assets of the
Investor and its subsidiaries taken as a whole, provided that, in each case, an
"Investor Business Combination" shall not include any transaction or series of
transactions following which the stockholders of the Investor immediately prior
to such transaction or series of transactions continue to hold, by reason of
their prior holdings of Voting Securities, an aggregate number of Voting
Securities of the Investor (or the surviving entity, as the case may be)
representing at least two-thirds of the Voting Power of the Voting Securities of
the Investor (or the surviving entity).
"INVESTOR CONTROL TRANSACTION" means any transaction or series of
transactions that involves (i) an Investor Business Combination or (ii) the sale
or issuance of Investor Voting Securities to any person or Group formed for the
purpose of exercising joint influence with respect thereto or (iii) the
acquisition of equity securities of the Investor by any person or Group formed
for the purpose of exercising joint influence with respect thereto, other than,
in each case a transaction or series of transactions following which the
stockholders of the Investor immediately prior to such transaction or series of
transactions continue to hold, by reason of their prior holdings of Voting
Securities, an aggregate number of Voting Securities of the Investor (or the
surviving entity, as the case may be) representing at least two-thirds of the
Voting Power of the Voting Securities of the Investor (or the surviving entity).
SECTION 7. "Kumho Tires" and "Kumho" Trademarks. The Company
represents and warrants that it owns "Kumho Tires" as its registered trade ▇▇▇▇.
For so long as the Investor owns an amount of Shares in excess of 5% of the
issued and outstanding Shares of the Company, the Company shall use its best
endeavors to maintain the right to use the original trademarks of "Kumho" with
respect to the tire business, free of royalty or other charges, subject to
requirement of applicable law, and provided that Kumho Industrial Co., Ltd.
continues to possess the right directly or indirectly to elect or nominate for
election a majority of the board of directors of the Company.
SECTION 8. Acknowledgments, Representations, Warranties and
Covenants.
(a) The Investor acknowledges and confirms that:
(i) it is not entitled to nominate or appoint any person
to be a director of the Company as a result or through its purchase
of the Investor Shares;
(ii) the Initial Price to Public is to be determined by
agreement between the Company and JPMorgan (on behalf of the
underwriters) following, and on the basis of, the "roadshow" and
"bookbuilding" process in connection with the Offering;
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(iii) the Investor Shares will be acquired by the
Investor through JPMorgan as underwriter of the International
Offering on the basis provided in Sections 1, 2 and 3 above, and on
the basis that the Investor has not relied, and will not be entitled
to rely on any legal opinion or other advice given by legal counsel
to the Company (except as provided in Section 9(c)) or legal counsel
to JPMorgan and underwriters in connection with the Offering, and
has taken its own independent advice to the extent it has considered
necessary or appropriate;
(iv) the Company and JPMorgan will have the absolute
discretion to change or adjust (a) the number of Shares and GDSs
comprising the Offering or any part thereof and (b) the ratio of
Shares and GDSs to be offered by the Company under the Offering or
any part thereof;
(v) the Investor is an accredited investor within the
meaning of Rule 501(a)(3) under the Securities Act;
(vi) subject to the provisions herein, the Investor
Shares may be offered, resold, pledged or otherwise transferred only
(A) to the Company, (B) to a person whom the seller reasonably
believes is a qualified institutional buyer in a transaction meeting
the requirements of Rule 144A, (C) outside the United States to a
person other than a U.S. person (as such terms are defined in
Regulation S under the Securities Act), (D) pursuant to an exemption
from registration under the Securities Act provided by Rule 144
under the Securities Act (if available), or (E) pursuant to an
effective registration statement under the Securities Act;
(vii) While any Investor Shares remain outstanding are
"restricted securities" within the meaning of Rule 144(a)(3) under
the Securities Act, the Company, during any period which (x) the
Company is not subject to and in compliance with Section 13 or 15(d)
of the U.S. Securities Exchange Act of 1934, as amended (the
"EXCHANGE ACT"), or (y) the Company is not exempt from the reporting
obligations of the Exchange Act pursuant to Rule 12g3-2(b), the
Company will furnish prospective purchasers of Investor Shares
designated by the Investor pursuant to Section 4, upon the request
of the Investor or such prospective purchasers, the information
required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act;
(viii) the Investor is purchasing the Investor Shares
for investment purposes and not with a view to the distribution of
such Shares; and
(ix) the Company and, for purposes of the opinions to be
delivered pursuant to the Purchase Agreement in connection with the
Offering, the counsels for the Company and the counsels for the
underwriters of the International Offering, respectively, may rely
upon the accuracy of the representations and warranties of the
Investor, and the Investor hereby consents to such reliance.
(b) Each of the Investor and the Company represents and warrants as
of the date hereof and as of the Closing Date that:
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(i) it is a corporation duly organized and validly
existing under the laws of its jurisdiction of incorporation;
(ii) the execution, delivery and performance of this
Agreement by it has been duly authorized by all necessary corporate
action on its part;
(iii) the execution, delivery and performance of this
Agreement by it, the compliance by it with all the provisions hereof
and the consummation of the transactions contemplated hereby will
not (i) violate any provisions of the articles of incorporation or
other constitutional documents, (ii) require any consent, approval,
authorization or other order of, or qualification with, any court or
governmental body or agency (except such as have been obtained or
made and are in full force and effect as of the Closing Date), (iii)
conflict with or constitute a breach of any of the terms or
provisions of, or a default under, any indenture, loan agreement,
mortgage, lease or other agreement or instrument to which it or any
of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound, or (iv) violate
or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or
agency having jurisdiction over it, any of its subsidiaries or their
respective property, except for such failures, violations,
conflicts, breaches or defaults under clauses (ii), (iii) and (iv)
that, individually or in the aggregate, neither have had nor are
reasonably likely to have a material adverse effect on the ability
of the party to perform its respective obligations under this
Agreement;
(iv) this Agreement has been duly authorized, executed
and delivered by it and constitutes its legal, valid and binding
obligations and that no corporate, shareholder or other consents,
approvals or authorizations are required by such party for the
performance of its obligations under this Agreement (except such as
have been obtained or made and are in full force and effect as of
the Closing Date).
(c) The Company represents and warrants as of the date hereof that:
(i) the authorized capital stock of the Company consists
of 200,000,000 Shares; as of the date hereof, 50,000,000 Shares are
validly issued and outstanding; and Kumho Industrial Co., Ltd. owns
of record 15,000,000 Shares as of December 31, 2004;
(ii) the Company has furnished to the Investor (x) the
audited combined balance sheets of the Company and its subsidiaries
(on a carve-out basis) as of December 31, 2001, December 31, 2002,
and June 30, 2003 and the audited consolidated balance sheet of the
Company and its subsidiaries as of December 31,2003, and related
combined statements of income and combined statements of cash flows
for each of the twelve-month periods ended December 31, 2001 and
2002, and related combined statement of income and combined
statement of cash flows for the six-month period ending June 30,
2003, and related consolidated statement of income and consolidated
statement of cash flows for the six-month period ended December 31,
2003, including, in each case, the notes thereto, and (y) the
audited non-consolidated balance sheet of the Company as of
September 30,
10
2004, and the related non-consolidated statement of income and
non-consolidated statement of cash flows for the nine-month period
then ended, including the notes thereto (collectively, the
"FINANCIAL STATEMENTS"). The Financial Statements fairly present in
all material respects the financial position of the Company as of
such dates, the operation of the Company's business and its net
income and cash flows for the periods then ended, and were prepared
in accordance with generally accepted accounting principles in
Korea;
(iii) no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator
involving the Company, any subsidiary or their respective properties
or assets is pending or, to the reasonable knowledge of the Company,
threatened, in each case, that (i) could have a material adverse
effect on the performance by the Company of its obligations pursuant
to this Agreement or the consummation of any of the transactions
contemplated hereby or (ii) could result in a material adverse
effect on the business, operations or financial condition of the
Company and its subsidiaries, taken as a whole; and
(iv) the preliminary offering circular and the final
offering circular, each relating to the International Offering, will
not, as of their respective dates, contain any untrue statement of a
material fact or omit a material fact necessary to make the
statements contained therein in light of the circumstances under
which they were made.
SECTION 9. Conditions Precedent. The rights and obligations of each
party hereto shall be subject to the conditions precedent that:
(a) the Offering shall occur simultaneously with the Transaction;
(b) each of the Company and the Investor shall have given all
notifications to, and received all consents and/or approvals of, third parties,
including governmental authorities, that are or may be required for the purposes
of or in connection with this Agreement, including, without limitation,
expiration or termination of the waiting period (and any extension thereof)
applicable to the transactions contemplated hereby under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1974, as amended;
(c) the Investor shall have received from Shin & ▇▇▇, counsel for
the Company, an opinion dated as of the Closing Date, in form and substance
satisfactory to the Investor; and
(d) the representations of the Investor (with respect to the
Company) and of the Company (with respect to the Investor) set forth in Section
8 herein shall be true and correct as in all respects as of the dates specified
herein.
SECTION 10. Announcements. The parties hereto shall consult with
each other prior to issuing any public announcement or statement with respect to
this Agreement or the transaction contemplated hereby. The Investor will not
make any announcement or other public statement with respect to this Agreement
or the arrangements contemplated by it, except (i) for any announcement by the
Investor which may be required in order to comply with the rules of any
government authority or agency or stock exchange applicable to the Investor (but
only after prior
11
consultation with the Company with respect to the form, timing and content of
any such announcement) or (ii) as may be agreed by the Company. In addition, the
Investor acknowledges and agrees (i) that this Agreement and the relationship
and arrangements between the parties contemplated by this Agreement will be
required to be described in the Offering Circular and any other marketing
materials for the Offering and specifically, this Agreement will be a material
contract required to be filed with regulatory authorities and/or made available
for public inspection in connection with the Offering and (ii) to permit the
Company to identify the Investor as a purchaser of Shares in the Offering
Circular and in any required filings with the relevant regulatory authorities
and/or stock exchanges or otherwise required in order to comply with the rules
of any government authority or agency or stock exchange applicable to the
Company.
SECTION 11. Further Efforts. (a) Each of the Investor and the
Company shall use its best endeavors to enter into further agreements in respect
of their business cooperation and/or strategic alliance.
(b) Each of the Investor and the Company shall use its best
endeavors to hold periodic meetings of a strategic management committee,
consisting of the Chairman of the Company's board of directors, the Company's
President and the Investor's President/Chief Executive Officer.
(c) The Investor and the Company shall cooperate with respect to any
notifications to, or consents and/or approvals of, third parties that are or may
be required for the purposes of or in connection with this Agreement.
(d) From and after the date of this Agreement, upon the request of
the Investor or the Company, the Company and the Investor shall execute and
deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
SECTION 12. Miscellaneous.
(a) Termination.
(i) The Company or the Investor may terminate this
Agreement at any time upon mutual agreement, or by giving written
notice to the other party if the other party (either the Company or
the Investor, as applicable) has committed a material breach of any
agreement, representation, condition, covenant or other term of this
Agreement and fails to cure such breach within thirty (30) days from
receipt by the defaulting party of a written notice to cure from the
non-defaulting party.
(ii) In the event that this Agreement is terminated
without any default of either party (including as a result of the
fact that the Offering shall not have been completed by June 30,
2005), the Investor shall no longer have any obligation to acquire
the Investor Shares from the Company and the Company shall no longer
have any obligation to sell the Investor Shares to the Investor;
provided, however, the Company and the Investor may proceed (but are
not obligated) to discuss, with participation of other concerned
parties if necessary, the possible acquisition by the Investor of
other equity stakes in the Company, including acquisition of an
ownership equity stake.
12
(iii) Any termination of this Agreement shall not affect
any accrued rights or liabilities of either party nor shall it
affect the coming into force or the continuation in force of any
provisions of this Agreement which are expressly or by implication
intended to come into force or continue in force on or after that
termination.
(b) Expenses. Each party hereto will pay its own expenses in
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated.
(c) Amendments and Waivers. This Agreement may be amended only by a
written instrument signed by each party hereto.
(d) No Assignment. This Agreement, or any party hereof, may not be
assigned by any party hereto without the prior written consent of the other
party hereto. Any purported assignment in violation of this paragraph (d) shall
be null and void.
(e) Notices. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (i) upon personal delivery to the
party to be notified; (ii) when sent by facsimile if sent during normal business
hours of the recipient, if not, then on the next business day; (iii) upon
delivery if sent by registered or certified mail, return receipt requested,
postage prepaid; or (iv) upon delivery if deposited with a nationally recognized
overnight courier, specifying next day delivery, with written verification of
receipt. All communications shall be sent to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
If to the Company:
Kumho Tire Co., Inc.
Kumho Asiana Building
57 Shinmunro 1-ga, Jongro-gu
▇▇▇▇▇ ▇▇▇-▇▇▇, ▇▇▇▇▇
Attention: Young Kyo Park
Facsimile: (▇▇▇) ▇▇▇▇ ▇▇▇▇
and
Kumho Asiana Group
Kumho Asiana Building
57 Shinmunro 1-ga, Jongro-gu
▇▇▇▇▇ ▇▇▇-▇▇▇, ▇▇▇▇▇
Attention: Park, ▇▇▇ ▇▇▇, Chairman, Ahn ▇▇▇▇ ▇▇▇ and ▇▇▇▇▇ ▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇▇ ▇▇▇▇
with a copy to:
▇.▇. ▇▇▇▇▇▇ Securities (Asia Pacific) Ltd.
▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇ SAR
13
Attention: ▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇▇ ▇▇▇▇
and
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇, Esq. and ▇▇▇▇▇▇▇▇ ▇▇▇▇, Esq.
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to the Investor:
▇▇▇▇▇▇ Tire & Rubber Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chairman of the Board,
President and Chief Executive Officer
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇ Tire & Rubber Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇, Vice President, General Counsel and
Secretary
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇,
or to such other address or addresses as shall be designated in
writing. All notices shall be effective when received.
(f) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
(g) Titles and Subtitles. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
(h) Governing Law. This Agreement shall be governed by, and
construed in accordance with, the law of the Republic of Korea.
(i) Separability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
(j) Entire Agreement. This Agreement and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects thereto and no party
shall be liable or bound to any other in any manner
14
by any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
(k) No Waiver; Cumulative Remedies. No failure or delay on the part
of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
(l) Submission to Jurisdiction. Each party hereto irrevocably
consents, to the fullest extent permitted by applicable law, to the
non-exclusive jurisdiction of Seoul Central District Court and in the courts
hearing appeals therefrom, for the resolution of any dispute, action, suit or
proceeding arising out of or relating to this Agreement.
[Signature page follows.]
15
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
KUMHO TIRE CO., INC.
By: /s/ ▇▇▇ ▇▇▇▇▇ Ju
--------------------------------
Name: ▇▇▇ ▇▇▇▇▇ Ju
Title: Attorney-in-fact
▇▇▇▇▇▇ TIRE & RUBBER COMPANY
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
