EXHIBIT 4.1
EXECUTION COPY
STOCK PURCHASE AGREEMENT
BY AND BETWEEN
KOREA DEPOSIT INSURANCE CORPORATION
AND
SHINHAN FINANCIAL GROUP
DATED JULY 9, 2003
TABLE OF CONTENTS
ARTICLE I
DEFINITIONS
Section 1.01. Definitions .............................................................................. 1
Section 1.02. General Interpretive Principles .......................................................... 7
ARTICLE II
SALE AND PURCHASE OF SHARES
Section 2.01. Sale and Purchase of Shares .............................................................. 7
Section 2.02. Closing .................................................................................. 8
Section 2.03. Actions at Closing ....................................................................... 9
Section 2.04. Withheld Indemnity Payment Amounts ....................................................... 9
Section 2.05. Earnout Payment .......................................................................... 11
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE SELLER
Section 3.01. Title to Shares .......................................................................... 12
Section 3.02. Authorization of Agreement; Enforceability ............................................... 12
Section 3.03. Consents; No Conflicts ................................................................... 12
Section 3.04. Ligitation ............................................................................... 13
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE BANK AND
SUBSIDIARIES
Section 4.01. Corporate Organization and Qualification ................................................. 13
Section 4.02. Authorization of Agreement; Enforceability ............................................... 13
Section 4.03. Consents; No Conflicts ................................................................... 13
Section 4.04. Capitalization; Securities ............................................................... 14
Section 4.05. Subsidiaries; Investments ................................................................ 14
Section 4.06. Financial Statements; Undisclosed Liabilities ............................................ 15
Section 4.07. Absence of Certain Changes ............................................................... 15
i
TABLE OF CONTENTS
Section 4.08. Property ................................................................................. 15
Section 4.09. Litigation ............................................................................... 16
Section 4.10. Compliance with Laws; Regulatory Approvals ............................................... 16
Section 4.11. Taxes .................................................................................... 16
Section 4.12. Employee Benefits Matters ................................................................ 17
Section 4.13. Labor .................................................................................... 17
Section 4.14. Contracts ................................................................................ 17
Section 4.15. Transaction with Subsidiaries ............................................................ 18
Section 4.16. Performance of Investment Trusts ......................................................... 18
Section 4.17. Derivative Instruments ................................................................... 18
Section 4.18. Trust Accounts ........................................................................... 19
Section 4.19. Books and Records ........................................................................ 19
Section 4.20. Insurance ................................................................................ 19
Section 4.21. Environmental, Health and Safety Laws .................................................... 19
Section 4.22. Finder's Fees ............................................................................ 20
Section 4.23. Consumer Finance Loans ................................................................... 20
Section 4.24 *Funds ................................................................................... 20
*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED SEPARATELY
WITH THE COMMISSION.
Section 4.25 Sale of Assets ........................................................................... 20
Section 4.26 Disclosure Schedules ..................................................................... 20
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
Section 5.01. Corporate Organization and Qualification ................................................. 21
Section 5.02. Authorization of Agreement; Enforceability ............................................... 21
Section 5.03. Consents; No Conflicts ................................................................... 21
Section 5.04. Litigation ............................................................................... 21
Section 5.05. Legal Requirements to Invest in a Bank ................................................... 21
Section 5.06. Financial Capacity ....................................................................... 22
ii
TABLE OF CONTENTS
ARTICLE VI
PRE-CLOSING COVENANTS
Section 6.01. Conduct of Business ...................................................................... 22
Section 6.02. Financial and Other Information .......................................................... 22
Section 6.03. Notifications ............................................................................ 23
Section 6.04. Taking of Necessary Action ............................................................... 23
Section 6.05. Further Cooperation ...................................................................... 23
Section 6.06. Public Statements......................................................................... 23
Section 6.07. Resignation of CHB Directors; Appointment of Acting CEO; Election of Directors
and Appointment of Officers .............................................................. 24
ARTICLE VII
CONDITIONS
Section 7.01. Conditions to the Purchaser's Obligations ................................................ 24
Section 7.02. Conditions to the Seller's and the Bank's Obligations .................................... 25
ARTICLE VIII
POST-CLOSING COVENANTS
Section 8.01. Lock-up .................................................................................. 26
Section 8.02. Qualified Public Offering ................................................................ 26
ARTICLE IX
TERMINATION
Section 9.01. Termination of Agreement ................................................................. 27
Section 9.02. Effect of Termination .................................................................... 27
ARTICLE X
INDEMNIFICATION AND SURIVAL PERIOD
Section 10.01. Indemnification .......................................................................... 28
iii
TABLE OF CONTENTS
Section 10.02. Survival of Representations and Warranties ............................................... 30
Section 10.03. Insurance Proceeds; Exceptions and Deductions; Determination of Indemnification Amount ... 30
Section 10.04. No Duplication; Sole Remedy Procedures ................................................... 31
ARTICLE XI
ASSET INDEMNIFICATION
Section 11.01. Asset Indemnification .................................................................... 31
Section 11.02. Dispute Resolution ....................................................................... 36
ARTICLE XII
MISCELLANEOUS
Section 12.01. Fees and Expenses ........................................................................ 36
Section 12.02. Notices .................................................................................. 36
Section 12.03. Entire Agreement; Amendment; Severability ................................................ 37
Section 12.04. Counterparts ............................................................................. 37
Section 12.05. Governing Law; Jurisdiction .............................................................. 37
Section 12.06. Successors and Assigns ................................................................... 37
iv
STOCK PURCHASE AGREEMENT
STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of July
9, 2003, by and between (i) Korea Deposit Insurance Corporation, a company
established and existing under the laws of Korea (the "Seller" or "KDIC"), and
(ii) Shinhan Financial Group, a financial holding company established and
existing under the laws of Korea (the "Purchaser" or "SFG") and acknowledged and
agreed to by Chohung Bank, a company established and existing under the laws of
Korea (the "Bank" or "CHB").
W I T N E S S E T H:
WHEREAS, the Bank is engaged principally in the banking business as
defined under the Banking Act of Korea, with an authorized capital of
2,000,000,000 common shares, par value five thousand (5,000) Won per share
("Common Stock");
WHEREAS, the Seller owns 543,570,144 shares of Common Stock, which
constitutes 80.04% of the issued and outstanding Common Stock of the Bank as of
the date hereof;
WHEREAS, the parties hereto have decided to enter into this Agreement
pursuant to which the Purchaser has agreed to purchase from the Seller, and the
Seller has agreed to sell to the Purchaser, 543,570,144 shares of Common Stock
of the Bank, constituting 80.04% of the total issued and outstanding Common
Stock of the Bank (the "Transaction Shares"); and
WHEREAS, the parties hereto desire to make certain representations,
warranties, covenants and agreements in connection with the transaction
contemplated by this Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements contained in this
Agreement, the parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01. Definitions. As used in this Agreement, the
following terms shall have the meanings set forth below:
"Additional Loss Amount" has the meaning set forth in the
Section 11.01.
"Affiliate" means (a) with respect to any Person other than a
Korean Governmental Entity (including the Seller), an affiliate of such Person
as defined under the Act on Monopoly Control and Fair Trade Act of Korea, and
(b) with respect to any Korean Governmental Entity (including the Seller), any
other Korean Governmental Entity. For the purposes of this definition, the
Resolution Finance Corporation shall not be deemed an Affiliate of the Seller.
"Agreement" has the meaning set forth in the preamble.
"Articles of Incorporation" means the Articles of
Incorporation of the Bank, as amended from time to time.
"Asset Indemnity Amount" shall be aggregate amount of the
Asset Indemnity Amount for Corporate Loan, Asset Indemnity Amount for Returned
KAMCO Credits and Asset Indemnity Amount for Card Loan.
"Asset Indemnity Amount for Corporate Loans" has the meaning
set forth in Section 11.01.
"Asset Indemnity Amount for Card Loans" has the meaning set
forth in Section 11.01.
"Asset Indemnity Amount for Returned KAMCO Credits" has the
meaning set forth in Section 11.01.
"Bank" has the meaning set forth in the preamble.
"Bank Financial Statements" means the audited consolidated
balance sheets of the Bank as of December 31, 2002, 2001 and 2000, and the
related consolidated statements of income, changes in capital surplus and
retained earnings, and cash flows for the years then ended, as prepared in
accordance with Korean GAAP and audited by the Bank's external auditors.
"Business Day" means any day, other than a Saturday, Sunday or
a day on which banking institutions in Korea are closed.
"Card Loans" mean Card Loan A and Card Loan B.
"Card Loan A" means (A) credit card cash advances made by CHB
to its credit card customers (the "Cash Advances") as of December 31, 2002; (B)
credit card loans, including Daewhan-loans made by CHB to its credit card
customers (the "Credit Card Loans") as of December 31, 2002; (C) any outstanding
credit card balances, including any accrued interests thereon, resulting from
purchases made by CHB credit card customers (the "Receivables") as of December
31, 2002; and (D) any additional Cash Advances or Credit Card Loan or
Receivables from January 1, 2003 until the Closing Date made by or to the credit
card customers in (A), (B) and (C) above. The details of Cash Advances, Credit
Card Loan and Receivables shall be described in Appendix 1 and the details of
any additional Cash Advances or Credit Card Loan or Receivables from January 1,
2003 until the Closing Date shall be described in Appendix 2
"Card Loan B" means any card loan which was subject to any
extensions of maturity or roll-overs or conversion (Daewhan) of the Card Loan A
during January 1, 2003 to December 31, 2003.
"Closing" means the closing of the sale and purchase of the
Transaction Shares pursuant to Section 2.02.
2
"Closing Date" has the meaning set forth in Section 2.02.
"Collateral Value" means the value of collateral securing the
Corporate Loans, as calculated in accordance with Appendix 3.
"Common Stock" has the meaning set forth in the recitals.
"Contract" means any contract, agreement, arrangement or
instrument which is legally binding on the parties thereto.
"Convertible Securities" means any subscriptions, options,
conversion rights, exchange rights, warrants, or other agreements, securities or
commitments of any kind obligating the Bank, if applicable, or any of its
Subsidiaries to issue, grant, deliver or sell, or cause to be issued, granted,
delivered or sold, any equity securities of the Bank, if applicable, or any of
its Subsidiaries.
"Corporate Loan(s)" mean (i) any commitments or extension of
loans (including syndicated loans), commercial paper, debt securities (including
convertible bonds or bonds with warrants), guarantees, equity securities
(excluding equity securities owned by CHB for trading purposes) or any similar
credit extension (Yeoshin) instruments made or held by CHB to certain CHB
borrowers set forth in Appendix 4 hereto as of December 31, 2002, and (ii) any
further commitments or extensions of loans (including syndicated loans),
commercial paper, debt securities (including convertible bonds or bond with
warrants), guarantees, equity securities (excluding equity securities owned by
CHB for trading purposes) or any similar credit extension (Yeoshin) instruments
made or held by CHB to certain CHB borrowers set forth in Appendix 4 from (and
including) January 1, 2003 until the Second Calculation Date up to, where
applicable, the "Credit Limit" existing as of the date hereof as identified in
Appendix 5. For purposes of this definition, "Credit Limit" shall mean the
credit limits classified by each corporate loan type; and any new credit limit
amounts resulting from an interchange of one corporate loan type into another
corporate loan type pursuant to (i) decisions of a creditors committee under the
Corporate Restructuring Promotion Law or other workout procedures (including
banks managements (Eunhangkwanri) or private restructuring arrangements
sponsored by banks), (ii) other laws or regulations or court orders, or (iii)
government policies or guidelines (each of the foregoing items (i) , (ii) and
(iii) will be referred to as a "Special Cause") will be deemed to be included in
the amount of the Credit Limit as if such corporate loan type had existed as of
the date hereof. For avoidance of doubt, any extensions of maturity or
roll-overs or conversion (including Daehwan) of corporate loans shall be
included in the foregoing definition of Corporate Loan(s); provided (i) any new
term loans made after a substantial time period (under normal circumstances a
two week time period or longer will be deemed to be a substantial time period)
has elapsed since the maturity of any previous term loan and (ii) any extensions
of maturity, roll-overs or conversion (which would not include any lending made
within certain credit limits, i.e. Hando-Georae) made on significantly adversely
different terms ("Special Rollovers") without the consent (which consent shall
not be unreasonably withheld) of KDIC shall be excluded. Special Rollovers shall
mean any extensions of maturity or roll-overs or conversion with a (A) change in
the Bank's proprietary credit rating for the Bank's borrowers (the "Bank's
Credit Rating System") in a significantly material manner (except the changes of
3
credit rating between and among "normal" and "precautionary" status of the
Bank's borrowers. For avoidance of doubt, if the consent of KDIC is given in
this respect, any extension of maturity or roll-overs or conversion for the same
borrower, so long as such borrower remains in the same credit rating status,
such extension of maturity or roll-overs or conversion shall not be deemed as a
change in the Bank's Credit Rating System in a significantly material manner.),
(B) any change in collateral (including corporate guarantees) which results in a
significantly material reduction of the total collateral for such extensions of
maturity or roll-overs or conversion and any other changes of a same or
character or nature tantamount to significantly adversely different terms
provided that such change was not due to a Special Cause. The consent of KDIC
may be made prior to or after the extensions of maturity or roll-overs or
conversion and any such post consent procedure shall not be penalized only
because such consent request was made after the extensions of maturity or
roll-overs or conversion; provided, that such post consent request was not made
deliberately.
"Employee Benefit Plans" means all bonus, deferred
compensation, pension, profit sharing, stock option, employee stock purchase or
other employee benefit plans applicable to any or all of the employees of the
Bank or any of its Subsidiaries.
"Exchangeable Note Documents" shall mean the Indenture between
the Seller, as Issuer, and JPMorgan Chase Bank, as Trustee, dated December 11,
2001, for the US$500,000,000 2.50% Exchangeable Notes due 2005, a copy of which
has been provided to the Purchaser, and the Terms and Conditions of the
Exchangeable Notes.
"First Calculation Date" means the end date of the quarterly
fiscal period of CHB immediately preceding the first anniversary of the earlier
of the Cash Portion Closing or September 30, 2003.
"GI Payment Amount" has the meaning set forth in Section
2.04(b).
"Governmental Entity" means any government or political
subdivision or department of such government or political subdivision, any
governmental or regulatory body, commission, board, bureau, agency or
instrumentality, any stock exchange or any court.
"Independent Accountant" means an individual third party
accountant or accounting firm appointed under Section 11.02.
"Intellectual Property" means all intellectual property
rights, including patents, patent rights, trademarks, service marks, trade
names, copyrights, applications for any of the foregoing, licenses, trade
secrets, know-how and proprietary processes and formulae.
"Investment Agreement" has the meaning set forth in Section
7.01(f).
"Judgments" has the meaning set forth in Section 4.09.
"Korea" means the Republic of Korea.
4
"Korean GAAP" means the generally accepted accounting
principles in Korea.
"Law" means any law, treaty, statute, ordinance, code, rule or
regulation of a Governmental Entity or judgment, decree, order, writ, award,
injunction or determination of an arbitrator or court or other Governmental
Entity.
"Lien" means any mortgage, pledge, lien, yangdo tambo or any
other security interest.
"Lock-up Period" has the meaning set forth in Section 8.01.
"Losses" means any and all losses, penalties, liabilities and
expenses (including reasonable attorneys' and advisors' fees and disbursements)
incurred by, imposed upon or asserted against any Person.
"Material Adverse Effect" means, with respect to any Person,
any material adverse effect on either (i) the financial condition, results of
operations or business of such Person (and with respect to the Bank and its
Subsidiaries, taken as a whole) or (ii) the ability of the Person to perform its
obligations under this Agreement.
"Other Commercial Banks" shall mean Kookmin Bank, Hana Bank,
Korea First Bank, Koram Bank, Woori Bank and Korea Exchange Bank (or any of
their successors) to the extent that such banks have any credit exposure
(non-collateral loan) of not less than ten (10) billion Won to the CHB borrowers
set forth in Appendix 5 hereto.
"Permitted Liens" means (i) mechanics', carriers', repairmen's
or other like Liens arising or incurred in the ordinary course of business, (ii)
statutory Liens for Taxes not yet due and payable and (iii) other Liens that do
not materially impair the continued use and operation of the assets to which
they relate.
"Person" means any individual, corporation, company,
association, partnership, joint venture, trust or unincorporated organization or
Governmental Entity.
"Pre-Closing Period" means the period from the date hereof
until the earlier of the Equity Portion Closing and the termination of this
Agreement.
"Proceeding" means any claim, suit, action, arbitration,
investigation or other legal proceeding against a party to this Agreement.
"Purchase Price" means the total consideration to be paid for
the Transaction Shares as set forth in Section 2.01.
"Purchaser" has the meaning set forth in the preamble.
"Regulatory Approvals" means, with respect to any matter, (i)
any and all permits, licenses, consents, approvals, orders, registrations,
authorizations, clearances from, or filings or
5
registrations with, Governmental Entities, and (ii) the expiration of any and
all waiting periods imposed by applicable laws, in each case in respect of such
matter.
"Relevant Corporate Loans Amount" means, with respect to
Corporate Loans to each CHB borrowers identified in Appendix 4 hereto, the
aggregate amount of Corporate Loan, provided, the Relevant Corporate Loans
Amount shall not include (i) the amount of the write-off or Write-Down of the
relevant Corporate Loans, as of the Second Calculation Date under Section
11.01(a)(iii) (for avoidance of doubt, in case CHB is required to reserve with
respect to the remaining balance of the applicable Corporate Loans that have
been written-off or Written-Down, such remaining balance shall be included in
the Relevant Corporate Loans Amount) or (ii) the amount sold to a third party
under Section 11.01(a)(iv)
"Representatives" means, with respect to any Person and any
particular matter, any of such Person's officers, directors, employees, agents,
attorneys, accountants, actuaries, consultants, or financial advisors or other
Person acting on behalf of such Person in respect of such matter.
"Required Regulatory Approvals" means each Regulatory Approval
required to be obtained in connection with the execution, delivery and
performance of this Agreement and the Investment Agreement.
"Returned KAMCO Credits" mean any assets, loans, or other
credits previously sold to KAMCO but are returned to CHB under the agreements
between KAMCO and CHB with regard to such assets as described in Appendix 6.
"Second Calculation Date" means the end date of the quarterly
fiscal period of CHB immediately preceding the second anniversary of the earlier
of the Cash Portion Closing and September 30, 2003.
"Secured Corporate Loans" means any portion of the Corporate
Loans that is secured by collateral, but only to the extent covered by the
Collateral Value of such collateral. For the avoidance of doubt, if the amount
of Corporate Loans with collateral exceeds the Collateral Value, such portion of
the Corporate Loans shall constitute the Unsecured Corporate Loans.
"Seller" has the meaning set forth in the preamble.
"Subsidiary" means as to any Person, any other Person of which
more than 50% of the capital voting stock is at the time directly or indirectly
owned or controlled by such Person or if any Person that, alone or together with
any other Person, directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, such Person (but
not including an ABS specialty company established under the Asset Backed
Securitization Act of Korea). For purposes of this definition, "control"
(including the terms "controlling", "controlled by" and "under common control
with"), as used with respect to any Person shall mean the possession, directly
or indirectly, of the power to direct or cause the direction of the
6
management policies of such Person, whether through ownership of voting
securities, by contract, agency or otherwise.
"Tax" or "Taxes" means all taxes, including any interest,
liabilities, fines, penalties or additions to tax that may become payable in
respect of such taxes, imposed by any Governmental Entity, including Korean and
other income taxes, payroll and employee withholding taxes, unemployment
insurance, social security, sales and use taxes, excise taxes, franchise taxes,
gross or net receipts taxes, occupation taxes, real and personal property taxes,
ad valorem taxes, stamp taxes, transfer taxes, capital taxes, import duties,
withholding taxes, workers' compensation taxes and other obligations of the same
or of a similar nature.
"Transaction Shares" has the meaning set forth in the
preamble.
"Transfer" has the meaning set forth in Section 8.01.
"Unsecured Corporate Loans" means any Corporate Loans that are
not Secured Corporate Loans.
"Write-Downs" or "Written-Down" means any reduction in the
amount of the principal for Corporate Loans or Card Loans, as applicable, due to
debt-equity swaps, exemptions, reduction of debt (Gamaek-Sonsil), valuation loss
(Pyungga-Sonsil) and any other similar actions or events resulting in the loss
of any principal on the Corporate Loans other than through provisioning of
reserves with respect to the Corporate Loans; provided any Write-Down or
Written-Down with respect to equity securities and convertible securities shall
be calculated as set forth in the Appendix 7.
Section 1.02. General Interpretive Principles. Whenever used
in this Agreement, except as otherwise expressly provided or unless the context
otherwise requires, any noun or pronoun shall be deemed to include the plural as
well as the singular and to cover all genders. The name assigned to this
Agreement and the section captions used herein are for convenience of reference
only and shall not be construed to affect the meaning, construction or effect
hereof. Unless otherwise specified, the term "including" means "including
without limitation" (and "include," "includes" and "included" shall be similarly
interpreted). References in this Agreement to Articles, Sections, Annexes,
Exhibits or Schedules mean the Articles, Sections, Annexes, Exhibits and
Schedules of or to this Agreement, and such Annexes, Exhibits and Schedules are
an integral part of this Agreement.
ARTICLE II
SALE AND PURCHASE OF SHARES
Section 2.01. Sale and Purchase of Shares. Subject to the
terms and conditions of this Agreement, the Seller agrees to sell and transfer
to the Purchaser, and the Purchaser agrees to purchase from the Seller, the
Transaction Shares for the following consideration (the Purchase Price"):
7
(i) Maximum amount of 1,718,800,548,296 Won for
277,220,773 Transaction Shares consisting of the following components
(the "Cash Portion"):
1. 900,000,000,000 Won in cash to be paid at
Closing (the "Closing Cash Payment Amount");
and
2. The Withheld Indemnity Payment Amounts (as
described in Section 2.04); and
(ii) 91,304,564 newly issued shares of preferred stock of
the Purchaser consisting of the following components (the "Equity
Portion"):
1. 46,583,961 newly issued shares of redeemable
preferred stock ("RPS") of the Purchaser
(the major terms of which are attached as an
exhibit to the Investment Agreement) in
exchange for 135,892,536 Transaction Shares
(reflecting a 0.3428 : 1 ratio between one
share of redeemable preferred stock of the
Purchaser and one Transaction Share; and
2. 44,720,603 newly issued shares of redeemable
convertible preferred stock ("RCPS") of the
Purchaser (the major terms of which are
attached hereto as an exhibit to the
Investment Agreement) in exchange for
130,456,835 Transaction Shares (reflecting a
0.3428 : 1 ratio between one share of
redeemable convertible preferred stock of
the Purchaser and one Transaction Share.
Section 2.02. Closing. The purchase and sale of the
Transaction Shares contemplated by this Agreement shall be consummated at one or
more closings (the "Closings") to be held at a place to be mutually agreed upon
as soon as practicable and, in any event, no later than September 30, 2003 or
such other time, date and location as the Seller and the Purchaser may agree
(such times and dates being herein referred to as the "Closing Dates"); provided
that the Purchaser may have the option to consummate the purchase and sale of
the Transaction Shares relating to the Equity Portion first (the "Equity Portion
Closing") and subsequently consummate the purchase and sale of the Transaction
Shares relating to the Cash Portion (the "Cash Portion Closing"). For avoidance
of doubt, the Equity Portion Closing shall mean (i) the issue of the Equity
Portion by the Purchaser to the Seller and (ii) the delivery by the Seller to
the Purchaser of the Transaction Shares relating to the Equity Portion (the date
thereof being the "Equity Portion Closing Date"), and the Cash Portion Closing
shall mean (i) the payment of the Cash Closing Payment and (ii) the delivery by
the Seller to the Purchaser of the Transaction Shares relating to the Cash
Portion (the date thereof being the "Cash Portion Closing Date"). Further, the
date of the Equity Portion Closing shall be deemed as the Closing Date for the
purpose of Articles IV, VI, 7.01(a) but only with respect to Article IV therein,
(g) and (h), X and XI and otherwise the Closing Date shall mean the Equity
Portion Closing Date or the Cash Portion Closing Date, as the case may be unless
provided otherwise in the relevant provisions.
8
Section 2.03. Actions at Closing.
(a) Cash Portion Closing. At the Cash Portion Closing,
the following actions shall occur:
(i) The Purchaser will deliver to the
Seller by wire transfer, to a bank account designated in
advance by the Seller, the Closing Cash Payment Amount of the
Purchase Price.
(ii) The Seller will deliver to the
Purchaser stock certificates of the Bank, in due and proper
form, representing the Transaction Shares relating to the Cash
Portion.
(iii) The Seller and the Bank will
deliver to the Purchaser the other documents to be delivered
pursuant to Section 7.01.
(iv) The Purchaser will deliver to the
Seller the other documents to be delivered pursuant to Section
7.02.
(b) Equity Portion Closing. At the Equity Portion
Closing, the following actions shall occur:
(i) The Seller will deliver to the
Purchaser stock certificates of the Bank, in due and proper
form, representing the Transaction Shares relating to the
Equity Portion.
(ii) The Purchaser will deliver to the
Seller the receipt representing the in-kind contribution for
the RPS and RCPS.
(iii) The Seller and the Bank will
deliver to the Purchaser the other documents to be delivered
pursuant to Section 7.01.
(iv) The Purchaser will deliver to the
Seller the other documents to be delivered pursuant to Section
7.02.
Section 2.04. Withheld Indemnity Payment Amounts. The total
additional payments relating to certain indemnities (the "Withheld Indemnity
Payment Amounts") that shall be deducted from the Cash Portion shall consist of
the following components:
(a) AI Payment Amount. The Purchaser shall pay to the
Seller an additional amount calculated as below (the "AI Payment
Amount") on the earlier of (i) 60 days after the date the Additional
Loss Amount (whether full or partial) with respect to the Second
Calculation Date is finally determined pursuant to Section 11.01(d) and
Section 11.02, or (ii) the date as agreed between the Seller and the
Purchaser (the "AI Payment Date"). The AI Payment Amount shall be
calculated as follows:
(i) The AI Payment Amount shall be as follows:
9
652,284,172,800 Won - (aggregate Asset
Indemnity Amount for Corporate Loans +
aggregate Asset Indemnity Amount for
Returned KAMCO Credits + aggregate Asset
Indemnity Amount for Card Loans), provided
that (i) the sum of the aggregate Asset
Indemnity Amount for the Corporate Loans and
the aggregate Asset Indemnity Amount for
Returned KAMCO Credits shall not exceed
332,073,000,000 Won, (ii) the Asset
Indemnity Amount for Card Loans shall not
exceed 450,667,000,000 Won, and (iii) the AI
Payment Amount shall not be less than zero.
(ii) The Purchaser shall pay to the Seller the
interest accrued on the AI Payment Amount. The rate for the
interest on the AI Payment Amount shall be 4.3% per annum and
shall accrue from the earlier of the Cash Portion Closing or
October 1, 2003 to the AI Payment Date; provided that any AI
Payment Amount not paid on such date shall accrue interest
thereon at 6% per annum until actual payment is made.
(b) GI Payment Amount. The Purchaser shall pay to the
Seller an amount equal to 166,516,375,496 Won (the "GI Payment Amount")
on the second anniversary of the earlier of the Cash Portion Closing or
September 30, 2003 (the "GI Payment Date"), subject to the following:
(i) The Purchaser shall pay the Seller interest
on the GI Payment Amount at a rate of 4.3% per annum starting
from the earlier of the Cash Portion Closing or October 1,
2003 until the GI Payment Date; provided, that the interest
shall not accrue on the Setoff Amount after the setoff of the
Setoff Amount in accordance with (ii) below; provided, further
that any GI Payment Amount not paid on the GI Payment Date
shall accrue interest at 6% per annum until the date of actual
payment.
(ii) If there are any amounts due and payable by
the Seller to the Purchaser on or before the GI Payment Date
pursuant to Section 10.01 (the "Setoff Amount"), the Purchaser
shall notify the Seller in writing (the "Setoff Notice") of
the Setoff Amount requesting the consent of the Seller to
deduct the Setoff Amount from the GI Payment Amount. If the
Seller consents to the deduction of the Setoff Amount from the
GI Payment Amount or does not object to such deduction in a
written notice to the Purchaser within 30 days of the Setoff
Notice, the Purchaser shall deduct the Setoff Amount from the
GI Payment Amount.
(iii) If the Seller objects to the deduction of
the Setoff Amount from the GI Payment Amount in a written
notice sent to the Purchaser within 30 days of the receipt of
the Setoff Notice, the Purchaser shall not deduct the Setoff
Amount from the GI Payment but instead the Seller shall pay
the Purchaser the Setoff Amount separately within 60 days of
receipt of the Setoff Notice and the Purchaser's rights,
interests and claims of the Purchaser to receive the Setoff
Amount from the Seller shall not be affected. If the Seller
does not pay the Setoff
10
Amount within 60 days of the receipt of the Setoff Notice,
interest shall accrue commencing upon the expiration of the 60
day period and be payable by the Seller to the Purchaser on
such amount at the rate of 6.0%. For the avoidance of doubt,
no interest shall accrue during the 60 days of the receipt of
the Setoff Notice.
Section 2.05. Earn Out Payment.
(a) The Purchaser shall pay to the Seller an amount equal
to 20% of the total Excess Amount for fiscal years 2004, 2005 and 2006
(the "Earn Out Payment Amount") within 30 days after the Excess Amount
(as defined below in (c) below) has been finally determined for the
fiscal year 2006.
(b) Within 90 days after the end of 2006, the Purchaser
shall, or cause the Bank to, notify KDIC of the Excess Amount (as
defined in (c) below) for the fiscal years 2004, 2005 and 2006 (the
"Earn Out Notice").
(c) The term Excess Amount shall mean with, respect to
fiscal years 2004, 2005 and 2006, the aggregate of the net income
appearing on the relevant audited consolidated income statement of the
Bank prepared in accordance with Korean GAAP (subject to 2.05 (d)
below) which is in excess of 1,800,000,000,000; provided that with
respect to the annual financial statements for fiscal year 2003, the
Bank shall use the provisioning method for reserves of Shinhan Bank as
attached in Exhibit A.
(d) When calculating the net incomes of the Bank in (c)
above, in the event that the Bank and Shinhan Bank are merged, the net
incomes of the Bank and Shinhan Bank for the two fiscal years prior to
such merger shall be used as the basis for the calculation of net
income for the fiscal year during which the merger occurs.
(e) When calculating the net incomes of the Bank in (c)
above, the net income derived from credit card business of CHB but
which are subsequently transferred to Shinhan Card Co., Ltd. after the
Cash Portion Closing will be taken into consideration in accordance
with the guidelines and principles contained in Exhibit B.
(f) In addition, the Seller and Purchaser agree in
principle, that in the case of any merger, split merger, split-off,
spin-off or other business combination or similar event involving the
business of the Bank (excluding "Mooljuk-Bunhal") subsequent to the
Cash Portion Closing, any profits or loss resulting from the above, as
well as the net income derived from such split-off or spin-off
business, will be reflected in the calculation of the net income of the
Bank in (c) above. The details of such calculation may be discussed
before the occurrence of any of the foregoing event.
(g) SFG shall take all necessary action to ensure the
election of an outside director of CHB recommended by KDIC and approved
by SFG in accordance with Section 7.02 (b) through (f) of the
Investment Agreement, which shall apply mutatis mutandis, provided that
employees of KDIC will be eligible to serve as an outside director of
CHB. The foregoing right of KDIC shall be from the general shareholders
11
meeting in 2003 to be held in accordance with Section 6.07(c) and
terminate at the annual general shareholders meeting in 2007.
ARTICLE III
REPRESENTATIONS AND WARRANTIES REGARDING THE SELLER
The Seller hereby represents and warrants to the Purchaser, as
of the date hereof and as of the Closings as if made on and as of each of the
Closing Dates (or, with respect to representations and warranties that are given
as of a specific date, as of such date), as follows:
Section 3.01. Title to Shares. The Seller is the legal and
beneficial owner of the Transaction Shares and upon consummation of the purchase
contemplated herein, the Purchaser will acquire from the Seller good title to
such Transaction Shares free and clear of Liens. Except as set forth in Schedule
3.01, the Transaction Shares have been duly authorized and are validly issued
and fully paid and non-assessable and will not be subject to any preemptive or
similar rights, restriction on voting rights (other than such restrictions on
voting rights provided for under applicable Law) or other Liens.
Section 3.02. Authorization of Agreement; Enforceability.
(a) The Seller has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action on the part of the Seller.
(b) This Agreement has been duly executed and delivered by the
Seller and constitutes a valid and binding obligation of the Seller, enforceable
against the Seller in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws relating to or affecting creditors' rights generally and by general
principles of equity.
Section 3.03. Consents; No Conflicts.
(a) Except for the Required Regulatory Approvals with respect
to the sale and transfer of the Transaction Shares set forth in Schedule
3.03(a), no Regulatory Approval is required to have been obtained by the Seller
in connection with the execution, delivery and performance of this Agreement.
(b) The execution, delivery and performance by the Seller of
this Agreement will not: (i) violate any provision of the Seller's articles of
association or other constitutional documents, (ii) result in the violation of
any Law or Regulatory Approval applicable to the Seller, nor (iii) violate,
conflict with or result in a breach or termination of any contract, obligation,
or commitment to which the Seller is a party or by which it is bound, except for
such violations, conflict, breach or termination that, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.
12
Section 3.04. Litigation. There are no Proceedings against the
Seller that enjoin, restrict or could materially delay the Seller's ability to
sell or transfer the Transaction Shares hereunder.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES REGARDING THE BANK AND
SUBSIDIARIES
Each of the Seller and the Bank hereby represents and warrants
to the Purchaser, as of the date hereof and as of the Equity Portion Closing as
if made on and as of the Equity Portion Closing Date (or, with respect to
representations and warranties that are given as of a specific date, as of such
date) giving effect to any supplements to the Disclosure Schedule made in
accordance with Section 6.08, as follows:
Section 4.01. Corporate Organization and Qualification. The
Bank is a corporation duly organized and validly existing under the laws of
Korea, has all power and authority required to use its properties and conduct
its business as it is now being conducted and is duly licensed to do business in
each jurisdiction in which it is required to be so licensed.
Section 4.02. Authorization of Agreement; Enforceability.
(a) The Bank has all requisite corporate power and authority
to execute, deliver and perform its obligations under this Agreement. The
execution, delivery and performance of this Agreement have been duly authorized
by all necessary corporate action on the part of the Bank.
(b) This Agreement has been duly executed and delivered by the
Bank and constitutes a valid and binding obligation of the Bank, enforceable
against the Bank in accordance with its terms, except as such enforceability may
be limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting creditors' rights generally and by general principles
of equity.
Section 4.03. Consents; No Conflicts.
(a) Except for the Required Regulatory Approvals with respect
to the sale and purchase of the Transaction Shares set forth in Schedule
4.03(a), no Regulatory Approval is required to have been obtained by the Bank in
connection with the execution, delivery and performance of this Agreement.
13
(b) The execution, delivery and performance of this Agreement
will not: (i) violate any provision of the Articles of Incorporation or other
constitutional documents of the Bank or any of its Subsidiaries nor (ii) result
in the violation of any Law or Regulatory Approval applicable to the Bank or any
of its Subsidiaries, except for such violations, conflict, breach or termination
that, individually or in the aggregate, neither have had nor are reasonably
likely to have a Material Adverse Effect.
(c) The Seller is registered as the holder of the Transaction
Shares in the Bank's shareholders' registry and no Liens are registered on the
Transaction Shares in such registry.
Section 4.04. Capitalization; Securities.
(a) As of the date hereof, the authorized and outstanding
capital stock and outstanding Convertible Securities of the Bank are as set
forth in Schedule 4.04(a). Except as set forth in Schedule 4.04(a), the Bank has
no obligations to issue or sell any other capital stock or Convertible
Securities.
(b) All outstanding shares of Common Stock (including the
Transaction Shares) were duly authorized and validly issued and are fully paid
and non-assessable.
(c) Except as set forth in Schedule 4.04(c), the Bank and its
Subsidiaries are not a party to any agreements (other than this Agreement) with
respect to the governance or management of the Bank and any of its Subsidiaries
or the exercise of voting rights in respect of equity securities of the Bank and
any of its Subsidiaries.
Section 4.05. Subsidiaries; Investments.
(a) Schedule 4.05(a) sets forth a list of all of the Bank's
Subsidiaries. For the avoidance of doubt, the trust accounts of the Bank shall
not be deemed a Subsidiary of the Bank for purposes of this Agreement and shall
be treated as a part of the Bank. Each Subsidiary is a corporation duly
organized and validly existing under the laws of its jurisdiction of
incorporation, has all power and authority required to use its properties and
conduct its business as it is now being conducted and is duly licensed to do
business in each jurisdiction in which it is required to be so licensed, except
for such failures to be licensed that, individually or in the aggregate, neither
have had nor are reasonably likely to have a Material Adverse Effect.
(b) As of the date hereof, the authorized and outstanding
capital stock and outstanding Convertible Securities of each Subsidiary are as
set forth in Schedule 4.05(b). Except as disclosed in Schedule 4.05(b), all of
the outstanding capital stock and outstanding Convertible Securities in each
Subsidiary is owned by the Bank free and clear of any Liens and none of the
Subsidiaries have any obligation to issue or sell any other capital stock or
Convertible Securities. All outstanding shares of the capital stock of each of
the Subsidiaries were duly authorized and validly issued and are fully paid and
non-assessable.
(c) Schedule 4.05(c) lists all of the Bank's equity ownership
interests in any other Person, other than (i) listed securities held in the
ordinary course of business representing less than ten percent (10%) of the
capital stock of the issuer and (ii) other equity ownership interests valued at
less than ten (10) billion Won.
14
Section 4.06. Financial Statements; Undisclosed Liabilities.
(a) The Bank Financial Statements and the financial statements
of the Subsidiaries were prepared in accordance with the requirements of
applicable Law and Korean GAAP (and with respect to the non-Korean Subsidiaries,
the generally accepted accounting principles of the jurisdictions of such
Subsidiaries) and present fairly, in material respects, the financial position,
results of operations, changes in capital surplus and retained earnings and cash
flows of the Bank and its Subsidiaries, as of the dates and for the periods
covered thereby.
(b) Except as disclosed in Schedule 4.06(b), as at the date of
the most recent audited financial statements, the Bank and its Subsidiaries have
no liability or obligations of any nature (whether known or unknown, accrued,
absolute, fixed, contingent, liquidated or otherwise ("Undisclosed
Liabilities"), except (i) as fully reserved against the latest Bank Financial
Statement (including footnotes thereof) and the most recently available audited
financial statements of the Subsidiaries (which shall have been delivered by the
Seller to the Purchaser prior to the date hereof) and (ii) for such Undisclosed
Liabilities that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.
(c) Except as disclosed in Schedule 4.06(c), since the date of
the most recent audited financial statements, the Bank and its Subsidiaries have
no Undisclosed Liabilities, except those incurred in the ordinary and usual
course of business consistent with prudent banking practices in Korea.
Section 4.07. Absence of Certain Changes. Except for (i) the
transaction contemplated by this Agreement or (ii) as disclosed in Schedule
4.07, since December 31, 2002 (with respect to the Bank) and the date of the
most recent audited financial statements of the Subsidiaries (with respect to
the Subsidiaries), the Bank and its Subsidiaries have conducted their business
in the ordinary and usual course, and there has not been any development that,
individually or in the aggregate, have had or is reasonably likely to have a
Material Adverse Effect.
Section 4.08. Property.
(a) Except as set forth in Schedule 4.08(a), the Bank and its
Subsidiaries have good and marketable title to all real property and buildings
owned by them free and clear of any Liens other than Permitted Liens.
(b) Except as set forth in Schedule 4.08(b), the Bank and its
Subsidiaries have made all payments, and are not in material default, under any
leases relating to real property and buildings held by or used by them, all of
which are in full force and effect, except for such non-payments, defaults and
non-effectiveness that, individually or in the aggregate, neither have had nor
could reasonably likely to have a Material Adverse Effect.
(c) Except as set forth in Schedule 4.08(c), the Bank and its
Subsidiaries (i) have the necessary rights to use the Intellectual Property used
in the conduct of their business, (ii) are in compliance with such rights to use
the Intellectual Property and (iii) have not received any notice of any
infringement of or conflict with asserted rights of others with respect to such
15
Intellectual Property or any challenge to or claim against the rights of the
Bank or any of its Subsidiaries with respect to such Intellectual Property
except for such lack of rights, non-compliance and claims and challenges that,
individually or in the aggregate, neither have had nor are reasonably likely to
have a Material Adverse Effect.
Section 4.09. Litigation. Except as disclosed in Schedule
4.09, (i) there are no material judgments, decrees, injunctions or orders
(collectively, "Judgments") outstanding against the Bank and any of its
Subsidiaries or any of their respective assets and (ii) there are no Proceedings
pending or, to the knowledge of the Seller, the Bank and its Subsidiaries,
threatened, relating to or affecting the Bank and any of its Subsidiaries or any
of their respective assets, except for Proceedings that individually involve
claims of less than one hundred (100) million Won for which individually or in
the aggregate, have not had nor are reasonably likely to have a Material Adverse
Effect.
Section 4.10. Compliance with Laws; Regulatory Approvals.
Except as set forth in Schedule 4.10, (i) the Bank and its Subsidiaries and, to
the knowledge of the Seller, the Bank and its Subsidiaries, the officers and key
employees of the Bank and its Subsidiaries (during the course of their
respective duties) are in compliance with all applicable Laws in material
respects, and (ii) neither the Bank nor any of its Subsidiaries is subject to
any investigation, inquiry or enforcement proceedings or process by any
Governmental Entity of which the Bank or its Subsidiaries have been notified,
except for such instances of non-compliance, failures to obtain Regulatory
Approvals and investigation, inquiry or enforcement proceedings or process that,
individually or in the aggregate, neither have had nor are reasonably likely to
have a Material Adverse Effect on the Bank and its Subsidiaries.
Section 4.11. Taxes. Except as disclosed on Schedule 4.11
hereto:
(a) The Bank and its Subsidiaries have duly filed all Korean
and other tax returns (including any information returns), reports and
statements that are required to have been filed with the appropriate taxing
authorities and have paid all Taxes required to have been paid for all relevant
periods (other than Taxes that are being contested in good faith and for which
appropriate reserves have been set aside);
(b) No audits or investigations relating to any Taxes for
which the Bank or any of its Subsidiaries may be liable are pending or, to the
knowledge of the Seller, the Bank and its Subsidiaries, threatened before any
taxing authority. There are no agreements or applications by the Bank or any of
its Subsidiaries for the extension of the time for filing any tax return or
paying any Tax, nor have there been any waivers by the Bank or any of its
Subsidiaries of any statutes of limitation for the assessment of any Taxes nor
are such agreements, applications and waivers under discussion; and
(c) The Bank and its Subsidiaries are not a party to any
agreements relating to the sharing or allocation of Taxes nor are they
discussing becoming a party to such agreements.
16
Section 4.12. Employee Benefits Matters.
(a) Except as set forth in Schedule 4.12(a), the Bank and its
Subsidiaries have no liability with respect to, and have timely made all
payments due to, and recorded on their books all amounts properly accrued in
respect of, all Employee Benefit Plans, except for such liabilities and failures
to pay that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.12(b), the Employee
Benefit Plans conform to applicable Laws in material respects and there are no
Proceedings pending with respect to the Employee Benefit Plans, except in each
case for such non-conformities and Proceedings that, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.
Section 4.13. Labor.
(a) Except as set forth in Schedule 4.13(a), the Bank and its
Subsidiaries do not have any collective bargaining agreements or wage agreements
generally applicable to any of their employees. Except as set forth in Schedule
4.13(a), the Bank and its Subsidiaries have conducted their businesses in
compliance with all material employment agreements, the rules of employment,
collective bargaining agreements and wage agreements, except for such
non-compliance that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.13(b), since December
31, 2002, the Bank and its Subsidiaries have not experienced any strikes, work
stoppages, or other material labor disputes, and there are no pending or, to the
knowledge of the Seller, the Bank and its Subsidiaries, threatened strikes, work
stoppages or other material labor disputes.
(c) Except as set forth in Schedule 4.13(c), the Bank and its
Subsidiaries are in compliance with all Laws in material respects relating to
employment, industrial relations, labor unions, mandatory severance benefits,
and social insurance programs, except for such non-compliance that, individually
or in the aggregate, neither have had nor are reasonably likely to have a
Material Adverse Effect.
Section 4.14. Contracts.
(a) Except as set forth in Schedule 4.14(a), all Contracts are
valid and enforceable in accordance with the terms thereof except for such
invalidity or unenforceability which, individually or in the aggregate, neither
have had nor are reasonably likely to have a Material Adverse Effect.
(b) Except as set forth in Schedule 4.14(b), the Bank and its
Subsidiaries have not violated the terms of, nor are they in default under, any
Contracts, except for such violations and defaults which, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.
17
(c) Except as set forth in Schedule 4.14(c), the execution,
delivery and performance of this Agreement, the performance by the Seller or the
Bank of its obligations hereunder and the consummation of the transactions
contemplated herein do not and will not violate, conflict with, or result in the
breach or termination of, or otherwise give any other Person the right to
challenge the validity of the transactions contemplated herein, accelerate,
renegotiate or terminate or receive any payment, or constitute a default or an
event of default (or an event which with notice, lapse of time, or both, would
constitute a default or event of default) under the terms of, or result in the
imposition of any Lien under, any Contracts to which the Bank or any of its
Subsidiaries are a party or by which the Bank or any of its Subsidiaries or any
of their respective assets or operations are bound or affected.
Section 4.15. Transaction with Subsidiaries. Except as
disclosed in Schedule 4.15, there are no material contracts, arrangements or
understandings of any kind between the Bank, on the one hand, and the
Subsidiaries , on the other hand, except for those contracts or arrangements
entered into in the ordinary course of business.
Section 4.16. Performance of Investment Trusts. Except as set
forth in Schedule 4.16, (i) there are no guarantees to investors by the Bank or
CHITMC relating to the yield, return or redemption value, of units of securities
investment trusts or shares of securities investment trust companies established
pursuant to the Securities Investment Trust Business Act or the Securities
Investment Company Act ("Investment Trusts"), or any interest therein, sold,
distributed, maintained or established by the Bank or CHITMC, except such
guarantees that are legally permitted pursuant to the Securities Investment
Trust Business Act and the Securities Investment Company Act and for such
guarantees which, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect, (ii) there has not been and
there exist no material violations of the relevant trust deeds or other
constituent instruments, contractual requirements, laws and regulations,
internal regulations of CHITMC or any such Investment Trusts managed by CHITMC,
and (iii) that CHITMC and each of the Investment Funds managed by CHITMC are in
compliance with all material legal obligations (including but not limited to
fiduciary duties) owed to investors in any of the Investment Trusts managed by
CHITMC, except for such non-compliance which, individually or in the aggregate,
neither have had nor are reasonably likely to have a Material Adverse Effect. In
addition, the Investment Trusts have been duly organized and the interests in
such Investment Trust have been validly issued. Except as set forth in Schedule
4.16, there are no agreements or side letters relating to CHITMC or any of the
funds managed by CHITMC that obligates CHITMC to roll-over and/or repurchase
commercial paper (so called "option CP") in connection with the commercial paper
held by CHITMC or any of the funds managed by CHITMC.
Section 4.17. Derivative Instruments.
(a) Except as set forth in Schedule 4.17(a), any swaps, caps,
floors, futures, forward contracts, option agreements, and any other derivative
financial instruments, contracts or arrangements (collectively, "Derivative
Instruments"), whether entered into for the account of the Bank or any of its
Subsidiaries or for the account of one of its customers, were entered into in
the ordinary course of business and in accordance with applicable Law. The Bank
and its Subsidiaries have complied in material respects with its obligations
under such Derivative Instruments to the extent that such obligations have
accrued and has not received any written
18
notice of default, acceleration or termination in respect of its Derivative
Instruments from any counterparty.
(b) Except as set forth in Schedule 4.17(b), the total
derivatives positions of the Bank and its Subsidiaries are hedged or secured
either by back-to-back or matching derivatives transactions or by other
transactions entered into by, or collateral provided to, the Bank and its
Subsidiaries consistent with prudent banking practices in Korea. All of the
outstanding Derivative Instruments of the Bank have been marked to market as of
the end of the preceding month in accordance with Korean GAAP.
Section 4.18. Trust Accounts. Except as set forth in Schedule
4.18, (i) the Bank has not engaged in any transfers of assets between trust
accounts of the Bank established under the Trust Business Act (the "Bank Trust
Accounts") that do not comply with the requirements of applicable Law, (ii)
there are no guarantees to customers relating to the yield, return, of the Bank
Trust Accounts (other than guarantees that are legally permitted pursuant to the
Trust Business Act), (iii) there has not been and there exist no material
violations of the relevant trust agreement or other constituent instruments,
contractual requirements, laws and regulations, internal regulations of the Bank
or any such investment vehicle or instrument, in relation to management or
distribution of such Bank Trust Accounts or any interest or participation
therein, and (iv) that the Bank is in compliance in material respects with all
material legal obligations (including but not limited to trustee's fiduciary
duties) owed to investors in any of the Bank Trust Accounts, except for such
non-compliance which, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect.
Section 4.19. Books and Records. All of the books and records
of the Bank and its Subsidiaries that have been provided to the Purchaser or
that the Purchaser shall have access to shall be accurate and complete. The Bank
and its Subsidiaries have maintained, in all material respects, the books and
records required to be maintained pursuant to the applicable Laws.
Section 4.20. Insurance. Except as set forth in Schedule 4.20,
the Bank and its Subsidiaries are insured against such losses and risks and in
such amounts as is (i) required by Law and (ii) consistent, in material
respects, with applicable internal risk management guidelines of the Bank and
its Subsidiaries and as is customary in the business in which it is engaged. No
notice of default with respect to any provision of any such policies has been
received, and all such policies are in full force and effect and will not be
impaired as a result of the performance of this Agreement, except for such
defaults, non-effectiveness and impairments that, individually or in the
aggregate, neither have had nor are reasonably likely to have a Material Adverse
Effect.
Section 4.21 Environmental, Health and Safety Laws. Except as
set forth in Schedule 4.21, the Bank and each of its Subsidiaries have obtained
from the appropriate Governmental Entity, and have been in compliance with all
terms and condition of, all permits which are required under, the applicable
Laws that are in effect relating to public health and safety, worker health and
safety and pollution or protection of the environment, except for such failures
to obtain permits and non-compliance that, individually or in the aggregate,
neither have had nor are reasonably likely to have a Material Adverse Effect.
Neither the Bank nor any of its
19
Subsidiaries has any liability (i) under any Law relating to the protection of
human health or safety or concerning employee or worker health and safety or
relating generally to the environment or (ii) for the release of any hazardous
substance which is prohibited by Law (including in relation to any foreclosed
property owned by the Bank and its Subsidiaries), except for such liabilities
that, individually or in the aggregate, neither have had nor are reasonably
likely to have a Material Adverse Effect.
Section 4.22 Finder's Fees. Except as set forth on Schedule
4.22, there is no investment bank, broker, finder or other intermediary that has
been retained by or is authorized to act on behalf of the Bank who may be
entitled to any fee or commission from the Bank in connection with the
transactions contemplated by this Agreement.
Section 4.23 Consumer Finance Loans. The loan receivables
listed on Schedule 4.23(a) constitute all of the outstanding loan receivables
purchased by the Bank from various consumer finance companies and all such
agreements contain in all material respects the same contents of the form
attached in Schedule 4.23(b).
Section 4.24 * Funds. Any and all losses incurred by * as a
result of the portion of the aggregate amount of the Value Deficiency (as
defined below) to be paid by * to all investors (including the distributors of
the funds ) upon redemption and/or cancellation of beneficial certificates of
the * funds (excluding money market funds) (i.e., the fund where the calculation
of the net asset value is based on, subject to adjustment under certain
circumstances, the acquisition cost of the underlying assets plus accrued
interest) existing as of the Equity Portion Closing Date (each a "Relevant *
Fund", and collectively, the "Relevant * Funds"), does not and shall not exceed
50 billion Won, and when and if such loss amount exceeds 50 billion Won (which
shall constitute a breach of this Section 4.24), such excess amount multiplied
by 80% shall constitute the Losses of the Purchaser; provided, that any Losses
under this Section 4.24 shall be limited to (i) Losses of the Relevant * Funds
managed by * ,(ii) those Losses resulting from payments required by law or
regulations to be made by *. For purposes of this Section 4.24, "Value
Deficiency", with respect to a Relevant * Fund, shall mean its * as at the
Equity Portion Closing less its fair market value (to be used for the
calculation of the amount of Value Deficiency constituting the basis of loss to
*) as at the Equity Portion Closing (to be determined by agreement of the Seller
and the Purchaser within 60 days after the Equity Portion Closing Date and if
the Seller and the Purchaser are not able to agree upon the fair market value ,
the fair market value shall be determined in accordance with Section 11.02,
mutatis mutandis provided, that the amount of Value Deficiency of a Relevant *
Fund cannot be negative..) Further, the above 50 billion won threshold shall be
reduced by the amount of any Losses to the Bank or * resulting from the
litigation filed by the Government Officials Pension Funds Management Company
(Case No. Ka-Hab 48394).
*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.
Section 4.25 Sale of Assets. The Bank is obligated to (i)
repurchase certain assets sold by the Bank (such sale having occurred before the
Equity Portion Closing), including through the use of ABS specialty companies,
or portions thereof or (ii) pay any difference or shortfall amounts relating to
such sold assets. To the Bank's knowledge, there are no grounds for triggering
such obligations. However, if any such obligation is triggered, any such loss
incurred in fulfilling such obligation shall constitute a breach of this Section
4.25 and any (a) such repurchase amount less the fair value of the repurchased
assets or (b) shortfall amounts shall constitute Losses of the Bank. If the
Seller and the Purchaser are not able to agree upon fair value of the
repurchased assets in the foregoing sentence, the fair value shall be determined
in accordance with Section 11.02, mutatis mutandis. For the avoidance of doubt,
there shall not be any duplication of Losses under this Section 4.25 and Article
XI.
Section 4.26 Disclosure Schedules. The inclusion of any
information in the Disclosure Schedule or other documents delivered by Seller or
the Bank under this Agreement shall not be deemed an admission or evidence of
the materiality of such item, nor shall it establish a standard of materiality
for any purpose whatsoever. Moreover, the disclosure in Schedule 4.09 of the
Proceedings involving claims of 100 million Won or more shall not establish a
standard of materiality for any purposes whatsoever.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER
The Purchaser represents and warrants to the Seller and the
Bank, as of the date hereof and as of each of the Closing as if made on and as
of each of the Closing Date (or, with
20
respect to representations and warranties that are given as of a specific date,
as of such date), as follows:
Section 5.01. Corporate Organization and Qualification. The
Purchaser is duly organized, validly existing and in good standing under the
laws of Korea, has all power and authority required to use its properties and
conduct its business as it is now being conducted and is duly licensed to do
business in each jurisdiction in which it is required to be so licensed, except
for such failures to be so licensed that, individually or in the aggregate,
neither have had nor are reasonably likely to have a Material Adverse Effect.
Section 5.02. Authorization of Agreement; Enforceability
(a) The Purchaser has all requisite corporate power and
authority to execute, deliver and perform its obligations under this Agreement.
The execution, delivery and performance of this Agreement have been duly
authorized by all necessary corporate action on the part of the Purchaser.
(b) This Agreement has been duly executed and delivered by the
Purchaser and constitutes its valid and binding obligation, enforceable against
it in accordance with its terms, except as such enforceability may be limited by
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium or
other laws relating to or affecting creditors' rights generally and by general
principles of equity.
Section 5.03. Consents; No Conflicts
(a) With respect to the purchase of the Transaction Shares set
forth in Schedule 5.03(a), no Regulatory Approval is required to have been made
or obtained by the Purchaser in connection with the execution, delivery and
performance of this Agreement, except for (i) approval from Financial
Supervisory Commission under the Financial Holding Company Act for the inclusion
of subsidiary and (ii) court approval for in-kind contribution.
(b) The execution, delivery and performance of this Agreement
will not (i) violate any provision of the Purchaser's articles of association or
other constitutional documents, (ii) result in the violation of any Law or
Regulatory Approval applicable to the Purchaser, or (iii) to the knowledge of
the Purchaser, violate, conflict with or result in a breach or termination of
any material contract, obligation, or commitment to which the Purchaser is a
party or by which it is bound, except for such violations, conflict, breach or
termination that, individually or in the aggregate, neither have had nor are
reasonably likely to have a Material Adverse Effect
Section 5.04. Litigation. There are no Proceedings against the
Purchaser that enjoin, restrict or materially delay the Purchaser's ability to
purchase the Transaction Shares hereunder.
Section 5.05. Legal Requirements to Invest in a Bank. The
Purchaser is qualified under the relevant Laws, and shall have obtained the
necessary approvals by the Equity Portion Closing Date, to acquire a controlling
interest in a Korean bank.
21
Section 5.06. Financial Capacity. The Purchaser (i) has the
financial capacity and means to pay the Purchase Price (including the capacity
to finance all or a portion of the Purchase Price) and to comply with any other
obligations under this Agreement and (ii) the consummation of the transaction
contemplated hereunder will not result in a violation of the applicable Laws,
including but not limited to, the applicable legal and regulatory capital
requirements of the Purchaser.
ARTICLE VI
PRE-CLOSING COVENANTS
Section 6.01. Conduct of Business.
From the date hereof until the earlier of (x) the Equity
Portion Closing Date or (y) the date of the appointment of the directors
nominated by the Purchaser become effective as described in Section 6.07 (c)
below, unless the Purchaser agrees in writing in advance, the Bank shall and
shall cause its Subsidiaries, and the Seller shall use its best efforts to cause
the Bank and its Subsidiaries, (i) to conduct its business in the ordinary
course (including keeping complete and accurate records and accounts of all
business activities in accordance with Korean GAAP or the generally accepted
accounting principles of the relevant jurisdiction), (ii) not amend the articles
of incorporation or other constitutional documents of the Bank or its
Subsidiaries, (iii) not take any action relating to any issuance or sale, or
dividend or other distribution, involving any of its equity securities or
Convertible Securities, (iv) to preserve intact its present business operations
in material respects (including using its best efforts to maintain good
relations with their respective creditors and customers), (v) not to take any
action, or permit the taking of any action, that would result in any of the
representations or warranties in Article IV being inaccurate at the Closing as
if made on and as of the Closing Date (except for such representations and
warranties that are made as of a specific date), (vi) take any action that would
result in any material increase of compensation (including bonus, incentive
compensation, severance payment or termination pay) payable or to become payable
by the Bank or its Subsidiaries to any of its directors, officers, employees or
agents except for increases required under the already existing terms of
employment agreements or amend any employee related service agreements, benefit
plans or collective bargaining agreements; (vii) enter into any material
commitment in respect of any actual or proposed acquisition, merger, investment
(including capital expenditures), divestiture or disposition of assets or other
business combination of any kind; or (viii) take any action or enter into any
transactions regarding the implementation of any bancassurance program).
Section 6.02. Financial and Other Information. During the
Pre-Closing Period, to the extent permitted under applicable Law and the
ordinary course of business is not disturbed, the Bank shall give the Purchaser
and its Authorized Representatives reasonable access during business hours to
the properties, books and records of the Bank and its Subsidiaries and to the
Authorized Representatives of the Bank and its Subsidiaries to discuss the
business, finances, operations, risk management, regulatory status and other
matters related to the Bank and its Subsidiaries and to the purchase of the
Transaction Shares, in each case to the extent the Purchaser shall have
requested such access at least one(1) Business Day in advance and the Seller has
provided its consent, which shall not be unreasonably withheld. The Purchaser's
use of information provided pursuant to this Section 6.02 shall be subject to
the
22
Confidentiality Agreement dated October 22, 2002, by and between the Seller
and the Purchaser. For the purposes of this Section 6.02, an "Authorized
Representative" shall mean a Representative of the Purchaser or a Representative
of the Bank or its Subsidiaries, as the case may be, who has been authorized in
writing by the Seller.
Section 6.03. Notifications. During the Pre-Closing Period,
the Seller and the Purchaser will promptly notify the other party in writing of
any fact, condition or occurrence that is reasonably likely to result in any of
its representations and warranties in this Agreement no longer being true at
Closing as if made on and as of the Closing Date (except for such
representations and warranties that are made as of a specific date) or its
failure or possible failure to satisfy any of the conditions set forth in
Article VII.
Section 6.04. Taking of Necessary Action. Each of the parties
agrees to use its best efforts promptly to do or cause to be done all things
required to be done by such party under applicable Laws to consummate the
transactions contemplated by this Agreement, including, but not limited to,
using its best efforts to make all filings and obtain all Required Regulatory
Approvals (including, but not limited to, the approval by the FSC of the Bank
becoming a subsidiary of the Purchaser under the Financial Holding Company Act
and any regulatory approvals required by the Purchaser in connection with the
financing of the transactions contemplated by this Agreement and the Investment
Agreement), assist the other party to make its filings and obtain all Required
Regulatory Approvals, and to cooperate with one another in taking all necessary
actions with respect to the foregoing.
Section 6.05. Further Cooperation. The Seller and the Bank
agree to do or cause to be done all things required to be done by such party and
otherwise offer full cooperation (including but not limited to preparing
offering circular, arranging management interviews and access to due diligence
documents), to the Purchaser in connection with the Purchaser's equity financing
transactions relating to this Agreement, preparing U.S. GAAP financials or other
materials for U.S, listing purposes and further offering of the shares of the
Purchaser (including but not limited to any new issuance of common shares,
preferred shares or shares for the issuance of depositary receipts). Further,
the Bank shall have a prior consultation with the Purchaser with respect to (i)
the agenda items of the board of directors meeting of the Bank and its
Subsidiaries and (ii) accounting policies when preparing any quarterly and
semi-annual financial statements or reports of the Bank and its Subsidiaries.
Section 6.06. Public Statements. Subject to Article 12.07, the
Seller and the Purchaser will agree upon the timing and content of any press
release to be issued relating to the execution of this Agreement and the Seller
and the Purchaser will thereafter consult with and provide reasonable
cooperation to the other in connection with the issuance of any further press
release or the making of any public disclosure describing the transactions
contemplated by this Agreement; provided that nothing in this Section 6.06 shall
prevent the Seller or the Purchaser from issuing any press release or making any
public disclosure that such party reasonably believes (based on the written
advice of experienced legal counsel) it is required to make under any applicable
Law.
23
Section 6.07. Resignation of CHB Directors; Appointment of
Acting CEO; Election of Directors and Appointment of Officers. The Bank shall,
and the Seller shall use its best efforts to cause the Bank to:
(a) use its best efforts to deliver, on the date
designated by the Purchaser and in form and substance reasonably
acceptable to the Purchaser, the resignation letters (including waivers
of any possible claims that could be made by the directors in
connection with their resignation) of all members of the board of
directors and officers (i.e., registered directors and non-registered
directors) of the Bank and CHITMC as notified to the Seller by the
Purchaser,
(b) use its best efforts to have a member of the board of
directors of the Bank designated by the Purchaser to be appointed as an
acting CEO of the Bank, and
(c) use its best efforts to arrange for the meeting of
the shareholders of the Bank and CHITMC (in each case, ordinary or
extraordinary) to be held as soon as possible on or after the Equity
Portion Closing Date but in no event more than one (1) week after such
date and, at such meeting shall elect the persons nominated by the
Purchaser as directors of the Bank and CHITMC.
Section 6.08. Supplements to the Disclosure Schedules. Seller may, from
time to time, by notice in accordance with this Agreement, supplement the
Disclosure Schedule including through one or more supplements (the
"Supplements") until three (3) days prior to the Equity Portion Closing Date
(the "Supplement Date")(for which prior notice shall be given at least twelve
(12) days before the proposed Equity Portion Closing Date, provided, that the
notice shall provide at least 7 Business Days prior to the Supplement Date), to
reflect any new facts that may have risen following the date hereof. The
Supplements shall be subject to the consent of the Purchaser (such consent shall
be deemed to have been given by Purchaser with respect to the Supplements which
are a result of ordinary and usual business consistent with prudent banking
practices) and the related termination provisions in Article IX.
ARTICLE VII
CONDITIONS
Section 7.01. Conditions to the Purchaser's Obligations. The
Purchaser will have no obligation to consummate the transaction contemplated
under this Agreement at each Closing unless each of the following conditions
precedent is satisfied or waived in writing by the Purchaser:
(a) Representations and Warranties; Covenants. The
representations and warranties set forth in Article III and IV shall be true and
correct in all material respects when made and at the Closing as if made on and
as of the Closing Date (or, with respect to representations and warranties that
are given as of a specific date, as of such date). The Seller and the Bank shall
have performed in all material respects all obligations required to be
respectively performed by it under this Agreement prior to the Closing.
(b) Compliance with Laws; No Adverse Action or Decision. Since
the date hereof, (i) no Law shall have been promulgated or enacted that
materially delays or makes illegal
24
the performance of this Agreement; (ii) no order by any Governmental Entity that
materially delays or makes illegal the performance of this Agreement shall be
effective; and (iii) no Governmental Entity shall have instituted any Proceeding
that seeks to materially delay or make illegal the performance of this
Agreement.
(c) Consents. All Required Regulatory Approvals shall have
been obtained on terms reasonably satisfactory to the Purchaser and shall not be
subject to any conditions that, individually and in aggregate, either have had
or are reasonably likely to have a Material Adverse Effect.
(d) Documents. The Purchaser shall have received counterpart
originals of this Agreement, the certified resolutions of the Seller and the
Bank approving this Agreement and related matters and copies of such other
documents as it may reasonably request.
(e) Opinions of counsel. The Purchaser shall have received at
the Closing from Shin & Xxx, Korean counsel to the Seller, a written opinion
dated the Closing Date, in a form reasonably satisfactory to the Purchaser.
(f) Investment Agreement. The Seller and the Purchaser shall
have entered into an investment agreement on terms and conditions acceptable to
the Purchaser (the form of which is attached hereto as Exhibit C).
(g) Third Party Consents. The Seller shall have obtained from
certain of the Bank's creditors (such as KDB) written consents or waivers, as
the case may be, in connection with such creditor's right to accelerate the
payment of the principle and accrued interest thereon, in connection with the
transaction contemplated by this Agreement.
(h) Material Event. Since the date hereof, there will have
been no labor strikes or reduction in the deposits held by the Bank resulting in
any material economic losses or business disruption of the Bank or there will
have been no material economic losses or business disruption of the Bank caused
by or related to the labor strikes of June 2003 by the Bank's labor union.
Section 7.02. Conditions to the Seller's and the Bank's
Obligations. The Seller will have no obligation to consummate the transaction
contemplated under this Agreement at the Closing unless each of the following
conditions precedent is satisfied or waived:
(a) Representations and Warranties; Covenants. The
representations and warranties of the Purchaser set forth in Article V hereof
shall be true and correct in all material respects when made and at the Closing
as if made on and as of the Closing Date (or, with respect to representations
and warranties that are given as of a specific date, as of such date). The
Purchaser shall have performed in all material respects all obligations required
to be performed by it under this Agreement prior to the Closing.
(b) Compliance with Laws; No Adverse Action or Decision. Since
the date hereof, (i) no Law shall have been promulgated or enacted that
materially delays or makes illegal the performance of this Agreement; (ii) no
order by any Governmental Entity that materially delays or makes illegal the
performance of this Agreement shall be effective; and (iii) no
25
Governmental Entity shall have instituted any Proceeding that seeks to
materially delay or make illegal the performance of this Agreement.
(c) Consents. All Required Regulatory Approvals shall have
been obtained on terms reasonably satisfactory to the Seller and shall not be
subject to any conditions that, individually or in the aggregate, have had or
are reasonably likely to have a material adverse effect on the ability of the
Purchaser to perform its obligations under this Agreement or a Material Adverse
Effect.
(d) Documents. The Seller shall have received counterpart
originals of this Agreement, the certified minutes and resolutions of the board
of directors of the Purchaser approving this Agreement and related matters and
copies of such other documents as it may reasonably request.
(e) Investment Agreement. The Seller and the Purchaser shall
have entered into an investment agreement on terms and conditions acceptable to
the Purchaser (the form of which is attached hereto as Exhibit C).
ARTICLE VIII
POST-CLOSING COVENANTS
Section 8.01 Lock-up. The Purchaser covenants and agrees with
the Seller that, for a period of three (3) years from the date hereof (the
"Lock-up Period"), without the prior written approval of the Seller, it will
not, directly or indirectly (including, for the avoidance of doubt, any Transfer
of the shares of or interest in the investment vehicle used by the Purchaser to
acquire the Transaction Shares), and will cause each of its Affiliates holding
such securities not to, sell, offer to sell, contract to sell, grant any option
to purchase or otherwise transfer or dispose of (any such act, a "Transfer") any
of the Transaction Shares, except for (and subject in each case to compliance
with all applicable Laws and the receipt of any necessary Regulatory Approvals)
any Transfer to an Affiliate of the Purchaser (provided that (a) such Affiliate
shall have agreed in writing with the Seller to be bound by all of the
provisions of this Agreement, including Article VIII, and (b) the Purchaser
shall cause such Affiliate to remain an Affiliate of the Purchaser at all times
during the Lock-up Period).
Section 8.02 Qualified Public Offering. If the common shares
of SFG become subject to the exchange rights under the Exchangeable Note
Documents for the OPERA Bonds and holders of the OPERA Bonds exercise such
exchange rights at an exchange price of less than 18,086 Won per share, the
Purchaser shall pay to the Seller any difference (the "Shortfall") that is
adverse to the Seller between such exchange price and 18,086 Won per share
relating to the OPERA Bonds so exchanged (the "QPO Payment Amount") and the
maximum amount payable by the Purchaser to the Seller pursuant to this Section
8.02 will be the Shortfall multiplied by 44,720,603. The QPO Payment Amount with
respect to all OPERA Bonds exchanged in a given fiscal year will be calculated
and notified to the Purchaser by the Seller within 30 days after the end of such
fiscal year and paid within 60 days after such notification. The Purchaser
agrees to use its best efforts not to cause a QPO. However, in the event that a
QPO will occur, the
26
Purchaser agrees to provide the Seller with written notice of the contemplated
QPO as soon as possible, but by no later than 3 months prior to such QPO. Upon
receipt of such notice, the Seller agrees to use its best efforts to amend the
Exchangeable Note Documents to remove the requirement to escrow the common
shares of SFG in the event of a QPO.
ARTICLE IX
TERMINATION
Section 9.01. Termination of Agreement.
(a) Subject to Section 9.02, this Agreement may be
terminated by notice in writing at any time prior to the Closing:
(i) by either party, if the Equity Portion
Closing has not occurred by September 30, 2003, provided, however, that
the right to terminate this Agreement under this Section 9.01(a) will
not be available to any party whose failure to fulfill any obligation
under this Agreement has caused the failure of the Equity Portion
Closing to occur by such date;
(ii) by either party, if prior to the Closing
Date, any Governmental Entity of competent jurisdiction has taken any
action prohibiting the consummation of the transaction contemplated by
this Agreement and such action becomes final and non-appealable;
(iii) prior to the Closing Date, by either party
may terminate this Agreement if the other party is in material breach
under this Agreement which cannot be remedied under Article X of this
Agreement;
(iv) by either party, if the Purchaser does not
consent to the Supplements to the Disclosure Schedule pursuant to
Section 6.08; or
(v) by the Seller and the Purchaser so mutually
agree in writing.
(b) Subject to Section 9.02, if the Cash Portion Closing
has not occurred by September 30, 2003, the Seller agrees to extend the Cash
Portion Closing to October 31, 2003 at which this Agreement shall terminate
automatically. The Purchaser shall pay to the Seller interest on the Closing
Cash Payment Amount at the rate of 6% per year, which shall accrue commencing on
October 1, 2003 until the consummation of the Cash Portion Closing if the Cash
Portion Closing is extended to October 31, 2003.
Section 9.02. Effect of Termination. If this Agreement is
terminated in accordance with Section 9.01 and the transaction contemplated by
this Agreement are not consummated, this Agreement shall become null and void
and of no further force and effect, except that the terms and provisions of this
Section 9.02, Article X, and Article XII shall remain in full force and effect.
In case of termination pursuant to Section 9.01 (b), the Seller may claim for
the losses of the Seller from the failure of such Cash Portion Closing and the
relevant expenses of the Seller (other than in the event such failure is due to
the failure to obtain any
27
Regulatory Approvals in connection with transactions contemplated under this
Agreement and the Investment Agreement and in connection with the provisions of
Article 46 of the Financial Holding Company Act relating to the issuance of
redeemable preferred shares to be issued for financing the above transactions).
ARTICLE X
INDEMNIFICATION AND SURVIVAL PERIOD
Section 10.01. Indemnification.
The Seller agrees to indemnify and hold harmless the Purchaser
and each Representative of the Purchaser (collectively, the "Indemnified
Purchaser Parties") from and against any and all Losses incurred by any of the
Indemnified Purchaser Parties (including the Bank and its Subsidiaries) as a
result of, or arising out of or in connection with, the breach of any
representation or warranty (without giving effect to any qualifiers or
exceptions relating to materiality (except those which are not related to or
does not result in the Losses), Material Adverse Effect or words of similar
import but giving effect to the Material Adverse Effect qualifier in 4.06(c) and
4.09, agreement or covenant made by the Seller and the Bank (in the case of the
Bank, however, any indemnification under this Article X will not be applicable
to the covenants in Section 6.01); provided, however, that: (i) the aggregate
amount of the Seller's liability for indemnification of all Indemnified
Purchaser Parties shall be limited to an amount equal to 30% of the Purchase
Price Won, (ii) no claim may be made against the Seller for any indemnification
unless the aggregate amount of such claims exceeds fifteen (15) billion Won (the
"Indemnification Threshold"), provided, further, that for any individual claims
that are less than 100 million Won (the "Small Claims"), the aggregate of the
Small Claims shall be included as indemnification amounts if the aggregate of
Small Claims exceed twenty (20) billion Won and (iii) any Losses described in
4.25 shall not be subject to the Indemnification Threshold . For avoidance of
doubt, claims that are based upon the same cause of action(s) shall be
aggregated and taken together as a whole to constitute an individual claim for
purposes of the foregoing provision regarding Indemnification Threshold. The
Seller shall be responsible for indemnification only for the amounts that exceed
fifteen (15) billion Won.
(b) The Purchaser agrees to indemnify and hold harmless the
Seller and its Representatives (the "Indemnified Seller Parties") from and
against any and all Losses incurred by any of the Indemnified Seller Parties as
a result of, or arising out of, the breach of any representation, warranty,
agreement or covenant made by the Purchaser in this Agreement, as they are
incurred; provided, however, that (i) the aggregate amount of the Purchaser's
liability for indemnification of all Indemnified Seller Parties shall be limited
to an amount equal to 30% of the Purchase Price and (ii) no claim may be made
against the Purchaser for any indemnification hereunder unless the total amount
of such claims against the Purchaser in the aggregate exceeds the
Indemnification Threshold.
(c) In the event any indemnified party should have a claim
against any indemnifying party that does not involve a Third Party Claim (as
defined below) being asserted
28
against or sought to be collected from such indemnified party, the indemnified
party shall deliver notice of such claim with reasonable promptness and
specifying the factual basis of that claim in reasonable detail to the
indemnifying party on or before the expiration of the applicable survival period
under Section 10.02, such notice to state that it is delivered pursuant to this
Section 10.01(c). The failure of any indemnified party to so notify the
indemnifying party shall not relieve the indemnifying party from any liability
which it may have to the indemnified party, unless and only to the extent such
failure results in actual and material prejudice to the indemnifying party.
Except as otherwise provided in this Agreement, within 60 days after receipt of
such notice, the indemnifying party shall pay the amount of such liability to
the indemnified party or, in the case of any notice in which the amount of the
claim (or any portion thereof) is estimated or if the indemnified party contests
the claim, on such later date when such claim becomes finally determined;
provided, that, if reimbursement is not made within 60 days after any such claim
becomes finally determined, amounts owed shall accrue interest at the rate of
6.0 % per annum.
(d) The following provisions shall apply to claims for Losses
from claims by a third party:
(i) An indemnified party entitled to any
indemnification provided for under this Agreement in respect of,
arising out of or involving a claim or demand made by any Person
against the indemnified party, including the Bank and its Subsidiaries
when the indemnified party is the Purchaser under this Section, (a
"Third Party Claim") shall deliver a notice specifying the factual
basis of that claim in reasonable detail to the indemnifying party
promptly after receipt by such indemnified party of written notice of
the Third Party Claim on or before the expiration of the applicable
survival period under Section 10.02, provided, that failure to give
such notification shall not affect the indemnified party's entitlement
to indemnification under this Article X unless and only to the extent
such failure results in actual and material prejudice to the
indemnifying party;
(ii) If a Third Party Claim is made against an
indemnified party, the indemnifying party may undertake, direct and
control, through counsel of its own choosing (subject to the consent of
the applicable indemnified party, such consent not to be unreasonably
withheld) and at the indemnifying party's sole risk and expense, the
good faith settlement or defense of such claim, provided that, the
indemnifying party notifies the indemnified party in writing within 30
calendar days after the indemnified party has given notice of the Third
Party Claim that the indemnifying party has decided to assume the
defense of the Third Party Claim and acknowledging the indemnification
obligation under this Article with respect to such claims;
(iii) If the indemnifying party has assumed the
defense of a Third Party Claim, (A) the indemnified party may retain
separate co-counsel or counsel and participate in the defense of the
Third Party Claim , (B) the indemnified party shall not consent to the
entry of any judgments or enter into any settlement with respect to the
Third Party Claim without the prior written consent of the indemnifying
party (not to be withheld unreasonably), and (C) the indemnifying party
will not, without the prior written consent of the indemnified party
(not to be withheld unreasonably), consent to the entry of any
judgments or enter into any settlement with respect to the Third Party
Claim;
29
(iv) If the indemnifying party has not assumed the
defense or settlement of a Third Party Claim, the indemnifying party
shall reimburse the indemnified party for the reasonable fees and
expenses of counsel employed by the indemnified party in defending or
settling such Third party Claim; and
(v) To the extent permitted by applicable Law, and to
the extent its relevant files and records and other information
contained therein are not protected by any privilege available under
applicable law (including, the attorney-client privilege), so long as
the indemnifying party is reasonably contesting any such Third Party
Claim in good faith, the indemnified party shall, and shall cause its
Affiliates to, at all times cooperate in all reasonable ways with,
provide reasonable access to its relevant files and records or
otherwise render reasonable assistance to, the indemnifying party (i)
in its defense of any action for which indemnity is sought hereunder
and (ii) in its prosecution under the preceding sentence of any related
claim, cross-complaint, counterclaim or right of subrogation.
Section 10.02 Survival of Representations and Warranties.
Notwithstanding any provision herein to the contrary, each representation or
warranty in this Agreement shall survive the Closing for a period of one year
after the Closing Date except that, the representations and warranties in this
Agreement relating to each * fund, tax and environmental matters shall
survive the Closing for a period of five (5) years after the Closing Date. Any
matter as to which a claim has been asserted by written notice within the time
limitation applicable by reason of the immediately preceding sentence that is
pending or unresolved at the end of any applicable limitation period under this
Section 10.02 or the statute of limitations applicable to such claim shall
continue to be covered by this Article 10 notwithstanding any applicable statue
of limitations (which the parties hereby waive solely with respect to such
circumstances) or the expiration date described in the immediately preceding
sentence of this Section 10.02 until such matter is finally terminated or
otherwise resolved by the parties under this Agreement, by an arbitration or by
a court of competent jurisdiction and any amounts payable hereunder are finally
determined and paid. Notwithstanding any provision herein to the contrary, no
claim may be asserted nor any action commenced against the Seller for breach of
any representation or warranty following the expiration of the indemnification
period set forth above, irrespective of whether the subject matter of such claim
shall have occurred before or after such date.
*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.
Section 10.03. Insurance Proceeds; Exceptions and Deductions;
Determination of Indemnification Amount.
(a) To the extent any Indemnified Parties receive any
insurance proceeds with respect to any Loss to be indemnified under this
Agreement, such insurance proceeds (on a net basis) shall be deducted from the
relevant Loss amount payable. For avoidance of doubt, "on a net basis" means
that any costs associated with or incurred in connection with the relevant
insurance coverage shall first be deducted from the insurance proceeds and the
resulting amount shall be deducted from the relevant Loss amount payable.
(b) No indemnifying party shall have liability under any
indemnification provision of this Article X, if and to the extent the Losses, or
any portion of such Losses, arise from or are attributable to the negligence or
willful misconduct of the indemnified party or its
30
Affiliates and in no event shall an indemnifying party be liable for special or
consequential damages arising from or in connection with this Agreement or the
transactions contemplated hereunder. The indemnified party shall take all
reasonable steps to mitigate losses upon and after becoming aware of an event
which, in the indemnified party's good faith judgment, is reasonably likely to
give rise to such Losses.
(c) For purposes of determining the Losses of the Purchaser
based on the breach of any representation and warranty by the Bank and its
Subsidiaries under Article IV (other than for Section 4.25), the amount of
Losses of the Bank and its Subsidiaries shall be multiplied by the Seller 's
share ownership percentage in the Bank (i.e., 80.04%) and the Bank's share
ownership percentage in its Subsidiaries as of the date immediately prior to the
Equity Portion Closing.
Section 10.04 No Duplication; Sole Remedy Procedures.
(a) Any liability for indemnification hereunder shall be
determined without duplication of recovery by reason of the state of facts
giving rise to such liability constituting a breach of more than one
representation, warranty, covenant or agreement.
(b) The indemnified party's rights to indemnification as
provided for in Section 10.01 shall constitute the indemnified party's sole and
exclusive remedy and the indemnifying party shall have no other liability or
damages to the indemnified party in case payment of money damages is sought
against any indemnified parties.
ARTICLE XI
ASSET INDEMNIFICATION
Section 11.01. Asset Indemnification. Upon the request of
the Purchaser, the Seller agrees to indemnify and hold harmless the Indemnified
Purchaser Parties in regards to the loss arising from certain cases provided for
in this Article XI of the Bank, including the assets of the trust accounts
(excluding performance based trust accounts) of the Bank (the "Additional Loss
Amount"), and 80.04% of such Additional Loss Amount shall be an asset indemnity
amount (the "Asset Indemnity Amount"). For avoidance of doubt, the Asset
Indemnity Amount shall be separate from amounts payable by the Seller to the
Purchaser under Article X. The Seller and the Purchaser understand and
acknowledge that the basic principles of this Article XI are to determine any
loss arising from the Corporate Loans, Card Loans and KAMCO Returned Credits
from December 31, 2002 to the relevant Calculation Date.
(a) Corporate Loans: The aggregate Additional Loss
Amount of the Corporate Loans shall be the sum of the Additional Loss Amount of
the Corporate Loans for each CHB borrower set forth in Appendix 4. The
Additional Loss Amount of the Corporate Loans for such borrower shall be {the
sum of the following in (1), (2) and (3) below for such borrower} minus {the
threshold amount for such borrower Appendix 8 (provided that such Additional
Loss Amount shall not be negative):
(1) any Required Reserve Amount based on the Reserve
Method, or Required Reserve Amount based on the Fair Value
Method, as the case may be,
(2) the total amount of any Write-Downs or write-offs
of any Corporate Loans from (and including) January 1, 2003
to the Second Calculation Date, and
(3) any Sales Loss Amount arising from the sale of
Corporate Loans from (and including) January 1, 2003 to the
Second Calculation Date.
(i) Required Reserve Amount based on the Reserve Method: If
the Reserve Ratio of the Other Commercial Banks and CHB are available
for any of the Corporate Loans, the Required Reserve Amount based on
the Reserve Method shall be the sum of (x) the Relevant Corporate Loans
Amount for Secured Corporate Loans multiplied by the Reserve Ratio of
the Secured Corporate Loans as of the Second Calculation Date and (y)
the Relevant Corporate Loans Amount for Unsecured Corporate Loans
multiplied by the Reserve Ratio of the Unsecured Corporate Loans as of
the Second Calculation Date:
(A) RESERVE RATIO OF THE SECURED CORPORATE LOANS as of
the Second Calculation Date means (i) with respect to Secured
Corporate Loans that are classified as "normal" or
"precautionary", a reserve ratio for unsecured loans
applicable to such borrower and (ii) with respect to Secured
Corporate Loans that
31
are classified as "substandard", "doubtful" or "estimated
loss", a reserve ratio of 20% provided that the Secured
Corporate Loans to be covered by bank cash deposit collateral
will be deemed as having a reserve ratio of 0%. For the
purpose of calculating the Reserve Ratio of each of the
relevant Secured Corporate Loans as of the Second Calculation
Date, the asset quality classification reflected in the
financial statements of CHB shall be used.
(B) RESERVE RATIO OF THE UNSECURED CORPORATE LOANS as
of the Second Calculation Date = (40% X Reserve Ratio of the
Other Commercial Banks as of the Second Calculation Date for
certain unsecured corporate loans) + (60% X Reserve Ratio of
CHB as of the Second Calculation Date for certain unsecured
corporate loans).
For the purpose of calculating the Reserve Ratio of the Other
Commercial Banks for certain unsecured corporate loans and
Reserve Ratio of CHB for certain unsecured corporate loans,
in each case, as of the Second Calculation Date, "certain
unsecured corporate loans" shall mean corporate loans with
respect to which provisioning of reserves is required in
accordance with asset quality classification standards of the
Financial Supervisory Commission but for which there is no
collateral.
RESERVE RATIO OF THE OTHER COMMERCIAL BANKS as of the Second
Calculation Date for certain unsecured corporate loans shall
mean the arithmetic mean of the reserve ratio for each
borrower of Corporate Loans, as the case may be, used by each
Other Commercial Bank that have been submitted to the
Financial Supervisory Service by the Other Commercial Banks
as of the Second Calculation Date such that the Reserve Ratio
of the Other Commercial Banks for certain unsecured corporate
loans of each of the Other Commercial Banks should be
calculated based on the following: (i) the aggregate reserve
amount of certain unsecured corporate loans of such Other
Commercial Bank divided by (ii) the aggregate amount of
certain unsecured corporate loans of such Other Commercial
Bank.
The Seller and the Purchaser shall use its best efforts to
provide the Other Commercial Banks' Reserve Ratios to the
extent not prohibited by applicable law and provide to each
other documentary evidence and source (the "Documentary
Evidence and Source") satisfactory to each other of such
Other Commercial Banks' Reserve Ratios within 60 days of the
Second Calculation Date. If the Documentary Evidence and
Source are not available within 60 days of the Second
Calculation Date or the Seller and the Purchaser do not agree
on the acceptability of the Other Banks Reserve Ratios, then
notwithstanding the above, the Reserve Ratio of the Unsecured
Corporate Loans shall be calculated using the Fair Value
Method (as described below).
32
RESERVE RATIO OF CHB as of the Second Calculation Date for
certain unsecured corporate loans shall mean the reserve
ratio for certain unsecured corporate loans used by CHB and
submitted to the Financial Supervisory Service as of the
Second Calculation Date such that the Reserve Ratio of CHB
for certain unsecured corporate loans shall be calculated
based on the following: (i) the aggregate reserve amount of
certain unsecured corporate loans of CHB divided by (ii) the
aggregate amount of certain unsecured corporate loans of CHB.
(ii) REQUIRED RESERVE AMOUNT BASED ON FAIR VALUE METHOD: The
Required Reserve Amount based on the Fair Value Method shall be
determined as follows:
The aggregate amount of (the principal of each of the
Unsecured Corporate Loans that is subject to the Fair Value
Method minus the Fair Value of each of the Unsecured
Corporate Loan Amount as of the Second Calculation Date),
provided that this amount cannot be negative.
The Independent Account shall determine the liquidation
value of each of the relevant CHB borrowers of the Unsecured
Corporate Loans (the "Liquidation Value") and the on-going
value of each of the relevant CHB borrowers of such Unsecured
Corporate Loans (the "On-Going Value"). The Fair Value in the
above formula shall be calculated based on the arithmetic
mean of the Liquidation Value and the On-Going Value. Section
11.02 shall be used for the purposes of determining the
Liquidation Value and the On-Going Value.
(iii) THE AMOUNT FOR ANY WRITE-OFF OR WRITE-DOWN FOR THE
CORPORATE LOANS shall be calculated based on the following with the
understanding that CHB shall write-off or Write-Down the relevant
Corporate Loans in good faith:
For each of the Corporate Loans that have been
written-off or Written-Down, the principal of the Corporate
Loan that was subject to write-off or Write-Down by CHB for
the applicable Corporate Loans minus {the remaining balance
of the applicable Corporate Loan that was subject to
write-off or Write-Down} minus {any additional collections
after such write-off or Write-Down from (and including)
January 1, 2003 until the Second Calculation Date}.
If the Other Commercial Banks' reference information in
regards to any of the Corporate Loans for the calculation of
write-off or Write-Down amounts are available and
satisfactory to the Seller and the Buyer, they may agree on
the amount for any write-off or Write-Down considering such
reference information and, if such agreement between both
parties is not made, then, the above formula shall be used
for the calculation of write-off or Write-Down amounts.
33
(iv) THE SALES LOSS AMOUNT FOR THE CORPORATE LOANS shall
be calculated based on the following:
(A) If CHB has sold or sells any of the Corporate Loans
to any third party on or before the Closing, or
(B) If CHB sells any of the Corporate Loans to any third
party with the consent of the Seller (such consent shall not
be unreasonably withheld) after the Closing but before the
Second Calculation Date,
the principal of the applicable Corporate Loans that were
subject to such sales by CHB minus the sale price of the
applicable Corporate Loan
(b) Card Loans: The Additional Loss Amount of the Card Loans shall be
the sum of the following in (1), (2), (3), (4) and (5) below minus the threshold
amount for Card Loans as set forth in Appendix 9, provided that this number
shall not be negative:
(1) Required Reserve Amount for the Card Loans which
shall be the sum of {First Calculation Date Reserve Amount of
the Card Loan A and the Second Calculation Date Reserve Amount
of the Card Loan B}.
(2) The total amount of any write-offs or Write-Downs of
Card Loans A from (and including) January 1, 2003 to the First
Calculation Date;
(3) Any Sales Loss Amount arising from sale of Card Loans
A from (and including) January 1, 2003 to the First
Calculation Date;
(4) The total amount of any write-offs or Write-Downs of
the Card Loans B from (and including) January 1, 2003 to the
Second Calculation Date; and
(5) Any Sales Loss Amount of Card Loan B from (and
including) January 1, 2003 to the Second Calculation Date.
(i) FIRST CALCULATION DATE RESERVE AMOUNT OF THE CARD LOAN A
and the SECOND CALCULATION DATE RESERVE AMOUNT OF THE CARD LOAN B mean
the reserve amount which is calculated as of the First Calculation Date
or the Second Calculation Date, as applicable, pursuant to the minimum
reserve required under the Bank Business Supervision Regulations
promulgated by the Financial Supervisory Commission which is effective
as of the date hereof (as attached in the Appendix 10) in regards to
such Card Loans A and Card Loans B, respectively.
34
(ii) THE AMOUNT FOR ANY WRITE-OFF OR WRITE-DOWN FOR THE CARD
LOANS shall be calculated based on the following:
For each of the Card Loans that were subject to write-offs or
Write-Downs, {the principal amount of the applicable Card Loans that
were subject to write-offs or Write-Downs by CHB} minus {the remaining
balance of the applicable Card Loans that were subject to write-offs or
Write-Downs} minus {any amount of additional collections after such
write-offs or Write-Downs from (and including) January 1, 2003 to the
First Calculation Date (in case of Card Loans A) or the Second
Calculation Date (in case of Card Loans B)}.
(iii) THE SALES LOSS AMOUNT FOR THE CARD LOANS A AND CARD
LOANS B shall be calculated based on the following:
(A) If CHB has sold or sells any of the Card Loans A
or Card Loans B to any third party on or before the Closing,
or
(B) If CHB sells any of the Card Loans A or Card Loans
B to any third party with the consent of the Seller (such
consent shall not be unreasonably withheld and such consent
shall be deemed to be made in case of the Appendix 11) after
the Closing until the First Calculation Date (in case of Card
Loans A) or the Second Calculation Date (in case of Card
Loans B),
the principal of the applicable Card Loans that has been sold
by CHB minus the sale price of the applicable Card Loans
(c) Returned KAMCO Credits: The Additional Loss Amount of the Returned
KAMCO Credits shall be (i) any amount paid (including any payment of accrued
interests thereon) by CHB to KAMCO with respect to the Returned KAMCO Credits
returned from (and including) January 1, 2003 until the Second Calculation Date
minus (ii) the Value of the Returned KAMCO Credits minus (iii) the threshold
amount for the Returned KAMCO Credits set forth in Appendix 12.
The Value of the Returned KAMCO Credits shall be calculated
using the Fair Value Method.
(d) Within 90 days after the First Calculation Date and the Second
Calculation Date, as applicable, the Purchaser may, or may cause CHB to, notify
the Seller (the "Asset Indemnity Notice") of the Additional Loss Amount as
calculated in this Section 11(a), (b) and (c). Within 30 days of receipt of the
Asset Indemnity Notice, the Seller shall notify to the Purchaser (i) the
Seller's acceptance of the Additional Loss Amount as stated in the Asset
Indemnity Notice, in which case such amount shall be final and binding upon the
parties, or (ii) the Seller's contestation of the Additional Loss Amount as
stated in the Asset Indemnity Notice, in which case the amount becomes final and
binding on the parties on the date when the dispute resolution procedure is
completed in accordance with Section 11.02.
35
(e) The provisions of this Article XI shall be applicable
notwithstanding any merger, split merger, spin-off, business transfer or other
business combination affecting CHB subsequent to the Closing and any references
to CHB under this article shall include such resulting or surviving or
transferee entity.
Section 11.02. Dispute Resolution. If any amount of the
Additional Loss Amount under Section 11.01 is subject to dispute (a "Dispute"),
the following procedure will apply to resolve a Dispute.
(a) In the case of a Dispute, the Seller and the Purchaser
shall jointly agree to appoint an Independent Accountant. If agreement is not
made within fourteen (14) days following the first notice of either party to
appoint an Independent Accountant, the parties agree that the Korean Institute
of Certified Public Accountants shall appoint the Independent Accountant
following the request of either party and such appointment shall become final.
(b) The appointed Independent Accountant shall review and
evaluate the assets based on the methods described in Section 11.01 and submit
an evaluation report (the "Evaluation Report") to the Purchaser and the Seller
with respect to the amount of the relevant Additional Loss Amount within 1 month
of its appointment, provided that at the discretion of the Independent
Accountant, such period may be extended to complete the Evaluation Report,
provided, further, that such extension shall not be grounds for challenging the
contents of the Evaluation Report by any of the parties.
(c) The Evaluation Report shall be final and binding upon the
Seller and the Purchaser upon receipt, and shall be deemed as a final and
binding arbitration award that is enforceable in any court having jurisdiction.
(d) Any costs and expenses incurred by the Independent
Accountant hereto in connection with the Dispute Resolution pursuant to Section
11.02, shall be borne equally by both parties.
ARTICLE XII
MISCELLANEOUS
Section 12.01. Fees and Expenses. The Seller and the Purchaser
shall bear its own costs, taxes and expenses including, but not limited to,
attorneys, accountants, consultants, agents and brokers' fees, incurred or to be
incurred by it in connection with this Agreement and the transaction
contemplated hereby, regardless of whether the transaction is consummated.
Section 12.02. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given upon
receipt, if delivered personally, sent by fax or sent by first class mail,
postage prepaid, as follows:
(a) If to the Seller, to:
Korea Deposit Insurance Corporation
00 Xx-xxxx, Xxxxx-xx
Xxxxx 000-000, Xxxxx
36
(b) If to the Purchaser, to:
Shinhan Financial Group
120 2Ga Taepyung-ro, Chung-gu
Xxxxx 000-000, Xxxxx
(c) If to the Bank, to:
Chohung Bank
14 Xxxxxxxxxxxx 0-xx, Xxxxx-xx,
Xxxxx, Xxxxx
or, in each case, to such other address or addresses or fax numbers as shall
hereafter be furnished as provided in this Section 10.02 by any party to the
other parties. All notices shall be effective when received.
Section 12.03. Entire Agreement; Amendment; Severability. This
Agreement and the documents described herein, or attached or delivered pursuant
to such agreements, set forth the entire agreement between the Purchaser, the
Bank and the Seller, with respect to the transaction contemplated by this
Agreement and supersede all prior agreements and undertakings. Any provision of
this Agreement may be amended, modified or supplemented in whole or in part at
any time by an agreement in writing between the Seller and the Purchaser. No
failure on the part of any party to exercise, and no delay in exercising, any
right shall operate as a waiver of such right, nor shall any single or partial
exercise by any party of any right preclude any other or future exercise of such
right or the exercise of any other right. If any provision of this Agreement is
held to be invalid or unenforceable, all other provisions shall nevertheless
continue in full force and effect.
Section 12.04. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to constitute an
original, but all of which together shall constitute one and the same document.
Section 12.05. Governing Law; Jurisdiction.
(a) This Agreement shall be governed by, and interpreted in
accordance with, the laws of Korea applicable to contracts made and to be
performed in that jurisdiction without reference to its conflict of laws rules.
(b) Any dispute, controversy or claim arising out of, relating
to or in connection with the execution, performance, interpretation and breach
of this Agreement shall be subject to the exclusive jurisdiction of the Seoul
District Court.
Section 12.06. Successors and Assigns. Except as otherwise
expressly provided herein, the provisions of this Agreement shall inure to the
benefit of, and be binding upon, the parties' successors and permitted assigns.
Neither this Agreement nor any rights or obligations
37
hereunder shall be assignable or transferable by the Seller or the Purchaser
without the prior written consent of the other party.
Section 12.07 Confidentiality. Without the express written
consent of the other Party, for a period of one year from the date hereof, each
Party agrees to keep confidential and not disclose, and will cause its agents,
Affiliates, employees, officers and directors to keep confidential and not
disclose, all confidential and proprietary information contained in or relating
to this Agreement, including but not limited to the contents of this Agreement
(other than information relating to the Purchase Price, the terms of the RPS and
RCPS or the existence of the AI Payment and GI Payment), except as may be
required to comply with the other terms and conditions of this Agreement and any
applicable law, rule or regulation and for information which is already in the
public domain.
38
IN WITNESS WHEREOF, this Agreement has been executed as a deed on behalf of the
parties to this Agreement by their respective duly authorized Representatives,
all as of the date first above written.
KOREA DEPOSIT INSURANCE
CORPORATION
By: ________________________________
Name: ______________________________
Title: _____________________________
SHINHAN FINANCIAL GROUP
By: ________________________________
Name: ______________________________
Title: _____________________________
39
Acknowledged and agreed:
CHOHUNG BANK
By: ________________________________
Name: ______________________________
Title: _____________________________
40
Exhibit A - Shinhan Provisioning Methods
Exhibit B - Principles and Guidelines on Net Income Calculation for Card
Business
Exhibit C - Investment Agreement
SCHEDULE 3.01
TITLE TO SHARES
N/A
SCHEDULE 3.03(a)
CONSENTS; NO CONFLICTS
KDIC may dispose its equity by resolutions of the Public Fund Oversight
Committee (Sale Examination Sub-Committee), Policy Committee and its Board of
Directors pursuant to the Public Fund Oversight Special Act, Regulation on
Public Fund Oversight Committee, Regulation on Policy Committee and Regulation
on Board of Director, respectively.
- 2002.12.11-26 Examination by the Sale Examination Sub-Committee (four
(4) times)
- 2003.1.16 Recommendation of Shinhan Financial Group Co., Ltd ("SFG")
as a candidate for preferred negotiation in the Sale
Examination Sub-Committee
- 2003.1.23 Selection of SFG as a party for preferred negotiation in
the Public Fund Oversight Committee
- 2003.6.19 Determination of SFG as a final purchaser of CHB in the
Public Fund Oversight Committee
- 2003.7.7 Resolution of execution of the Agreement in the Board of
Directors of KDIC
- 2003.7.9 Resolution of execution of the Agreement in the Policy
Committee (Expected)
SCHEDULE 4.03(a)
CONSENTS; NO CONFLICTS
N/A
SCHEDULE 4.04(a)
CAPITALIZATION; SECURITIES
CURRENT STATUS OF SHARES HELD BY CHOHUNG BANK
-------------------------------------------------------------------------------------
NUMBER OF ISSUED
NUMBER OF AND OUTSTANDING
CLASSIFICATION AUTHORIZED SHARES SHARES PAR VALUE
=====================================================================================
Common Shares 2,000,000,000 shares 679,118,429 shares 5,000 Won
-------------------------------------------------------------------------------------
CURRENT STATUS OF SHAREHOLDERS OF CHOHUNG BANK
---------------------------------------------------------------------------------------------
NUMBER OF SHAREHOLDING
PRIORITY NAME OF SHAREHOLDER SHARES RATIO
=============================================================================================
1 Korea Deposit Insurance Corporation 543,570,144 80.041%
---------------------------------------------------------------------------------------------
2 Hyundai Heavy Industries Co., Ltd 12,089,238 1.780%
---------------------------------------------------------------------------------------------
3 Hyundai Motor Group Hyundai Motor Co., Ltd. 2,631,328 0.387%
---------------------------------------------------------
Hyundai Capital Service Inc. 4,198,832 0.618%
---------------------------------------------------------
Subtotal 6,830,160 1.006%
---------------------------------------------------------------------------------------------
Others Minority Shareholder (less than 1% of 116,628,887 17.173%
Shareholding)
---------------------------------------------------------------------------------------------
Current status of issuance of equity linked bonds of CHB (CB, BW, EB etc.),
options and otherwise and current status of any and all agreements, contracts,
etc. to issue or sell the shares thereby
N/A
CURRENT STATUS OF STOCK OPTION OF CHOHUNG BANK
------------------------------------------------------------------------------------------------
NUMBER
NUMBER OF OF
GRANTING GRANTED GRANTED EXERCISE
DATE SHARES PERSON EXERCISE PRICE PERIOD
================================================================================================
1 2000.3.27. 969,200 19 5,000 Won 2003.3.28.
Shares ~2006.3.27.
------------------------------------------------------------------------------------------------
2 2001.3.09. 664,000 15 5,000 Won 2004.3.10.
Shares ~2007.3.9.
------------------------------------------------------------------------------------------------
3 2002.3.29. 312,000 17 Based on the standard exercise price 2004.3.20.
Shares (5,720 Won), the exercise price shall ~2007.3.29.
------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------
be determined by the formula
linked to the stock price index of
the banking business at the time of
exercise of stock option.
------------------------------------------------------------------------------------------------
4 2003.3.28. 312,000 17 - Based on the standard 2005.3.29.
Shares exercise price (3,730 Won), ~2008.3.28.
60% of the stock option shall be
determined by the formula linked
to increase ratio of the stock
price index of the banking
business at the time of exercise
of stock option. In spite of the
foregoing formula, the calculated
price is below 5,000 Won, the
exercise price is 5,000 Won.
- 40% of the stock option is
5,000 Won.
------------------------------------------------------------------------------------------------
Total 2,257,200 68
Shares
------------------------------------------------------------------------------------------------
SCHEDULE 4.04(c)
CAPITALIZATION; SECURITIES
CHOHUNG BANK
------------------------------------------------------------------------------------------------------------------------------------
RELEVANT AGREED AGREED UNDERLYING
CLASSIFICATION INSTITUTION DATE PERIOD LAWS MAJOR CONTENTS REMARKS
====================================================================================================================================
Agreement for FSC, KDIC 1999.11.12. In case the Articles 4 and - Agreement for the performance 2002.4.9.
Performance shareholding 8 of the Act of the management (Termination of
of Management ratio of on the rehabilitation plan subject request for taking
Rehabilitation the government Structural to assistance of public funds actions of
Plan falls below Financial - Improvement of management management
50% Industry control structure improvement)
-Performance of business
division system
- Reconstruction of business
infrastructure
- Substantiality of capital
- Granting of aim of
financial ratio
------------------------------------------------------------------------------------------------------------------------------------
Agreement for KDIC 2002.1.31. In case the Public Fund - Financial Sector: Submission of
Performance first Oversight amplification of capital, sale letter of
of Management shareholder is Special Act of NPL, sale of fixed assets, undertaking
Rehabilitation disqualified reorganization of
Plan in case the office/subsidiary, granting of
(Re-execution) (shareholding aim of financial ratio
of the - Non-Financial Sector:
government is introduction/enforcement of
less than 1/3, personnel system weighted on
it is reviewed performance, strengthening of
to terminate risk management system,
the Agreement.) construction of reasonable
credit system
------------------------------------------------------------------------------------------------------------------------------------
OVERSEAS SUBSIDIARY OF CHOHUNG BANK
--------------------------------------------------------------------------------------------------------------------------
RELEVANT AGREED AGREED UNDERLYING MAJOR
SUBSIDIARY CLASSIFICATION INSTITUTION DATE PERIOD LAWS CONTENTS PERFORMANCE
==========================================================================================================================
CHB America Bank Agreement for KDIC 1999.11.12 To be Article 17 of Merged with Merged on March
(Formerly, CHB Performance of consulted the Public CHB New York 24, 2003.
California Management separately Fund Bank
Bank) Rehabilitation Oversight
Plan Special Act
--------------------------------------------------------------------------------------------------------------------------
Chohung Vina Joint Venture Bank for 2002.11.19 2013.1.3. Participation
Bank Agreement Foreign in 50% of
Trade of shareholding
Vietnam and acquisition
Bank of managerial
right
--------------------------------------------------------------------------------------------------------------------------
DOMESTIC SUBSIDIARY OF CHOHUNG BANK
--------------------------------------------------------------------------------
DATE OF
SUBSIDIARY AGREEMENT PARTY AGREEMENT MAJOR CONTENTS
================================================================================
CNV Co., Ltd Joint Venture Chohung Bank 2001.06.04 Participation of one
Agreement Valuemeet (1) non-standing
Investment director as an
Co., Ltd equity participant,
not direct
participating in
operation of company
--------------------------------------------------------------------------------
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.05(a)
SUBSIDIARIES; INVESTMENTS
SUBSIDIARIES OF CHOHUNG BANK
-------------------------------------------------------------------------------------------------
RATIO OF
NAME OF COMPANY CAPITAL SHAREHOLDING
=================================================================================================
Chohung Investment Trust Management Co., Ltd. 45,000,000,000 Won 79.77%
Domestic -------------------------------------------------------------------------------------
CNV Co., Ltd. 1,000,000,000 Won 49.00%
-------------------------------------------------------------------------------------------------
Chohung Finance Ltd. (Hong Kong) US$ 15,000,000 99.99%
-------------------------------------------------------------------------------------
CHB America Bank US$ 44,680,700 100.00%
Overseas -------------------------------------------------------------------------------------
Chohung Bank (Deutschland) GmbH EUR 15,338,756.44 100.00%
-------------------------------------------------------------------------------------
Chohung Vina Bank (Vietnam) US$ 20,000,000 50.00%
-------------------------------------------------------------------------------------------------
SCHEDULE 4.05(b)
SUBSIDIARIES; INVESTMENTS
CURRENT STATUS OF SHAREHOLDERS OF SUBSIDIARIES
------------------------------------------------------------------------------------------------------------
NAME OF COMPANY CAPITAL RATIO OF SHAREHOLDING
============================================================================================================
Chohung Investment Trust 45,000,000,000 Won Chohung Bank 79.77%
Management Co., Ltd. KGI Securities Co., Ltd. 18.72%
Employee Stock Ownership
Domestic Association, etc. 1.51%
---------------------------------------------------------------------------------------------
CNV Co., Ltd. 1,000,000,000 Won Chohung Bank 49.00%
Valuemeet Investment Co., Ltd.
51.00%
------------------------------------------------------------------------------------------------------------
Chohung Finance Ltd. US$ 15,000,000 Chohung Bank 99.99%
(Hong Kong) Xxxx-Xxx Xxx 1 share
---------------------------------------------------------------------------------------------
CHB America Bank US$ 44,680,700 Chohung Bank 100.00%
----------------------------------------------------------------------------------------------
Overseas Chohung Bank (Deutschland) GmbH EUR 15,338,756.44 Chohung Bank 100.00%
----------------------------------------------------------------------------------------------
Chohung Vina Bank (Vietnam) US$ 20,000,000 Chohung Bank 50.00%
Bank for Foreign Trade of Vietnam
50.00%
-------------------------------------------------------------------------------------------------------------
Current status of issuance and options of equity linked bonds issued by
Subsidiaries (CB, BW, EB etc.), and current status of any and all agreements,
contracts, etc. by which the shares are issued or sold
N/A
SCHEDULE 4.05(c)
SUBSIDIARIES; INVESTMENTS
CURRENT STATUS OF CHOHUNG BANK'S INVESTMENT IN OTHER COMPANIES
LISTED SHARES
--------------------------------------------------------------------------------
TOTAL MARKET RATIO OF HOLDING
NAME OF COMPANY NUMBER OF SHARES VALUE (WON) (%)
================================================================================
Ssangyong Motor Company 9,200,216 50,601,188,000 7.62
(cost method)(1)
--------------------------------------------------------------------------------
Ssangyong Motor Company 3,000,000 19,200,000,000 2.48
(market value method)
--------------------------------------------------------------------------------
Hynix Semiconductor Inc. 45,418,897 175,398,499,759 10.24
(cost method)(2)
--------------------------------------------------------------------------------
UNLISTED SHARES
----------------------------------------------------------------------------------------------
RATIO OF HOLDING
NAME OF COMPANY NUMBER OF SHARES BOOK VALUE (WON) (%)
==============================================================================================
Chohung Investment Trust 7,179,678 57,912,022,362 79.77
Management Co., Ltd.
----------------------------------------------------------------------------------------------
KGI Securities Co., Ltd. 2,801,608 13,040,757,318 8.76
----------------------------------------------------------------------------------------------
Korea Securities Corporation 2,014,799 10,060,436,408 2.96
----------------------------------------------------------------------------------------------
Daewoo Electronics Corp. 5,794,620 28,973,100,000 5.55
----------------------------------------------------------------------------------------------
Samsung Life Insurance Co., Ltd.(3) 58,387 28,527,888,200 0.29
----------------------------------------------------------------------------------------------
Seoul Express Bus Terminal Co., Ltd. 35,611 11,283,986,348 5.57
----------------------------------------------------------------------------------------------
INVESTMENT
Invest 12,986,677,024 Won in Securities Market Stabilization Fund (as of June
30, 2003)
------------------
(1) Sales will be restricted by December 31, 2003
(2) Sales will be restricted by December 31, 2006
(3) Shares acquired as a compensation for credits relating to Renault Samsung
Motors Co., Ltd.
SCHEDULE 4.06(b)
FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES
CHOHUNG BANK
1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE
(As of December 31, 2002) (Unit: Million Won)
------------------------------------------------------------------------------
DESCRIPTION DOMESTIC OVERSEAS TOTAL
==============================================================================
Won Currency Payment Guarantee 576,826 - 576,826
------------------------------------------------------------------------------
Bond Issue Payment Guarantee 27,169 - 27,169
------------------------------------------------------------------------------
Payment Guarantee for Loan Collateral 94,516 - 94,516
------------------------------------------------------------------------------
Import L/C related Guarantee - - -
------------------------------------------------------------------------------
Commercial Xxxx Guarantee - - -
------------------------------------------------------------------------------
Trade Xxxx Acceptance - - -
------------------------------------------------------------------------------
Other Won Currency Payment Guarantee 455,141 - 455,141
------------------------------------------------------------------------------
Foreign Currency Payment Guarantee 458,870 233,890 660,798
------------------------------------------------------------------------------
Acceptance 290,415 26,631 317,046
------------------------------------------------------------------------------
Foreign Currency Loan Acceptance - -
------------------------------------------------------------------------------
L/G for imported freight 61,477 115 61,592
------------------------------------------------------------------------------
Other Foreign Currency Payment Guarantee 106,978 207,144 282,160
------------------------------------------------------------------------------
(Credit Derivatives Sale) - -
------------------------------------------------------------------------------
Total of Confirmed Payment Guarantee 1,035,696 233,890 1,237,624
------------------------------------------------------------------------------
note) In Table, The difference of 31,962 million Won stated above between the
sum of domestic amount and overseas amount of foreign currency payment guarantee
and the total amount above is resulted because the payment guarantee with
respect to the same case is included both in the domestic and overseas amount.
2. CURRENT STATUS OF SOUNDNESS OF CONFIRMED PAYMENT GUARANTEE
(As of December 31, 2002) (Unit: Million Won)
----------------------------------------------------------------------------------------
WON CURRENCY PAYMENT FOREIGN CURRENCY PAYMENT
GUARANTEE GUARANTEE TOTAL
--------------------- ------------------------ --------------------
ASSET GUARANTEE GUARANTEE GUARANTEE
SOUNDNESS DEPOSIT RESERVES DEPOSIT RESERVES DEPOSIT RESERVES
========================================================================================
Normal 432,914 - 527,483 - 960,397 -
----------------------------------------------------------------------------------------
Precautionary 3,076 - 131,105 54,726 134,181 54,726
----------------------------------------------------------------------------------------
Substandard 13 3 2,129 426 2,142 429
----------------------------------------------------------------------------------------
Doubtful 140,042 70,021 81 71 140,123 70,092
----------------------------------------------------------------------------------------
Estimated Loss 676 676 - - 676 676
----------------------------------------------------------------------------------------
Total 576,721 70,700 660,798 55,223 1,237,519 125,923
----------------------------------------------------------------------------------------
3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE
(As of December 31, 2002) (Unit: Million Won)
--------------------------------------------------------------------------------
DESCRIPTION DOMESTIC OVERSEAS TOTAL
================================================================================
Opening of Standby L/C 1,143,593 56,070 1,199,663
--------------------------------------------------------------------------------
Import L/C (Foreign Currency) 1,097,969 56,070 1,154,039
--------------------------------------------------------------------------------
Import L/C (Won Currency) 45,624 - 45,623
--------------------------------------------------------------------------------
Local L/C (Won Currency) - - -
--------------------------------------------------------------------------------
Other Payment Guarantee 306,301 1,411 307,712
--------------------------------------------------------------------------------
Total of Unconfirmed Payment Guarantee 1,449,894 57,481 1,507,375
--------------------------------------------------------------------------------
4. CURRENT STATUS OF ENDORSED XXXX
(As of December 31, 2002) (Unit: Million Won)
--------------------------------------------------------------------------------
DESCRIPTION DOMESTIC OVERSEAS TOTAL
================================================================================
Secured Endorsed Xxxx 14,738 - 14,738
--------------------------------------------------------------------------------
Unsecured Endorsed Xxxx 25,160,939 - 25,160,939
--------------------------------------------------------------------------------
Total of Endorsed Xxxx 25,175,677 - 25,175,677
--------------------------------------------------------------------------------
5. CURRENT STATUS OF OTHER RESERVES
(Unit: Million Won)
--------------------------------------------------------------------------------
CLASSIFICATION 2003.3.31 2002.12.31
================================================================================
Ceiling on Credit Card Service 3,451 863
Credit Card Point 2,694 2,494
--------------------------------------------------------------------------------
Litigation relating to Jang Hang Mutual
Saving's & Finance Co., Ltd. 2,000 2,000
--------------------------------------------------------------------------------
Reserve for KAMCO Repurchase Request 10,000 10,000
--------------------------------------------------------------------------------
Total 18,145 15,357
--------------------------------------------------------------------------------
6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS
(As of December 31, 2002) (Unit: Million Won)
--------------------------------------------------------------------------------
DESCRIPTION DOMESTIC OVERSEAS TOTAL
================================================================================
Derivatives Transactions 9,648,913 61,837 9,710,750
--------------------------------------------------------------------------------
A. Transaction relating to Interest Rate 6,666,182 31,210 6,697,392
--------------------------------------------------------------------------------
1) Interest Rate Purchased Forward
--------------------------------------------------------------------------------
2) Interest Rate Sold Forward
--------------------------------------------------------------------------------
3) Interest Rate Purchased Futures 31,041 31,041
--------------------------------------------------------------------------------
4) Interest Rate Sold Futures 309,875 309,875
--------------------------------------------------------------------------------
5) Interest Rate Purchased Swap 3,162,500 15,605 3,178,105
--------------------------------------------------------------------------------
6) Interest Rate Sold Swap 3,162,766 15,605 3,178,371
--------------------------------------------------------------------------------
7) Interest Rate Purchased Option
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
8) Interest Rate Sold Option
--------------------------------------------------------------------------------
B. Transactions relating to Currency 2,982,721 30,627 3,013,348
--------------------------------------------------------------------------------
1) Purchased Forward Exchange 1,085,743 4,898 1,090,641
--------------------------------------------------------------------------------
2) Sold Forward Exchange 1,352,510 25,729 1,378,239
--------------------------------------------------------------------------------
3) Currency Purchased Futures
--------------------------------------------------------------------------------
4) Currency Sold Futures
--------------------------------------------------------------------------------
5) Currency Purchased Swap 296,654 296,654
--------------------------------------------------------------------------------
6) Currency Sold Swap 247,814 247,814
--------------------------------------------------------------------------------
7) Currency Purchased Option
--------------------------------------------------------------------------------
8) Currency Sold Option
--------------------------------------------------------------------------------
C. Transactions relating to Equity 10 10
--------------------------------------------------------------------------------
1) Stock Purchased Forward
--------------------------------------------------------------------------------
2) Stock Sold Forward
--------------------------------------------------------------------------------
3) Stock Purchased Futures
--------------------------------------------------------------------------------
4) Stock Sold Futures
--------------------------------------------------------------------------------
5) Stock Purchased Swap
--------------------------------------------------------------------------------
6) Stock Sold Swap
--------------------------------------------------------------------------------
7) Purchased Equity Option 5 5
--------------------------------------------------------------------------------
8) Sold Equity Option 5 5
--------------------------------------------------------------------------------
Purchased of Credit Derivatives
--------------------------------------------------------------------------------
Note) The current status of transactions above is prepared on a basis of the
notes of balance sheet being prepared by the Bank rather than the disclosure
method of notes on derivatives under the corporate accounting standard.
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE
(As of December 31, 2002) (unit: million won)
------------------------------------------------------------------------------------------------
Chohung Bank
DESCRIPTION Chohung Finance Ltd. (Deutschland) GmbH Chohung Vina Bank
================================================================================================
Acceptance 3,037 1,022 1,422
------------------------------------------------------------------------------------------------
Other Foreign Currency Payment
Guarantee 143 523 9,130
------------------------------------------------------------------------------------------------
Total 3,180 1,545 10,552
------------------------------------------------------------------------------------------------
(1$= 1,200.40 Won)
2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION
(As of December 31, 2002) (unit: million Won)
----------------------------------------------------------------------------------------------------
Chohung Bank (Deutschland)
Chohung Finance Ltd. GmbH Chohung Vina Bank
---------------------- -------------------------- --------------------
GUARANTEE GUARANTEE GUARANTEE
CLASSIFICATION DEPOSIT RESERVES DEPOSIT RESERVES DEPOSIT RESERVES
====================================================================================================
Foreign Currency 3,180 1,200 1,545 0 10,522 0
----------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------
Payment Guarantee
----------------------------------------------------------------------------------------------------
Soundness 179(Normal) Normal Normal (9,732)
Classification 3,001(Precautionary) Estimated Loss (820)
----------------------------------------------------------------------------------------------------
(1$= 1,200.40 Won)
3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE
(As of December 31, 2002) (unit: million Won)
--------------------------------------------------------------------------------------------------
Chohung Bank Chohung Vina
Description Chohung Finance Ltd. CHB America Bank (Deutschland) GmbH Bank
==================================================================================================
Import L/C
Issuance 6,142 7,640 5,672 8,954
--------------------------------------------------------------------------------------------------
(1$= 1,200.40 Won)
4. CURRENT STATUS OF ENDORSED XXXX
N/A
5. CURRENT STATUS OF OTHER RESERVES
Chohung Finance Ltd. (Hong Kong)
Reserve relating to Securities: 180,000,000 Won
Reserve relating to Corporate Tax: 480,000,000 Won
6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS
(As of December 31, 2002) (unit: million Won)
--------------------------------------------------------------------------------
NAME OF SUBSIDIARIES DESCRIPTION AMOUNT REMARKS
================================================================================
Interest Rate Purchased Swap 4,305
Chohung Finance Ltd -------------------------------------------------
Interest Rate Sold Swap 4,305
--------------------------------------------------------------------------------
Interest Rate Purchased Swap 4,201
Chohung New York -------------------------------------------------
Interest Rate Sold Swap 4,201
--------------------------------------------------------------------------------
Chohung Investment Trust Management Co., Ltd.
1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE
N/A
2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION
N/A
3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE
N/A
4. CURRENT STATUS OF ENDORSED XXXX
N/A
5. CURRENT STATUS OF OTHER RESERVES
N/A
6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS
N/A
SCHEDULE 4.06(c)
FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES
* Each item represents the records as of the date stated below. Any item, even
though described below, cannot be said to occur in the normal commercial course
of banking business.
CHOHUNG BANK
1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE
(As of May 31, 2003) (unit: million Won)
DESCRIPTION DOMESTIC OVERSEAS TOTAL
----------- -------- -------- -----
Won Currency Payment Guarantee 542,153 - 542,153
Bond Issue Payment Guarantee 23,990 - 23,990
Payment Guarantee for Collateral of Loan 84,235 - 84,235
Import L/C related Guarantee - - -
Commercial Xxxx Guarantee - - -
Trade Xxxx Acceptance - - -
Other Won Currency Payment Guarantee 433,928 - 433,928
Foreign Currency Payment Guarantee 505,784 209,039 681,347
Acceptance 351,386 27,710 379,096
Foreign Currency Loan Acceptance - - -
L/G for imported freight 43,327 2,257 45,584
Other Foreign Currency Payment Guarantee 111,071 179,072 256,666
(Credit Derivatives Sale) - 30,165 30,165
Total of Confirmed Payment Guarantee 1,047,937 209,039 1,223,500
2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION
(As of May 31, 2003) (unit: million Won)
WON CURRENCY PAYMENT FOREIGN CURRENCY PAYMENT
GUARANTEE GUARANTEE TOTAL
-------------------------- ------------------------ ---------------------
ASSET GUARANTEE GUARANTEE GUARANTEE
SOUNDNESS DEPOSIT RESERVES DEPOSIT RESERVES DEPOSIT RESERVES
--------- --------- -------- --------- -------- --------- --------
Normal 555,248 - 561,880 9 1,117,128 9
Precautionary 7,269 - 183,786 59,828 191,055 59,828
Substandard - - 2,157 431 2,157 431
Doubtful 252 126 74 69 326 195
Estimated Loss 814 814 - - 814 814
Total 563,583 940 747,897 60,337 1,311,480 61,277
++) The Current Status of Confirmed Payment Guarantee Soundness Classification
stated above excludes
accounts of merchant banks.
3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE
(As of May 31, 2003) (unit: million Won)
DESCRIPTION DOMESTIC OVERSEAS TOTAL
----------- -------- -------- -----
Opening L/C of Payment Guarantee 958,529 70,311 1,028,839
Import L/C Issued Foreign Currency 913,390 70,311 983,701
Import L/C Issued Won Currency 45,140 - 45,140
Local L/C Issued Won Currency - - -
Other Payment Guarantee 286,240 1,441 287,681
Total of Unconfirmed Payment Guarantee 1,244,770 71,752 1,316,522
4. CURRENT STATUS OF ENDORSED XXXX
(As of May 31, 2003) (unit: million Won)
DESCRIPTION DOMESTIC OVERSEAS TOTAL
----------- -------- -------- -----
Secured Endorsed Xxxx 19,255 - 19,255
Unsecured Endorsed Xxxx 16,069,887 - 16,069,887
Total of Endorsed Xxxx 16,089,142 - 16,089,142
5. CURRENT STATUS OF OTHER RESERVES
(unit: million Won)
CLASSIFICATION 2003. 3.31. 2002. 12.31.
-------------- ----------- ------------
Ceiling on Credit Card Service 3,451 863
Credit Card Point 2,494 2,494
Litigation relating to Jang Hang Mutual
Saving's & Finance Co., Ltd. 2,000 2,000
Reserve for KAMCO Repurchase Request 10,000 10,000
Unlisted Stock 200
Total 18,145 15,357
6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS
(As of May 31, 2003) (unit: million Won)
DESCRIPTION DOMESTIC OVERSEAS TOTAL
----------- -------- -------- -----
Derivatives Transactions 16,508,398 58,657 16,567,055
A. Transaction relating to Interest Rate 10,098,680 24,132 10,122,812
1) Interest Rate Purchased Forward
2) Interest Rate Sold Forward
3) Interest Rate Purchased Forward 12,380 12.380
4) Interest Rate Sold Futures 144,102 144,102
5) Interest Rate Purchased Swap 4,971,099 12,066 4,983,165
6) Interest Rate Sold Swap 4,971,099 12,066 4,983,165
7) Interest Rate Purchased Option
8) Interest Rate Sold Option
B. Transactions relating to Currency 6,257,371 34,525 6,291,896
1) Purchased Forward Exchange 2,329,762 20,858 2,350,620
2) Sold Forward Exchange 2,922,222 13,667 2,935,889
3) Currency Purchased Futures
4) Currency Sold Futures 12,066 12,066
5) Currency Purchased Swap 507,061 507,061
6) Currency Sold Swap 486,260 486,260
7) Currency Purchased Option
8) Currency Sold Option
C. Transactions relating to Equity 152,347 152,347
1) Stock Purchased Forward
2) Stock Sold Forward
3) Purchased Forward Stock 203 203
4) Sold Forward Stock
5) Stock Purchased Swap
6) Stock Sold Swap
7) Purchased Equity Option 75,732 75,732
8) Sold Equity Option 76,412 76,412
Purchase of Credit Derivatives
7. OTHERS
The total cumulative balance of credit card points as of December 31, 2002 is
approximately 31 billion Won and the allowance thereof is 2,494,000,000 Won.
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE
(As of May 31, 2003) (unit: million Won)
Chohung Bank
DESCRIPTION Chohung Finance Ltd. (Deutschland) GmbH Chohung Vina Bank
----------- -------------------- ------------------ -----------------
Acceptance 3,464 435 1,382
Other Foreign Currency Payment
Guarantee 0 654 6,043
Total 3,464 1,089 7,425
(1$=1,206 Won)
2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION
(As of May 31, 2003) (unit: million Won)
Chohung Bank
Chohung Finance Ltd. (Deutschland) GmbH Chohung Vina Bank
--------------------- ----------------------- ----------------------
GUARANTEE GUARANTEE GUARANTEE
CLASSIFICATION DEPOSIT RESERVES DEPOSIT RESERVES DEPOSIT RESERVES
-------------- --------- -------- --------- -------- --------- --------
Foreign Currency
Payment Guarantee 3,464 1,206 1,089 0 7,425 0
Soundness Normal (6,601)
Classification 3,016(Precautionary) Normal Estimated Loss (824)
(1$=1,206 Won)
3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE
(As of May 31, 2003) (unit: million Won)
Chohung Bank
Description Chohung Finance Ltd. CHB America Bank (Deutschland) GmbH Chohung Vina Bank
----------- -------------------- ---------------- ------------------ -----------------
Import L/C
Issuance 2,849 7,513 502 8,863
(1$=1,206 Won)
4. CURRENT STATUS OF ENDORSED XXXX
N/A
5. CURRENT STATUS OF OTHER RESERVES
Chohung Finance Ltd.
Reserves for Securities: US$ 150,000
Reserves for Corporate Tax: US$ 400,000
6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS
(As of May 31, 2003) (unit: million Won)
NAME OF SUBSIDIARIES DESCRIPTION AMOUNT REMARKS
-------------------- ----------- ------ -------
Chohung Finance Ltd Interest Rate Purchased Swap 3,620
Interest Rate Sold Swap 3,620
CHB America Bank Interest Rate Purchased Swap 4,223
Interest Rate Sold Swap 4,223
Chohung Investment Trust Management Co., Ltd.
1. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE
N/A
2. CURRENT STATUS OF CONFIRMED PAYMENT GUARANTEE SOUNDNESS CLASSIFICATION
N/A
3. CURRENT STATUS OF UNCONFIRMED PAYMENT GUARANTEE
N/A
4. CURRENT STATUS OF ENDORSED XXXX
N/A
5. CURRENT STATUS OF OTHER RESERVES
N/A
6. CURRENT STATUS OF DERIVATIVES TRANSACTIONS
N/A
SCHEDULE 4.07
ABSENCE OF CERTAIN CHANGES
CHOHUNG BANK
DETAILS OF DECLINE IN RECEIPT DURING STRIKE FROM 2003. 6. 17. TO 2003. 6. 20.
1. BANK ACCOUNTS' RECEIPT DURING STRIKE (ON A BASIS OF BANK ACCOUNT B/S AS OF
THE DATE)
(unit: million Won)
-------------------------------------------------------------------------------------------------------
ACCOUNT
CODE DESCRIPTION 2003.6.17. 2003.6.20. VARIATIONS
=======================================================================================================
200107 Won Currency Deposits 36,388,124 33,216,899 -3,171,225
-------------------------------------------------------------------------------------------------------
200206 Demand Deposits 7,044,076 6,963,907 -80,169
-------------------------------------------------------------------------------------------------------
210104 Current Deposits 84,947 495,718 410,771
-------------------------------------------------------------------------------------------------------
210203 Household Current Deposits 24,550 24,744 194
-------------------------------------------------------------------------------------------------------
200215 Miscellaneous Deposits 5,192,440 5,213,475 21,035
-------------------------------------------------------------------------------------------------------
210401 Ordinary Deposits 1,608,640 1,120,705 -487,935
-------------------------------------------------------------------------------------------------------
200217 Deposits of Public Funds 95,326 74,468 -20,858
-------------------------------------------------------------------------------------------------------
210708 Won Currency Deposits for Non-residents 357 519 162
-------------------------------------------------------------------------------------------------------
200255 Free Won Currency Deposits for Non-residents 15 15 0
-------------------------------------------------------------------------------------------------------
210900 Treasury Deposits 37,801 34,263 -3,538
-------------------------------------------------------------------------------------------------------
210906 Other Demand Deposits 0 0 0
-------------------------------------------------------------------------------------------------------
200305 Time and Savings Deposits 28,362,520 25,284,260 -3,078,260
-------------------------------------------------------------------------------------------------------
200405 Savings Deposits 6,888,081 5,728,493 -1,159,588
-------------------------------------------------------------------------------------------------------
211008 Ordinary Savings Deposits 4,608,790 3,877,064 -731,726
-------------------------------------------------------------------------------------------------------
211015 MMDA Savings Deposits 863,094 631,031 -232,063
-------------------------------------------------------------------------------------------------------
211107 Free Access Savings Deposits 1,416,197 1,220,399 -195,798
-------------------------------------------------------------------------------------------------------
200515 Corporate Free Savings Deposits 3,024,384 1,518,808 -1,505,576
-------------------------------------------------------------------------------------------------------
211152 Ordinary Corporate Free Savings Deposits 664,414 432,058 -232,356
-------------------------------------------------------------------------------------------------------
211175 MMDA Corporate Free Savings Deposits 2,359,969 1,086,750 -1,273,219
-------------------------------------------------------------------------------------------------------
211206 Time Deposits 14,544,885 14,141,027 -403,858
-------------------------------------------------------------------------------------------------------
211305 Installment Savings Deposits 2,464,405 2,459,201 -5,204
-------------------------------------------------------------------------------------------------------
211404 Preferred Household Installment Savings Deposits 625 625 0
-------------------------------------------------------------------------------------------------------
211503 Worker's Savings for Housing Down payment 84 84 0
-------------------------------------------------------------------------------------------------------
211602 Worker's Housing Savings 0 0 0
-------------------------------------------------------------------------------------------------------
211701 Won Currency Deposits for Non-residents 0 0 0
-------------------------------------------------------------------------------------------------------
211752 Worker's Long-term Savings 784 785 1
-------------------------------------------------------------------------------------------------------
211855 Lone-term Housing Savings 124,694 125,120 426
-------------------------------------------------------------------------------------------------------
211894 Household Long-term Savings 245,495 242,162 -3,333
-------------------------------------------------------------------------------------------------------
211901 Preferred Worker's Savings 1,069,083 1,067,954 -1,129
-------------------------------------------------------------------------------------------------------
211909 Other Time and Savings Deposits 0 0 0
-------------------------------------------------------------------------------------------------------
201001 Installment Received Savings 644,163 631,793 -12,370
-------------------------------------------------------------------------------------------------------
230108 Installment Savings before Performance 644,163 631,793 -12,370
-------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------
230207 Installment Savings after Performance 0 0 0
-------------------------------------------------------------------------------------------------------
230216 Installment Savings for Housing 337,365 336,939 -426
-------------------------------------------------------------------------------------------------------
201250 Transferable Deposits 3,299,320 3,292,879 -6,441
-------------------------------------------------------------------------------------------------------
231009 Certificate of Deposit to Banks 127,069 127,069 0
-------------------------------------------------------------------------------------------------------
231101 Certificate of Deposit to Customers 3,172,251 3,165,810 -6,441
-------------------------------------------------------------------------------------------------------
201803 Sale of Won Currency Bonds Purchased under 269,018 2,265,018 1,996,000
Agreement to Resell
-------------------------------------------------------------------------------------------------------
232500 Sale of Won Currency Bonds Purchased under 0 2,000,000 2,000,000
Agreement to Resell for Banks
-------------------------------------------------------------------------------------------------------
232609 Sale of Won Currency Bonds Purchased under 269,018 265,018 -4,000
Agreement to Resell for Non-banks
-------------------------------------------------------------------------------------------------------
201500 Xxxx Sold 815,458 808,770 -6,688
-------------------------------------------------------------------------------------------------------
231705 Commercial Xxxx Sold 0 0 0
-------------------------------------------------------------------------------------------------------
231754 Cover Xxxx Sold 815,458 808,770 -6,688
-------------------------------------------------------------------------------------------------------
2. ACCOUNTS OF MERCHANT BANKS
(unit: million Won)
-------------------------------------------------------------------------------
DESCRIPTION 2003.6.17. 2003.6.20. VARIATIONS
===============================================================================
Bills Issued 2,434,609 558,994 -1,875,615
-------------------------------------------------------------------------------
CMA Deposits 301,018 68,398 -232,620
-------------------------------------------------------------------------------
Total 2,735,627 627,392 -2,108,235
-------------------------------------------------------------------------------
3. AMOUNT OF TRUSTED MONEY IN TRUST ACCOUNT DURING STRIKE (ON A BASIS OF TRUST
ACCOUNT B/S AS OF THE DATE)
(unit: million Won)
---------------------------------------------------------------------------------------------------------
ACCOUNT
CODE DESCRIPTION 2003.06.17 2003.06.20 VARIATIONS REMARKS
=========================================================================================================
985118 MONEY TRUST 4,294,392 4,265,071 -29,321
---------------------------------------------------------------------------------------------------------
985217 Unspecified Money Trust Joint Management 8,381 8,381 0
---------------------------------------------------------------------------------------------------------
985314 Accumulative-aimed Trust Joint Management 298,790 293,937 -4,853
---------------------------------------------------------------------------------------------------------
985415 Household Money Trust Joint Management 62,884 62,330 -554
---------------------------------------------------------------------------------------------------------
985811 Old Age Pension Trust Joint Management 104,558 103,983 -574
---------------------------------------------------------------------------------------------------------
986012 Corporate Money Trust Joint Management 31,101 31,053 -48
---------------------------------------------------------------------------------------------------------
986418 National Stock Trust Joint Management 2,097 2,097 0
---------------------------------------------------------------------------------------------------------
986815 Individual Pension Trust Joint Management 699,302 700,382 1,079
---------------------------------------------------------------------------------------------------------
986839 Household Long-term Trust Joint Management 255,731 247,845 -7,886
---------------------------------------------------------------------------------------------------------
986843 Preferred Worker's Trust Joint Management 67,937 66,681 -1,256
---------------------------------------------------------------------------------------------------------
986852 New Accumulative Trust Joint Management 75,125 72,939 -2,186
---------------------------------------------------------------------------------------------------------
986861 Retirement Trust Joint Management 157,983 157,941 -42
---------------------------------------------------------------------------------------------------------
986210 Restricted Money Trust 2,106,706 2,097,086 -9,619
---------------------------------------------------------------------------------------------------------
986898 Testamentary Trust 500 500 0
---------------------------------------------------------------------------------------------------------
986872 Unit Money Trust Joint Management 139,143 138,130 -1,014
---------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------
986881 Additional Money Trust Joint Management 118,082 116,575 -1,506
---------------------------------------------------------------------------------------------------------
986884 Real Estate Investment Trust 31,351 31,351 0
---------------------------------------------------------------------------------------------------------
986887 New Individual Pension Trust Joint Management 8,409 8,421 13
---------------------------------------------------------------------------------------------------------
986892 New Old Age Pension Trust Joint Management 88,007 87,127 -880
---------------------------------------------------------------------------------------------------------
986894 Pension Trust Joint Management 38,304 38,312 8
---------------------------------------------------------------------------------------------------------
986924 Property Trust 134,723 134,393 -330
---------------------------------------------------------------------------------------------------------
987114 Money Receivables Trust Joint Management 31,560 31,230 -330
---------------------------------------------------------------------------------------------------------
987213 Joint Trust of Movable Property and Real Estate 103,163 103,163 0
---------------------------------------------------------------------------------------------------------
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
Overseas subsidiaries, New York Chohung Bank and California Chohung Bank were
merged as of March 24, 2003 into CHB America Bank.
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.08(a)
PROPERTY
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.08(b)
PROPERTY
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.08(c)
PROPERTY
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.09
LITIGATIONS
CURRENT STATUS OF LITIGATION INSTITUTED AGAINST CHOHUNG BANK (MORE THAN
100,000,000 WON)
PROCEEDING
-------------------------------
INTER-
DATE OF AMOUNT AT 1ST MEDIATE FINAL
PLAINTIFF COMMENCEMENT CASE STAKE(KRW) TRIAL APPEAL APPEAL CONTENT
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Sang-Xxxx Xxx 2002/04/24 Dividend 120,000,000 Lost Lost Pending Under the auction procedure of real
Objection (CHB Portion: property relating to Xxxx-Xxx Xxx as
:13,632,786) debtor, the plaintiff as lessee with
priority requesting to pay dividend
was not entitled to dividend
distribution being regarded as false
lessee. Thus, the plaintiff raised
its objection to dividend
distribution against the provisional
attachment creditors including CHB
and Korea Technology Credit
Guarantee Fund.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxxx Xxxx 2002/08/08 Dividend 678,100,097 Win Pending In relation to CHB's collection of
Investment Bank Objection receivables purchased from Chonggu
Co., Ltd., when the third party
obligor placed the money to the
court and under the distribution
procedure made thereafter, the
plaintiff was not entitled to
distribution because the partial of
its claims was overlapped with the
receivables purchased by CHB. Then,
the plaintiff instituted this
lawsuit.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxxx Xxxx 2002/09/27 Dividend 367,026,600 Win Pending In relation to CHB's collection of
Investment Bank Objection receivables purchased from Chonggu
Co., Ltd., when the third party
obligor placed the money to the
court and under the distribution
procedure made thereafter, the
plaintiff was not entitled to
distribution because the partial of
its claims was overlapped with the
receivables purchased by CHB. Then,
the plaintiff instituted this
lawsuit.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Young-Xxxx Xxxx 2002/07/29 Undue Benefit 120,000,000 Pending The plaintiffs are the co-owners of
and two others the partial land used by CHB
headquarter as parking lot. The
plaintiffs assert that CHB uses the
land belong to the co-owned share
and that CHB should return the
rental as consideration of use of
such land to the plaintiffs.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
PROCEEDING
-------------------------------
INTER-
DATE OF AMOUNT AT 1ST MEDIATE FINAL
PLAINTIFF COMMENCEMENT CASE STAKE(KRW) TRIAL APPEAL APPEAL CONTENT
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Dream Holdings 2002/12/04 Undue Benefit 520,000,000 Pending The plaintiff which promoted the
Co.,Ltd, Internet lottery related business
was excluded from selection of the
lottery operator. The plaintiff
instituted this lawsuit against the
related parties to compensate for
expenses and efforts.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Woori Bank 2002/12/10 Undue Benefit 110,956,620 Pending The plaintiff asserts that more tax
was imposed on the collateral of the
plaintiff than that of CHB under the
public sale of collateral provided
by Young-Ho Xxxx who is the borrower
of the special credit extended by
Choongjeongro Branch. Thus, the
plaintiff claimed to refund the
undue benefit.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Inforbank 2003/04/17 Verification 800,000,000 Pending The plaintiff asserts that CHB
Corporation of extended loan secured by savings
Non-existence deposit after receiving only the
of Debts minute of board of directors and the
forged corporate seal certificate,
without autograph of the
representative director and thus,
the loan agreement is null and void.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Filler. 2001/11/21 Compensation U$166,957,963 Dis- The plaintiff asserts that the
Xxxxxxx for Damages missed defendant banks (Hanvit, Shinhan,
because CHB) helped the forgery committed by
US court L&H Korea such as false accounting
has no of sales. This caused damage to
juris- Segate which is the shareholder of
diction L&H. Accordingly, the plaintiff as
shareholder of Segate was also
damaged to the extent of such
damages incurred by Segate.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxxxx and three 2002/05/29 Compensation U$274,647,073 Dis- The plaintiff asserts that the
other parties for Damages missed defendant banks (Hanvit, Shinhan,
because CHB) helped the forgery committed by
US court L&H Korea such as false accounting
has no of sales. This caused damage to
xxxxx- Xxxxx and three other parties which
diction are the shareholder of L&H.
Accordingly, the plaintiff as
shareholder of Xxxxx and three other
parties was also damaged to the
extent of such damages incurred by
Xxxxx and three other parties.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Government 2002/10/31 Compensation 24,000,000,000 Pending While the plaintiff claimed for
Employees for Damages damages against Chohung Investment
Pension Trust Management Co., Ltd. which was
Corporation the management company of the
(Co-defendant : beneficiary certificates, and the
Chohung plaintiff also called to account CHB
Investment which did not withdraw its
Trust management instruction. See the
Management Co., relevant part of CHBIT.
Ltd.)
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
PROCEEDING
-------------------------------
INTER-
DATE OF AMOUNT AT 1ST MEDIATE FINAL
PLAINTIFF COMMENCEMENT CASE STAKE(KRW) TRIAL APPEAL APPEAL CONTENT
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Soo-Rok Kang 2003/06/24 Compensation 163,093,775 Pending The plaintiff received the partial
for Damages facility loan as construction
proceeds after completing the
construction ordered by the borrower
of CHB. However, the plaintiff
asserts that the part of such loan
was paid to other person due to the
fraud act of the officer in charge
of loan operation of CHB, which
caused damages to the plaintiff.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Kangryeung City 2001/04/16 Compensation 250,000,000 Partial Pending Xxxxx-Xxx Xxxxx being the public
for Damages (Amount under lost officer of the Plaintiff city
appeal: (Lost embezzled the public funds in the
75,000,000) :75,000,000) amount of 250,000,000 Won. The
plaintiff asserts that CHB made such
embezzlement easier by opening the
passbook in violation of the Act on
Real Name Financial Transactions and
Guarantee of Secrecy for the
offender and instituted this lawsuit
to claim the compensation for
damages incurred from joint tort.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Jang Hang 2001/02/27 Return of 7,000,000,000 Lost Pending Xxxxx-Xxx Xxx who is the general
Mutual Saving's Savings manager of Hwajeong-dong branch had
& Finance Deposit deposited the savings on behalf of
Co.,Ltd. the Fund and withdrew (embezzled)
such bank deposit without due
payment procedure. So, the plaintiff
instituted this lawsuit to return
such deposit.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Korea Exchange 2003/05/07 Purchase 9,982,356,165 Pending The plaintiff asserts that CHB
Bank Price executed the repurchase contract in
respect to SKG The plaintiff claimed
payment of purchase price asserting
that there was repurchase agreement
with CHB for CPs issued by SKG and
intermediated by the Short Term
Financing Department (purchase
agreement by exercise of option)
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Loit Co.,Ltd. 2003/05/12 Claims for 16,400,000,000 Pending While Xxx-Xxx Xxx, being the
: former name: Return of CD representative director of the
Telnet IT Co., plaintiff and purchaser of shares
Ltd. embezzled the company funds, Xxx-Xxx
Xxx provided CD purchased in the
name of the plaintiff as his own
personal collateral to CHB. Thus,
the plaintiff asserts that such act
is null and void.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
KAMCO Two ABS 2003/06/17 Claim for 674,354,087 Pending The plaintiff claimed to return the
Specialty Co., Return of balance resulted from the difference
Ltd. Repurchase in calculation of repurchase price
Price of the special credits between CHB
and KAMCO.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
PROCEEDING
-------------------------------
INTER-
DATE OF AMOUNT AT 1ST MEDIATE FINAL
PLAINTIFF COMMENCEMENT CASE STAKE(KRW) TRIAL APPEAL APPEAL CONTENT
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxx-Rang Xxxx 2003/06/24 Return of 250,000,000 Pending The plaintiff deposited three sheets
Money in of check in the amount of 250
Custody million Won with the deputy general
manager of Eungam-dong Branch of CHB
and received the receipt fixed by
such deputy general manager without
permission. So, the plaintiff
instituted this lawsuit to refund
such deposited money of 250 million
Won on a basis of such receipt
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Pal-Bok Bang 2002/08/05 Cancellation 130,000,000 Pending Young-Xxxx Xxx and Xxxx-Xxxxx Xxx
and two other of who are the debtors of Ansan Branch
parties Registration of CHB executed the exchange
of Title contract by forgery and effected the
Transfer registration of title transfer. The
plaintiff asserts that the cause for
such title transfer is invalid and
claims to perform the registration
of title transfer (approval).
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxx-Xxxx Xxx 2002/12/13 Cancellation 360,000,000 Pending The plaintiff asserts that the title
of transfer to the apartment house
Registration owned by himself was registered
of Title through the fraud act of Xxxx-Xxxx
Transfer Kang as defendant and thus such
transfer is invalid. Therefore, the
registration of kun-mortgage
underlying upon such title transfer
by CHB should be also cancelled.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Sammi Steel 1998/11/30 Objection to 4,542,190,704 Pending Sammi Steel Co., Ltd. (guarantor)
Co.,Ltd. Claims under the corporate reorganization
procedure asserts that the credits
of CHB were changed into shares and
notes in accordance with the
composition plan of Sammi Atlas
Canada and thus, the guarantee
obligation was also discharged
because the primary obligation was
discharged.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
IT Relay LTD. 2001/05/28 Return of (pound) 851,000 Pending IT Relay Ltd. in UK (Xxxx-Xxx Xxx)
Remittance (1,706 MM Won) remitted (pound)851,000 at the
Proceeds London branch of Shinhan Bank to
Jeong-Xxxxx Xxx who is the customer
of CHB, Eungamdong Branch. CHB paid
such amount in check to the payee.
The plaintiff, IT Relay Ltd. asserts
that it was illegal remittance made
through unlawful act and claims to
refund such remitted amount.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
PROCEEDING
-------------------------------
INTER-
DATE OF AMOUNT AT 1ST MEDIATE FINAL
PLAINTIFF COMMENCEMENT CASE STAKE(KRW) TRIAL APPEAL APPEAL CONTENT
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxxx-Xxxx Xxx 2000/12/01 Cancellation 150,000,000 Win Pending The plaintiffs are the inheritors of
and one other of the collateral furnished to secure
person Registration the obligation of Xxxxx-Xxxx Ha as
of Title borrower. The plaintiffs assert that
Transfer the cause for title transfer
registration is invalid because
other inheritors in conspiracy made
the title transfer registration
excluding the plaintiffs
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Saewoon 2002/09/10 Cancellation 26,000,000,000 Pending CHB created the pledge over the
Construction of kun-mortgaged bonds which was
Co.,Ltd. Fraudulent provided by Seokyung Investment Co.,
Act Ltd. to secure the loan obligation
of CNC Xxxxxxx.Xx.,Ltd. in the
amount of 26 billion Won. The
plaintiff instituted this lawsuit to
cancel the fraudulent act, asserting
that such creation of pledge by CHB
was fraudulent act.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Seok-Xxx Xxx 2001/10/15 Objection to 150,000,000 Win Kang Il Xxx as guarantor of Jangkog
Provisional Construction Co.,Ltd. sold its sole
Attachment own real property to his
acquaintance Seok-Xxx Xxx and
thereafter, created new kun-mortgage
and cancelled the existing
kun-mortgage. CHB effected the
provisional attachment on such real
property of Seok Xxx Xxx as debtor
and beneficiary on a basis of
compensation of the value of the
real property. So, Seok Xxx Xxx
raised objection thereto.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxxxx-Xxxx Xxxxx 2002/06/20 Return of 500,000,000 Win Pending Xxxxx-Xxxx Xxxxx, the representative
Stock director of old Daesung Timber,
Certificate provided his shares of 880,000 as
collateral to secure obligation of
Daesung Timber. With respect to
100,000 shares (par value: 5,000
Won) out of such 880,000 shares, the
plaintiff requested to return the
share certificate for the reason of
discharge of obligation.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxxxx-Xxx Nam 2000/02/17 Removal of - Lost Win With respect to the amusement
Building, facility leased by Hyundai
etc. International Merchant Bank relating
to the lessee Yuni Development
Co.,Ltd., the plaintiff instituted
this lawsuit, asserting removal of
such amusement facility. The counsel
for the lessee approved it.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
PROCEEDING
-------------------------------
INTER-
DATE OF AMOUNT AT 1ST MEDIATE FINAL
PLAINTIFF COMMENCEMENT CASE STAKE(KRW) TRIAL APPEAL APPEAL CONTENT
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Company under 2003/01/20 Lawsuit for 26,201,436,120 Pending CHB enforced the shares received to
reorganization Denial secure obligation of Daewoo Motor
procedure Co., Ltd. in order to collect its
Daewoo Motor credits before the commencement of
Co., Ltd. corporate reorganization procedure
was determined. The receiver
instituted the lawsuit of denial
pursuant to the Corporate
Reorganization Act (denial of
enforcement).
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Kijinchulgu Co. 2001/05/02 L/C Price U$361,370 Pending CHB as L/C opening bank notified its
of Sandong, Yen 28,161,040 dishonor for the reason acceptable
China Total: under the terms of L/C. The
723,000,000 plaintiff institutes this lawsuit,
Won asserting that CHB should pay the
amount of L/C because the plaintiff
submitted all document required
under the L/C.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Xxxx Xxxx 2003/06/12 Delivery of 262,000,000 Lost Pending After the Defendant was defeated at
Investment Bank Earnings the 1st trial, this case is pending
Defendant: at the appellate trial. However, if
Coret Trust the defendant is defeated, 7
Co.,Ltd. institutions including CHB should
return the substantial repayment
amount paid by the defendant because
the claims relating to right to
collect expense is judged as
unsecured credit. Thus, CHB
participated in order to support the
defendant to win the case.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Pahlaj Bajaj 2002/08/06 Compensation 995,000,000 Pending The plaintiff institutes this
&co. Xxx.Xxx for Damages lawsuit, asserting that the
plaintiff who was the lessor of the
business office of CHB, Mombai
Branch asserts that it was damaged
because CHB did not restore the
office to original condition when
CHB transferred such office.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
PROCEEDING
-------------------------------
INTER-
DATE OF AMOUNT AT 1ST MEDIATE FINAL
PLAINTIFF COMMENCEMENT CASE STAKE(KRW) TRIAL APPEAL APPEAL CONTENT
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
In-Yong Seo 1999.12.28 Compensation 70,000,000 Win Partial Pending The plaintiff instituted this
(2001.7.26) for Damages = 224,250,000 Lost lawsuit to claim the compensation
(Extension of for damages which were allegedly
Claims) incurred from the act committed by
Beom-Seok Seo, who is the brother of
the plaintiff (who is the president
of Elcanto, Pohang agency).
Beom-Seok Seo wrongfully used the
check delivered to him by submitting
the application for current check
affixed with the fabricated seal.
The plaintiff provided the
negligence of CHB to deliver the
check carelessly as cause for
action. This case was dismissed in
the original court. At the
intermediate trial, the part of
claims of the plaintiff was
accepted. So, the CHB appealed this
case to the higher court.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Hak-Seo Park 2003-03-31 Claim for 140,000,000 Pending Xxxxx-Seo Park who embezzled the
Payment of funds of Kyeungyeung Engineering
Check Co.,Ltd. withdrew the cashier's
Amount check as part of embezzled funds.
With respect to this check, CHB
suspended payment, but the plaintiff
who is the brother of Xxxxx-Seo Park
instituted this lawsuit, asserting
that the cashier's check was legally
delivered to him.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Korea Credit 2002/11/08 Partial 550,000,000 Pending CHB received the payment by
Guarantee Fund Enforcement subrogation in connection with the
and 1 other of credit guarantee issued by Korea
party Kun-Mortgage Credit Guarantee Fund and Korea
Technology Credit Guarantee Fund,
but the plaintiffs asserts that they
have preferential right to the
purchase price of the subject
machinery and tools and instituted
this lawsuit. CHB filed an answer to
the plaintiff's pleading for the
reason that it has the preferential
right because this case is
kun-mortgage.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Si-Xxx Xxx 20/02/06 Cancellation 267,298,150 Lost Lost Pending The plaintiff asserts that the
of kun-mortgage agreement was executed
Kun-Mortgage through forgery of CHB employee. So,
the plaintiff instituted this
lawsuit to claim the cancellation of
the kun-mortgage agreement.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
Ing-Duk Park 03/05/22 Return of 251,800,000 Pending The plaintiff is the account holder
Bank Deposit relating to the embezzlement of
deposit savings by Ae-Xxxxx Xxx
working at CHB's Wolsandong Branch.
The plaintiff instituted this
lawsuit to claim the return of his
savings deposit.
--------------- ------------ ------------- --------------- ----------- -------- -------- ------------------------------------
CURRENT STATUS OF LITIGATION INSTITUTED AGAINST SUBSIDIARIES OTHER THAN CHOHUNG
INVESTMENT TRUST MANAGEMENT CO., LTD. (MORE THAN 100,000,000 WON)
CHB AMERICA BANK
Plaintiff: Bankcard Services (Outsourcing company delegated with
business operation of credit card member shops by CHB
California before merger in 1998~2000)
Amounts at stake: None
Details: The power of management of member shops was sold to other
service company Card Data Service Inc. upon termination of
the member shop business operation on April 1, 2003. The
plaintiff asserts that it has preferential right as
outsourcing company with respect to such sale. This
assertion is groundless pursuant to the agreement. The
motion for dismissal was filed and is now pending.
CURRENT STATUS OF LITIGATION INSTITUTED AGAINST CHOHUNG INVESTMENT TRUST
MANAGEMENT CO., LTD. ("CHTMC") (MORE THAN 100,000,000 WON)
PLAINTIFF AMOUNT AT STAKE CASE NO. / CASE COMPETENT COURT CONTENT REMARK
------------------- ---------------- ----------------- --------------- ------------------------------------- ----------------
Chonbang Co., Ltd 257,000,000 Won The plaintiff asserts that CHITMC 1st Trial:
has managed the MMF Fund to invest Lost in part
in Daewoo bonds rated as (5%)
under-investment grade in the 2nd Trial: Win
violation of the terms and (approximately
conditions under which MMF Fund is 247 MM
originally scheduled to invest in Won)
only investment-grade securities.
The plaintiff alleges that it was
damaged from such investment and
institutes this lawsuit to claim for
compensation.
------------------- ---------------- ----------------- --------------- ------------------------------------- ----------------
Tongyang Investment 3,253,000,000 Compensation for Seoul District The plaintiff asserts that CHITMC Pending in the
Bank Won Damages Court has managed the MMF Fund to invest first trial
in Daewoo bonds rated as court
under-investment grade in the
violation of the terms and
conditions under which MMF Fund is
originally scheduled to invest in
only investment-grade securities.
The plaintiff alleges that it was
damaged from such investment and
institutes this lawsuit to claim for
compensation.
------------------- ---------------- ----------------- --------------- ------------------------------------- ----------------
Youngjin Mutual 200,000,000 Won Compensation for Seoul District The plaintiff asserts that CHITMC Pending in the
Savings Bank Joint Damages Court has invested in Daewoo bonds in first trial
Ltd. Southern Branch excess of 10% in the breach of terms court
and conditions under which MMF Fund
could not invest in any single issue
in excess of 10%. The plaintiff
alleges that it was damaged from
such investment and institutes this
lawsuit to claim for compensation.
------------------- ---------------- ----------------- --------------- ------------------------------------- ----------------
Government 24,000,000,000 0000 Xxxxx00000 Xxxxx Xxxxxxxx The plaintiff asserts that CHITMC Pending in the
Employees Pension Won Compensation for Court substituted the guaranteed Hynix first trial
Corporation Damages bonds, which were the original court
(Co-defendant: CHB) investments, with non-guaranteed
Hynix bonds at its own accord
without the consent of the
plaintiff. The plaintiff alleges
that it was damaged from such
investment and institutes this
lawsuit to claim for compensation.
------------------- ---------------- ----------------- --------------- ------------------------------------- ----------------
SCHEDULE 4.10
COMPLIANCE WITH LAWS; REGULATORY APPROVALS
CHOHUNG BANK
1. MATTERS RELATING TO INSPECTION OR AUDIT OF FINANCIAL SUPERVISORY SERVICE, THE
BOARD OF AUDIT AND INSPECTION OF KOREA AND THE BANK OF KOREA
-----------------------------------------------------------------------------------------
FINANCIAL SUPERVISORY SERVICE
--------------------------------------------------------------------
CAUTIONARY MEASURES MATTERS ON-SITE
BUSINESS MATTERS IN SUBJECT TO TO BE CORRECTIVE CAUTIONARY CORRECTIVE
YEAR TYPE MANAGEMENT REPRIMAND IMPROVED MATTERS MATTERS MEASURES
-----------------------------------------------------------------------------------------
2001 Deposit 1
-----------------------------------------------------------------------------------------
Trust 1 1 5 1 2
-----------------------------------------------------------------------------------------
Credit 6 2 1 6
-----------------------------------------------------------------------------------------
Foreign
Exchange 1 8
-----------------------------------------------------------------------------------------
Computation 2 5 2 1
-----------------------------------------------------------------------------------------
Internal
Control 2 1 1
-----------------------------------------------------------------------------------------
---------------------------------------------------------------------
THE BOARD OF AUDIT AND THE BANK
INSPECTION OF KOREA OF KOREA
------------------------------------------------
BUSINESS
YEAR TYPE NOTICE CAUTION RECOMMENDATION OTHERS TOTAL
---------------------------------------------------------------------
2001 Deposit 1 2
---------------------------------------------------------------------
Trust 10
---------------------------------------------------------------------
Credit 3 18
---------------------------------------------------------------------
Foreign
Exchange 2 11
---------------------------------------------------------------------
Computation 10
---------------------------------------------------------------------
Internal
Control 4
---------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Business
Management 9 5 2 3
-----------------------------------------------------------------------------------------
Risk
Management 4
-----------------------------------------------------------------------------------------
Real Name
Financial
Transaction
-----------------------------------------------------------------------------------------
Fund
Management 2
-----------------------------------------------------------------------------------------
Finance 3 2 2
-----------------------------------------------------------------------------------------
International
Business
-----------------------------------------------------------------------------------------
Credit Card 1
-----------------------------------------------------------------------------------------
SUBTOTAL 27 3 21 8 23
-----------------------------------------------------------------------------------------
2002 Deposit 1
-----------------------------------------------------------------------------------------
Trust 1
-----------------------------------------------------------------------------------------
Credit 5 1 1 1 1
-----------------------------------------------------------------------------------------
Foreign
Exchange 1 1 2
-----------------------------------------------------------------------------------------
Computation 1 2
-----------------------------------------------------------------------------------------
Internal
Control 1 1 1
-----------------------------------------------------------------------------------------
---------------------------------------------------------------------
Business
Management 19
---------------------------------------------------------------------
Risk
Management 4
---------------------------------------------------------------------
Real Name
Financial
Transaction
---------------------------------------------------------------------
Fund
Management 2
---------------------------------------------------------------------
Finance 7
---------------------------------------------------------------------
International
Business
---------------------------------------------------------------------
Credit Card 1
---------------------------------------------------------------------
SUBTOTAL 6 88
---------------------------------------------------------------------
2002 Deposit 1 2
---------------------------------------------------------------------
Trust 1
---------------------------------------------------------------------
Credit 5 14
---------------------------------------------------------------------
Foreign
Exchange 1 5
---------------------------------------------------------------------
Computation 3
---------------------------------------------------------------------
Internal
Control 3
---------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Business
Management 10 3 3
-----------------------------------------------------------------------------------------
Risk
Management 2
-----------------------------------------------------------------------------------------
Real Name
Financial
Transaction
-----------------------------------------------------------------------------------------
Fund
Management 1
-----------------------------------------------------------------------------------------
Finance 2
-----------------------------------------------------------------------------------------
International
Business
-----------------------------------------------------------------------------------------
Credit Card 1
-----------------------------------------------------------------------------------------
SUBTOTAL 21 1 7 4 10
-----------------------------------------------------------------------------------------
TOTAL 48 4 28 12 33
-----------------------------------------------------------------------------------------
---------------------------------------------------------------------
Business
Management 16
---------------------------------------------------------------------
Risk
Management 2
---------------------------------------------------------------------
Real Name
Financial
Transaction
---------------------------------------------------------------------
Fund
Management 1
---------------------------------------------------------------------
Finance 2
---------------------------------------------------------------------
International
Business
---------------------------------------------------------------------
Credit Card 1
---------------------------------------------------------------------
SUBTOTAL 7 50
---------------------------------------------------------------------
TOTAL 13 138
---------------------------------------------------------------------
2. MATTERS RELATING TO FAIR TRADE COMMISSION
- With respect to abuse of the market controlling status of BC Card Co.,
Ltd, 12 member banks, LG Capital Co., Ltd and Samsung Card Co., Ltd, on
March, 2001, the corrective order (Resolution no. 2001-040) was rendered
and the penalty surcharge in the amount of 357,100,000 Won was imposed. The
penalty surcharge imposed on CHB is reduced into 353,400,000 Won.
- With respect to unfair joint activity relating to differential
application of the merchant charge for the departments by Kookmin Card Co.,
Ltd, Korea Exchange Card Co., Ltd., Samsung Card Co., Ltd, LG Card Co., Ltd
and BC Card Co. Ltd, on November, 2002, the penalty
surcharge in the amount of 340,000,000 Won was imposed (Resolution no.
2002-341). The allotted charge of CHB is 39,432,000 Won.
- Xxxxxx Xxxxx, 0000, Xxxxx Federation of Community Credit Cooperative
instituted the lawsuit for the reason of unfair joint activity and
transaction activity subject to confinement against BC Card Co. Ltd to the
Fair Trade Commission.
- With respect to transaction rejection activity of 7 banks including
CHB, the corrective order (Resolution no. 2002-0001) was rendered on
January, 2002.
- Hyundai International Merchant Bank was merged into Kangwon Bank on
February, 1999 and Kangwon Bank was merged into CHB on September, 1999.
With respect to unfair assistance activity to 17 Hyundai affiliates, such
as Hyundai Investment Trust Management Co., Ltd, the corrective order
(Resolution no. 99-213) has been rendered. CHB instituted the lawsuit for
cancellation of corrective order (Case no. 2000 Nu 4943) to the Seoul High
Court and it is currently pending.
- Hyundai International Merchant Bank was merged into Kangwon Bank on
February, 1999 and Kangwon Bank was merged into CHB on September, 1999.
With respect to unfair assistance activity to Aluminum of Korea Ltd. and
Mando Machinery Cooperation by way of acceptance of private convertible
bonds or commercial papers, etc, the corrective order (Resolution no.
98-171) was rendered and the penalty surcharge in the amount of
644,000,000 Won was imposed. CHB instituted the lawsuit for cancellation of
corrective order and imposition of the penalty surcharge (Case no. 2001 Du
6197) to the Supreme Court and it is currently pending.
3. DETAILS OF FINANCIAL ACCIDENTS RELATING TO EMBEZZLEMENT AND MISAPPROPRIATION
OF EMPLOYEES (2000.1.1~PRESENT)
(Unit: Million Won)
------------------------------------------------------------------------------------------------------------------------------------
ACCIDENT ACCIDENT
YEAR DATE AMOUNT BRANCH CONTENTS BALANCE RESULT REMARKS
====================================================================================================================================
2000 94.7.30 249 Kyedong Branch Unfair withdrawal of suspense 245 Offender: Disciplinary
~95.7.8 (Formerly, receipts and inter-bank Dismissal Accused
Kangwon Bank adjustment funds in dealing Person Concerned: 2 on January
Seoul Branch) with clearance business and Persons for Reprimand, 5 19, 2000
embezzlement thereof Persons for Warning, 25
Persons for Caution
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
2000 98.8.14 000 Xxxxxxxxxxx Misappropriation of 0 Offender: Suspension from
~99.7.21 Branch miscellaneous deposits, credit Office for 6 months
card fees and current Person Concerned: 1 Person
deposits, etc. for Reprimand, 5 Persons for
Warning, 15 Persons for
Caution
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2000 2000.1.8 000 Xxxxxxx Embezzlement of the loans 74 Offender: Disciplinary Confined
~2000.1.8 Corporate extended after provision of Dismissal on April
Financial Center other banks with collateral 21, 2000
obtained by illegal theft of
treasury bonds, which are
property collaterals
------------------------------------------------------------------------------------------------------------------------------------
2000 99.12.1~ 70 Ulsan Central Embezzlement of the cash in CD 0 Offender: Disciplinary
2000.4.12 Branch machines located in any other Dismissal
place other than the branch Person Concerned: 2 Persons
for Warning, 5 Persons for
Warning
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2000 99.7.28 325 Pohang Nam Fraud of the loans and the 314 Offender: Disciplinary Prosecuted
~2000.3.23 Branch amounts withdrawn from cash Dismissal on June 27,
service of the credit card, Person Concerned: 1 2000
based on the false credit Person for Salary Reduction, 2
documents Persons for Reprimand
------------------------------------------------------------------------------------------------------------------------------------
2000 00.6.17 350 Wonju Branch Embezzlement of the cash 0 Offender: Disciplinary
~00.6.17 received from forgery of the Dismissal
receipt of cash transportation Person Concerned: 1
between other banks and other Person for Warning
banks Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2000 00.8.23 15 Seochodong Embezzlement of some bundles 0 Offender: Disciplinary
~00.8.23 Branch of cash in the safe Dismissal
Person Concerned: 1
Person for Warning, 1 Person
for Caution
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2000 00.1.25 000 Xxxxxxxxxxxxx Remittance without sources, 103 Offender: Disciplinary Prosecuted
~00.9.2 Branch correction of the receipt of Dismissal October 23,
customer's deposits and Person Concerned: 4 2000
embezzlement of public Persons for Reprimand Full
imposts, etc payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
2000 00.3.30 46 Dogokdong Fraud of the card use amounts 0 Offender: Suspension from
~00.6.24 Branch after issuance of the card Office for 6 months
based on the false credit card Person Concerned: 1 Person for
application Warning, 5 Persons for Caution
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
0000 00.00.00 000 Xxxxxxxxxxxx Xxxxx of the loans extended by 183 Offender: Disciplinary Prosecuted
~00.11.9 Branch the false credit documents and Dismissal November 13,
private money borrowing and Person Concerned: 1 Person for 2000
lending, etc. Suspension from Office, 3
Persons for Reprimand, 3
Persons for Warning
------------------------------------------------------------------------------------------------------------------------------------
0000 00.00.00 1 Hwajeong Correction (temporary 0 Offender: Salary Reduction for
~00.11.30 Branch misappropriation) after 6 months
illegal withdrawal of the Full payment of accident
customer's deposits amount
------------------------------------------------------------------------------------------------------------------------------------
0000 00.00.00 23 Bujeondong Embezzlement of the cash in CD 0 Offender: Suspension from
~00.10.28 Branch machines Office for 6 months
Person Concerned: 1 Person for
Reprimand, 2 Persons for
Warning
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2000 00.6.24 27 Sachang Nambu Embezzlement of public imposts 0 Offender: Suspension from
~00.12.21 Branch Office for 6 months
Person Concerned: 1 Person for
Warning, 4 Persons for Caution
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
2001 00.10.29 11 Ssangmundong Embezzlement of public imposts 0 Offender: Suspension from
~00.12.30 Branch Office for 6 months
Person Concerned: 1 Person for
Caution
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
2001 00.8.31 53 Myunmokdong Fraud of the loans extended by 0 Offender: Suspension from
~00.12.7 Branch the false credit documents, Office for 3 months
private money borrowing and Person Concerned: 1 Person for
lending and violation of the Salary Reduction, 2 Persons for
real name financial Warning
transaction, etc. Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
2001 00.4.20 00 Xxxxxxxxxxx Xxxxxxxxxxxx of public imposts 0 Offender: Suspension from
~01.1.31 Branch Office for 6 months
Person Concerned: 1 Person for
Caution
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
2001 01.3.22 1 Bomundong Embezzlement of the cash lost 0 Offender: Disciplinary
~01.3.22 Branch by a customer in the office Dismissal
for payment of the default Person Concerned: 3 Persons
money of the credit card for Warning
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2001 01.4.4 30 Sokcho Branch Computational manipulation of 0 Offender: Disciplinary
~01.4.4 delivery and payment of the Dismissal
cash in CD machines and Person Concerned: 2 Persons for
embezzlement of such cash Warning
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
0000 00.00.00 20 Yicheon Branch Computational manipulation of 0 Offender: Disciplinary
~01.4.11 delivery and payment of the Dismissal
cash in CD machines and Person Concerned: 2 Persons for
embezzlement of such cash Reprimand, 3 Persons for Warning
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
2001 00.9.9 199 Onsan Branch Rejection of subrogation due 0 Offender: Disciplinary
~00.9.9 to the loans extended by Dismissal
ignoring the special Person Concerned: 2
conditions of the credit L./G Persons for Reprimand
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2001 00.1.26 0.6 Kwangju Branch Embezzlement of the small sum 0 Offender: Suspension from
~00.4.28 deposits in hand after Office for 6 months
discretionary registration of Person Concerned: 1 Person
the debit card for the for Warning, 1 Person for
convenience of customer's Caution
deposit transactions Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2001 00.6.20 4.7 Jeonnongdong After making cash service 0 Offender: Disciplinary
~00.6.20 Branch transfer with BC card of the Dismissal
customer, not returning the Person Concerned: 1 Person
card, withdrawal of the for Caution
customer's deposits from CD Full payment of accident
machines and embezzlement amount
thereof
------------------------------------------------------------------------------------------------------------------------------------
2001 00.2.7 8 Juahn Branch Embezzlement of public imposts 0 Offender: Disciplinary
~00.9.8 Dismissal
Person Concerned: 3 Persons
for Warning
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2001 97.6.10 117 Kangnam Central Fraud of the loans extended by 53 Offender: Disciplinary Prosecuted
~01.3.23 Branch the false credit documents and Dismissal on August
Shihwa Kongdan embezzlement of the refund of Person Concerned: 3 24, 2001
Branch the deposit money Persons for Warning, 2
Persons for Caution
------------------------------------------------------------------------------------------------------------------------------------
2001 00.6.22 69 Suwon Branch Embezzlement of public imposts 0 Offender: Disciplinary
~00.10.24 Dismissal
Person Concerned: 2
Persons for Warning
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2001 94.4.28 145 Seongnam Branch After discretionary receipt of 114 Offender: Disciplinary Accused on
~95.10.17 slips of the uncollected Dismissal
domestic exchange bonds, Person Concerned: 9 Persons
for
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
Mikeum Station withdrawal (destruction of Warning, 7 Persons August 31,
Branch slips) and embezzlement for Caution 2001
thereof
------------------------------------------------------------------------------------------------------------------------------------
2001 01.9.14 35 Ulsan Branch Misappropriation of the funds 0 Offender: Disciplinary
~01.9.14 after payment without sources Dismissal
into other banks Person Concerned: 1 Person
for Reprimand, 2 Persons for
Warning
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
2001 01.7.9 5 Business Fraud of the difference Offender: Disciplinary
~01.11.12 Operational accrued from double Dismissal
Department manipulation of the foreign Person Concerned: 1 Person
exchange rate at the time of Persons for Reprimand, 5
customer exchange for Salary Reduction, 3
Persons for Warning, 1 Person
for Caution
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2001 01.8.7 288 Shinwoldong Misappropriation from unfair Offender: Disciplinary
~01.11.24 Branch extension of the loans secured Dismissal
by the customer's deposits Person Concerned: 5 Persons
through internet banking for Warning
system Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2002 00.9.6 487 Tyeokyedong After discretionary 362 Offender: Disciplinary Prosecuted
~02.5.15 Branch registration of the internet Dismissal on May 31,
Kangwon Business banking system, embezzlement Person Concerned: 2 2002 and
Operational of the security for deposits Persons for Salary Reduction, currently
Department and credit loans, etc 1 Person for Reprimand, 3 in prison
Persons for Warning
------------------------------------------------------------------------------------------------------------------------------------
2002 02.5.13 000 Xxxxxxxxxxxx Embezzlement of the cash 0 Offender: Disciplinary
~02.6.10 Branch withdrawn from remittance Dismissal
without sources into the Person Concerned: 1 Person
principal's accounts for Reprimand, 1 Person for
Warning
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
2002 00.7.29 00 Xxxxxxxxx Misappropriation of discounted 0 Offender: Suspension from
~00.7.29 Branch notes, default interest Office for 6 months
(special bonds) and received Person Concerned: 1 Person for
amounts Warning, 1 Person for Caution
Full payment of accident
amount
------------------------------------------------------------------------------------------------------------------------------------
2002 02.5.14 000 Xxxxxxxxxxx Embezzlement of the cash 0 Offender: Disciplinary
~02.8.14 Branch withdrawn from remittance Dismissal
without sources into the Person Concerned: 1 Person for
principal's accounts Reprimand, 2 Persons for
Warning
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
2002 98.3.4 563 Wolsandong Branch After discretionary 460 Offender: Disciplinary Accused on
~02.10.30 Hwajeongdong re-issuance of the deposit and Dismissal November 15,
Branch trust passbooks, embezzlement Person Concerned: 2 Persons 2002 and
Daeindong Branch from their early termination for Salary Reduction, currently
1 Person for Reprimand, 6 in prison
Persons for Warning
------------------------------------------------------------------------------------------------------------------------------------
0000 00.00.00 30 Deungchondong Embezzlement of public imposts 0 Offender: Disciplinary Accused on
~02.12.10 Branch Dismissal January 7,
Person Concerned: 3 Persons 2003 and
for Warning currently
Full payment of accident amount in prison
------------------------------------------------------------------------------------------------------------------------------------
2003 03.2.27 1 Inchon Airport Fraud of the difference 0 Offender: Suspension from
~03.3.16 Branch accrued from double Office for 1 month
manipulation of the foreign Full payment of accident amount
exchange rate at the time of
customer exchange
------------------------------------------------------------------------------------------------------------------------------------
0000 00.00.00 14 Jamsil Branch Embezzlement of public imposts 0 Offender: Disciplinary
~03.4.10 Dismissal
Person Concerned: 3 Persons
for Warning
Full payment of accident amount
------------------------------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------------------------------
2003 03.4.30 0 Eungamdong Drain of the CD certificates 0 Under disciplinary actions Accused on
~03.5.20 Branch and false issuance thereof in May 26, 2003
consideration of money and and
goods in conspiracy with the currently
confidence group in prison
------------------------------------------------------------------------------------------------------------------------------------
SUBSIDIARY OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD
CHB Germany Bank was examined by FSS on June, 2002 and was required to rectify 5
cautionary matters in management for overall businesses. And then, CHB completed
to perform such cautionary matters in management on March, 2003 and reported it
to FSS.
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD
1. MATTERS RELATING TO INSPECTION OR AUDIT OF FINANCIAL SUPERVISORY SERVICE, THE
BOARD OF AUDIT AND INSPECTION OF KOREA AND THE BANK OF KOREA
-----------------------------------------------------------------------------------------
FINANCIAL SUPERVISORY SERVICE
BUSINESS --------------------------------------------------------------------
YEAR TYPE CAUTIONARY MEASURES MATTERS ON-SITE
MATTERS IN SUBJECT TO TO BE CORRECTIVE CAUTIONARY CORRECTIVE
MANAGEMENT REPRIMAND IMPROVED MATTERS MATTERS MEASURES
-----------------------------------------------------------------------------------------
July, Trust 1
2000 ------------------------------------------------------------------------------
SUBTOTAL 1
-----------------------------------------------------------------------------------------
February, Trust 1
2001 ------------------------------------------------------------------------------
SUBTOTAL 1
-----------------------------------------------------------------------------------------
---------------------------------------------------------------------
THE BOARD OF AUDIT AND THE BANK
INSPECTION OF KOREA OF KOREA
BUSINESS ------------------------------------------------
YEAR TYPE NOTICE CAUTION RECOMMENDATION OTHERS TOTAL
---------------------------------------------------------------------
July, Trust 1
2000 ----------------------------------------------------------
SUBTOTAL 1
---------------------------------------------------------------------
February, Trust 1
2001 ----------------------------------------------------------
SUBTOTAL 1
---------------------------------------------------------------------
-----------------------------------------------------------------------------------------
Trust 2 4 2
-------------------------------------------------------------------------------
August, Internal 1
2001 Control
-------------------------------------------------------------------------------
SUBTOTAL 2 1 4 2
-----------------------------------------------------------------------------------------
TOTAL 3 1 1 4 2
-----------------------------------------------------------------------------------------
---------------------------------------------------------------------
Trust 8
-----------------------------------------------------------
August, Internal 1
2001 Control
-----------------------------------------------------------
SUBTOTAL 9
---------------------------------------------------------------------
TOTAL 11
---------------------------------------------------------------------
2. MATTERS RELATING TO FAIR TRADE COMMISSION
N/A
SCHEDULE 4.11
TAXES
CHOHUNG BANK
N/A
SUBSIDIARY OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD
N/A
SCHEDULE 4.12(a)
EMPLOYEE BENEFITS MATTERS
CHOHUNG BANK
1. COMPENSATION FOR UNUSED DAYS OF MONTHLY LEAVE
- Provisions regarding monthly leave in the Rules of Employment ("XXX"): One
(1) day of monthly leave for each month (From July 1, 2002, the individual
monthly leave is not granted due to the implementation of the Five-day
Workweek System).
- Case where compensation for the unused days of monthly leave has not been
paid: N/A
2. ALLOWANCE FOR WORK OUTSIDE REGULAR WORKING HOURS
- Provisions in the XXX: Compensation for overtime work is stipulated as
required by the pertinent law (In case of overtime work, nighttime work, or
day-off work which is performed before or after business hours, the
employer shall pay the allowance equivalent to 1.5/183 of the ordinary wage
for each hour of work outside regular working hours).
- Status of operation: The above allowance is paid for the overtime work
performed by special service and general service employees.
- Remark: With respect to nighttime work, day-off work, and overtime work,
although it is difficult to eliminate the concerns about any potential
legal disputes, such as a claim for the failure to pay the compensation
amount, it is true that any action or legal dispute regarding the unpaid
allowance for work outside regular working hours has not been brought up to
date.
3. SUSPENSION OF AGREED AMOUNT OF THE WAGE INCREASE
N/A
(Upon the wage negotiation for the year 2001, the Union and the Company agreed
to apply the wage increase for the year 2000 and the year 2001 starting from
January 1, 2002, and it has been applied.)
4. RETURN OF REGULAR BONUS
N/A
(In 1998, the regular bonus was returned on a discriminative basis (160% up to
250%) pursuant to each position grade in accordance with the agreement with the
Union (dated May 30, 1998). However, the prescription of the wage claim (3
years) has already elapsed.)
5. RETURN OF WELFARE BENEFIT SUBSIDIES
N/A
(In 1998, some welfare benefit subsidies were suspended from January 1, 1998
until December 31, 1998 in accordance with the agreement with the Union (dated
May 30, 1998). However, the prescription of the wage claim (3 years) has already
elapsed.)
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT
COMPENSATION FOR UNUSED DAYS OF MONTHLY LEAVE
The Leave Regulation and the Remuneration Regulation provide that any unused
days of monthly leave shall be compensated. However, from January 1, 1999 until
October 30, 2002, the use of monthly leave was obligatory (one (1) weekday, two
(2) Saturdays), and since November 1, 2002 to the present, the Five-day Workweek
System and xxx Xxxxxxxxx-off System have been temporarily implemented. In this
regard, Company regulations will be amended after the Labor Standards Act is
confirmed.
The above matters were implemented after a full discussion with and a notice to
the officers and employees, and in this regard, there has been no legal dispute.
SCHEDULE 4.12(b)
EMPLOYEE BENEFITS MATTERS
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.13(a)
LABOR
CHOHUNG BANK
1. DETAILS OF COLLECTIVE BARGAINING AGREEMENT, ETC.
A. Collective Bargaining Agreement
- Composition : preamble, 108 articles in the text, 7 articles in the
addendum, and 1 attachment
- Date of Execution : May 23, 2002
- Parties : Heads of 26 financial institutions, Chairman of the
Financial Industry Union, and respective Chairman of each Branch
Union
- Major Provisions : Any and all matters in relation to the Company
and the Union including working conditions and the Union activities
B. Agreement on Five-day Workweek System (including Supplementary
Agreement)
- Composition : 10 articles in the text and 1 article in the
attachment
- Date of Execution : May 23, 2002
- Parties : Heads of 26 financial institutions, Chairman of the
Financial Industry Union, and respective Chairman of each Branch
Union
- Major Provisions : Matters regarding the Five-day Workweek System
C. Agreement on Job Security
- Composition : 11 articles in the text and 2 articles in the addendum
- Date of Execution : May 23, 2002
- Parties : Heads of 26 financial institutions, Chairman of the
Financial Industry Union, and respective Chairman of each Branch
Union
- Major Provisions : Any and all matters regarding job security of
employees
D. Agreement on Company Development Committee
- Composition : 7 articles in the text and 2 articles in the addendum
- Date of Execution : May 23, 2002
- Parties : Heads of 26 financial institutions, Chairman of the
Financial Industry Union, and respective Chairman of each Branch
Union
- Major Provisions : Any and all matters regarding the Company
Development Committee
E. Supplementary Agreement of Collective Bargaining Agreement
- Composition : 47 articles in the text, 4 articles in the addendum,
and 6 articles in the attachment
- Date of Execution : December 26, 2002
- Parties : President of Chohung Bank, and Chairman of Chohung Bank
Branch Union
- Major Provisions : Any and all matters in relation to the Company
and the Union including the detailed matters regarding the Collective
Bargaining Agreement
F. Remuneration Agreement
- Composition : 14 articles in the text, 4 articles in the addendum,
and 1 article in the attachment
- Date of Execution : December 26, 2002
- Parties : President of Chohung Bank, and Chairman of Chohung Bank
Branch Union
- Major Provisions : Any and all matters regarding the remuneration
G. Supplementary Agreement on the Five-day Workweek System
- Composition : 5 articles in the text
- Date of Execution : June 29, 2002
- Parties : President of Chohung Bank, and Chairman of Chohung Bank
Branch Union
- Major Provisions : Matters regarding the Five-day Workweek System
H. Agreement etc.
- 2003.4.15: Agreement (Regarding the operation of the
representative office in Kangwon Land Casino)
- 2003.2.25: Agreement (Regarding the collection of the donation for
the "Daegu subway disaster" victims' relief)
- 2002.12.16: Agreement (Regarding the wage increase)
- 2002.10.2: Agreement (Performance based payment for employees in
charge of the funds operation)
- 2002.8.23: Agreement (Regarding the performance based payment
system)
- 2002.8.12: Agreement (Collection of the donation for the flood
victims' relief)
- 2002.7.3: Agreement (Regarding the operation of offices on
Saturdays)
- 2002.6.29: Agreement (Regarding the five-day workweek system)
- 2002.6.26: Agreement (Payment of the duty allowance in connection
with the strike of CAPS)
- 2002.1.28: Agreement (Regarding the payment of the car maintenance
subsidy and commuting subsidy)
- 2002.1.26: Agreement (Regarding CHB Chohung family Hanmaum pledge)
- 2001.10.5: Agreement (Regarding the wage increase)
- 2001.9.29: Agreement (Regarding the amendment of the compensation
system and the abolishment of a reduction and the exemption from the
loan rate for the officers and employees)
- 2001.6.8: Agreement (Collection of the donation for the drought
victims' relief)
- 2001.5.23: Agreement (Regarding the operation of the branch office
in the Inchon international airport)
- 2001.5.7: Agreement (Regarding the increase of loan rate for the
officers and employees)
- 2001.3.29: Agreement (Regarding the commuting allowance and car
maintenance subside)
- 2001.3.2: Agreement (Regarding the operation of branch office in
the National Cancer Center)
- 2001.1.31: Agreement (Regarding the voluntary resignation)
- 2001.1.16: Agreement (Regarding the development of new system for
credit card)
- 2001.1.8: Agreement (Regarding the change of severance payment
standards)
- 2001.1.3: Agreement (Regarding the development of new system for
credit card)
I. Labor Management Council Agreement
- 2002.12.26: Extraordinary Labor Management Council(the "LMC")
Agreement
- 2002.4.25: LMC Agreement in the first quarter of 2002
- 2001.5.7: LMC Agreement in the first quarter of 2001
- 2000.12.30: LMC Agreement in the third quarter of 2000
- 2000. 5.30: LMC Agreement in the first quarter of 2000
2. DETAILS OF NON-COMPLIANCE OF COLLECTIVE BARGAINING AGREEMENT, ETC.
The collective bargaining agreement as of May 23, 2002, provides as follows:
The Bank may pay a special severance pay in addition to the statutory
severance pay to an employee who is over 45 years old, has worked for 20
years or longer, and voluntarily retires before reaching the retirement
age. However, the employer and the Union shall separately determine the
detailed matters..
Article 44 of the Supplementary Agreement in relation to the Special Severance
Payment for an employee who retires at an age equivalent to the retirement age,
provides as follows:
The Company shall pay the special severance pay in addition to the
statutory severance pay to the employee who is over 45 years old, has
worked for 20 years or longer, and voluntarily retires before reaching
retirement age. The special severance pay set forth in Item 1. shall
comply with the separate agreement between the employer and the Union.
The employer and the Union, however, did not come to an agreement concerning the
scope of a special severance pay.
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT
CHOHUNG VINA BANK (VIETNAM)
1. DETAILS OF COLLECTIVE BARGAINING AGREEMENT, ETC.
Collective Bargaining Agreement
- Composition: 12 articles in the text
- Date of Execution: April 23, 2001.
- Parties: Chairman of labor union and the president of Chohung Vina Bank
- Major Provisions: All matters concerning labor and management including
working conditions and matters regarding union activities
2. DETAILS OF NON-COMPLIANCE OF COLLECTIVE BARGAINING, ETC.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT
N/A
SCHEDULE 4.13(b)
LABOR
CHOHUNG BANK
- On November 5, 2002, the Korea Financial Industrial Union Chohung Bank
Branch Union submitted the application for mediation of a labor dispute in
relation to the Wage Agreement and the Collective Bargaining Agreement of the
year 2002.
- From 09:30 of June 18, 2003 to 08:30 of June 22, 2003, a general strike
against selling Chohung Bank
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT
N/A
SCHEDULE 4.13(c)
LABOR
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.14(a)
CONTRACTS
N/A
SCHEDULE 4.14(b)
CONTRACTS
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.14(c)
CONTRACTS
CHOHUNG BANK
- US$ 100,000,000 Transferable Term Loan Facility Agreement for Chohung Bank,
arranged by Arab Bank Plc, The Korea Development Bank, Singapore Branch,
Standard Chartered Bank with The Korea Development Bank, Singapore Branch
as agent
It is provided in Paragraph 7.1 (Early Prepayment) that if the Korean
Government is disqualified from the direct or indirect largest shareholder
for the shares issued by the Borrower, and at the Majority Banks(i)'
discretion, such disqualification is likely to give a material adverse effect
to the current or future financial situation of the Borrower, the Agent (i)
may give a notice of cancellation of the lending obligations of the Lender to
the Borrower (if it is instructed by the Majority Banks, the Agent shall be
obliged to give a notice to the Borrower), and (ii) the Borrower shall repay
the loan in full within 10 business days from the receipt of such notice.
- Agreement for Performance of Management Rehabilitation Plan entered by and
between CHB and KDIC on November 12, 1999
The shareholding ratio of CHB held by KDIC is below 50%, it shall be
destroyed.
- Agreement for Performance of Management Rehabilitation Plan re-entered by
and between CHB and KDIC on January 31, 2002
In case KDIC is disqualified from the first shareholder of CHB, it shall be
destroyed.
- Employee's compensation liability insurance contract entered by and between
CHB and Hyundai Marine & Fire Insurance Co., Ltd. on November 25, 2002
In case of change of the shareholding of CHB and otherwise, the premium
may be readjusted. In this case, CHB shall give a notice of it to the other
party.
SUBSIDIARY OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD
N/A
SCHEDULE 4.15
TRANSACTION WITH SUBSIDIARIES
CHOHUNG BANK
---------------------------------------------------------------------------------------------------
COUNTERPARTY CONTRACT DATE EXPIRATION DATE CONTENTS
---------------------------------------------------------------------------------------------------
CH Biz Co., Ltd. 2002. 11. 1. 2003. 10. 31. Contracts on Operation of CHB
Phone-Banking Counseling Center (11.2
billion Won)
------------------------------------------------------------------------------
2000. 12. 31. 2003. 12. 31. Contracts on Security Service
---------------------------------------------------------------------------------------------------
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
-----------------------------------------------------------------------------------------------------------
NAME OF SUBSIDIARIES COUNTER-PARTY CONTRACT DATE EXPIRATION DATE CONTENTS AMOUNT
-----------------------------------------------------------------------------------------------------------
Chohung Finance Ltd. CHB 1995. 9. 19. 2005. 9. 19. Subordinated USD 3,000,000
Borrowing
---------------------------------------------------------------------
1997. 3. 24. 2007. 3. 24. Subordinated USD 13,000,000
Borrowing
-----------------------------------------------------------------------------------------------------------
Chohung Bank CHB 1995. 11. 13. 2005. 11. 15. Subordinated EURO 7,669,378.22
(Deutschland) GmbH Borrowing
-----------------------------------------------------------------------------------------------------------
CHOHUNG INVESTMENT TRUST CO., LTD.
AGREEMENTS WITH CHB
----------------------------------------------------------------------------------------------------------
NAME OF AGREEMENTS COUNTERPARTY EXECUTION DATE
----------------------------------------------------------------------------------------------------------
Consignment Sale Agreement CHB 1999. 6.
----------------------------------------------------------------------------------------------------------
Administrative Agreement CHB 1999. 6.
----------------------------------------------------------------------------------------------------------
Securities Investment Trust Agreement CHB 1997. 4. 7.
----------------------------------------------------------------------------------------------------------
Amendment Agreement for Bank Account Interest CHB 2002. 1.
----------------------------------------------------------------------------------------------------------
Agreement on Withholding Tax of Trust Assets CHB 1997. 4. 7.
----------------------------------------------------------------------------------------------------------
Facsimile Usage Agreement CHB 1997. 4. 7.
----------------------------------------------------------------------------------------------------------
LIST OF FUNDS WHOSE TRUST COMPANY IS CHB
-------------------------------------------------------------------------------------------------------------
DATE OF NUMBER OF BALANCE
TYPE FUND CODE NAME OF FUND ESTABLISHMENT ACCOUNT
-------------------------------------------------------------------------------------------------------------
EQUITY 5033 MOA Accumulative Equity 1 2002-07-22 8,654
------------------------------------------------------------------------------------
5131 POWER Growing Equity 1 2002-04-03 8,906
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
5231 Stable Long-term Equity 2001-10-22 7,279
------------------------------------------------------------------------------------
5232 Growing Long-term Equity 2001-10-22 11,108
------------------------------------------------------------------------------------
5233 Stable Long-term Equity 2 2001-11-29 28,063
-------------------------------------------------------------------------------------------------------------
EQUITY TOTAL 64,010
-------------------------------------------------------------------------------------------------------------
EQUITY-BALANCED 5141 FIGHTING Balanced 2002-04-17 12,261
------------------------------------------------------------------------------------
5333 CHANGE 15C-2 1999-05-14 2,567
------------------------------------------------------------------------------------
5347 CHANGE 7+3 1 2001-11-28 415
------------------------------------------------------------------------------------
5348 CHANGE 7+3 2 2001-12-11 1,188
------------------------------------------------------------------------------------
5349 CHANGE 7+3 3 2002-01-10 660
------------------------------------------------------------------------------------
5350 CHANGE 12+3 1 2002-01-12 330
------------------------------------------------------------------------------------
5356 CHANGE 7+3 4 2002-02-23 328
------------------------------------------------------------------------------------
5357 CHANGE 7+3 5 2002-03-14 1,585
------------------------------------------------------------------------------------
5358 CHANGE 7+3 6 2002-03-21 15,402
------------------------------------------------------------------------------------
5359 CHANGE 7+3 7 2002-03-29 1,683
------------------------------------------------------------------------------------
5360 CHANGE 7+3 8 2002-04-11 18,148
------------------------------------------------------------------------------------
5361 CHANGE 7+3 9 2002-04-24 16,267
------------------------------------------------------------------------------------
5362 CHANGE 7+3 10 2002-05-10 7,719
------------------------------------------------------------------------------------
5363 CHANGE 7+3 11 2002-05-23 7,972
------------------------------------------------------------------------------------
5364 CHANGE 7+3 12 2002-06-10 2,599
------------------------------------------------------------------------------------
5401 GWANGSU THINKING C-1 1999-04-22 12,839
------------------------------------------------------------------------------------
5411 GWANGSU 2 TAILORED B1 1999-06-08 1,306
------------------------------------------------------------------------------------
0000 XXXXXXXX 1 2000-02-29 708
-------------------------------------------------------------------------------------------------------------
EQUITY-BALANCED TOTAL 103,977
-------------------------------------------------------------------------------------------------------------
BOND 1021 HANBAGUNI C-1 1998-10-08 6,328
------------------------------------------------------------------------------------
1027 HANBAGUNI C7 1998-10-23 3,154
------------------------------------------------------------------------------------
1063 NEW JUMP Short-term 3 1998-05-18 148
------------------------------------------------------------------------------------
2073 HANBAGUNI D-3 1998-09-02 273
------------------------------------------------------------------------------------
2092 HANBAGUNI E-2 1998-10-12 108
------------------------------------------------------------------------------------
2503 NEW JUMP Medium-term C3 1998-10-23 2,303
------------------------------------------------------------------------------------
3051 TOP Long-term 2-51 1998-01-30 9
------------------------------------------------------------------------------------
3107 HAN Long-term B7 1998-10-23 94,185
------------------------------------------------------------------------------------
3638 HAN Long-term C-8 1998-11-14 409
------------------------------------------------------------------------------------
6201 G NEW JUMP Short-term 1 1998-05-19 36,660
------------------------------------------------------------------------------------
6233 G HANBAGUNI C7 1998-10-23 88
------------------------------------------------------------------------------------
6234 G HANBAGUNI 6 1998-07-31 215
------------------------------------------------------------------------------------
6236 G1 HAN Long-term C4 1998-10-23 487
------------------------------------------------------------------------------------
6237 G2 HAN Long-term C4 1998-10-23 4,764
------------------------------------------------------------------------------------
6239 G HAN Long-term C-5 1998-11-14 303
------------------------------------------------------------------------------------
6240 G1 HAN Long-term C-6 1998-11-14 134
------------------------------------------------------------------------------------
6243 G4 HAN Long-term C-6 1998-11-14 75
------------------------------------------------------------------------------------
6244 G5 HAN Long-term C-6 1998-11-14 40,099
------------------------------------------------------------------------------------
6245 G1 HAN Long-term C-7 1998-11-14 722
------------------------------------------------------------------------------------
6246 G2 HAN Long-term C-7 1998-11-14 3,023
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
7004 OPTI Long-term A-1 2000-02-18 1,259
------------------------------------------------------------------------------------
7008 OPTI Medium-term A-3 2000-07-10 1,260
-------------------------------------------------------------------------------------------------------------
BOND 7017 12M Private Bond 2 2002-09-05 30,000
------------------------------------------------------------------------------------
7019 12M Private Bond 3 2002-09-27 40,000
------------------------------------------------------------------------------------
7028 OPTI Short-term HT1 2000-09-29 872
------------------------------------------------------------------------------------
7030 (Private) Bond 3 2002-02-09 30,042
------------------------------------------------------------------------------------
7035 6M Private Bond 6 2002-11-15 11,900
------------------------------------------------------------------------------------
7036 24M Private Bond 1 2002-12-24 20,000
------------------------------------------------------------------------------------
7038 OPTI Short-term S-1 2000-06-14 9,267
------------------------------------------------------------------------------------
7039 3M Private Bond 9 2003-01-08 30,400
------------------------------------------------------------------------------------
7040 (Private) Bond 4 2002-03-22 22,930
------------------------------------------------------------------------------------
7045 6M Private Bond 8 2003-01-24 50,000
------------------------------------------------------------------------------------
7046 6M Private Bond 9 2003-01-27 100,000
------------------------------------------------------------------------------------
7047 6M Private Bond 10 2003-02-20 99,966
------------------------------------------------------------------------------------
7049 6M Private Bond 11 2003-03-13 10,000
------------------------------------------------------------------------------------
7054 3M Private Bond 13 2003-03-25 16,200
------------------------------------------------------------------------------------
7059 6M Private Bond 13 2003-04-14 13,000
------------------------------------------------------------------------------------
7060 3M Private Bond 16 2003-05-29 197
------------------------------------------------------------------------------------
7062 3M Private Bond 17 2003-06-19 10,000
------------------------------------------------------------------------------------
7065 3M Private Bond 18 2003-07-08 11,000
------------------------------------------------------------------------------------
7072 BEST NETIAN 2 2000-05-16 375,337
------------------------------------------------------------------------------------
7088 ACE Long-term Government and 2000-10-02 40,000
Public Bond II
------------------------------------------------------------------------------------
7110 S GUARD Medium-term 1 2003-03-12 973
------------------------------------------------------------------------------------
7111 GUARD Medium-term Bond 1 2002-05-28 5,476
------------------------------------------------------------------------------------
7112 GUARD Medium-term Bond 2 2002-10-08 7,499
------------------------------------------------------------------------------------
7122 CHOICE Medium-term 2 2001-09-29 532
------------------------------------------------------------------------------------
7172 CHOICE Short-term 4 2001-12-18 19,133
------------------------------------------------------------------------------------
7174 CHOICE Short-term 6 2003-03-13 45,000
------------------------------------------------------------------------------------
7175 CHOICE Short-term 4(7172) 2001-12-18 7,434
------------------------------------------------------------------------------------
7176 CHOICE Short-term 4(7172) 2001-12-18 9,287
------------------------------------------------------------------------------------
7182 HIGH JUMP Bond 2 2002-04-17 198
------------------------------------------------------------------------------------
7303 OPTI Long-term J-3 2000-05-26 1,405
------------------------------------------------------------------------------------
7831 Separated Taxation Government 2001-12-19 18,967
Bond 1
------------------------------------------------------------------------------------
7832 Separated Taxation Government 2002-07-11 23,993
Bond 2
------------------------------------------------------------------------------------
7923 OPTI Long-term IIB3 2000-06-23 2,636
------------------------------------------------------------------------------------
7930 Non-taxable Government and 2000-07-27 27,035
Public CH-1
------------------------------------------------------------------------------------
7931 Non-taxable Bond CH-1 2000-07-27 2,600
------------------------------------------------------------------------------------
7932 Non-taxable Bond C1 2000-07-27 386
------------------------------------------------------------------------------------
7933 Non-taxable Government and 2000-08-08 1,998
Public IIC1
------------------------------------------------------------------------------------
7934 Non-taxable Government and 2000-09-04 247
Public J1
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
7943 OPTI Medium-term IIIA1 2000-11-13 2,333
------------------------------------------------------------------------------------
7947 OPTI Medium-term IIIH1 2000-11-24 305
------------------------------------------------------------------------------------
7963 OPTI Medium-term IIICH1 2001-03-12 3,283
------------------------------------------------------------------------------------
7965 OPTI Medium-term IIICH2 2001-05-17 6,333
------------------------------------------------------------------------------------
7970 OPTI Long-term IIICH1 2001-07-16 1,626
------------------------------------------------------------------------------------
7972 OPTI Medium-term IIICH5 2001-08-09 984
------------------------------------------------------------------------------------
8101 Chohung 12M B1 1999-12-29 1,980
-------------------------------------------------------------------------------------------------------------
BOND TOTAL 1,308,761
-------------------------------------------------------------------------------------------------------------
BOND-BALANCED 5262 PW20 SA Unit 1 2002-07-29 2,500
------------------------------------------------------------------------------------
5365 NEW CHANGE 1 2003-01-07 2,710
------------------------------------------------------------------------------------
5366 NEW CHANGE 2 2003-02-04 918
------------------------------------------------------------------------------------
5367 NEW CHANGE 3 2003-07-07 300
------------------------------------------------------------------------------------
5385 MERIT Unit B-1 2000-01-27 32,313
------------------------------------------------------------------------------------
5446 MERIT II6MCH1 2001-03-13 1,183
-------------------------------------------------------------------------------------------------------------
BOND BALANCED 5447 MERIT II3MJ4 2001-05-29 822
------------------------------------------------------------------------------------
5449 FUSION 6M 1 2002-01-12 2,365
------------------------------------------------------------------------------------
5451 MERIT II 6M2 2002-01-17 3,248
------------------------------------------------------------------------------------
5452 MERIT II 6M3 2002-01-31 19,281
------------------------------------------------------------------------------------
6005 D NEW JUMP Medium-term B4 1998-07-16 326
------------------------------------------------------------------------------------
6006 D NEW JUMP Medium-term B11 1998-10-23 76
------------------------------------------------------------------------------------
6261 BEST 9M SA Balanced 1 2002-12-12 49,480
------------------------------------------------------------------------------------
6310 High-yield Balanced C1 2001-08-14 3,912
------------------------------------------------------------------------------------
6311 High-yield Balanced CH1 2001-08-16 12,983
------------------------------------------------------------------------------------
6312 High-yield Balanced CH2 2002-05-04 68,137
------------------------------------------------------------------------------------
6320 High-yield Balanced A1 2001-08-14 371
------------------------------------------------------------------------------------
0000 X Xxxx-xxxxx Xxxxxxxx XX0 0000-00-00 490
------------------------------------------------------------------------------------
0000 X Xxxx-xxxxx Xxxxxxxx XX0 0000-00-00 1,899
------------------------------------------------------------------------------------
6504 CLOVER H-Y A1 2000-03-16 20,646
------------------------------------------------------------------------------------
6505 CLOVER H-Y A2 2000-03-16 12,220
------------------------------------------------------------------------------------
6506 CLOVER H-Y B 2000-03-27 63,836
------------------------------------------------------------------------------------
6507 CLOVER H-Y C1 2000-05-10 39,273
------------------------------------------------------------------------------------
6508 CLOVER H-Y C2 2000-05-10 2,659
------------------------------------------------------------------------------------
6509 CLOVER HY Balanced J1 2000-09-27 2,416
------------------------------------------------------------------------------------
6518 NEW H-Y12M001 2000-01-24 5,557
------------------------------------------------------------------------------------
6519 NEW H-Y DII 2000-06-15 4,855
------------------------------------------------------------------------------------
7050 CP Private Offering Balanced 1 2003-03-14 30,000
------------------------------------------------------------------------------------
7063 CP Private Offering Balanced 3 2003-07-04 10,000
------------------------------------------------------------------------------------
7064 CP Private Offering Balanced 4 2003-07-04 10,000
-------------------------------------------------------------------------------------------------------------
BOND BALANCED TOTAL 404,776
-------------------------------------------------------------------------------------------------------------
MMF 1317 BEST NEW MMF J6 2000-10-27 28,714
------------------------------------------------------------------------------------
1325 BEST NEW MMF A3 1999-09-17 42,743
------------------------------------------------------------------------------------
1338 BEST NEW MMF C1 1999-03-23 37
------------------------------------------------------------------------------------
1339 BEST NEW MMF C2 1999-08-19 33,846
------------------------------------------------------------------------------------
------------------------------------------------------------------------------------
1381 BEST NEW MMF H1 1999-06-30 836
------------------------------------------------------------------------------------
1392 BES NEW MMF HT2 2000-08-03 1,396
------------------------------------------------------------------------------------
1393 BEST NEW MMF C3 2000-07-05 210
------------------------------------------------------------------------------------
1395 BEST NEW MMF C5 2000-10-06 6,355
------------------------------------------------------------------------------------
1396 BEST NEW MMF C6 2001-01-11 35,377
------------------------------------------------------------------------------------
1400 BEST NEW MMF 1 2001-05-10 185,688
------------------------------------------------------------------------------------
1418 CLEAN MMF IICH1 2001-03-12 250,708
------------------------------------------------------------------------------------
1433 CLEAN MMF II 1 2001-06-04 42,548
------------------------------------------------------------------------------------
1436 BES NEW MMF 2 2003-03-13 332,478
------------------------------------------------------------------------------------
1437 BES NEW MMF 3 2003-03-13 128,190
------------------------------------------------------------------------------------
1438 CLEAN MMF II 3 2003-03-14 76,141
------------------------------------------------------------------------------------
1439 Government and Public Bond MMF 4 2003-03-20 49,000
------------------------------------------------------------------------------------
1440 Government and Public Bond MMF 5 2003-03-26 251,930
------------------------------------------------------------------------------------
1442 Government and Public Bond MMF 7 2003-04-03 791,543
------------------------------------------------------------------------------------
1443 Government and Public Bond
MMF II 4 2003-04-10 2,035
------------------------------------------------------------------------------------
1444 Government and Public Bond
MMF 8 2003-04-16 228,600
------------------------------------------------------------------------------------
1450 BEST NEW MMF J6(1317) 2000-10-27 15,806
------------------------------------------------------------------------------------
1451 BEST NEW MMF No.1(1400) 2001-05-10 46,017
-------------------------------------------------------------------------------------------------------------
MMF TOTAL 2,550,198
-------------------------------------------------------------------------------------------------------------
TOTAL 4,431,722
-------------------------------------------------------------------------------------------------------------
SCHEDULE 4.16
PERFORMANCE OF INVESTMENT FUNDS
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
CURRENT STATUS OF REVOLVING CP
--------------------------------------------------------------------------------------------------------
TRANSACTION AGREED INTEREST
DATE NAME OF ISSUE DUE DATE AMOUNT RATE REMARKS
--------------------------------------------------------------------------------------------------------
2002.4.9. SK Corporation 2003.4.9. 20 billion 5.40% Termination of Agreement
Won
-------------------------------------------------------------------------------------------------------
2002.5.13. SK Corporation 2003.5.13. 20 billion 5.45% Termination of Agreement
Won
-------------------------------------------------------------------------------------------------------
2002.4.24. Kookmin Credit 2004.1.16. 50 billion 5.91% 2003. 4. 17. Refusal to accept
Card Co., Ltd. Won refinancing issued CP, Removal
of Agreement
-------------------------------------------------------------------------------------------------------
2002.2.6. Samsung Capital 2004.4.24. 10 billion 5.85% 2003. 4. 24. Refusal to accept
Co., Ltd. Won refinancing issued CP, Removal
of Agreement
-------------------------------------------------------------------------------------------------------
2002.4.17. Samsung Capital 2004.1.29. 40 billion 5.60% 2003. 4. 29. Refusal to accept
Co., Ltd. Won refinancing issued CP, Removal
of Agreement
-------------------------------------------------------------------------------------------------------
2002.1.29. Woori Credit 2004.2.6. 40 billion 5.55% 2003. 5. 6. Refusal to accept
Card Co., Ltd Won refinancing issued CP, Removal
of Agreement
-------------------------------------------------------------------------------------------------------
SCHEDULE 4.17(a)
DERIVATIVE INSTRUMENTS
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.17(b)
DERIVATIVE INSTRUMENTS
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.18
TRUST ACCOUNTS
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.20
INSURANCE
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.21
ENVIRONMENTAL, HEALTH AND SAFETY LAWS
CHOHUNG BANK
N/A
SUBSIDIARIES OTHER THAN CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
CHOHUNG INVESTMENT TRUST MANAGEMENT CO., LTD.
N/A
SCHEDULE 4.22
FINDER'S FEES
N/A
SCHEDULE 4.23
CONSUMER FINANCE LOANS
FINANCIAL COOPERATION DETAILS OF CHOHUNG BANK
-------------------------------------------------------------------------
NAME OF COMPANY BALANCE
-------------------------------------------------------------------------
LG Card Co., Ltd. 200.5 billion Won
-------------------------------------------------------------------------
Hyundai Capital Service Inc. 178.9 billion Won
-------------------------------------------------------------------------
Samsung Capital Co., Ltd. 24.8 billion Won
-------------------------------------------------------------------------
Total 404.2 billion Won
-------------------------------------------------------------------------
* Reference to Exhibit in contents of contracts
--------
(i) The Majority Banks mean that the aggregate outstanding loans among the
Lenders are 66 2/3% of the aggregate loans.
EXHIBIT A: RATIO OF ALLOWANCES OF SHINHAN BANK
* Ratio of Allowances based on Asset Classification
(as of June 30, 2003)
--------------------------------------------------------------------------------
Grade Asset Classification Ratio of Allowances
--------------------------------------------------------------------------------
1 0.2%
----- -------------------
2 0.5%
----- -------------------
3 Normal 0.6%
----- -------------------
4 1.2%
----- -------------------
5 1.5%
----- -------------------
6 2.0%
--------------------------------------------------------------------------------
7 Precautionary 4.0%
--------------------------------------------------------------------------------
8 Substandard 20.0%
--------------------------------------------------------------------------------
9 Doubtful 95.0%
--------------------------------------------------------------------------------
10 Estimated Loss 100.0%
--------------------------------------------------------------------------------
EXHIBIT B. CALCULATION METHOD OF "EARN-OUT" AS A RESULT OF SPIN-OFF OF
CREDIT CARD BUSINESS DIVISION
- If the credit card business division of Chohung Bank ("CHB") will be
spun off (including business transfer, hereinafter the same), the net
income of CHB for the years of 2004 to 2006 should reflect the
contribution by the credit card business division of CHB to the net
income of the consolidated credit card company created after spin-off
("CHB Contribution Profit") (the concept of "net income" includes net
loss).
- After spin-off, the method of calculation of the CHB Contribution
Profit shall be agreed between the parties by the Cash Portion Closing,
taking into account any appropriate methods including without
limitation Method 1 and Method 2 set forth below; provided, that the
method of calculation should be agreed in a way that the contribution
ratio will be produced on a basis of objective data in order to prevent
any dispute in the future.
Method 1
Determine the profit contribution ratio by the credit card business division of
CHB and Shinhan Card Co., Ltd. on a basis of the net credit card receivables
(amount of credit card receivables minus allowances) of each of credit card
business division of CHB and Shinhan Card Co., Ltd. as of December 31, 2002.
Then calculate the CHB Contribution Profits by applying the said profit
contribution ratio to the aggregate net profit and loss of the consolidated
credit card company after spin-off for the period during 2004 to 2006.
Method 2
Calculate CHB Contribution Profit arising from the credit card business division
of CHB out of the annual profit and loss of the consolidated credit card company
after the spin-off appropriately by taking into account the customers concerned
and the relevant profits/expenses.
EXHIBIT C: INVESTMENT AGREEMENT
APPENDIX 1: CARD LOAN A
--------------------------------------------------------------------------------
Balance as of End of 2002
Classification (Unit: Million Won)
--------------------------------------------------------------------------------
Total of Card Loan A
--------------------------------------------------------------------------------
(A) Cash Advance +
(B) (C) Receivables
--------------------------------------------------------------------------------
(B) Credit Card Loan (Including Replacement
Loan)
--------------------------------------------------------------------------------
Note 1) Amount for each item specified above shall be attached hereto after
both parties confirm the materials provided by CHB by the Cash Closing.
Note 2) Details of the Card Loan A per each borrower shall be attached hereto
after both parties confirm the materials provided by Chohung Bank by
the Cash Closing.
APPENDIX 2: CARD LOAN A (D)
- Details of the Card Loan A (D) shall be attached hereto after both
parties confirm the materials provided by CHB at least one (1) month
from the Cash Closing.
APPENDIX 3: COLLATERAL VALUE
- It means the collateral value of property for each corporate loan as of
the Second Calculation Date. It shall be calculated by deducting the
secured obligations which have priority (mortgage, pledge, wage claim
(including severance payment) and tax claim, etc.) from the sum of 1) +
2).
1) In case of land, building and any other movable property, the
value evaluated by one or more certified appraisal company
which is(are) selected through agreements of both parties at
the time of evaluation
- In case more than one certified appraisal companies
shall evaluate, the Collateral Value shall be
calculated by using the arithmetic average.
- Expenses relating to the appraisal shall be borne by
each party at 50:50 basis.
2) In case of deposits, public and corporate bonds or other
monetary receivables, the Collateral Value shall be the
present value.
APPENDIX 4: WORKSHEET OF THE 9 ENTERPRISES SUBJECT TO INDEMNIFICATION RELATING
TO CORPORATE LOANS & BALANCE OF CORPORATE LOANS AS OF DECEMBER 31, 2002
* Balance of Loans of Enterprises Subject to Indemnification and Detailed
Balance classified by Corporate Loan Type
Borrower Total Type Type Type Type Type Type Type
-------- ----- ---- ---- ---- ---- ---- ---- ----
(unit: million won)
*
*
*
*
*
*
*
*
*
Note) The amount by each item shall be attached hereto after both parties
confirm the materials provided by CHB by the Cash Closing.
*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.
APPENDIX 5: WORKSHEET OF THE 9 ENTERPRISES SUBJECT TO INDEMNIFICATION OF
CORPORATE LOANS & CEILING OF CORPORATE LOANS AS OF SIGNING
* Credit Ceiling of Each Enterprise subject to Indemnification by Corporate Loan
Type
Borrower Total Type Type Type Type Type Type Type
-------- ----- ---- ---- ---- ---- ---- ---- ----
(unit: million won)
*
*
*
*
*
*
*
*
*
Note) The amount by each item shall be attached hereto after both parties
confirm the materials provided by CHB by the Cash Closing.
*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.
APPENDIX 6: STATUS OF RETURNED KAMCO CREDIT
Name of Company Purchase Price
--------------- --------------
(unit: million won)
Total
Note) Each enterprise and each amount by enterprise shall be attached
hereto after both parties confirm the materials provided by CHB by
the Cash Closing.
APPENDIX 7: CALCULATION OF REDUCTION LOSS (VALUATION LOSS) OF EQUITY AND
EQUITY LINKED SECURITIES
- Reduction loss (including valuation loss) of equity and equity linked
securities shall be calculated per relevant equity and equity linked
securities by using the weighted average of the average loss ratios of
other banks and that of CHB at a ratio of 4:6.
In other words, reduction loss and valuation loss of equity and equity
linked securities shall be calculated as follows:
= Principal amount before Reduction and Valuation X Loss Ratio
- Average loss ratio of other banks shall be the average of the loss
ratio calculated by each bank.
- Loss Ratio by each Bank = (Principal amount before Reduction or
Valuation - Balance after Reduction or Valuation)/(Principal amount
before Reduction or Valuation)
- Average Loss Ratio of CHB = (Principal amount before Reduction or
Valuation - Balance after Reduction or Valuation)/(Principal amount
before Reduction or Valuation)
- The loss ratio of equity and equity linked securities of other banks
and CHB includes negative (-) ratio. (in case of valuation profit)
- Standard for selecting other banks: commercial banks (Kookmin Bank,
Hana Bank, Korea First Bank, KorAm Bank, Woori Bank, Korea Exchange
Bank) which hold the balance of the relevant equity and equity linked
securities by each corporation amounting to 10 billion Won or more.
- Except as specified in this Appendix 7, for the detailed calculation
method and procedure, etc. of the average loss ratio of other bank(s)
(arithmetic average of loss ratio of each bank, provision of the
Documentary Evidence and Source, or application of the Fair Value
Method, if applicable) the provision of the "RESERVE RATIO OF THE OTHER
COMMERCIAL BANKS" of Section 11.01 (a)(i)(B) in the Agreement shall
apply.
APPENDIX 8: THRESHOLD OF CORPORATE LOANS OF THE 9 ENTERPRISES
(unit: million won)
Shinhan Accounting
Amount of Allowances Corporation
as of End of 2002 Additional Allowances Threshold
No Borrower (A) (B) (A+B)
--- -------- -------------------- --------------------- ----------
1 *
2 *
3 *
4 *
5 *
6 *
7 *
8 *
9 *
Notes)
1) The amount stated above refers to the amount stated in the evaluation
report on share value submitted by Shinhan Accounting Corporation to Korea
Deposit Insurance Corporation ("KDIC") in connection with stock sale of
CHB, and is attached by the Cash Closing after the Purchaser confirms.
2) KDIC makes its best efforts to assist the Purchaser's confirmation.
3) In case of SK Global Co., Ltd., additional reserves will be calculated
taking into account amount of allowances as of the end of 2002 after
converting the ratio of allowance evaluated by Shinhan Accounting
Corporation into 19%.
*MATERIAL OMITTED: CONFIDENTIAL TREATMENT HAS BEEN REQUESTED AND FILED
SEPARATELY WITH THE COMMISSION.
APPENDIX 9: THRESHOLD OF CARD LOANS
(Unit: Million Won)
--------------------------------------------------------------------------------
Additional Allowances
Allowances as of End of of Shinhan Accounting
2002 Corporation Threshold
Classification (A) (B) (A+B)
--------------------------------------------------------------------------------
Card Loan
--------------------------------------------------------------------------------
Note 1) The amount stated above refers to the amount stated in the evaluation
report on share value submitted by Shinhan Accounting Corporation to
Korea Deposit Insurance Corporation ("KDIC") in connection with stock
sale of CHB, and is attached by the Cash Closing after the Purchaser
confirms.
Note 2) KDIC makes its best efforts to assist the Purchaser's confirmation.
APPENDIX 10: GUIDELINES FOR ALLOWANCE RATIO ON CARD LOANS
* Credit Card & Card Loan (Banking Business Supervision Regulation)
-----------------------------------------------------------------------------------------------
Asset Classification Minimum
--------------------------------------------------------------- Allowance
Classification Default Period Other Creditworthiness Ratio
-----------------------------------------------------------------------------------------------
Normal Less than 1 month Customers maintaining good financial 1%
& no default conditions and no problems in the
recovery are expected
-----------------------------------------------------------------------------------------------
Precautionary Less than 3 months Customers having potential factor which 12%
may cause deterioration of their
repayment capability in the future
-----------------------------------------------------------------------------------------------
Substandard Expected recovery Portion of credits classified as 20%
portion out of "Doubtful" and "Estimate Loss" which
credits classified is expected to be recovered
as "Doubtful" and Customers from whom recoverability has
"Estimate Loss" serious risk
-----------------------------------------------------------------------------------------------
Doubtful Less than 6 month Customers from whom recoverability has 60%
serious risk occurred because their
repayment capability have been remarkably
deteriorated
-----------------------------------------------------------------------------------------------
Estimated Loss 6 month or more Customers from whom recoverability is 100%
sure to be impossible and the charge-off
is inevitable because the repayment
capability of customers have been
seriously deteriorated
Customers undergoing insolvency,
bankruptcy or liquidation or
discontinuance of business
-----------------------------------------------------------------------------------------------
[ ] In determining the other creditworthiness of customers, the credit rating
may be consulted in case of a corporation and the credit information held by
other financial institution may be consulted in case of an individual.
(Reference: In case of a corporation, its credit rating means application of
standard for classification of credit rating to corporation loan to such
corporation.)
* Replacement Loan
-----------------------------------------------------------------------------------------------
Soundness Classification Minimum
--------------------------------------------------------------- Allowance
Classification Default Period Other Creditworthiness Ratio
-----------------------------------------------------------------------------------------------
Precautionary Less than 1 Customers maintaining good financial 12%
month & no conditions and no problems in the
defaults recovery are expected
Customers having potential factor which
may cause deterioration of their
repayment capability in the future
-----------------------------------------------------------------------------------------------
Substandard Expected recovery Portion of of credits classified as 20%
portion out of "Doubtful" and "Estimate Loss" which is
credits classified expected to be recovered
as "Doubtful" and Customers from whom recoverability has
"Estimate Loss" serious risk
-----------------------------------------------------------------------------------------------
Doubtful Less than 3 month Customers from whom recoverability has 60%
serious risk occurred because their
repayment capability have been
remarkably deteriorated
-----------------------------------------------------------------------------------------------
Estimated Loss 3 month or more Customers from whom recoverability is 100%
sure to be impossible and the charge-off
is inevitable because the repayment
capability of customers have been
seriously deteriorated
Customers undergoing insolvency,
bankruptcy or liquidation or
discontinuance of business
-----------------------------------------------------------------------------------------------
[ ] In determining the other creditworthiness of customers, the credit rating
may be consulted in case of a corporation and the credit information held by
other financial institution may be consulted in case of an individual.
(Reference: In case of a corporation, its credit rating means application of
standard for classification of credit rating to corporation loan to such
corporation.)
APPENDIX 11. MATTERS RELATING TO SALE OF CARD LOANS
- When card loans are to be sold after the Closing, in case of
followings, it is deemed that KDIC has consented thereto.
1) Sale of Card Loan in default for six months or more
2) Sale of Card Loan Written-Off
3) In case the sale loss occurring from sale of Card Loan in default less
than six months is
to be satisfied with the allowances in accordance with the standard of
allowances in Appendix 10
APPENDIX 12: THRESHOLD OF RETURNED KAMCO CREDITS
(unit: million won)
--------------------------------------------------------------------------------
Additional
Allowances of
Allowances as of End Shinhan Accounting
of 2002 Corporation Threshold
Classification (A) (B) (A+B)
--------------------------------------------------------------------------------
Returned KAMCO
Credits
--------------------------------------------------------------------------------
Note 1) The amount stated above refers to the amount stated in the evaluation
report on share value submitted by Shinhan Accounting Corporation to
Korea Deposit Insurance Corporation ("KDIC") in connection with stock
sale of CHB, and is attached by the Cash Closing after the Purchaser
confirms.
Note 2) KDIC makes its best efforts to assist the Purchaser's confirmation.
SCHEDULE 5.03(A): CONSENTS; NO CONFLICTS.
1. Pursuant to Article 16 of the Financial Holding Company Act,
FSC (Financial Supervisory Commission) approval is required
for the acquisition of 80.04% stakes in CHB and CHB becoming a
subsidiary.
2. For the Closing of Equity Section, the court approval is
required for contribution in kind of equities held by the
government for the Company's issuance of new shares.
3. With respect to the Company's issuance of new shares for the
Closing of Equity Section, the acceptance by FSS (Financial
Supervisory Service) of the registration statement submitted
to FSS is required.
