Memorandum of Understanding between Woori Finance Holdings and Peace Bank



 Exhibit 4.10 
  
  
 AGREEMENT 
 ON 
 THE MANAGEMENT OF THE IMPLEMENTATION OF THE MANAGEMENT IMPROVEMENT PLAN

  
 Woori Finance Holdings Co., Ltd. (“WFH”) and Peace Bank of Korea
(“Peace”) made and enter into the following agreement (the “Agreement”) to concretely implement the Agreement on Implementation of the Management Improvement Plan (“Management Improvement Plan”) between WFH and Korea
Deposit Insurance Corporation (“KDIC”) dated July 2, 2001, under Article 6 (Execution of Agreement between WFH and the Subsidiaries) of the Management Improvement Plan. 
  
  
 Article 1 Purpose 
  

	 	1.1	 	The purpose of this agreement is to set forth the terms and conditions required for WFH to define the roles of WFH and Peace, the authority of WFH over Peace, the obligations and
responsibilities of Peace to WFH, so that WFH may become a competitive financial group (the “Group”) and increase its corporate value and any other items necessary to recover public funds invested in Peace in a timely and profitable
manner. 

  
  
 Article 2 Roles of WFH 
  
 WFH will fulfill the following items to effectively implement its overall business policies and strategies, including: 
  

	 	2.1	 	Assign individual business goals to each of its subsidiaries to achieve the overall goal of the Group; 

  

	 	2.2	 	Discuss and coordinate any decisions that may have a material impact on Peace, such as business plan, capital budgeting, dividend policy, and capital increases;


  

	 	2.3	 	Manage and develop Peace’s human resource and implement an education program on a Group basis; 

  

	 	2.4	 	Enact, amend, or abolish articles or provisions of relevant rules and regulations, in order to efficiently implement business management of Peace as defined in Article 15 of the
Financial Holding Company Act; 

  

	 	2.5	 	Establish and manage the criteria used to evaluate the business performance and compensation scheme of Peace and its senior management; 

  

	 	2.6	 	Examine, or request for an examination, of the business activities and the assets of Peace if WFH deems it necessary to do so, and exercise any corrective action and requests to
reprimand any employees concerned for violations of any relevant regulations and rules, or any unfair or wrongful business activities; 

  

	 	2.7	 	Manage public relations activities of Peace and rebrand to the Group’s corporate identity; 

  

	 	2.8	 	Organize and manage task forces for special projects, as well as, request to assign employees of Peace to various task forces; 

  

	 	2.9	 	Request to amend the business action plans of Peace under the Agreement; 

  

	 	2.10	 	Request to submit amendments to the Business Normalization Plan which was entered into between KDIC and Peace; and 

  

	 	2.11	 	Request for necessary measures regarding to Peace in order to achieve WFH’s business goals and enhance its corporate value. 








  
 Article 3 Roles of Peace 

Peace will fulfill the following items to effectively implement WFH’s business policies and strategies: 
  

	 	3.1	 	Achieve the business goals as assigned by WFH; 

  

	 	3.2	 	Consult with WFH regarding decisions that may have a material impact on their management, such as business plans, capital budgeting, dividend policy, capital increases, and
appointment of senior management; 

  

	 	3.3	 	Establish and implement an Action Plan (defined hereinafter) regarding WFH’s business improvement strategy and business restructuring; 

  

	 	3.4	 	Provide regular and timely reporting of Peace’s business performance; 

  

	 	3.5	 	Observe relevant rules and regulations applicable to the Group which are enacted by WFH; 

  

	 	3.6	 	Agree to share consulting fees or expenses incurred for the purpose of building and implementing the Group’s business strategy, provided that Peace benefits from such
consulting services; 

  

	 	3.7	 	Dispatch employees to special task forces deemed necessary by the Group; 

  

	 	3.8	 	Cooperate and support examinations or requests for examination by WFH, and report to WFH actions and results of correction or reprimand as a result of examination; and


  

	 	3.9	 	Implement any other necessary measures as required by WFH. 

  
  
 Article 4 Action Plan 
  

	 	4.1	 	WFH may request Peace to submit its action plan (“Action Plan”) necessary for WFH’s efficient implementation of the Management Improvement Plan, and Peace shall
submit to WFH the Action Plan within one month from the receipt of such request. 

  

	 	4.2	 	The Action Plan as referred in Section 4.1 should include the following: 

  

	 	4.2.1	 	Quarterly milestones to achieve target financial ratios as referred in “Appendix 1”; 


	 	4.2.2	 	Business execution plans in connection to “Appendix 2”; and 


	 	4.2.3	 	Any additional factors as requested by WFH. 

  
  
 Article 5 Request for Proposed Supplements to the Action Plan 
  

	 	5.1	 	In the event where it is deemed that Peace is not likely to implement the plans under the Action Plan due to revision of applicable laws and regulations, changes in the external
environments such as substantial changes in the market conditions and changes in WFH’s business strategies, Peace may immediately report to WFH thereof and subsequently submit to WFH the proposed amendments to the Action Plan (“Proposed
Amendments to the Action Plan”). 

  

	 	5.2	 	In order to successfully achieve targets as described in the Management Improvement Plan, WFH may request Peace to submit a proposed supplemental plan or such necessary measures as
correction or changes to the Action Plan or Proposed Amendments to the Action Plan in Section 5.1, Peace should follow the request in the determined periods. 

  

	 	5.3	 	In case the event described in Section 5.1 occurs or in any other event that may threaten the attainment of the objectives under the Management Improvement Plan because Peace does
not implement the Action Plan, WFH may request Peace to modify the Action Plan to include the following: 

  

	 	5.3.1	 	Restrict sales of specific financial products; 


	 	5.3.2	 	Restrict investments on fixed assets, entry to new business, or new investment in stock; 

  

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	 	5.3.3	 	Prohibit acquisition of assets with high risk of default or price volatility, or dispose high risk assets that has already been purchased; 


	 	5.3.4	 	Improve or reduce of manpower and organization; and 


	 	5.3.5	 	Close, unify, or restrict new establishment of branch and organization, and dispose subsidiaries of the Peace. 

  
 Article 6 Obligations to Implement the Action Plan 
  

	 	6.1	 	Peace shall be obligated to implement in good faith the Action Plan except for the occurrence of a natural disaster, material national economic crisis or any other events of the
force majeure (collectively, the “Event of Force Majeure”). 

  

	 	6.2	 	Peace shall obtain and submit to WFH the Letter of Undertaking, in the form designated under the Action Plan as attached hereto, each of which shall have been signed by the
incumbent officers as of the effective date of this Agreement and any other officer to be appointed by Peace during the term of this Agreement. 

  

	 	6.3	 	Except for the case where Peace fails to perform its obligations to implement the Action Plan in the Event of the Force Majeure as specified in Section 6.1 above, Peace shall not
deny that such failure was caused by or resulted from its willful misconduct or negligence or any other similar reasons attributable to it. Furthermore, Peace shall not claim that any problems arising out of the relationship with the officers or
employees, labor unions, creditors, debtors or any other interested parties of it shall be deemed as one of the Events of Force Majeure. 

  
 Article 7 Reporting and Reviewing on Implementation of the Action Plan 
  

	 	7.1	 	Peace must submit to WFH a report on the implementation of the Action Plans (“Implementation Report”) so that WFH may inspect the process of the implementation of the
Action Plan and such report shall include the following matters: 

  

	 	7.1.1	 	Summary of changes in the market conditions during the relevant term; 


	 	7.1.2	 	Overview on the business and financial conditions including financial statements; 


	 	7.1.3	 	Description of the goals to be performed or attained during the relevant term in respect of each plan itemized in the Action Plan; 


	 	7.1.4	 	Contents and results of performance of each itemized plan as specified in the foregoing Section 7.1.3; 


	 	7.1.5	 	Any issues or problems incurred in the course of fulfilling the Action Plans during the relevant term; 


	 	7.1.6	 	Any itemized plans resulting in poor performance, the reasons thereof and measures for the remedy thereof; and 


	 	7.1.7	 	Any Action Plans for the immediately following term. 

  

	 	7.2	 	When reporting each of the items specified in the foregoing Section 7.1, Peace shall not impair the accuracy and the integrity of the Implementation Report by adopting any
discretionary accounting methods or any other means. 

  

	 	7.3	 	Peace shall submit to WFH the Implementation Report under Section 7.1 on a quarterly basis within one (1) month from the end of each fiscal quarter. 

  

	 	7.4	 	WFH may request Peace to submit additional materials in addition to the report specified in Section 7.3 and Peace may not reject WFH’s request for such additional materials
without any special reason. 

  

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	 	7.5	 	Upon review of the Implementation Reports or additional materials as specified in Sections 7.1 and 7.4, WFH may inspect Peace’s operations and financial conditions if WFH deems
it necessary to reveal the reasons for lack of performance. 

  
  
 Article 8 Request for Proposed Amendments to the Business Normalization Plan 
  

	 	8.1	 	If WFH deems it necessary for effective implementation of the Management Improvement Plan, WFH may request Peace to submit to KDIC the proposed amendments to the Business
Normalization Plan 

  

	 	    	 	(“Proposed Amendments to the Business Normalization Plan”) in connection to the Business Normalization Plan that was made and entered into by and between KDIC and Peace.


  

	 	8.2	 	Without any reasonable excuse, Peace must submit to KDIC the Proposed Amendments to the Business Normalization Plan within one month from the receipt of such request.


  
  
 Article 9 Measures against the Failure of Implementation 
  

	 	9.1	 	In the event where it is deemed that Peace fails to perform any obligations hereunder, WFH may request Peace to take any of the following measures with respect to its officers or
employees, which may include cautions, warnings, reprimands, salary reductions, suspensions, and dismissals, and in these cases Peace shall take such measures as requested by WFH and submit to WFH a report on the results of such measures taken by
it. 

  

	 	9.2	 	In the event where Peace’s officers or employees delay in making such reports or make a false or fraud statement in such reports as specified in Article 7 or refuse, interrupt,
or neglect any performance of its obligations or any requests made by WFH according to this Agreement including but not limited to the provisions of Articles 2, 4, and 8, WFH may request Peace to take any measures specified in Section 9.1 above and
Peace shall immediately take such measures and submit to WFH the results of such measures taken by it. 

  
  
 Article 10 Effective Period 
  

	 	10.1	 	This Agreement shall become effective from the date on which WFH and Peace has affixed their respective seals and signatures hereto. 

  

	 	10.2	 	This Agreement shall become null and void at the time when Peace is no longer a subsidiary of WFH in accordance with relevant laws and regulations unless there exists any other
special reason. 

  

	 	10.3	 	In such case KDIC is no longer the largest shareholder of WFH and the Management Improvement Plan shall no longer be in effect as stated in Section 13.2 of the Management
Improvement Plan, this Agreement shall continue to be in effect so long as Peace is a subsidiary of WFH in accordance with relevant laws and regulations. However, this Agreement shall cease once a mutual agreement has been made between WFH and
Peace. 

  
  
 Article 11 Miscellaneous 
  

	 	11.1	 	If any term or provision hereof is invalid or unenforceable for any reasons whatsoever, such invalidity or unenforceability does not affect the remaining parts of this Agreement.


  

	 	11.2	 	Any dispute arising out of or in connection with this Agreement or the performance of obligations hereunder shall be submitted to the non-exclusive jurisdiction of the Seoul
District Court to be a court of the first instance. 

  

	 	11.3	 	In the case there exist any discrepancies regarding the interpretation of this Agreement, Peace will respect the interpretation by WFH to the extent that such interpretation is
consistent with the purpose of this Agreement as set out in Article 1 above. 

  
  

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	 	11.4	 	This Agreement shall not affect any rights reserved by WFH as a shareholder or creditor, or any rights reserved by it under the Financial Holding Company Act and other relevant laws
and regulation. 

  
  
 Supplementary Provision 
  
 Woori Finance Holdings and Peace Bank of Korea will cooperate closely and in concert with the urgent and important management subjects in order to enhance the competitive power and value of Group, and Woori Finance Holdings will assure the
greatest independency of Peace Bank of Korea in management. 
  
 July
2, 2001 
  

	 Woori Finance Holdings Co., Ltd.
	 	Chairman	 	Byung Chul Yoon
			
	 Peace Bank of Korea
	 	Chief Executive Officer	 	Suk Hee Hwang

  
 Appendix. I Supplement Business
Normalization Plan for Woori Credit Card 
  
  
  
 A. Financial Ratio Targets (Minimum Requirements) 
  
  

	 	  	(%, W100m)
	 Items

	  	2003

	 	 	2004


	  	Jun

	 	 	Sep

	 	 	Dec

	 	 	Mar

	 	 	Jun

	  	Sep

	  	Dec


	 Capital adequacy ratio (%)
	  	8.00	 	 	9.50	 	 	9.50	 	 	9.50	 	 	9.50	  	9.50	  	9.50
	 Return on total assets (%)
	  	(6.0	)	 	(5.2	)	 	(6.8	)	 	(0.2	)	 	0.0	  	0.2	  	0.3
	 Expense-to-revenue ratio (%)
	  	14.3	 	 	14.3	 	 	13.4	 	 	14.4	 	 	14.1	  	13.9	  	13.0
	 Operating income per employee
	  	21	 	 	22	 	 	23	 	 	24	 	 	24	  	24	  	25
	 Delinquency ratio (more than 1 month) (%)
	  	9.9	 	 	9.9	 	 	9.7	 	 	9.9	 	 	9.8	  	9.9	  	9.7



	*	 	Possible to adjust the targets considering the effect on financial targets of the future integration of credit card business of Kyongnam Bank. 


	**	 	The above financial targets are set to the level for minimum survival status and early business normalization considering the whole business environment of current credit card
industry, and assume no further increases in employee compensation with additional wage and expenses. 

  
  
 B. Non-Financial Targets 
  

	 Business

	  	 Plan

	  	 Target Date


	 Maximize the
 group-wide synergies
	  	 n Integrate credit card business of Kyongnam Bank
  
  
 n Encourage related business within the Group
	  	 Depends on the schedule of WFH
  
 Continuous

			
	 Others
	  	 n Establish plan for diversity of funding source and report the result
  
 n Continue to operate and improve the system introduced
by
      previous Business Normalization Plan
  
 n Establish and promote plan to efficiently operate
      manpower and expenses
	  	 End of July, 2003
  
  
 Continuous
  
  
 Continuous


  

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