Document:

Exhibit 10.1

 

 

EXECUTION VERSION

 

AMENDED AND RESTATED

 

 

INVESTOR AGREEMENT

 

 

BY AND BETWEEN

 

 

MORGAN STANLEY

 

 

AND

 

 

INVESTOR

 

 

DATED AS OF JUNE 30, 2011

 

 

 

  

  

 

  

 

	
TABLE OF CONTENTS

	 	  	
Page

	
ARTICLE I

	
DEFINITIONS

	
Section 1.1

	
Definitions

	
1

	
ARTICLE II

	
REPRESENTATIONS AND WARRANTIES

	
Section 2.1

	
Representations and Warranties of the Company

	
5

	
Section 2.2

	
Representations and Warranties of the Investor

	
5

	
ARTICLE III

	
BOARD REPRESENTATION AND VOTING; STANDSTILL PROVISIONS

	
Section 3.1

	
Board of Directors

	
6

	
Section 3.2

	
Voting

	
8

	
Section 3.3

	
Standstill Restrictions

	
8

	
Section 3.4

	
Standstill Period

	
9

	
Section 3.5

	
Cooperation

	
10

	
ARTICLE IV

	
TRANSFER RESTRICTIONS

	
Section 4.1

	
Transfer Restrictions

	
10

	
ARTICLE V

	
PREEMPTIVE RIGHTS

	
Section 5.1

	
Preemptive Rights

	
12

	
Section 5.2

	
Notice

	
12

	
Section 5.3

	
Purchase Mechanism

	
13

	
Section 5.4

	
Cooperation

	
14

	
Section 5.5

	
Limitation of Rights

	
14

	
Section 5.6

	
Termination of Preemptive Rights

	
14

	
ARTICLE VI

	
[RESERVED]

	 
	
ARTICLE VII

	
EFFECTIVENESS AND TERMINATION

	
Section 7.1

	
Termination

	
15

 

  

  

  

 

 

	
ARTICLE VIII

	
CONFIDENTIALITY

	
Section 8.1

	
Company Proprietary Information

	
15

	
Section 8.2

	
Investor Proprietary Information

	
16

	
ARTICLE VIII

	
MISCELLANEOUS

	
Section 9.1

	
Successors and Assigns

	
16

	
Section 9.2

	
Amendments; Waiver

	
17

	
Section 9.3

	
Notices

	
17

	
Section 9.4

	
Governing Law

	
18

	
Section 9.5

	
Submission to Jurisdiction

	
18

	
Section 9.6

	
Headings

	
19

	
Section 9.7

	
Entire Agreement

	
19

	
Section 9.8

	
Severability

	
19

	
Section 9.9

	
Counterparts

	
19

	
Section 9.10

	
Interpretation

	
19

	
Section 9.11

	
Specific Performance

	
19

	
Section 9.12

	
Process Agent

	
20

	
Section 9.13

	
No Third Party Beneficiaries

	
20

	  	  	  

 

 

  

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AMENDED AND RESTATED INVESTOR AGREEMENT (this “Agreement”), by and between Morgan Stanley, a Delaware corporation (the “Company”), and Mitsubishi UFJ Financial Group, Inc., a joint stock company organized under the laws of Japan (the “Investor”), dated as of June 30, 2011.

 

W I T N E S S E T H:

 

WHEREAS, the Company and the Investor have entered into a Securities Purchase Agreement, dated September 29, 2008 and amended by the First Amendment to Securities Purchase Agreement, dated as of October 3, 2008, the Second Amendment to Securities Purchase Agreement, dated as of October 8, 2008 and the Third Amendment to Securities Purchase Agreement, dated as of October 13, 2008 (such Securities Purchase Agreement, as so amended and as it may be further amended from time to time, the “Purchase Agreement”), pursuant to which the Investor purchased and acquired from the Company, and the Company issued and sold to the Investor, (i) shares of the 10% Series B Non-Cumulative Non-Voting Perpetual Convertible Preferred Stock, par value $.01 per share of the Company (the “Series B Preferred Stock”), which is convertible into shares of Common Stock, par value $.01 per share of the Company (the “Common Stock”), and (ii) shares of the 10% Series C Non-Cumulative Non-Voting Perpetual Preferred Stock, par value $.01 per share of the Company, (together with Series B Preferred Stock, “Preferred Stock”);

 

WHEREAS, the Company and the Investor have entered into the Transaction Agreement dated as of April 21, 2011 (the “Transaction Agreement”) and the execution and delivery of this Agreement is a condition to the closing of the transactions contemplated therein;

 

WHEREAS, the Company and the Investor are parties to that certain Investor Agreement, dated as of October 13, 2008 and amended by the First Amendment to Investor Agreement, dated as of October 27, 2008 (the Investor Agreement, as so amended, the “Investor Agreement”); and

 

WHEREAS, the Company and the Investor have determined to further amend and restate the Investor Agreement as set forth herein.

 

NOW, THEREFORE, in consideration of the premises and of the respective representations, warranties, covenants and conditions contained herein, the parties hereto agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1  Definitions.  In addition to other terms defined elsewhere in this Agreement, as used in this Agreement, the following terms shall have the meanings ascribed to them below:

 

“Affiliate” or “affiliate” means, with respect to a specified Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, the specified Person (as used in this definition, the term “control” means the possession, directly or 

 

  

 

  

 

indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise).

 

“Agreement” shall have the meaning assigned in the preamble hereto.

 

“Applicable Law” shall have the meaning assigned in the Transaction Agreement.

 

“Beneficially Own” shall mean, with respect to any securities, having “beneficial ownership” of such securities for purposes of Rule 13d-3 or 13d-5 under the Exchange Act as in effect on the date hereof, and “Beneficial Ownership” shall have the corresponding meaning.

 

“Board” shall mean the Board of Directors of the Company.

 

“Business Day” shall mean any day other than a Saturday, Sunday or a legal holiday in New York City or in Tokyo, Japan, or any other day on which commercial banks in New York City or in Tokyo, Japan are authorized or required by law or government decree to close.

 

“Closing Date” shall have the meaning assigned in the Purchase Agreement.

 

“Common Stock” shall have the meaning assigned in the recitals hereto.

 

“Company” shall have the meaning assigned in the preamble hereto.

 

“Company Proprietary Information” shall have the meaning set forth in Section 8.1.

 

“Controlled Affiliate” shall mean any Affiliate of the specified Person that is, directly or indirectly, controlled (as defined in the definition of “Affiliate”) by the specified Person.

 

“Covered Securities” shall mean Common Stock and any securities convertible into or exercisable or exchangeable for Common Stock that are not Excluded Securities.

 

“Designated Securities” shall have the meaning assigned in Section 5.2(a).

 

“Director” shall mean any member of the Board.

 

“Economic Interest Percentage” shall mean, calculated at any particular point in time, the ratio, expressed as a percentage, of (x) the aggregate number of shares of Common Stock Beneficially Owned by the Investor at the relevant time (for purposes of this definition, treating the Series B Preferred Stock as fully converted into the underlying Common Stock) to (y) the total number of shares of Common Stock outstanding at the relevant time, on a Fully Diluted Basis.

 

“Exchange Act” shall mean the Securities Exchange Act of 1934, or any successor federal statute, and the rules and regulations promulgated thereunder, all as amended, and as the same may be in effect from time to time.

 

  

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“Excluded Securities” shall mean any securities that are (i) issued by the Company pursuant to any employment contract, employee or benefit plan, stock purchase plan, stock ownership plan, stock option or equity compensation plan or other similar plan whereby stock is being issued or offered to a trust, other entity or otherwise, to or for the benefit of any employees, potential employees, officers or directors of the Company, (ii) issued by the Company in connection with a business combination or other merger, acquisition or disposition transaction, (iii) issued with reference to the common stock of a subsidiary (e.g., a carve-out transaction), (iv) issued in connection with a dividend investment or stockholder purchase plan or (v) issued upon the conversion, exchange or exercise of any security or right or purchase obligation outstanding as of the date hereof in accordance with its terms as such terms exist as of the date hereof.

 

“Fully Diluted Basis” shall mean based on the total number of shares of the relevant class of stock or type of equity interest that would be outstanding on the relevant date assuming the exercise of all options, warrants and other rights or obligations (including purchase contracts) to acquire such relevant class of stock or type of equity interest (without regard to exercisability, vesting or similar provisions and restrictions thereof) and the conversion or exchange of all securities convertible into or exchangeable for stock or equity interest (without regard to exercisability, vesting or similar provisions and restrictions thereof).

 

“Governmental Entity” shall have the meaning assigned in the Purchase Agreement.

 

“Hedge” shall mean, in respect of the Common Stock, to enter into any swap or any other agreement, transaction or series of transactions that hedges or transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of such Common Stock, whether any such transaction, swap or series of transactions is to be settled by delivery of securities, in cash or otherwise.

 

“Investor” shall have the meaning assigned in the preamble hereto.

 

“Investor Director” shall have the meaning assigned in Section 3.1(a).

 

“Investor Nominee” shall have the meaning assigned in Section 3.1(a).

 

“Investor Percentage Interest” shall mean, as of any date, the percentage equal to (i) the aggregate number of shares of Common Stock Beneficially Owned by the Investor (treating the Series B Preferred Stock and any other securities of the Company convertible into or exercisable or exchangeable for Common Stock that are Beneficially Owned by the Investor or its Affiliates as fully converted into or exercised or exchanged for the underlying Common Stock) divided by (ii) the total number of outstanding shares of Common Stock (treating (x) the Series B Preferred Stock and any other securities of the Company convertible into or exercisable or exchangeable for Common Stock that are Beneficially Owned by the Investor or its Affiliates as fully converted into or exercised or exchanged for the underlying Common Stock and (y) all shares of Common Stock issuable upon conversion or exercise or exchange of any other then outstanding securities convertible into or exercisable or exchangeable for Common Stock, to the 

 

  

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extent such other securities are Covered Securities sold in a Qualified Offering, as having been issued).

 

“Investor Proprietary Information” shall have the meaning set forth in Section 8.2.

 

“Investor Rights Termination Event” shall be deemed to have occurred if, at the close of any Business Day following the Closing Date, the Investor’s Economic Interest Percentage is less than 10%.

 

“Nominee Disclosure Information” shall have the meaning assigned in Section 3.1(b).

 

“Observer” shall have the meaning assigned in Section 3.1(f).

 

“Person” shall mean a legal person, including any individual, corporation, company, partnership, joint venture, association, joint-stock company, trust, limited liability company or unincorporated association or any other entity or organization, including a government or any agency or political subdivision thereof, or any other entity of whatever nature.

 

“Preemptive Rights Expiration Date” shall have the meaning assigned in Section 5.6.

 

“Preferred Stock” shall have the meaning assigned in the recitals hereto.

 

“Private Placement” shall have the meaning set forth in Section 5.2(b).

 

“Process Agent” shall have the meaning set forth in Section 9.12.

 

“Purchase Agreement” shall have the meaning assigned in the recitals hereto.

 

“Qualified Offering” shall mean a public or nonpublic offering of Covered Securities for cash, and, for the avoidance of doubt, shall include all Covered Securities issued in respect of such offering pursuant to the exercise of preemptive rights.

 

“Registration Rights Agreement” shall mean the Registration Rights Agreement, dated as of October 13, 2008, as amended by the amendment dated April 21, 2011.

 

“Related Agreements” shall mean the Purchase Agreement and Registration Rights Agreement.

 

“SEC” shall mean the U.S. Securities and Exchange Commission.

 

“Securities” shall mean shares of Common Stock and Preferred Stock.

 

  

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“Securities Act” shall mean the U.S. Securities Act of 1933, and any similar or successor federal statute, and the rules and regulations promulgated thereunder, all as amended, and as the same may be in effect from time to time.

 

“Standstill Period” shall have the meaning set forth in Section 3.4.

 

“Subsidiary” shall mean, with respect to any Person, any other Person more than fifty percent (50%) of the shares of the voting stock or other voting interests of which are owned or controlled, or the ability to select or elect more than fifty percent (50%) of the directors or similar managers is held, directly or indirectly, by such first Person or one or more of its Subsidiaries or by such first Person and one or more of its Subsidiaries.  A Subsidiary that is directly or indirectly wholly owned by another Person except for directors’ qualifying shares shall be deemed wholly owned for the purposes of this Agreement.

 

“Transaction Agreement Closing Date” shall mean the closing provided for in Section 2.01 of the Transaction Agreement.

 

“Transfer” shall have the meaning set forth in Section 4.1.

 

 

ARTICLE II

REPRESENTATIONS AND WARRANTIES

 

Section 2.1  Representations and Warranties of the Company.   The Company represents and warrants to the Investor as of the date hereof as follows:

 

(a)           The Company has been duly incorporated and is validly existing as a corporation in good standing under the laws of the State of Delaware, and has all requisite power and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

(b)           This Agreement and all transactions and obligations contemplated hereby have been duly and validly authorized by all necessary action on the part of the Company.

 

(c)           This Agreement has been duly executed and delivered by the Company and, assuming due authorization and valid execution and delivery by the Investor, is a valid and legally binding obligation of the Company, enforceable against it in accordance with its terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights.

 

Section 2.2  Representations and Warranties of the Investor.   The Investor represents and warrants to the Company as of the date hereof as follows:

 

(a)           The Investor has been duly incorporated and is validly existing and in good standing under the laws of the jurisdiction of its organization and has all requisite power 

 

  

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and authority to execute and deliver this Agreement and to perform its obligations hereunder and to consummate the transactions contemplated hereby.

 

(b)           This Agreement and all transactions and obligations contemplated hereby have been duly and validly authorized by all necessary action on the part of the Investor.

 

(c)           This Agreement has been duly executed and delivered by the Investor and, assuming due authorization and valid execution and delivery by the Company, is a valid and legally binding obligation of the Investor, enforceable against it in accordance with its terms subject to bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and similar laws of general applicability relating to or affecting creditors’ rights.

 

ARTICLE III

BOARD REPRESENTATION AND VOTING; STANDSTILL PROVISIONS

 

Section 3.1 Board of Directors.  (a)  Until an Investor Rights Termination Event, the Company shall take all lawful action to cause the number (specified in subsection (e) of this Section 3.1) of the Investor’s senior officers or directors designated by the Investor in writing to the Company (each, an “Investor Nominee”) who satisfy any applicable regulatory requirements applicable to directors or director nominees to the Board to be members of the Board (each such Investor Nominee elected to the Board, an “Investor Director”).  If the Investor is entitled pursuant to this Article III to designate one Investor Director, the Investor may designate one Investor Director to be appointed as a member of such committees of the Board as the Investor may designate, subject to any applicable legal or stock exchange requirements and except as necessary to maintain best practices in corporate governance regarding such appointment.  If the Investor is entitled pursuant to this Article III to designate two Investor Directors, the Investor may designate each of the Investor Directors to be appointed as a member of such committees of the Board as the Investor may designate, provided that only one such Investor Director may be appointed to each committee of the Board, subject to any applicable legal or stock exchange requirements and except as necessary to maintain best practices in corporate governance regarding such appointment.  For the avoidance of doubt, the Company acknowledges that each Investor Director shall be entitled to vote on all matters in his or her discretion.  Moreover, the Company acknowledges that each Investor Director, in his or her capacity as such, will have the same access as other directors to management and other directors with respect to matters relating to the operation, financial and all other policies of the Company and the ability to participate in the processes by which those policies are made.  Without limitation of the foregoing, each Investor Director shall have the same ability as other directors to attend (in his or her capacity as a director) all meetings of committees of the Board, including the Audit, Nominating/Governance, Compensation Committees and the newly constituted Global Operations and Technology Committee.  For purposes of this Section 3.1, Investor shall mean Mitsubishi UFJ Financial Group, Inc., notwithstanding any Transfer to a Controlled Affiliate.

 

(b)           Until an Investor Rights Termination Event, at any annual or special meeting of shareholders of the Company at which Directors are to be elected (and at which a seat held by an Investor Director is subject to election), the Company shall, provided the Investor shall have complied with the immediately succeeding sentence of this paragraph (b), renominate 

 

  

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each such Investor Director, or nominate another Investor Nominee or other Nominees designated by the Investor in writing to be elected to the Board, and shall use its best efforts to cause such person(s) to be elected to such position.  The Investor shall notify the Company of its proposed nominee(s) to the Board, in writing, no later than the latest date on which stockholders of the Company may make nominations to the Board in accordance with the bylaws of the Company, together with all information concerning such nominee(s) reasonably requested by the Company, so that the Company can comply with applicable disclosure rules (the “Nominee Disclosure Information”); provided that in the event the Investor fails to provide any such notice, the Investor Nominee(s) shall be the person(s) then serving as the Investor Director(s) as long as the Investor provides the Nominee Disclosure Information to the Company promptly upon request by the Company.

 

(c)           In the event of the death, disability, resignation or removal of an Investor Director, the Board will promptly elect to the Board an Investor Nominee to fill the resulting vacancy, which such individual shall then be deemed an Investor Director for all purposes hereunder.

 

(d)           All obligations of the Company pursuant to this Section 3.1 shall terminate, and the Investor shall cause the Investor Director(s) to resign from the Board, immediately upon the occurrence of an Investor Rights Termination Event.

 

(e)           Until the first time at which the Investor Percentage Interest has been less than 20% for a period of six consecutive months, the Investor shall continue to have the right to designate two Investor Nominees pursuant to Section 3.1(a). From such date until an Investor Rights Termination Event, the Investor shall have the right to designate one Investor Nominee pursuant to Section 3.1(a).

 

(f)           From the first date on which (x) the Investor Percentage Interest has been less than 20% for a period of six consecutive months and (y) only one Investor Director is a member of the Board until an Investor Rights Termination Event, the Company shall permit one senior officer or director of the Investor designated by the Investor in writing to the Company (the “Observer”) to attend each physical and telephonic meeting of the Board as an observer and the Observer shall have the same ability as the directors to attend any committee of the Board as an observer, including the Audit, Nominating/Governance, Compensation Committees and the newly constituted Global Operations and Technology Committee. The Company shall cause the Observer to be furnished with all information generally provided to the Board.  Notwithstanding the foregoing, the Observer shall not participate in any meeting or receive any materials (1) if the Investor Director has recused himself or herself because he or she is reasonably likely to have a conflict of interest with respect to the subject matter of the meeting or any portion of the meeting or (2) to the extent but only to the extent that the Observer’s attendance or receipt of such materials is, in the opinion of the Company’s counsel, reasonably likely to adversely affect the existence of legal privilege.  Such Observer shall not be entitled to vote at any Board meeting or receive any compensation or reimbursement of expenses from the Company for services as an observer, and shall not participate in executive sessions of the Board.  In the event of the death, 

 

  

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disability, resignation or removal of the Observer, the Investor will promptly designate another senior officer or director of the Investor to serve as the Observer.

 

Section 3.2  Voting.  The Investor agrees to cause each share of Common Stock Beneficially Owned by it that is entitled to vote in any election for Directors to be present in person or represented by proxy at all meetings of stockholders of the Company, so that all such shares shall be counted as present for determining the presence of a quorum at such meetings.   The provisions of this Section 3.2 shall not apply at any time that the Company is not in compliance with its obligations under Section 3.1 or following the occurrence of an Investor Rights Termination Event.

 

Section 3.3  Standstill Restrictions.   During the Standstill Period (as defined in Section 3.4), the Investor shall not, and shall not permit any of its Affiliates to, without the prior written consent of the Company:

 

	
  

	
(i)

	
acquire, agree to acquire or make any public proposal to acquire, directly or indirectly, Beneficial Ownership of any voting securities or assets of the Company or its Subsidiaries, except (A) the acquisition of securities or assets by the Investor or any of its wholly owned Subsidiaries from the Investor or any such Subsidiary, (B) Beneficial Ownership resulting from the acquisition of interests in any unrelated Person that has Beneficial Ownership of shares of Common Stock, provided, in the case of this clause (B) that (1) the acquisition of Beneficial Ownership of Common Stock was not the primary purpose of the acquisition of interests in such unrelated Person, (2) the Investor or the relevant Affiliate divests, or causes the unrelated Person to divest, any such shares of Common Stock reasonably promptly in a commercially reasonable manner, and (3) any such shares of Common Stock shall not be counted in any calculation of the Investor’s Economic Interest Percentage, (C) pursuant to the exercise of preemptive rights pursuant to Article V, or, prior to the time Investor first takes an action described in Section 5.6(ii), purchases of Common Stock in the open market up to a cap, which cap shall be an Investor Percentage Interest of 22.4% (provided that if such limitation would result in the Investor being limited to an Economic Interest Percentage of less than 20%, then such limitation shall instead be equal to the lesser of (x) an Economic Interest Percentage of 20% and (y) an Investor Percentage Interest of 24.9%), or (D) on behalf of customers in the ordinary course of their respective financial services businesses;

 

	
  

	
(ii)

	
deposit any shares of Common Stock in a voting trust or similar arrangement or subject any shares of Common Stock to any voting agreement, pooling arrangement or similar arrangement, or grant any proxy with respect to any shares of Common Stock;

 

  

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(iii)

	
publicly propose to enter into, directly or indirectly, any merger or other business combination or similar transaction with, or change in control transaction involving, the Company or its Subsidiaries;

 

	
  

	
(iv)

	
make, or in any way join in, directly or indirectly, any “solicitation” of “proxies” (as such terms are used in the proxy rules of the SEC) to vote any securities of the Company or its Subsidiaries (it being understood that (A) the Investor is entitled to exercise the voting rights with respect to the Securities in its discretion (and without regard to the recommendation of the Board or management of the Company), (B) the Investor may publicly propose that that Board take actions that the Investor supports or refrain from taking actions that the Investor opposes and (C) the Investor may vote in favor of proposals made by other stockholders (and without regard to the recommendation of the Board with respect thereto));

 

	
  

	
(v)

	
[Reserved.]

 

	
  

	
(vi)

	
seek a release of the restrictions contained in this Section 3.3, in any manner that would require public disclosure thereof;

 

	
  

	
(vii)

	
form, join or in any way participate in a “group” (within the meaning of Section 13(d)(3) of the Exchange Act) that, with respect to any securities of the Company or its Subsidiaries, would be required under Section 13(d) of the Exchange Act and the rules and regulations thereunder to file a Statement on Schedule 13D with the SEC as a “person” (within the meaning of Section 13(d)(3) of the Exchange Act); or

 

	
  

	
(viii)

	
publicly disclose any plan or proposal with respect to the foregoing.

 

Notwithstanding anything to the contrary herein, the Company acknowledges that the Investor may provide guidance and participate with respect to matters relating to the Company’s business, including operational and financial policies.  It is understood between the Company and Investor that (A) the Investor is entitled to exercise the voting rights with respect to the Securities in its discretion (and without regard to the recommendation of the Board or management of the Company), (B) the Investor may privately or publicly propose that the Board or the Company take actions that the Investor supports or refrain from taking actions that the Investor opposes and (C) the Investor may publicly state its position with regard to proposals made by other stockholders and vote in favor of or against proposals made by other stockholders (and without regard to the recommendation of the Board with respect thereto.

 

The restrictions on the Investor contained in this Section 3.3 shall not apply at any time that the Company is not in compliance with its obligations under Section 3.1.

 

Section 3.4  Standstill Period.   “Standstill Period” shall mean the period from the date hereof until the earlier of (i) October 13, 2013, and (ii) the occurrence of an Investor Rights Termination Event; provided, however, that the parties shall, prior to the expiration of the 

 

  

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Standstill Period, discuss in good faith whether to extend the Standstill Period (with no obligation to extend).  In addition, the Standstill Period shall be suspended, and the restrictions of Section 3.3 shall not apply, upon the failure of any Investor Nominee to be elected to the Board within 60 calendar days following any annual or special meeting of shareholders of the Company at which an Investor Nominee stood for election but was nevertheless not elected, provided that the Standstill Period shall resume and the restrictions of Section 3.3 shall apply, from and after the date that such Investor Nominee (or an alternate designated by the Investor) is elected or appointed to the Board.

 

Section 3.5  Cooperation.   The Company shall cooperate with the Investor to provide such information as is necessary to and to take such action from time to time as may be  necessary for the Investor to apply the equity method of accounting for its investment in the Company.  At the first scheduled meeting of the Board after the Transaction Agreement Closing Date, (i) the number of directors on the Board shall be increased by one, (ii) the Board will elect to the Board a senior officer or director of the Investor to be designated by the Investor in writing to the Company who satisfies any applicable regulatory requirements applicable to directors or director nominees to the Board to be a member of the Board and an Investor Director hereunder and (iii) such Investor Director as the Investor may designate pursuant to Section 3.1(a) shall be appointed to the newly constituted Global Operations and Technology Committee.  So long as the Investor is entitled pursuant to this Article III to designate two Investor Directors, the Company agrees to maintain a Board having at least 14 members, provided that the size of the Board may temporarily be less than 14 members for a reasonable period of time necessary to fill any temporary vacancy on the Board.  In the event that the Company and the Investor have not entered into the written agreement or agreements referred to in Section 5.01(d)(i) of the Transaction Agreement on or prior to the Transaction Agreement Closing Date, then the Company and the Investor shall further cooperate with each other and use their respective reasonable best efforts to enter such an agreement or agreements promptly thereafter.  The Company and the Investor shall cooperate for the purpose of complying with the disclosure and other regulatory requirements that will, or will continue to, apply under Applicable Law (including the Exchange Act, the Banking Act of Japan and the Financial Instruments and Exchange Law of Japan and the rules and regulations promulgated thereunder).

 

ARTICLE IV

TRANSFER RESTRICTIONS

 

Section 4.1  Transfer Restrictions.  (a)  Prior to October 13, 2011, the Investor shall not, within any period of three months, offer, sell, pledge or otherwise transfer (“Transfer”)  Securities or Hedge its direct or indirect exposure to Common Stock, in one transaction or a series of transactions involving Securities, having an aggregate value exceeding $2.5 billion, in each case, other than (i) to a Controlled Affiliate that agrees to be bound by the provisions of this Agreement as if it were the Investor hereunder or (ii) as may be required by order or decree of any Governmental Entity having jurisdiction over the Investor or in the reasonable discretion of the Investor to comply with any applicable statute, rule or regulation.  In the event that prior to October 13, 2011, any Person who was a transferee pursuant to clause (i) of the preceding sentence ceases to be a Controlled Affiliate of Investor, then any prior Transfer to such Person 

 

  

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pursuant to clause (i) shall become null and void and ownership and title to any such securities so Transferred shall revert to Investor.  The Investor shall immediately notify the Company if it engages in any of the transactions referred to in this Section 4.1.

 

(b)           At any time during which Investor is permitted to Transfer any Securities, the Investor shall not, without prior approval of the Board, knowingly Transfer such Securities to any one Person (or group of related Persons) if such Transfer would result in such Person (or group of related Persons) Beneficially Owning in excess of 5% the then-outstanding shares of Common Stock.  The foregoing shall not apply to Transfers (i) consisting only of block trades executed at prevailing market prices obtainable at the time of such Transfer through brokers in transactions on the NYSE, provided that the transferor does not know or have reason to believe that such Transfer would result in such Person (or group of related Persons) Beneficially Owning in excess of 5% of the then-outstanding shares of Common Stock, or (ii) effected through widely distributed public offerings.

 

(c)           The Investor’s rights under this Agreement will not be transferable to any transferee of any shares of Common Stock or Preferred Stock, other than a transferee that is and remains a wholly owned Subsidiary of the Investor.

 

(d)           Any certificates for Securities issued pursuant to the Purchase Agreement or issued upon conversion or exchange of Securities or issued in respect of any transfer of Securities shall bear a legend or legends (and appropriate comparable notations or other arrangements will be made with respect to any uncertificated shares) referencing restrictions on transfer of such shares under the Securities Act and under this Agreement; provided, that the holder of any certificate(s) bearing any such legend (or any uncertificated shares subject to such notations or arrangements) shall be entitled to receive from the Company new certificates for a like number of Securities not bearing such legend (or the elimination or termination of such notations or arrangements) upon the request of such holder and upon (x) such time as such restriction is no longer applicable, and (y) delivery of an opinion of counsel to such holder, which opinion is reasonably satisfactory in form and substance to the Company and its counsel, that the restriction referenced in such legend (or such notations or arrangements) is no longer required in order to ensure compliance with the Securities Act.

 

(e)           Nothing in this Section 4.1 (other than Section 4.1(b)) shall restrict Investor from Transferring, and the Investor is hereby permitted to Transfer, any Securities in order to reduce the number of Securities owned by it below 24% of “a class of voting stock” of the Company, as calculated for purposes of the Bank Holding Company Act of 1956, as amended (the “BHCA”).  If at any time the Company reduces the number of shares of its Common Stock outstanding, it shall use reasonable best efforts to notify the Investor promptly if the Investor would own a number of Securities exceeding 24% of “a class of voting stock” of the Company, as calculated for purposes of the BHCA.  For purposes of such calculation, the Company shall be permitted to rely on the number of shares of Common Stock reported as Beneficially Owned by the Investor in its most recent Schedule 13D filing with the SEC.

 

  

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ARTICLE V

PREEMPTIVE RIGHTS

 

Section 5.1 Preemptive Rights.  If the Company offers to sell Covered Securities in a Qualified Offering, the Investor shall be afforded the opportunity to acquire from the Company, for the same price and on the same terms as such Covered Securities are offered, in the aggregate up to the amount of Covered Securities required to permit the Investor’s Investor Percentage Interest immediately after giving effect to the issuance of such Covered Securities (including the issuance of Covered Securities pursuant to this Section 5.1) to be equal to the Investor’s Investor Percentage Interest immediately prior to the issuance of any such Covered Securities, but only to the extent that the Investor Percentage Interest does not as a consequence exceed 22.4% (provided that if such limitation would result in the Investor being limited to an Economic Interest Percentage of less than 20%, then such limitation shall instead be equal to the lesser of (x) an Economic Interest Percentage of 20% and (y) an Investor Percentage Interest of 24.9%).  For the avoidance of doubt, in the event that the issuance of Covered Securities in a Qualified Offering involves the purchase of a package of securities that includes Covered Securities and other securities in the same Qualified Offering, Investor shall have the right to acquire a pro rata portion of such other securities, together with a pro rata portion of such Covered Securities, at the price and on the terms that such other securities are purchased by the other purchaser or purchasers of such Covered Securities and other securities and, if the Investor chooses to acquire Covered Securities pursuant to this Section 5.1, it shall also acquire a pro rata portion of such other securities at such price and on such terms.

 

Section 5.2  Notice.  (a)  In the event the Company intends to make a Qualified Offering of Covered Securities that is an underwritten public offering or a private offering made to Qualified Institutional Buyers (as such term is defined in Rule 144A under the Securities Act) for resale pursuant to Rule 144A under the Securities Act, the Company shall give the Investor written notice of its intention (including, in the case of a registered public offering and to the extent possible, a copy of the prospectus included in the registration statement filed in respect of such offering), describing, to the extent then known, the anticipated amount of securities, price and other material terms upon which the Company proposes to offer the same.  The Investor shall have 24 hours (which shall not include any hours during any day that is not a Business Day) from the date and time of receipt of any such notice to notify the Company in writing that it intends to exercise such preemptive purchase rights and as to the amount of Covered Securities the Investor desires to purchase, up to the maximum amount calculated pursuant to Section 5.1 (the “Designated Securities”).  Such notice shall constitute a non-binding indication of interest of Investor to purchase the Designated Securities so specified at the range of prices and other terms set forth in the Company’s notice to it.  The failure to respond during such 24-hour period shall constitute a waiver of preemptive rights in respect of such offering.  To the extent the Company shall give the Investor notice of any such offer prior to the public announcement thereof, the Investor shall agree to confidentiality and restriction on trading terms reasonably acceptable to the Company.  The failure of the Investor to agree to such terms within 24 hours (which shall not include any hours during any day that is not a Business Day) after the date and time of receipt of the Company’s notice as described in this clause shall constitute a waiver of the Investor’s preemptive rights in respect of such offering.

 

  

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(b)           If the Company proposes to make a Qualified Offering of Covered Securities that is not an underwritten public offering or Rule 144A offering (a “Private Placement”), the Company shall give the Investor written notice of its intention, describing, to the extent then known, the anticipated amount of securities, price and other material terms upon which the Company proposes to offer the same.  The Investor shall have 48 hours (which shall not include any hours during any day that is not a Business Day) from the date and time of receipt of the notice required by the immediately preceding sentence to notify the Company in writing that it intends to exercise such preemptive purchase rights and as to the amount of Designated Securities the Investor desires to purchase, up to the maximum amount calculated pursuant to Section 5.1.  Such notice shall constitute a non-binding indication of interest of the Investor to purchase the amount of Designated Securities so specified (or a proportionately lesser amount if the amount of Covered Securities to be offered in such Private Placement is subsequently reduced) upon the price and other terms set forth in the Company’s notice to it.  The failure of the Investor to respond during the 48-hour period (which shall not include any hours during any day that is not a Business Day) referred to in the second preceding sentence shall constitute a waiver of the preemptive rights in respect of such offering.  To the extent the Company shall give the Investor notice of any such offer prior to the public announcement thereof, the Investor shall agree to confidentiality and restriction on trading terms reasonably acceptable to the Company.  The failure of the Investor to agree to such terms within 48 hours (which shall not include any hours during any day that is not a Business Day) after the date and time of receipt of the Company’s notice as described in this clause shall constitute a waiver of the Investor’s preemptive rights in respect of such offering.

 

Section 5.3  Purchase Mechanism.  (a)  If the Investor exercises its preemptive purchase rights provided in Section 5.2(a), the Company shall offer the Investor, if such underwritten public offering or Rule 144A offering is consummated, the Designated Securities (as adjusted to reflect the actual size of such offering when priced) at the same price as the Covered Securities are offered to the investors in such offering and shall provide written notice of such price to the Investor as soon as practicable prior to such consummation.  Contemporaneously with the execution of any underwriting agreement or purchase agreement entered into between the Company and the underwriters or initial purchasers of such underwritten public offering or Rule 144A offering, the Investor shall, if it continues to wish to exercise its preemptive rights with respect to such offering, enter into an instrument in form and substance reasonably satisfactory to the Company acknowledging the Investor’s binding obligation to purchase the Designated Securities to be acquired by it and containing representations, warranties and agreements of the Investor that are customary in private placement transactions and, in any event, no less favorable to the Investor than any underwriting or purchase agreement entered into by the Company in connection with such offering, and the Investor’s failure to enter into such an instrument at or prior to such time shall constitute a waiver of preemptive rights in respect of such offering.  Any offers and sales pursuant to this Article V in the context of a registered public offering shall be also conditioned on reasonably acceptable representations and warranties of the Investor regarding its status as the type of offeree to whom a private sale can be made concurrently with a registered offering in compliance with applicable securities laws.

 

  

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(b)           If the Investor exercises its preemptive rights provided in Section 5.2(b), the closing of the purchase of the Covered Securities with respect to which such right has been exercised shall be conditioned on the consummation of the Private Placement giving rise to such preemptive purchase rights and shall take place simultaneously with the closing of the Private Placement or on such other date as the Company and the Investor shall agree in writing; provided that the actual amount of Covered Securities to be sold to the Investor pursuant to its exercise of preemptive rights hereunder shall be reduced if the aggregate amount of Covered Securities sold in the Private Placement is reduced and, at the option of the Investor (to be exercised by delivery of written notice to the Company within five Business Days of receipt of notice of such increase), shall be increased if such aggregate amount of Covered Securities sold in the Private Placement is increased.  In connection with its purchase of Designated Securities, Investor shall, if it continues to wish to exercise its preemptive rights with respect to such offering, execute an agreement containing representations, warranties and agreements of Investor that are substantially similar in all material respects to the agreements executed by other purchasers in such Private Placement.

 

Section 5.4  Cooperation.  The Company and the Investor shall cooperate in good faith to facilitate the exercise of the Investor’s preemptive rights hereunder, including securing any required approvals or consents, in a manner that does not jeopardize the timing, marketing, pricing or execution of any offering of the Company’s securities.  In the event that within 60 days of the date hereof the Company proposes to offer or sell securities in a single transaction or series of transactions for aggregate proceeds in excess of $500,000,000, the Company shall consult with Investor concerning such transaction or transactions prior to undertaking such transaction.

 

Section 5.5  Limitation of Rights.  Notwithstanding the above, nothing set forth in this Article V shall confer upon the Investor the right to purchase any securities of the Company other than Designated Securities.

 

Section 5.6  Termination of Preemptive Rights.  The preemptive right to purchase Covered Securities granted by this Article V shall not be available for any offering that commences at any time after (i) October 13, 2013 (the “Preemptive Rights Expiration Date”) or (ii) the date on which the Investor Transfers any of the Securities that it acquired on the Closing Date or the Common Stock issued upon conversion of any Securities, or Hedges its exposure to the Common Stock, except as contemplated by clause (i) or (ii) of the first sentence of Section 4.1(a) and Section 4.1(e); provided, however, that the parties shall, no later than 3 months prior to the Preemptive Rights Expiration Date, discuss in good faith whether to extend the Preemptive Rights Expiration Date (with no obligation to extend).

 

  

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ARTICLE VI

[RESERVED]

 

ARTICLE VII

EFFECTIVENESS AND TERMINATION

 

Section 7.1 Termination.  Other than the termination provisions applicable to particular Sections of this Agreement that are specifically provided elsewhere in this Agreement, this Agreement shall terminate (a) upon the mutual written agreement of the Company and the Investor or (b) at such time as the Investor no longer Beneficially Owns any Securities.

 

ARTICLE VIII

CONFIDENTIALITY

 

Section 8.1  Company Proprietary Information.  (a)  The Investor hereby agrees to, and to cause its employees, representatives and Controlled Affiliates to, and shall instruct its Affiliates that are not Controlled Affiliates to, keep confidential the Company Proprietary Information and to utilize the Company Proprietary Information only for purposes related to the purpose for which such information was disclosed.  “Company Proprietary Information” shall mean any and all confidential information of the Company, including without limitation non-public information relating to the Company’s finances and results, technology, trade secrets, know-how, customers, business plans, marketing activities, financial data and other business affairs that is disclosed by the Company to the Investor Directors, the Observer, the Investor (or its Affiliates and representatives) or is learned by an Investor Director or the Observer while acting in his or her capacity as such; provided, however, that “Company Proprietary Information” does not include any information that:  (i) is, or subsequently becomes, publicly available without breach of these confidentiality provisions;  or (ii) is or becomes known or available to the Investor from a source other than the Company that, to the receiving party’s knowledge, is not prohibited from disclosing such Company Proprietary Information to the receiving party by a contractual, legal or fiduciary obligation owed by such other third party to the Company.

 

(b)           In the event that the Investor or any of its Affiliates or representatives is requested pursuant to, or required by, applicable law, regulation or legal process to disclose any Company Proprietary Information, then before substantively responding to any such request or requirement, the Investor will provide the Company with prompt written notice of any such request or requirement so that the Company may seek a protective order or other appropriate remedy, or both, or waive compliance with the provisions of this Section 8.1 or other appropriate remedy, or if the Company so directs, the Investor will exercise its own reasonable best efforts to assist the Company in obtaining a protective order or other appropriate remedy at the Company’s expense.  If, failing the entry of a protective order or other appropriate remedy or the receipt of a waiver hereunder, disclosure of any Company Proprietary Information is, in the opinion of the Investor’s counsel, required, the Investor may furnish only that portion of the Company Proprietary Information which in the opinion of the Investor’s counsel is required to be so furnished pursuant to law, regulation or legal process.  In any event, the Investor will cooperate 

 

  

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fully with any action by the Company to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Company Proprietary Information.

 

Section 8.2    Investor Proprietary Information.  (a)  The Company hereby agrees to, and to cause its employees, representatives and Controlled Affiliates to, and shall instruct its Affiliates that are not Controlled Affiliates to, keep confidential the Investor Proprietary Information and to utilize the Investor Proprietary Information only for purposes related to the purpose for which such information was disclosed.  “Investor Proprietary Information” shall mean any and all confidential information of the Investor, including without limitation non-public information relating to the Investor’s finances and results, technology, trade secrets, know-how, customers, business plans, marketing activities, financial data and other business affairs that is disclosed by the Investor to the Company (or its Affiliates and representatives) in connection with the Investor’s investment in the Company or the Strategic Alliance as defined in the Purchase Agreement; provided, however, that “Investor Proprietary Information” does not include any information that:  (i) is, or subsequently becomes, publicly available without breach of these confidentiality provisions;  or (ii) is or becomes known or available to the Company from a source other than the Investor that, to the receiving party’s knowledge, is not prohibited from disclosing such Investor Proprietary Information to the receiving party by a contractual, legal or fiduciary obligation owed by such other third party to the Investor.

 

(b)           In the event that the Company or any of its Affiliates or representatives is requested pursuant to, or required by, applicable law, regulation or legal process to disclose any Investor Proprietary Information, then before substantively responding to any such request or requirement, the Company will provide the Investor with prompt written notice of any such request or requirement so that the Investor may seek a protective order or other appropriate remedy, or both, or waive compliance with the provisions of this Section 8.2 or other appropriate remedy, or if the Investor so directs, the Company will exercise its own reasonable best efforts to assist the Investor in obtaining a protective order or other appropriate remedy at the Investor’s expense.  If, failing the entry of a protective order or other appropriate remedy or the receipt of a waiver hereunder, disclosure of any Investor Proprietary Information is, in the opinion of the Company’s counsel, required, the Company may furnish only that portion of the Investor Proprietary Information which in the opinion of the Company’s counsel is required to be so furnished pursuant to law, regulation or legal process.  In any event, the Company will cooperate fully with any action by the Investor to obtain an appropriate protective order or other reliable assurance that confidential treatment will be accorded the Investor Proprietary Information.

 

ARTICLE IX

MISCELLANEOUS

 

Section 9.1  Successors and Assigns.  Except as and to the extent set forth in Section 4.1(a), neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any of the parties hereto, in whole or in part (whether by operation of law or otherwise), without the prior written consent of each of the other parties.  Notwithstanding the foregoing, the Investor may assign any of its rights or obligations under this Agreement to any 

 

  

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direct or indirect wholly owned Subsidiary of the Investor, but the assignor shall remain liable for the assignee’s nonperformance of any such obligations.  Subject to the preceding sentence, this Agreement will be binding upon, inure to the benefit of and be enforceable by the parties and their respective successors and assigns.  Any attempted assignment in violation of this Section 9.1 shall be void.

 

Section 9.2  Amendments; Waiver.  This Agreement may be amended only by an agreement in writing executed by the Company and the Investor.  Any party may waive in whole or in part any benefit or right provided to it under this Agreement, such waiver being effective only if contained in a writing executed by the waiving party.  No failure by any party to insist upon the strict performance of any covenant, duty, agreement or condition of this Agreement or to exercise any right or remedy consequent upon breach thereof shall constitute a waiver of any such breach or of any other covenant, duty, agreement or condition, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

 

Section 9.3  Notices.  Except as otherwise provided in this Agreement, all notices, requests, claims, demands, waivers and other communications hereunder shall be in writing and shall be deemed to have been duly given when delivered by hand or overnight courier service, or when received by facsimile transmission or electronic mail transmission if promptly confirmed (in the case of electronic mail transmission, by means such as by the “return receipt requested” function, return electronic mail or other written acknowledgment by the intended recipient), as follows:

 

  If to the Company:

 

	
  

	
Morgan Stanley

	
  

	
Attention:  Chief Financial Officer

	
  

	
1585 Broadway

	
  

	
New York, NY 10036

	
  

	
E-mail: 

 

  with copies to:

	
  

	
Davis Polk & Wardwell LLP

	
  

	
Attention: Thomas J. Reid

	
  

	
        Marc O. Williams

	
  

	
450 Lexington Avenue

	
  

	
New York, NY  10017

	
  

	
Fax:  (212) 701-5800

	
  

	
E-mail: tom.reid@davispolk.com

  marc.williams@davispolk.com

 

  

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  If to the Investor:

 

	
  

	
Mitsubishi UFJ Financial Group, Inc.

	
  

	
Attention: Chief Manager

	
  

	
       Strategic Alliance Office

	
  

	
       Corporate Planning Division

	
  

	
7-1, Marunouchi 2-chome

	
  

	
Chiyoda-ku, Tokyo 100-8388, Japan

	
  

	
Fax: +81 (3) 3240 5324

	
  

	
E-mail: 

 

  with copies to:

	
  

	
Sullivan & Cromwell LLP

	
  

	
Attention: Donald J. Toumey

	
  

	
       Keiji Hatano

	
  

	
125 Broad Street

	
  

	
New York, NY  10004

	
  

	
Fax:  (212) 558-3588

	
  

	
E-mail: toumeyd@sullcrom.com

	
  

	 	
  hatanok@sullcrom.com

or to such other address, facsimile number or telephone as either party may, from time to time, designate in a written notice given in a like manner.

 

Section 9.4  Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Delaware applicable to contracts executed in and to be performed entirely within such State, without giving effect to the conflicts of laws principles thereof that would govern, construe or enforce the Agreement under laws other than the State of Delaware.

 

Section 9.5  Submission to Jurisdiction.  The Investor irrevocably submits to the non-exclusive jurisdiction of any Delaware State or United States Federal court sitting in the County of New Castle, Delaware over any suit, action or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby.  The Investor irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of venue of any such suit, action or proceeding brought in such a court and any claim that any such suit, action or proceeding brought in such a court has been brought in an inconvenient forum.  EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND THEREFORE EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.  EACH PARTY CERTIFIES 

 

  

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AND ACKNOWLEDGES THAT (i) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER, (ii) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (iii) EACH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (iv) EACH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT  BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 9.5.

 

Section 9.6  Headings.  The descriptive headings of the several sections in this Agreement are for convenience only and do not constitute a part of this Agreement and shall not be deemed to limit or affect in any way the meaning or interpretation of this Agreement.

 

Section 9.7  Entire Agreement.  This Agreement, the Related Agreements and the schedules and exhibits attached to any such documents constitute the entire agreement between the Company and the Investor with respect to the subject matter hereof.  This Agreement and the Related Agreements supersede all prior agreements with respect to the subject matter hereof.

 

Section 9.8  Severability.  If any term or provision of this Agreement or any application thereof shall be declared or held invalid, illegal or unenforceable, in whole or in part, whether generally or in any particular jurisdiction, such provision shall be deemed amended to the extent, but only to the extent, necessary to cure such invalidity, illegality or unenforceability, and the validity, legality and enforceability of the remaining provisions, both generally and in every other jurisdiction, shall not in any way be affected or impaired thereby.

 

Section 9.9  Counterparts.  This Agreement may be signed in one or more counterparts, each of which shall constitute an original and all of which together shall constitute one and the same agreement.

 

Section 9.10  Interpretation.  When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated.  The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.  Whenever the words “include,” “includes” and “including” are used in this Agreement, they are deemed to be followed by the words “without limitation.”  For all purposes of this Agreement, except as otherwise expressly provided or unless the context otherwise requires, (a) the terms defined include the plural as well as the singular, (b) all accounting terms not otherwise defined herein have the meanings assigned under generally accepted accounting principles in the United States, and (c) the words “herein,” “hereof” and “hereunder” and other words of similar import refer to this Agreement as a whole and not to any particular Article, Section or other subdivision.

 

Section 9.11  Specific Performance.  The parties agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that 

 

  

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the parties shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement.

 

Section 9.12  Process Agent.  The Investor irrevocably appoints MUFG North America, 1251 Avenue of the Americas, New York, NY 10020-1104, to act as its agent for service of process and any other documents in proceedings in the State of New York or the State of Delaware or any other proceedings in connection with this Agreement.

 

Section 9.13  No Third Party Beneficiaries.  Except for the transferees contemplated by clause (i) of the second sentence of Section 4.1(a), nothing in this Agreement, expressed or implied, is intended to confer upon any Person, other than the parties hereto or their respective successors, any rights, remedies, obligations or liabilities under or by reason of this Agreement.

 

  

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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective authorized officers as of the date set forth at the head of this Agreement.

 

 

	 	
MORGAN STANLEY

	 
	 	 	 	 
	
 

	
By: 

	 /s/ David S. Russo	 
	 	 	Name:  David S. Russo	 
	 	 	Title:    Treasurer	 
	 	 	 	 

 

 

 

	 	
MITSUBISHI UFJ FINANCIAL GROUP, INC.

	 
	 	 	 	 
	
 

	
By: 

	 /s/ Katsunori Nagayasu	 
	 	 	Name:    Katsunori Nagayasu	 
	 	 	Title:      President & CEO	 
	 	 	 	 

 

 

 

 

 

 

 

[Signature Page to Amended and Restated Investor Agreement]Exhibit 4.7

 

ESCISION AGREEMENT

 

The following is the escision agreement entered into by the participant companies described in this document:

 

The undersigned Legal Representatives of GRUPO AVAL ACCIONES Y VALORES S.A., INVERSIONES ESCORIAL S.A. (hereinafter “Escorial”) and POPULAR SECURITIES S.A. (hereinafter “Popular”), companies domiciled in Bogotá D.C., taking into account that there is a willingness to engage in a partial escision, do therefore agree to submit to the consideration of their respective Shareholders Meetings, for their approval, the escision agreement that, upon due fulfillment of the requirements imposed by Article 4 of Law 222 of 1995, is incorporated in the following clauses:

 

I. THE ESCISION

 

	
1.

	
The participant companies express their intention to engage in a partial escision by virtue of which Inversiones Escorial S.A. and Popular Securities S.A. (hereinafter the “Escorial and Popular” or the “Original Owners”), carry out an escision in favor of Grupo Aval Acciones y Valores S.A. (hereinafter “Grupo Aval” or the “Beneficiary”) of the shares of stock of Banco Popular of their respective property, as well as of all dividends decreed, accrued but not yet payable, derived from the so referred shares of Banco Popular.

 

	
  

	
As a consequence of the escision, Escorial and Popular will partially split and will continue their legal and economic existence life with the assets and net-worth that they retain.

 

	
2.

	
The escision project complies with the legal requirements imposed by, amongst other, the Code of Commerce, Law 222 of 1995, External Circulars No. 1 of 23 March 2007 and No. 7 of 2 April 2008 issued by the Superintendency of Corporations, and External Circular No. 5 of 2005 issued by Superintendency of Securities (currently the Financial Superintendency of Colombia).

 

	
3.

	
The project of escision is subject to the approval of the Shareholders Meetings of the participant companies and to the authorization of the incumbent entities of surveillance and control. The Original Owners fall under the supervision of the Superintendency of Corporations; in turn, Grupo Aval, in its capacity as issuer in the public securities market, is subject to the exclusive control of the Financial Superintendency of Colombia.

 

II. NATURE OF THE ESCISION

 

	
1.

	
The nature of the project is a partial escision by reason of:

 

	
a)

	
Escorial transfers a portion of its assets and net worth in favor of Grupo Aval, represented by 757,081,997 shares of stock of Banco Popular, corresponding to 9.80%

 

  

  

  

 

	
 

	
of the capital of said bank, as well as all dividends, decreed, accrued and not yet payable, derived from such shares of Banco Popular.

 

	
b)

	
Popular transfers a portion of its assets and net worth in favor of Grupo Aval, represented by 757,081,997 shares of stock of Banco Popular, corresponding to 9.80% of the capital of said bank, as well as all dividends decreed, accrued and not yet payable derived from such shares of Banco Popular.

 

	
2.

	
Escorial and Popular will continue their legal existence with the assets and net worth they retain.

 

III. REASONS FOR THE ESCISION

 

To concentrate in the hands of Grupo Aval the entirety of the shares of stock of Banco Popular S.A. (hereinafter “Banco Popular”) currently owned by the Original Owners; in consideration for this transfer the shareholders of the Original Owners will receive shares with preferred dividend and no voting right (hereinafter the “Preferred Shares”) issued by Grupo Aval.

 

In a similar manner, the shareholders of the Original Owners consider this a favorable transaction to the extent that, as consideration for the escision, they receive Preferred Shares of Grupo Aval.

 

IV. FINANCIAL STATEMENTS PRIOR TO THE ESCISION

 

	
1.

	
The parties have taken, as basis for the escision, the financial statements at 31 March 2011, with their respective notes, signed by the Legal Representative, the Accountant and the Fiscal Auditor of each participant company, duly certified and with their respective opinions. Between the cut-off date and the date of summons of the Shareholders Meetings there is a time lapse shorter than one month, in compliance with Article 29 of Decree 2649 of 1993 and Numeral 2.8.1 of External Circular No. 7 of 2008 issued by the Superintendency of Corporations.

 

	
2.

	
The Balance Sheet of the participant companies constitute an integral part of the project, in the form of Annexes No. 1, 1A, 2, 2A, 3 and 3A.

 

	
3.

	
A breakdown of all assets, liabilities, net worth and capital of the participant companies is attached hereto in the form of Annexes No, 4, 5 and 6, which are an integral part of this document.

 

V. BREAKDOWN OF ASSETS THAT WILL BE INTEGRATED TO THE NET WORTH OF GRUPO AVAL

 

Assets and net worth matter of the escision are as follows:

 

CHART I: Assets, Liabilities, Net Worth and Capital matter of the escision

 

  

2

  

 

 

	 	
GRUPO AVAL S.A.

	
INVERSIONES ESCORIAL S.A.

	
S.APOPULAR. SECURITIES S.A.

	 	
TOTAL

	
ASSETS

	
0,00

	
527,481,739,769.81

	
527,481,739,769.81

	  	
1,054,963,479,539.62

	
LIABILITIES

	
0,00

	
0.0

	
0.00

	  	
0.00

	
NET WORTH

	
0,00

	
527,481,739,769.81

	
527,481,739,769.81

	  	
1,054,963,479,539.62

	
CAPITAL

	
0,00

	
261,218,468,725.00

	
181,025,086,603.00

	  	
442,243,555,328.00

 

	 	
(i)  

	
Pursuant to the escision Escorial will transfer to Grupo Aval the following assets, with a value of five hundred twenty seven thousand four hundred eighty one million seven hundred thirty nine thousand seven hundred and sixty nine pesos and 81 cents ($527.481.739.769.81) legal currency, as follows:

	 	
-  

	
757,081,997 shares of Banco Popular at historic cost in the amount of three hundred forty thousand six hundred eighty six million eight hundred ninety eight thousand six hundred and fifty pesos ($340,686,898,650.00) legal currency;

	 	
-  

	
Revaluation of the above shares in the amount of one hundred seventy eight thousand four hundred thirty six million six hundred fifty five thousand eight hundred seventy two pesos and 93 cents ($178,436,655,872.93) legal currency;

	 	
-  

	
Account receivable by Banco Popular in the amount of eight thousand three hundred fifty eight million, one hundred eighty five thousand two hundred forty six pesos and 88 cents ($8,358,185,246.88) legal currency.

Escorial does not transfer any liabilities to Grupo Aval. In consideration for its assets at 31 March 2011, Escorial transfers to the Beneficiary the following components of its Net Worth in the same amount of the incumbent assets, i.e., five hundred twenty seven thousand four hundred eighty one million seven hundred thirty nine thousand seven hundred sixty nine pesos and 81 cents ($527,481,739,769.81) legal currency, which breakdown is as follows:

	 	
-  

	
Capital: two hundred sixty one thousand two hundred eighteen million four hundred sixty eight thousand seven hundred twenty five pesos (($261,218,468,725.00) legal currency;

	 	
-  

	
Reserves: taken from the item “temporary reserves” in the amount of eighty seven thousand eight hundred twenty six million six hundred  fifteen thousand one hundred seventy one pesos and 88 cents ($87,826,615,171.88) legal currency;

 

  

3

  

 

	 	
-  

	
Revaluation Surplus of Banco Popular shares in the amount of one hundred seventy eight thousand four hundred thirty six million   six hundred fifty five thousand eight hundred seventy two pesos and 93 cents ($178,436,655,872.93) legal currency.

The account for cash receivables from the credit establishment denominated Banco Popular corresponds to dividends decreed, accrued and not yet payable derived from the shares being transferred with its correlated net worth item, in the same amount, that will not be taken into account for purposes of determining the exchange ratio.

	 	
(ii)  

	
Popular will transfer to Grupo Aval, by reason of the escision, the following assets with total value of  five hundred twenty seven thousand four hundred eighty one million seven hundred thirty nine thousand seven hundred sixty nine pesos and 81 cents ($527,481,739,769.81) legal currency, as follows:

	 	
-  

	
757,081,997 shares of Banco Popular at historic cost in the amount of three hundred forty thousand six hundred eighty six million eight hundred ninety eight thousand six hundred and fifty pesos ($340,686,898,650.00) legal currency;

	 	
-  

	
Revaluation of the above shares in the amount of one hundred seventy eight thousand four hundred thirty six million six hundred fifty five thousand eight hundred seventy two pesos and 93 cents ($178,436,655,872.93) legal currency;

	 	
-  

	
Account receivable by Banco Popular in the amount of eight thousand three hundred fifty eight million, one hundred eighty five thousand two hundred forty six pesos and 88 cents ($8,358,185,246.88) legal currency.

Popular does not transfer any liabilities to Grupo Aval; as corresponding item for its assets at 31 March 2011, Popular transfers to the Beneficiary the following components of its Net Worth in the same amount of the incumbent assets, i.e., five hundred twenty seven thousand four hundred eighty one million seven hundred thirty nine thousand seven hundred sixty nine pesos and 81 cents ($527,481,739,769.81) legal currency, which breakdown is as follows:

	 	
-  

	
Capital: one hundred eighty one thousand twenty five million eighty six thousand six hundred and three pesos ($181,025,086,603.00) legal currency;

	 	
-  

	
Capital Surplus: in the form of Premium on Stock Sold in the amount of one hundred thirty eight thousand four hundred thirteen million five hundred eighty one thousand three hundred thirty two pesos and 81 cents ($138,413,581,332.81) legal currency;

 

  

4

  

 

	 	
-  

	
Reserves: taken from “temporary reserves”, in the amount of twenty five thousand three hundred nineteen million one hundred sixty seven thousand nine hundred sixty two pesos and 43 cents ($25,319,167,962.43) legal currency;

 

	 	
-  

	
Earnings as of 31 March 2011 in the amount of four thousand two hundred eighty seven million two hundred forty seven thousand nine hundred ninety eight pesos and 64 cents ($4,287,247,998.64) legal currency;

	 	
-  

	
Revaluation Surplus corresponding to Banco Popular shares in the amount of one hundred seventy eight thousand four hundred  thirty six million six hundred fifty five thousand eight hundred  seventy two pesos and 93 cents ($178,436,655,872.93) legal currency.

The account for cash receivables by the credit establishment denominated Banco Popular corresponds to dividends decreed, accrued and not yet payable derived from the shares being transferred with its correlated net worth item, in the same amount, that will not be taken into account for purposes of determining of the exchange ratio.

 

VI. CONDITIONS AND PROCEDURE FOR ESCISION

 

	
1.

	
As previously mentioned, this is a partial escision through which (i) Escorial transfers a portion of its assets, represented by shares of Banco Popular corresponding to 9.80% of the capital of said bank; (ii) Popular transfers a portion of its assets represented by 757,081,997 shares of stock of Banco Popular corresponding to 9.80% of the capital of said bank and (iii) an account payable to each of the Original Owners by Banco Popular by reason of dividends decreed, accrued and not yet payable , along with their correlative net worth, in favor of Grupo Aval.

 

	
2.

	
The shareholders of the Original Owners, by reason of the escision become title holders of 934,669,126 Preferred Shares of the Beneficiary, Grupo Aval.

 

VII. FINANCIAL STATEMENTS AFTER ESCISION

 

The general balance sheets of the participant companies after the escision are incorporated herein in the form of Annexes No. 9, 9A, 10, 10A, 11 and 11A.

 

VIII. DISTRIBUTION OF PREFERRED SHARES OF GRUPO AVAL TO THE SHAREHOLDERS OF ESCORIAL AND POPULAR

AND EXPLANATION OF VALUATION METHODS

The exchange ratio derived from the studies on the transactions is as follows:  For each 1.62 (one point sixty two) ordinary shares of Banco Popular received by Grupo Aval by reason of the escision, it will issue 1 (one) Preferred Share in favor of the shareholders of the Original Owners.

 

  

5

  

 

The above mentioned exchange ratio received a Fairness Opinion issued by the independent investment bank Rothschild de Mexico S.A. de C.V. (hereinafter “Rothschild”) dated as of 6 January 2011, accepted by the Shareholders Meetings of Escorial and Popular and by the Shareholders Meeting of Grupo Aval, on respectively, 6 and 7 January 2011.

The study  prepared by Rothschild indicates  that their analysis is based on the application of valuation methodologies commonly used for this type of transactions, including: (i) the model of discounted dividends; (ii) the valuation by multiples for comparable public companies; and (iii) the valuation by multiples for precedent transactions. Additionally, for the issuance of their fairness opinion, Rothschild considered the reasonability of applying of each of the aforementioned valuation techniques.

 

In the method denominated “Model of Discounted Dividends”, estimated dividend flows for the participant entities are discounted at different discount rates. In the second method (“Valuation by Multiples of Comparable Public Companies”), there is commonly an observation of ratios existing between the market value of comparable entities and their net worth and earnings (historic and forecasted); these ratios are used for determination of the value of the entities being studied through multiplication of their net worth and/or earnings (as the case may be) by the ratios previously calculated. In the third method (“Valuation by Multiples of Precedent Transactions”), which is very similar to the second approach, estimation is made of the ratios price to earnings or the price to book value of comparable transactions, not as a function of the market price of the incumbent entities but as a function of the price announced for similar transactions taking place in comparable markets.

 

Taking the above into account, the number of Preferred Shares of Grupo Aval to be received by the shareholders of Escorial and Popular on the escision totals 934,669,126, established as follows:

 

	
1)

	
Determination is made of the total number of Preferred Shares of Grupo Aval to be issued in favor of the shareholders of Escorial and Popular, through application of the following formula;

 

Number of shares to be issued by Grupo Aval = ABP / RI

 

In which

 

ABP = shares of Banco Popular received: 1,514,163,994

 

RI = Exchange ratio (1.62 shares of Banco Popular for 1.00 Preferred Share of Grupo Aval)

 

That is: 1,514,163,994 / 1.62 = 934,669,132.0988 shares and fraction

 

That, by effect of approximation to a whole number of shares by shareholder of each participant company, results in a total of 934,669,126 whole shares.

 

2) On the basis of the total number of Preferred Shares calculated as indicated  above, each shareholder of Escorial and Popular receives a number of Preferred Shares proportional to their respective participation in the capital of each of the Original Owners..

  

6

  

 

In any event, it is understood that each shareholder will receive, only, whole Preferred Shares and, therefore, should application of the procedure above result in fractions of shares of Grupo Aval in favor of the shareholders of the Original Owners, they will be permitted to negotiate amongst them, through the day of registration of the Public Deed that perfects the escision, the fraction of share required to complete one whole number of Preferred Share of Grupo Aval. Should they not complete such negotiation, it is understood that the underlying fractions are discarded.

 

Annex No. 8, an integral part of this document, presents the exchange ratio and the number of preferred shares to be issued by Grupo Aval to the shareholders of Escorial and Popular, distribution determined as stated above and as established in numeral V of this agreement. The method used for determination of the number of Preferred Shares of Grupo Aval to be delivered to the shareholders of Escorial and Popular does not in any manner impair the rights of any of the associates under the escision, which is so stated and expressly accepted by the shareholders of the participant companies.

 

IX. EFFECTS OF THE ESCISION AGREEMENT

 

	
1.

	
Closing of this escision is subject to approval by the respective Shareholders Meetings of the participant companies and to authorizations by the corresponding control authorities. The transaction will have the legal effects described in the following numerals:

 

	
2.

	
By means of the escision procedure, the Original Owners will transfer assets and net worth, as detailed in the charts above and in the annexes, to the Beneficiary.

 

	
3.

	
Escorial and Popular will continue their legal existence with the assets and net worth they retain.

 

	
4.

	
Regarding tax effects, the escision implies, for the beneficiary company, the commitment to fulfill all fiscal obligations of the Original Owners as they relate to the assets and liabilities matter of the escision. The Beneficiary will file tax returns for all fiscal periods on the basis of the portion of earnings transferred to it at closing of the escision. It will also include in its accounting and tax returns, all fiscal entries transferred under the escision, such as advances, accounts receivable and accounts payable from and to the tax authority, as well as all withholdings, deductions by excess of presumptive income and accumulated tax losses and excess presumptive income.

 

	
5.

	
For fiscal purposes, there is no divestiture under the escision, as established in articles 14-1, 14-2 and 428-2 of the Tax Code.

 

	
6.

	
Guarantees to creditors will not be affected by the escision since, for the Original Owners, liabilities in terms of assets account for 10.53% at Escorial and for 0.80% at Popular and also because Grupo Aval, Beneficiary under the escision, is not assuming any liability. The obligations of the Original Owners are guaranteed in ample and satisfactory manner; on the other hand, the participant companies are jointly liable under article 10 of Law 222 of 1995.

 

  

7

  

 

	
7.

	
The escision does not involve any restrictive commercial practices and does not involve technology, markets, patents or rights that in any manner have effects over the markets in which the beneficiary is a participant.

 

	
  

	
In any event, Grupo Aval exercises control of Banco Popular, as stated in the Certificate of Existence and Legal Representation of Grupo Aval.

 

	
8.

	
The date of accounting cut-off will be the date of closing of the escision, that is, the date of registration of the public deed of escision, date in which the beneficiary company will receive the assets and net worth matter of the escision as provided for in this agreement an in the general balance sheets of the escision at 31 March 2011, duly updated as of the date of accounting cut-off.

 

Once the public deed ofescision is duly filed at the mercantile registry, the bulk transfer of the net worth matter of the escision between the Original Owners and the Beneficiary and before third parties, becomes operative. The Beneficiary becomes proprietor and title holder of the assets and net worth matter of the escision, it being understood that, in accordance with Colombian law, the public deed for the escision is title of transfer over said holdings.

 

	
9.

	
In terms of tax effects, the assets and net worth matter of the escision retain, for the beneficiary company, the same fiscal cost they have for the Original Owners, at the instance of the escision.

 

	
10.

	
The Original Owners do not hold any bond issues. Grupo Aval is an issuer of ordinary bonds in the public securities market and, in such regard, application will be made of pertinent stock market and commercial regulations; in consequence, bond holders will have those rights established under Decree 2555 of 2010.

 

	
11.

	
Final Caital

 

CHART II – Final Capital

 

	  	
GRUPO AVAL S.A.

	
INVERSIONES ESCORIAL S.A.

	
POPULAR SECURITIES S.A.

	
TOTAL

	
CAPITAL

	
14,878,649,797.00

	
763,664,232,275.00

	
69,013,397.00

	
778,611,895,469.00

 

X. PUBLICATION AND FORMALIZATION OF THE ESCISION

 

	
1.

	
Once the escision project is approved, the Legal Representatives of the participant companies will make public announcement of such agreement, through publication of an ad in a newspaper of the city of Bogota that fulfills the dual quality of country-wide circulation and ample circulation at the city of domicile of the companies, in the terms of article 5 of Law 222 of 1995 and External Circulars  No. 1 of 23 March 2007 and No. 7 of 2 April 2008 issued by the Superintendency of Corporations and of External Circular No. 5 of 2005 issued by the Superintendency of Securities (currently the Financial Superintendency of Colombia) and will engage in all procedures necessary to secure the approval of the official entities that exercise the functions of control or supervision of the participant companies and will also perform any other required proceeding.

 

  

8

  

 

	
2.

	
They will also deliver a letter to each and all creditors of the participant companies, informing about the agreement, per second paragraph of article 5 of Law 222 of 1995.

 

	
3.

	
Once the ad is published and once the required authorizations are secured, the escision agreement is to be formalized by means of conversion of the escision project and its annexes into a public deed that will include abstracts of the minutes of the shareholders meetings approving  the escision.

 

	
4.

	
During the period from approval of the escision through and including the date of closing of the escision, the participant companies will continue their regular operation.

 

	
5.

	
The Legal Representatives of the participant companies are empowered to carry-out all transactions and adjustments for the escision and in terms of accounting, as motivated by the resulting changes in the general balance sheets as of 31 March 2011, basis for the agreement, and those of the date of closing.

 

	
6.

	
The Legal Representatives are also authorized to carry-out, in the name of the participant companies, all procedures that may be required for due closing of the escision. In exercising the authorization so granted, they may execute documents, public deeds and titles as required for closing of the agreement; likewise, they may also request or carry-out any required filing.

 

	
7.

	
The date of accounting cut-off is the date of closing of the escision; that is, the date of registration of the public deed of escision at the Chamber of Commerce. The underlying transfer will take place on the basis of accounting figures on the date of closing of the escision.

 

	
8.

	
Exercise of the right of withdrawal is subject to articles 12 and subsequent of Law 222 of 1995.

 

XI. LISTING OF CHARTS AND ANNEXES IN THE ESCISION PROJECT

 

CHARTS:

 

	
CHART I:

	
Assets, Liabilities, Net Worth and Capital matter of the escision

 

	
CUADRO II:

	
Final Capital

 

ANNEXES:

 

	
ANNEX 1:

	
Balance Sheet of Grupo Aval prior to the escision

 

	
ANNEX 1-A:

	
Income Statement of Grupo Aval prior to the escision

 

	
ANNEX 2:

	
Balance Sheet of Inversiones Escorial prior to the escision

 

	
ANNEX 2-A:

	
Income Statement of Inversiones Escorial prior to the escision

 

	
ANNEX 3:

	
Balance Sheet of Popular Securities prior to the escision

 

	
ANNEX 3-A:

	
Income Statement of Popular Securities prior to the escision

 

	
ANNEX 4:

	
Assets, Liabilities, Net Worth and Capital of Grupo Aval prior to the escision

 

  

9

  

 

	
ANNEX 5:

	
Assets, Liabilities and Net Worth of Inversiones Escorial prior to the escision

 

	
ANNEX 6:

	
Assets, Liabilities and Net Worth of Popular Securities prior to the escision

 

	
ANNEX 7:

	
Transfer of Assets, Liabilities and Net Worth from Inversiones Escorial and Popular Securities to Grupo Aval

 

	
ANNEX 8:

	
Exchange Ratio and Number of Preferred Shares to be issued

 

	
ANNEX 9:

	
Balance Sheet of Grupo Aval prior to the escision

 

	
ANNEX 9-A:

	
Income Statement of Grupo Aval prior to the escision

 

	
ANNEX 10:

	
Balance Sheet of Inversiones Escorial after the escision

 

	
ANNEX 10-A:

	
Income Statement of Inversiones Escorial after the escision

 

	
ANNEX 11:

	
Balance Sheet of Popular Securities after the escision

 

	
ANNEX 11-A:

	
Income Statement of Popular Securities after the escision

 

XII. DISCLOSURE OF THE ESCISION IN COURSE

 

Just as informed in Note No. 29 of the Financial Statements of Grupo Aval as of 31 March 2011, the partial escision of Rendifin S.A was approved on 22 February 2011by the Shareholder Meetings of Rendifin S.A. and Grupo Aval Acciones y Valores S.A., as evidenced in, respectively, Minutes No. 22 and 54, though which Rendifin S.A. transfers of a portion of its assets and net worth in favor of Grupo Aval Acciones y Valores S.A., represented by 3,358,446,312 shares of Banco Popular, corresponding to 43.7% of the capital of said bank, as well as by dividends decreed, accrued and not yet payable  derived from said shares of Banco Popular, and Grupo Aval Acciones y Valores S.A. will issue, in favor of the shareholders of Rendifin S.A. a total of 2,073,115,004 preferred dividend shares without voting right at a ratio of 1 preferred share of Grupo Aval Acciones y Valores S.A. for each 1.62 ordinary shares of Banco Popular received by Grupo Aval.

 

This escision was approved by the Superintendency of Corporations through Resolution 126-002332 of 14 April 2011 and is pending approval by the Financial Superintendency of Colombia; once approval by the latter is received, closing of the escision will take place.

 

  

10

  

 

XIII. CONSIDERATION AND APPROVAL

 

After reading of this project and all its annexes, it is signed by the legal representatives in order for it to be submitted for approval by the Shareholders Meetings of the participant companies, on the twentieth nine (29th) day of the month of April 2011.

 

	
 

	
 

	 	 
	
/s/ Gabriel Mesa Zuleta

	
/s/ Luis Carlos Sarmiento Gutierrez

	 	 
	
President - SADINSA S.A.

Legal Representative of

	
President

	
POPULAR SECURITIES S.A.

INVERSIONES ESCORIAL S.A.

	
GRUPO AVAL ACCIONES Y VALORES S.A.

 

 11

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