BANCO INDUSVAL S.A. Authorized Capital Publicly-held Company CNPJ No. 61.024.352/0001-71 NIRE 353000242-90 MATERIAL FACT Banco Indusval S.A. (Bovespa: IDVL 3 and IDVL4), a financial institution with its principal place of business in the capital of the State of São Paulo, at Rua Boa Vista, 356, 7 th floor, enrolled in the National Register of Legal Entities of the Ministry of Finance (CNPJ/MF) under No. 61.024.352/0001-71 ( Company or Banco Indusval ), in compliance with the provisions of article 157, paragraph 4 of Law 6404/1976 ( Corporation Law ) and Brazilian Securities Commission (CVM) Ruling 358/2002, informs its shareholders and the market at large the following: Investment Agreement Capitalization and Agreement with Sertrading 1. Upon approval of its Board of Directors at a meeting held on the date hereof, the Company executed, also on the date hereof, an Investment Agreement with (i) its current controlling shareholders, Messrs. Manoel Felix Cintra Neto, Luiz Masagão Ribeiro, Carlos Ciampolini and Antonio Geraldo da Rocha ( Company s Controlling Persons ), (ii) Sertrading S.A. ( Sertrading ), (iii) Messrs. Jair Ribeiro da Silva Neto, Mineração Santa Elina Indústria e Comércio S.A. and Serglobal Participações S.A., and (iv) WP X Fundo de Investimento em Participações ( WP, affiliated to Warburg Pincus LLC, Warburg Pincus ) (the Investment Agreement ). 2. The main contents of the Investment Agreement are: (a) Capitalization of Banco Indusval: a private capital increase in Banco Indusval, resolved by its Board of Directors, within the limit of the authorized capital, in the total amount of up to R$289,215,524.00, with the possibility of a partial homologation provided that a minimum of R$200,999,971.60 is subscribed for. The capital increase shall comprise the issuance of up to 9,945,649 new common shares and up to 21,490,821 new preferred shares, identical to the current ones, for the issuance price of R$ 9.20 per share, which shall be duly justified upon the respective resolution (the Capital Increase ).
By means of the partial assignment of the Company s Controlling Persons preemptive rights and that of other related shareholders, (i) WP undertook to subscribe and pay in for common and preferred shares issued by the Company in the approximate aggregate amount of R$ 150 million, (ii) the Sertrading shareholders undertook to subscribe and pay in for common and preferred shares issued by the Company in the approximate aggregate amount of R$ 30 million and (iii) the Company s Controlling Persons undertook to subscribe and pay in for common shares issued by Company in the approximate amount of R$ 21 million. The Capital Increase will be subject to the approval of the Central Bank of Brazil ( Bacen ). With the investment from WP, Banco Indusval will have a strong partner. Founded in 1966, Warburg Pincus has invested more than $35 billion in equity in over 600 companies in more than 30 countries. Its current portfolio includes more than 110 companies and is diversified by status, sector and place. Warburg Pincus has extensive expertise in the financial sector, having invested over US$ 7.5 billion in over 75 financial institutions. Funds managed by Warburg Pincus are currently shareholders in more than 10 financial institutions in the US, Europe and Asia. Current and past financial sector investments include Arch Capital Group, Aeolus Re, DIME Bancorp, HDFC, Kotak Mahindra, Mellon Bank, National Penn Bancshares, Primerica, Renaissance Re, Sterling Financial, and Webster Financial. The firm has offices in New York, Beijing, Frankfurt, Hong Kong, London, Mumbai, San Francisco, Luxembourg, Amsterdam, Port Louis, São Paulo, and Shanghai. It is estimated that, after the Capital Increase, if the current minority shareholders subscribe for 100% of their corresponding preemptive rights, WP s ownership interest will represent 22.68% of the Company s total capital. The capitalization abovementioned aims at strengthening and increasing the capital base of Banco Indusval, enabling the growth of its assets within a stronger capital structure. Moreover, this is the first significant investment of an international private equity fund in a Brazilian credit bank, opening a new source of long term funding for the Brazilian financial system. (b) Investment in Sertrading: Banco Indusval shall invest, through the subscription of common shares as a capital increase, R$ 25 million in Sertrading, one the largest logistics and foreign trade services company of Brazil, founded in 2001, that has today as its main shareholders Messrs. Alfredo De Goeye Junior, Jair Ribeiro da Silva Neto and Mineração Santa Elina Indústria e Comércio S.A. - 2 -
This investment will result in a minority ownership interest of 17.7% of Sertrading s corporate capital. The following table presents the main financial information of Sertrading: Information / Year 2010 2009 Growth (%) Foreign Trade Volume R$ 1.6 billion R$ 1.1 billion 45% Net Revenues R$ 502.5 million R$ 345.8 million 45% Operating Profit R$ 30.4 million R$ 15.1 million 101% Net Profit R$ 12.8 million R$ 6.3 million 103% EBITDA* R$ 30.9 million R$ 16.2 million 91% * Earnings before interest, taxes, depreciation and amortization. Banco Indusval shall execute a shareholders agreement with the current Sertrading shareholders. This shareholders agreement shall include provisions related to (i) a two-year call option for the Company over the outstanding corporate capital of Sertrading, (ii) election by the Company of two board members of Sertrading; and (iii) veto rights to certain matters, such as M&As, relevant leverage and other rights over Sertrading that are typical to this type of investment. On the date hereof, Banco Indusval also executed a five-year operational agreement with Sertrading, pursuant to which Banco Indusval will have the right of first refusal to purchase receivables generated by Sertrading related to its foreign trade transactions. Finally, Banco Indusval shall also acquire from Sertrading, for the aggregate amount of R$ 15 million, the business related to generation and investment in general rural bonds, as well as Serglobal Comércio Cereais Ltda., a subsidiary of Sertrading related to the business referred to above. This acquisition does not constitute a material investment, neither is subject to the provisions set forth in article 256 of the Corporation Law. (c) Transaction benefits: Banco Indusval intends to benefit from Sertrading s businesses, especially (i) the expansion of its presence in the foreign trade platform, with access to larger clients, improving its quality assets generation base; and (ii) the obtainment of higher visibility of the clients operational chain, thus mitigating the risks of such transactions and increasing its offering of corresponding financial products. - 3 -
(d) Change in Banco Indusval s managerial structure: after due approvals by Bacen, Mr. Manoel Felix Cintra Neto shall occupy the position of Executive Chairman of the Board of Directors, and Messrs. Jair Ribeiro da Silva Neto and Luiz Masagão Ribeiro shall occupy the position of Company s co-ceo. Mr. Alfredo de Goeye Junior shall remain as Sertrading s CEO. (e) Banco Indusval strategy: with this transaction, Banco Indusval strengthens its strategy of excellence and innovation in providing corporate financing, with the basic characteristic the deep knowledge of its clients operations, as well as, from its current operational structure and expanding clients base, developing and focusing on becoming one of the leaders of the growing corporate fixed income titles market in Brazil. (f) New trade name: upon conclusion of the transaction, the Company shall adopt the trade name BANCO INDUSVAL & PARTNERS, thus maintaining the same existing corporate name. 3. Upon completion of its investment, WP shall enter into a shareholders agreement with the Company s Controlling Persons providing WP with certain minority investor s rights in the Company, including the right to appoint a member to the Board of Directors. Notwithstanding the execution of a shareholders agreement, neither WP nor Warburg Pincus will be part of the Company s control group. 4. The Company s Controlling Persons intend to negotiate with Mr. Jair Ribeiro da Silva Neto another shareholders agreement, which shall be executed after the Capital Increase is approved by Bacen. Jair Ribeiro da Silva Neto was one of the co-founders and acted as president of Banco Patrimônio (1988-1999), as well as president of Banco Chase Manhattan S.A. and executive officer of JP Morgan Chase (NY) (2000-2003). Recently, Jair Ribeiro da Silva Neto acted as shareholder, CEO and president of the executive committee of the board of directors of CPM Braxis S.A. (2005-2010), one of the largest Brazilian IT companies, which corporate control was recently acquired by a giant of the sector: the European Cap Gemini (October 2010). In this shareholders agreement, which shall be subject to approval by Bacen, the current Company s Controlling Persons will contemplate the entrance - 4 -
of Mr. Jair Ribeiro da Silva in the Company s Controlling Persons group. The expansion of the control group is justified not only because of (i) the investment to be made in Banco Indusval, but also because of (ii) the expertise that Mr. Jair Ribeiro da Silva Neto will bring to the Company. 5. The Company intends to implement new stock option plans for the directors, officers and eligible managers, with the intention of attracting, motivating and retaining such professionals, as well as aligning their interests with the Company s and the shareholders interests. The stock option plans, which are still in an initial development phase, have the base premise a dilution of approximately 10% of the corporate capital of the Company after the Capital Increase and vesting term from 3 to 7 years. 6. We emphasize that the steps described above (i) shall be subject to the applicable corporate and regulatory approvals; (ii) do not entail a sale of corporate control, therefore no obligation to pursue a public offering for acquisition of shares applies hereof; and (iii) do not grant withdrawal rights to the Company s shareholders. Agreement with JP Morgan 7. By means of agreements also executed on the date hereof: (a) JP Morgan will grant a credit facility to the Company in the amount of US$ 25 million, with a two-year term and interest payment per quarter; (b) after Bacen s approval of the Capital Increase, the Company s Board of Directors shall resolve on the issuance of warrants for subscription of preferred shares of the Company corresponding to 3.2% of the Company s corporate capital after the Capital Increase, with the following main terms, to be detailed upon resolution on the matter by the Board of Directors: (i) market issuance price, to be established by the Board of Directors of the Company; (ii) exercise price: net equity per share, based on the last quarterly balance sheet available upon exercise of the warrants; and (iii) exercise term of the warrants: at any time after six months and within five years of their issuance. JP Morgan undertook to subscribe for warrants issued by the Company enabling JP Morgan to subscribe for preferred shares corresponding to 2.5% of the Company s corporate capital after the Capital Increase, through assignment to JP Morgan of the Company s Controlling Persons, Sertrading s - 5 -
controlling persons and WP s preemptive rights. The Company s shareholders will have the right to exercise their corresponding preemptive rights for subscription of the warrants when the issuance proceeding is started up by the Company. JP Morgan will not take part in the Company s Controlling Persons group, nor participate on the Company s management; (c) Sertrading will acquire quotas representing 100% of the corporate capital of JPMorgan Chase Vastera do Brasil Serviços de Comércio Exterior Ltda. and J.P. Morgan Vastera Argentina S.R.L., currently held by Vastera Netherlands, B.V., a subsidiary wholly-owned by JPMorgan Chase & Co. (NY). These companies act on the same business as Sertrading and will strengthen its activities in the market of foreign trade commerce services. The amount of the transaction is not material to the companies involved. Other Matters 8. Upon entrance of the new partners and review of the Company s provisioning policy, the senior management will consider strengthening the Company s provisioning for doubtful debtors, to be acknowledged in the quarterly balance sheet as of March 31, 2011, with effects in the net equity of the Company in an amount between R$ 50 million and R$55 million. 9. In order to maintain the shareholders and investors duly informed, further details and updates on each step shall be supplied in new material facts, informed to the market and/or notices to the shareholders to be disclosed in due course as (i) the aforesaid steps set out in the Investment Agreement are consummated, and (ii) required in accordance with the applicable laws and regulations. 10. The electronic version of this Material Fact is available on the website of the Company (www.indusval.com.br/ri), of BM&FBOVESPA (www.bmfbovespa.com.br), and CVM (www.cvm.gov.br). São Paulo, March 22, 2011 Luiz Masagão Ribeiro Chairman of the Board of Directors Ziro Murata Jr. Investors Relations Officer - 6 -
BANCO INDUSVAL S/A About Warburg Pincus: a global leading private equity firm. Founded in 1966, Warburg Pincus has invested more than $35 billion in equity in over 600 companies in more than 30 countries. Its current portfolio includes more than 110 companies and is diversified by status, sector and place. Warburg Pincus has extensive expertise in the financial sector, having invested over US$ 7.5 billion in over 75 financial institutions. Funds managed by Warburg Pincus are currently shareholders in more than 10 financial institutions in the US, Europe and Asia. Current and past financial sector investments include Arch Capital Group, Aeolus Re, DIME Bancorp, HDFC, Kotak Mahindra, Mellon Bank, National Penn Bancshares, Primerica, Renaissance Re, Sterling Financial, and Webster Financial. The firm has offices in New York, Beijing, Frankfurt, Hong Kong, London, Mumbai, San Francisco, Luxembourg, Amsterdam, Port Louis, São Paulo, and Shanghai. About Sertrading: Company organized in 2001, resulting from the expertise in foreign trade and financial markets of the partners Alfredo de Goeye and Jair Ribeiro. Currently, it is one of the largest foreign trade service companies in Brazil, exporting and importing for more than 90 countries. In 2010, it has transacted a volume of R$ 1.6 billion; such volume has increased at a rate of 45% per year. In its business, the creation of Serlac can be highlighted, a company that is a leader in the Brazilian export dairy products. In addition to its operations in São Paulo, it has a branch in China. - 7 -