1. Enforcing Security Interests in Brazil March 2009

2. Security Interests under Brazilian Law Security interests may be created in one of three means: Pledge (penhor): security interest over personal property (other than real estate) Mortgage (hipoteca): security interest over real estate property Provisional transfer/assignment of legal title: over fungible assets (alienação fiduciária de bens móveis fungíveis) over rights over moveable assets (cessão fiduciária de direitos sobre bens móveis) non fungible assets (alienação fiduciária de bens infungíveis)

3. Security Interests under Brazilian Law Alienação/cessão fiduciária are security mechanisms that have the effect of transferring to the creditor title to collateral assets Important innovation with enhanced credit protection and simplified enforcement proceeding Alienação/cessão fiduciária over fungible assets is only allowed with respect to agreements executed in the context of the financial and capital markets, or as a guarantee for tax and social security credits Strucutures available to foreign lenders

4. Enforcement of Security Interests Enforceability requirements: Compliance with perfection requirements Security documents executed in a foreign language must be translated into Portuguese by a sworn translator and registered, along with the sworn translation, with the appropriate Registry of Deeds and Documents in Brazil In the event any of the parties signed the agreement outside Brazil the signature of such party will have to be notarized by a notary public licensed as such under the law of the place of signing and such notary public’s signature have to be authenticated by the Brazilian Consulate

5. Enforcement of Security Interests As a general rule, under Brazilian law the creditor may not receive the collateral in consideration for its credit. Creditor may, however, be authorized by court to receive the underlying asset in lieu of payment for the debt. Recent court decisions have admitted receipt by creditors of the collateral as payment for the defaulted obligation. Pledge, alienação/cessão fiduciária over fungible and non- fungible moveable assets Extrajudicial sale of the collateral, provided that the applicable agreement contains a provision to that effect No public auction and no appraisal required Estimated foreclosure time: up to 3 months (extrajudicial sale)

6. Enforcement of Security Interests Mortgage Judicial procedure (ação de execução) required to foreclose on the collateral Public auction required for the sale of the real estate property; appraisal required unless the sale price has been agreed upon in the mortgage deed Estimated foreclosure time: 3-5 years Alienação fiduciária over real estate property Extrajudicial foreclosure procedure, conducted with the assistance of the Real Estate Registry Public auction required for the sale of the real estate property No appraisal required; price must be determined in the alienação fiduciária agreement Estimated foreclosure time: 6-12 months

7. Enforcement of Security Interests Recent Developments Change in law to expedite the judicial collection proceedings Authorization for the courts to deny opposition to collection proceedings having the purpose to delay foreclosure on the collateral, which are subject to fines of up to 20% of the amount being collected As a general rule, oppositions no longer suspend the collection Admission of arbitration to discuss any opposition to the collection proceeding. Collection itself, whenever required, must be made through the courts

8. Security Interests upon Insolvency Judicial Recovery Pledge and mortgage: secured creditors would face a 180 days delay in commencing or continuing enforcement proceedings. Following such time period, creditor would automatically recover the right to initiate or continue enforcement proceedings against the debtor company Alienação/cessão fiduciária: Brazilian Bankruptcy Law expressly provides that the credits secured by alienação/cessão fiduciária are not subject to the judicial recovery, and that creditor’s property rights vis-à-vis the relevant asset, as well as the relevant contractual provisions, are not affected thereby

9. Security Interests upon Insolvency Extrajudicial Recovery Extrajudicial recovery does not, by operation of law, entail the suspension of any then-existent enforcement proceedings running against the debtor company, or preclude the commencement of any such proceeding by a secured creditor. Nonetheless, a secured creditor may be bound by the terms of an extrajudicial recovery plan that he has not approved but which has been voted on favorably by a majority of the creditors of his class. Accordingly, any such plan could, pursuant to its terms and conditions, impair certain rights of a secured creditor, such as his right to initiate enforcement proceedings against the debtor.

10. Security Interests upon Insolvency Bankruptcy Pledge and mortgage: upon bankruptcy, the enforcement proceedings would be interrupted and the creditor would be enrolled in the general list of creditors as a secured creditor, and would have to await the conclusion of the liquidation proceeding to possibly receive his credit Alienação/cessão fiduciária: considering that in a alienação/cessão fiduciária the transfer of title to the collateral effectively takes place, the onset of a liquidation proceeding would have no effect on the properly perfected alienação/cessão fiduciária, and the creditor would be entitled to keep the transferred asset and sell it for satisfaction of his credit

11. Security Interests upon Insolvency Insolvency procedures applicable to financial institutions Intervention (intervenção) – six month stay period Extrajudicial liquidation (liquidação extrajudicial) Bankruptcy Law shall be adopted on a subsidiary basis to govern the cases that are not specifically provided for in the Bank Insolvency Law

12. Security Interests upon Insolvency Additional issues: Posting of additional collateral Substitution of existing collateral Transfer of collateral during the “suspect period” Claw-back provisions