US$75000000 Lupatech Finance Limited - Banco Best

Guarantors that are Brazilian companies may be required to perform their payment obligations under the
Guarantees. If these regulations or their interpretation are modified and an authorization from the Central Bank is
required, those Guarantors that are Brazilian companies would need to seek an authorization from the Central Bank
to transfer the amounts under the guarantees out of Brazil or, alternatively, make such payments with funds held by
the Guarantors outside Brazil. We cannot assure you that such an authorization will be obtained or that such funds
will be available.
In Argentina, since the amendment of the convertibility law in December 2001, the Argentine government
has imposed several restrictions on the purchase of foreign currency in the exchange market and the transfer of
funds outside of Argentina. The foreign exchange control regulations in Argentina may restrict the transfer of funds
outside Argentina for payments required to be made by those Guarantors that are domiciled in Argentina.
Judgments of Brazilian and Argentine courts enforcing the Brazilian or Argentine Guarantors’ respective
obligations under the bonds are payable only in Brazilian reais or Argentine pesos, respectively.
If proceedings were brought in the courts of Brazil seeking to enforce the Brazilian Guarantors’ obligations
under the bonds, the Brazilian Guarantors would not be required to discharge their obligations in a currency other
than reais. Any judgment obtained against the Brazilian Guarantors in Brazilian courts in respect of any payment
obligations under the bonds will be expressed in reais equivalent to the U.S. dollar amount of such payment at the
exchange rate published by the Central Bank (i) on the date on which such judgment is rendered or (ii) on the date
on which the judicial proceeding was filed, in which case the amount due in reais would be subject to a monetary
correction as determined by the relevant court. Similarly, if proceedings were brought in the courts of Argentina
seeking to enforce the Argentine Guarantors’ obligations under the bonds, the Argentine Guarantors’ would not be
required to discharge their obligations in a currency other than Argentine pesos, and any judgment obtained against
the Argentine Guarantors in respect of payment obligations under the bonds would be subject to monetary
correction. There can be no assurance that such rates of exchange will afford you full compensation of the amount
invested in the bonds plus accrued interest.
Payments on the bonds and the guarantees will be junior to any secured debt obligations of Lupatech Finance
and the Guarantors, as the case may be.
The bonds and the guarantees will constitute senior unsecured obligations of Lupatech Finance and the
Guarantors, respectively, and will rank equal in right of payment with all of the other existing and future senior
unsecured indebtedness of Lupatech Finance and the Guarantors, respectively. Although the holders of the bonds
will have a direct, but unsecured claim on the assets and property of Lupatech Finance, payment on the bonds will
be subordinated to any secured debt of Lupatech Finance to the extent of the assets and property securing such debt.
Payment on the bonds will also be effectively subordinated to the payment of secured debt and other creditors of the
Guarantors.
In addition, under Brazilian and Argentine law, the obligations of the Brazilian and the Argentine
Guarantors, respectively, under the guarantees are subordinated to certain statutory preferences, including claims for
salaries, wages, secured obligations, social security, taxes, court fees, expenses and costs. In the event of the
Brazilian or Argentine Guarantors’ liquidation, such applicable statutory preferences will have preference over any
other claims, including claims by any holder of the bonds.
Prior to the issuance of the new bonds, Lupatech Finance had US$200 million outstanding from the
issuance of the initial bonds. As of March 31, 2008, on a consolidated basis, Lupatech and its subsidiaries had
approximately R$706.6 million of total indebtedness. Approximately R$14 million of this total amount was
structurally senior to the bonds being sold in this offering, including R$9.5 million of secured debt of Lupatech and
R$4.5 million of debt of Lupatech’s subsidiaries.
The guarantees may not be enforceable.
The guarantees provide a basis for a direct claim against the Guarantors; however, it is possible that the
guarantees may not be enforceable under Brazilian or Argentine law. While Brazilian and Argentine law do not
prohibit the giving of guarantees and, as a result, do not prevent the guarantees of the bonds from being valid,
binding and enforceable against the Guarantors, in the event that a Guarantor becomes subject to a reorganization
26