20-F

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.  20549

FORM 20-F

o	REGISTRATION STATEMENT PURSUANT TO SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 2005
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
OR
o	SHELL COMPANY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 1-15018

Votorantim Celulose e Papel S.A.

(Exact name of Registrant as specified in its charter)

Votorantim Pulp and Paper Inc.

(Translation of Registrant’s name into English)

Federative Republic of Brazil

(Jurisdiction of incorporation or organization)

Alameda Santos, 1357, 6^th floor

01419-908, São Paulo, SP, Brazil

(Address of principal executive offices)

Securities registered or to be registered pursuant to Section 12(b) of the Act.

Title of each class:	Name of each exchange on which registered:
Preferred Shares, without par value	New York Stock Exchange*
American Depositary Shares (as evidenced	New York Stock Exchange
by American Depositary Receipts), each
representing one share of Preferred Stock

* Not for trading purposes but only in connection with the registration on the New York Stock Exchange of American Depositary Shares representing those preferred shares

Securities registered or to be registered pursuant to Section 12(g) of the Act:

None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act:

None

The number of outstanding shares of each class of stock of Votorantim Celulose e Papel S.A. as of December 31, 2005.

105,702,452	Shares of Common Stock
85,911,046	Shares of Preferred Stock

     Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. 

Yes o No x

     If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. 

Yes o No x

     Note—Checking the box above will not relieve any registrant required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 from their obligations under those Sections.

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

     Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.  See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  (Check one):

Large Accelerated Filer o Accelerated Filer x Non-accelerated Filer o

     Indicate by check mark which financial statement item the registrant has elected to follow.

Item 17 o Item 18 x

     If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). 

Yes o No x

TABLE OF CONTENTS

	Page
PART I
ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS	3
ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE	3
ITEM 3.  KEY INFORMATION	3
ITEM 4.  INFORMATION ON VCP	14
ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS	44
ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES	68
ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS	74
ITEM 8.  FINANCIAL INFORMATION	77
ITEM 9.  THE OFFER AND LISTING	81
ITEM 10.  ADDITIONAL INFORMATION	86
ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	96
ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES	100
PART II
ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES	100
ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS	100
ITEM 15.  CONTROLS AND PROCEDURES	100
ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT	101
ITEM 16B.  CODE OF ETHICS	101
ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES	101
PART III
ITEM 17.  FINANCIAL STATEMENTS	103
ITEM 18.  FINANCIAL STATEMENTS	103
ITEM 19.  EXHIBITS	103

i

INTRODUCTION

          All references in this annual report to:

• “VCP,” “we,” “our” and “us” are to Votorantim Celulose e Papel S.A. and its consolidated subsidiaries (unless the context otherwise requires);

• “Votorantim group” are to the group of companies, including VCP, controlled by the Ermírio de Moraes family;

• “Votorantim Participações S.A.”, or “VPAR”, is our immediate parent company and the holding company of the Votorantim Group, controls three areas of the business: Votorantim Industrial, Votorantim Finance and Votorantim New Businesses, each of them containing one or more business units;

• “BNDESPAR” are to BNDES Participações S.A. – BNDESPAR, a wholly owned subsidiary of BNDES, the Brazilian economic and social development bank owned by the Brazilian federal government;

• “Nova” are to Nova HPI Participações Ltda., a company of the Votorantim group;

• “the Ermírio de Moraes family” are to the families of Antonio Ermírio de Moraes, Ermírio Pereira de Moraes, Maria Helena de Moraes Scripilliti and José Ermírio de Moraes (in memoriam);

• the “Brazilian government” are to the federal government of the Federative Republic of Brazil;

• “real,” “reais” or “R$“ are to Brazilian reais, the official currency of Brazil;

• “US$,” “dollars” or “U.S. dollars” are to United States dollars;

• “ton” are to one metric ton (1,000 kilograms).  One kilogram equals approximately 2.2 pounds;

• “BEKP” are to bleached eucalyptus kraft pulp;

• “ADSs” are to our American Depositary Shares, each one of our ações preferenciais, or preferred shares;

• “CVM” are to the Comissão de Valores Mobiliários, the Brazilian securities commission;

• “Brazilian GAAP” are to accounting practices adopted in Brazil, which are based on Brazilian corporate law (Law No. 6,404 of December 15, 1976, as amended by Law No. 10,303 of October 1, 2001, as amended), the rules and regulations of the CVM, and the accounting standards issued by the Instituto dos Auditores Independentes do Brasil, the Brazilian Institute of Independent Accountants, or IBRACON; and

• “Commission” are to the Securities and Exchange Commission.

          As used in this annual report, one hectare equals approximately 2.471 acres and one kilometer equals approximately 0.621 miles.  References in this annual report to nominal production capacity or production capacity mean annual projected capacity for which the facility was designed, with the facility operating under optimal conditions, 24 hours a day, for 365 days a year and subject to reductions in rates of production for scheduled maintenance only.  Actual production capacity will vary depending on operating conditions, the grades of pulp or paper produced and other factors.

1

          The commercial selling rate is used in this annual report rather than the noon buying rate in New York City as reported by the Federal Reserve Bank of New York because the noon buying rate was not consistently reported for reais during the periods shown in this annual report.  See “Item 3—Key Information—Selected Financial Data—Exchange Rates” for information regarding exchange rates applicable to the Brazilian currency since 2000.

          We have prepared our consolidated financial statements included in this annual report in conformity with generally accepted accounting principles in the United States, or U.S. GAAP.  Our reporting currency in this annual report for all periods is the U.S. dollar.

          We make statements in this annual report about our competitive position and market share in, and the market size of, the pulp and paper industry.  We have made these statements on the basis of statistics and other information from third-party sources that we believe are reliable.  We derive this third-party information principally from reports published by BRACELPA — Associação Brasileira de Celulose e Papel (the Brazilian Association of Pulp and Paper), and Valois Vision, which is a monthly report on the pulp markets.  Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share, market size or market growth data provided by third parties or by industry or general publications. 

FORWARD-LOOKING STATEMENTS

          This annual report includes forward-looking statements, principally in “Item 3D—Key Information—Risk Factors,” “Item 4B—Information on VCP—Business Overview” and “Item 5—Operating and Financial Review and Prospects.”  We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends affecting our business.  These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things:

• general economic, political and business conditions, both in Brazil and in our principal export markets;

• changes in market prices, customer preferences, competitive conditions and general level of demand for our products;

• our management’s expectations and estimates concerning future financial performance, financing plans and the effects of competition;

• our level of debt;

• anticipated trends in the pulp and paper industry, including changes in capacity and industry price movements;

• our capital expenditure plans;

• changes in currency exchange rates;

• our ability to produce and deliver our products on a timely basis;

• existing and future governmental regulation, including environmental laws, tariffs on pulp and paper imports and import tax policies in Brazil;

• our ability to successfully undertake or complete expansion projects and to manage the engineering, construction and regulatory challenges and costs involved in such projects; and

• other risk factors as set forth under “Item 3D—Key Information—Risk Factors.”

          The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar words are intended to identify forward-looking statements.  We undertake no obligation to update publicly or revise any forward-looking statements because of new information, future events or otherwise.  In light of these risks and uncertainties, the forward-looking information, events and circumstances discussed in this annual report might not occur.  Our actual results and performance could differ substantially from those anticipated in our forward-looking statements.

2

PART I

ITEM 1.  IDENTITY OF DIRECTORS, SENIOR MANAGEMENT AND ADVISERS

          Not applicable.

ITEM 2.  OFFER STATISTICS AND EXPECTED TIMETABLE

          Not applicable.

ITEM 3.  KEY INFORMATION

A.  Selected Financial Data

          We maintain our books and records in reais, which are the basis for our statutory financial statements prepared as prescribed under Law No. 6,404/76, as amended, known as the Brazilian corporate law, and used to determine income taxes and mandatory minimum dividend calculations.  The statutory financial statements (not included in this annual report) are prepared in accordance with accounting practices adopted in Brazil, or Brazilian GAAP, which are based on the Brazilian corporate law, the rules and regulations of the CVM, and the accounting standards issued by the Instituto dos Auditores Independentes do Brasil, the Brazilian Institute of Independent Accountants, or IBRACON.  We have also prepared consolidated balance sheets at December 31, 2005 and 2004 and the related consolidated statements of income, cash flows and changes in shareholders’ equity for the years ended December 31, 2005, 2004 and 2003, all stated in U.S. dollars in accordance with U.S. GAAP.  Our U.S. GAAP financial statements are included in this annual report.  The selected financial information at and for the years ended December 31, 2005, 2004, 2003 and 2002 are derived from our U.S. GAAP financial statements audited by PricewaterhouseCoopers Auditores Independentes, São Paulo, Brazil.  The selected financial information at and for the year ended December 31, 2001 is derived from our U.S. GAAP financial statements audited by Ernst & Young Auditores Independentes S.S., São Paulo, Brazil.

          The following table presents a summary of our selected financial data at the dates and for each of the periods indicated.  You should read the following information together with our financial statements, including the notes thereto, included elsewhere in this annual report.

3

	For the Years Ended December 31,
	2005			2004			2003			2002			2001
	(U.S. dollars in millions, unless otherwise indicated)
STATEMENT OF INCOME DATA
Net operating revenue:
Domestic sales	US$	564		US$	512		US$	443		US$	410		US$	443
Export sales		566			498			373			199			211
Total net sales		1,130			1,010			816			609			654
Operating costs and expenses:
Cost of sales		654			518			421			329			344
Selling, marketing, general and administrative		193			161			115			88			88
Other operating expenses (income), net		36			6			12			15			5
Total		883			685			548			432			437
Operating profit		247			325			268			177			217
Non-operating income (expenses):
Financial income (expenses), net		(40	)		(29	)		(6	)		14			32
Foreign exchange gain (losses), net		(5	)		12			(14	)		(11	)		(8	)
Total		(45	)		(17	)		(20	)		3			24
Income before income tax, equity in results of affiliates and cumulative effect of accounting change		202			308			248			180			241
Income tax (expense) benefit		8			(36	)		(23	)		10			(59	)
Income before equity in results of affiliates and cumulative effect of accounting change		210			272			225			190			182
Equity in earnings (losses) of affiliates		54			31			19			(121	)		—
Income before cumulative effect of accounting change		264			303			244			69			182
Cumulative effect of accounting change, net of tax		—			—			—			—			10
Net income	US$	264		US$	303		US$	244		US$	69		US$	192
Net income applicable to preferred stock	US$	124		US$	143		US$	115		US$	32		US$	90
Net income applicable to common stock		140			160			129			37			102
Net income	US$	264		US$	303		US$	244		US$	69		US$	192
Basic earnings per share (in U.S. dollars):(1)
Preferred	US$	1.46		US$	1.67		US$	1.34		US$	0.38		US$	1.05
Common		1.33			1.51			1.22			0.35			0.96
Weighted average number of shares outstanding (in thousands):
Preferred		85,451			85,773			85,510			85,107			85,734
Common		105,702			105,702			105,702			105,702			105,702
Dividends per share (in U.S. dollars):(2)
Preferred	US$	0.45		US$	0.58		US$	0.22		US$	0.19		US$	0.20
Common		0.41			0.52			0.20			0.17			0.19

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	As at December 31,
	2005			2004			2003			2002			2001
	(U.S. dollars in millions)
BALANCE SHEET DATA
Cash and cash equivalents	US$	261		US$	151		US$	290		US$	90		US$	172
Held-to-maturity investments(3)		—			278			303			320			364
Property, plant and equipment, net		1,758			1,443			1,202			907			1,100
Investment in affiliates, including goodwill		596			249			245			218			216
Total assets		3,731			2,644			2,468			1,918			2,321
Short-term debt(4)		132			79			48			66			69
Long-term debt, including current portion		1,364			866			1,098			973			973
Shareholders’ equity		1,737			1,498			1,185			767			1,107
	For the Years Ended December 31,
	2005			2004			2003			2002			2001
	(U.S. dollars in millions, except for percentages)
OTHER FINANCIAL DATA
Gross margin		42.1	%		48.7	%		48.4	%		46.0	%		47.4	%
Operating margin		21.9	%		32.2	%		32.8	%		29.1	%		33.2	%
Capital expenditures(5)		247			218			165			317			309
Acquisition of interest in equity affiliate(6)		275			—			—			—			370
Goodwill impairment in investee(7)		—			—			—			136			—
Depreciation and depletion		117			89			72			51			52
Cash flow provided by (used in):
Operating activities		223			255			238			185			234
Investing activities		(615	)		(148	)		(97	)		(260	)		(1,002	)
Financing activities		505			(258	)		39			36			525
	For the Years Ended December 31,
	2005			2004			2003			2002			2001
OPERATIONAL DATA
Number of employees (at year end)		3,620			3,624			3,702			3,848			3,767
Nominal production capacity (thousand metric tons):
Pulp		1,400			1,400			1,150			850			800
Paper		635			610			580			580			580
Sales volumes (thousand metric tons):		1,493			1,459			1,175			906			913
Domestic market:		506			515			477			521			522
Market pulp		80			80			77			82			85
Paper		426			435			400			439			437
Printing and writing		331			338			313			353			357
Other specialty papers(8)		95			97			87			86			80
International market:		987			944			698			385			391
Market pulp		787			764			530			253			258
Paper		200			180			168			132			133

(1)	Based on the weighted average number of shares outstanding for each period.  Following the reverse stock split of our shares and ADSs on October 18, 2004, we have retroactively adjusted all shares and ADS data to reflect the reverse split.  For additional information on earnings per share, see Note 2(k) to our consolidated financial statements and “Item 5A—Operating Results.”
(2)	Dividends paid per shares in U.S. dollars.  Dividends per share were adjusted to reflect the reverse stock split that occurred in October 2004.
(3)	Includes current and non-current portions.
(4)	Excludes current portion of long-term debt.
(5)	Represents cash expenditures for acquisition of property, plant and equipment, excluding the investment in Aracruz Celulose S.A.
(6)	Includes the excess of the cost of investment in Aracruz Celulose S.A. (2001) of US$155 million over the underlying fair value of net assets on the acquisition of a 12.35% interest in the total capital of Aracruz Celulose S.A. Consistent with Statement of Financial Accounting Standard (SFAS) No. 142 “Goodwill and Other Intangible Assets,” this excess has not been amortized.  Includes the acquisition cost of investment of 23.03% indirect interest in Ripasa S/A Celulose e Papel (2005) for a total amount of US$275 million.
(7)	Pursuant to Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investment in Common Stock,” we reduced the carrying value of our investment in Aracruz Celulose S.A. to quoted market value at December 31, 2002.  This impairment provision of US$136 million (gross of deferred income tax effects of US$46 million) was charged directly to income (“Equity loss of investee”).
(8)	Includes sales of thermal and carbonless papers, sales of third-party products by KSR and sales of specialty papers produced at the Mogi das Cruzes mill, such as label papers, finish foil, soap wrapping papers, etc.

5

Exchange Rates

          On March 4, 2005, the National Monetary Council (CMN) of the Brazilian Central Bank issued resolutions 3265 and 3266 setting forth important modifications to the Brazilian exchange market.  Changes turned the Brazilian exchange market into a more flexible one and, consequently, made the Brazilian market more competitive.  The main changes set forth by the two resolutions can be summarized as follows:

          Both Brazilian foreign exchange markets, the floating rate exchange market (Mercado de Câmbio de Taxas Flutuantes) and free rate exchange market (Mercado de Câmbio de Taxas Livres), were unified into a unique exchange market.  The free rate exchange market was used mainly for import and export transactions and foreign investment, while the floating rate exchange market was mainly used for transfers of funds from or to Brazil. 

          Most trade and financial foreign-exchange transactions, including transactions relating to the purchase or sale of preferred shares or the payment of dividends with respect to preferred shares or ADSs, were carried out on the commercial market at the applicable commercial market rate.  Purchase of foreign currencies in the commercial market could only be carried out through a Brazilian bank authorized to buy and sell currency in that market.  In both markets, rates are freely negotiated but could be strongly influenced by intervention by the Brazilian Central Bank, or the Central Bank.

          In 2001 and 2002, the real depreciated by 16% and 34%, respectively, against the U.S. dollar.  In 2003, 2004 and 2005 the real appreciated 22%, 9% and 13%, respectively against the US dollar.  Resolution No. 3,265 by the National Monetary Council, dated March 4, 2005, consolidated the foreign exchange markets into one single exchange market, effective as of March 14, 2005.  According to this Resolution, all foreign exchange transactions must be carried out through institutions authorized to operate in the consolidated market and are subjected to registration with the Central Bank’s electronic registration system.  Foreign exchange rates continue to be freely negotiated.  As of June 21, 2006, the commercial market rate for purchasing U.S. dollars was R$ 2.2378 to US$ 1.00.  We cannot assure you that the real will not devalue or appreciate substantially in the near future.  See “Item 5—Operating and Financial Review and Prospects—Overview—Brazilian Economic Environment.”

          The following table shows the commercial selling rate for U.S. dollars for the periods and dates indicated. 

	Exchange Rate of Reais per US$ 1.00
Year Ended December 31,	Low		High		Average(1)		Period-end
2001		1.9357		2.8007		2.3523		2.3204
2002		2.2709		3.9552		2.9203		3.5333
2003		2.8219		3.6623		3.0775		2.8892
2004		2.6544		3.2051		2.9263		2.6544
2005		2.1633		2.7621		2.4357		2.3407

Exchange Rate of Reais per US$1.00 - Month Ended	Low		High
December 31, 2005		2.1800		2.3735
January 31, 2006		2.2116		2.3407
February 28, 2006		2.1182		2.2217
March 31, 2006		2.1067		2.2238
April 30, 2006		2.0892		2.1542
May 31, 2006		2.0586		2.3711
June 21, 2006		2.2378		2.3018

Source:  Central Bank.
(1)	Represents the daily average exchange rate during each of the relevant periods.

B.  Capitalization and Indebtedness

          Not applicable.

6

C.  Reasons for the Offer and Use of Proceeds

          Not applicable.

D.  Risk Factors

          We are subject to various risks resulting from changing competitive, economic, political and social conditions that could harm our business, results of operations or financial condition.  The risks described below are not the only ones we face.

Risks Relating to VCP and the Pulp and Paper Industry

          The market prices for our products are cyclical. 

          The prices we are able to obtain for our products depend on prevailing world prices for market pulp and paper.  World prices have historically been cyclical and subject to significant fluctuations over short periods of time depending on a number of factors, including:

• worldwide demand for pulp and paper products;

• worldwide production capacity and inventories;

• the strategies adopted by major pulp and paper producers; and

• the availability of substitutes for our products.

All of these factors are beyond our control.  After reaching a peak of approximately US$ 700 per ton in the second half of 2000, market pulp prices began to fall in 2001 due primarily to a significant drop in demand and a slowdown of the U.S. economy.  After stabilizing in the third quarter of 2002, prices fell in the fourth quarter of 2002 because seasonal factors resulted in higher inventories.  Due to seasonal factors, in the beginning of the third quarter of 2003, prices declined again to US$ 530 per ton in the United States, US$ 490 per ton in Europe and US$ 450 per ton in Asia.  In January 2004, due to a reduction in purchase volumes at the end of 2003, bleached eucalyptus kraft pulp, or BEKP, prices declined to US$ 440 per ton in Asia, US$ 490 in Europe and US$ 525 in the United States.  However, in the first quarter of 2004, demand for pulp increased, especially in Europe and Asia, which caused an increase in prices in all regions that quarter.  In April 2004, market pulp price was US$ 530 per ton in Asia, US$ 565 in the United States and US$ 550 in Europe.  However, markets were more resistant to new price increases, due to high inventory levels in China and resistance to paper price increases in Europe.  These conditions led to successive reductions in pulp prices over the third quarter of the year, closing at US$ 450 per ton in Asia, US$ 490 per ton in Europe and US$ 555 per ton in the United States.  As demand improved, international pulp prices began to increase in November of 2004 and in January, March and April of 2005, reaching US$ 570 per ton in Asia, US$ 600 per ton in Europe and US$ 635 per ton in the United States.  These prices remained stable during the second half of 2005, except in Asia where the price fell by US$ 30 in the second half of the year.  The price of paper products, although less volatile than the price of pulp, experiences fluctuations in response to global demand and production and fluctuations in pulp prices.  During 2005 paper prices in the European and North American markets had not increased to match the increases in pulp prices since the fourth quarter of 2004.  Therefore, margins in paper prices have continued to be low in those markets.  The first quarter of 2006 was marked by capacity adjustments and shut-downs, combined with a continuous expansion in global demand, which improved the international scenario, even during the northern-hemisphere winter, bringing prospects of new price increases.  In February, eucalyptus pulp prices went up by US$ 19 per ton in all regions.  In May we increased our price in the Asian markets to US$ 590 per ton.  The capacity adjustments also occurred on the paper side, and in the first half of 2006 we saw paper prices increasing for several grades in the United States and Europe.

          It is possible that the market prices for pulp and paper will decline in the future, or that there will not be sufficient demand for our products to enable us to operate our production facilities in an economical manner. 

7

          A demand slowdown in China may adversely affect our exports. 

          China has been an increasingly important market to us since the expansion of our pulp exports in 2002. According to the Pulp and Paper Products Council (PPPC) the market pulp demand in China grew to 6.3 million tons in 2005, a 4.5% increase over 2004, and represented 13.5% of the world pulp demand in 2005, compared to approximately 2% in 1995.  China represents approximately 14% of our total export volume and 10% of our total sales volume.  There is no assurance that demand by China for pulp will sustain its current pace of growth in the future or that China will continue to constitute a significant part of our exports.

          We face significant competition in some of our lines of business, which may adversely affect our market share and profitability. 

          The pulp and paper industry is highly competitive.  Competitive features within the industry include the following:

• in the domestic paper market, we face competition from larger international companies that have greater ability to support strategic expenditures directed to increase market share; and

• in the international pulp and paper markets, we compete with larger competitors that have greater financial strength and higher production capacities.

          Traditionally, imports of pulp and paper have not provided substantial competition for us in Brazil due to, among other factors, logistical costs, tariff rates and exchange rates on those products.  If the Brazilian government decreases import tariffs, we may face a sudden increase in competition in the domestic market by foreign producers. 

          In addition, most markets are served by several suppliers, often from different countries.  Many factors influence our competitive position, including mill efficiency and operating rates and the availability, quality and cost of wood, energy, water, chemicals and labor, and exchange rate fluctuations.  See “ Item 3D—Risks Relating to Brazil-- Exchange rate instability may adversely affect our financial condition and results of operations and the market price of our preferred shares and ADSs.”  Some of our competitors have greater financial and marketing resources, larger customer bases and greater breadth of product offerings than we do.  If we are unable to remain competitive with these producers in the future, our market share may be adversely affected.  In addition, downward pressure on the prices of pulp and paper by our competitors may affect our profitability. 

          Delays in the expansion of our facilities may affect our costs and results of operations. 

          As part of our strategy to increase our international market share and improve our competitiveness through greater economies of scale, we may expand one or more of our production facilities.  The expansion of a production facility involves various risks.  These risks include engineering, construction, regulatory and other significant challenges that may delay or prevent the successful operation of the project or significantly increase our costs.  Our ability to complete successfully any expansion project on time is also subject to financing and other risks. 

          We may be adversely affected because:

• we may not be able to complete any expansion project on time or within  budget;

• our new or modified facilities may not operate at designed capacity or may cost more to operate than we expect; and

• we may not be able to sell our additional production at attractive prices.

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          We may be adversely affected by the imposition and enforcement of more stringent environmental regulations that would require us to spend additional funds. 

          We are subject to stringent environmental laws and regulations in Brazil governing air emissions, effluent discharges, solid wastes, odor and reforestation, and we require permits from governmental agencies for certain of our operations.  Changes in these laws and regulations could adversely affect us.  If we violate or fail to comply with these laws, regulations and permits, we could be fined or otherwise sanctioned by regulators or our permits could be revoked, and our ability to operate could be suspended or otherwise adversely affected.  In addition, noncompliance with these laws, regulations and permits could result in criminal sanctions for us and for our employees.  We could also be responsible for related environmental remediation costs, which could be substantial. 

          It is possible that governmental agencies or other authorities will pass new laws or impose additional laws and regulations even more stringent than the ones currently in force or will seek a more stringent interpretation of existing laws and regulations that would require us to spend additional funds on environmental compliance or limit our ability to operate as we currently do.  In addition, these actions could increase the costs associated with renewing existing permits or applying for new ones.  There can be no assurance that these additional funds or costs will not be material or that existing permits will be renewed. 

          In addition, environmental laws and regulations in certain countries may be more stringent than the ones we are subject to in Brazil, which may lead to such countries imposing trade related sanctions against Brazil or our industry.  Furthermore, our inability to comply with more stringent foreign environmental laws and regulations may prevent us from seeking lower cost financing from foreign governmental related or multilateral development organizations, which may condition future financing on our compliance with more stringent environmental laws and regulations.

          Our insurance coverage may be insufficient to cover our losses, especially in cases of damage to our forests.

          Our insurance may be insufficient to cover losses that we might incur.  We have comprehensive insurance with leading insurers to cover damages to our mills caused by fire, general third-party liability for accidents and operational risks and international and domestic transportation.  However, we do not maintain insurance coverage against fire, disease and other risks to our forests.  In each of the past three years, forest fires have not resulted in material damages of our total planted area.  The occurrence of losses or other damages not covered by insurance or that exceed our insurance limits could result in significant unexpected additional costs. 

          If we are unable to manage potential problems and risks related to acquisitions and alliances, our business and growth prospects may suffer.  Some of our competitors may be better positioned to acquire other pulp and paper businesses.

          We may, as part of our business strategy, acquire other businesses in Brazil or elsewhere or enter into alliances.  Our management is unable to predict whether or when any prospective acquisitions or alliances will occur, or the likelihood of a material transaction being completed on favorable terms and conditions.  Our ability to continue to expand successfully through acquisitions or alliances depends on many factors, including our ability to identify acquisitions and negotiate, finance and close transactions.  Even if we complete future acquisitions:

• we could fail to successfully integrate the operations, services and products of any acquired company;

• we could fail to select the best partners or fail to effectively plan and manage any alliance strategy;

• the acquisitions could increase our costs;

• our management’s attention could be diverted from other business concerns; and

• we could lose key employees of the acquired company.

          Our failure to integrate new businesses or manage new alliances successfully could adversely affect our business and financial performance.  Furthermore, the world pulp and paper industry is undergoing consolidation, and many companies compete for acquisition and alliance opportunities in our industry.  Some of our competitors have greater financial and other resources than we do.  This may reduce the likelihood that we will be successful in completing acquisitions and alliances necessary for the expansion of our business.  In addition, any major acquisition we consider may be subject to regulatory approval.  We may not be successful in obtaining required regulatory approvals on a timely basis or at all.  See “Item 4A—Information on VCP—History and Development of VCP.”

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          We are controlled by a defined group of individuals who have the power to control all our subsidiaries and us. 

          We are controlled by the Ermírio de Moraes family, which indirectly controls all of our outstanding common voting shares.  Consequently, our controlling shareholders have the power to control us and all of our subsidiaries, including the power to:

• elect our directors; and

• determine the outcome of any action requiring shareholder approval, including transactions with related parties, corporate reorganizations and dispositions and the timing and payment of any future dividends.

          We engage in, and expect from time to time in the future to engage in, commercial and financial transactions with our controlling shareholders or their affiliates.  Commercial and financial transactions between our affiliates and us create the potential for, or could result in, conflicts of interests.  For a discussion of certain related party transactions, see “Item 7—Major Shareholders and Related Party Transactions—Related Party Transactions.”

          We rely on third parties for some of our technology. 

          We rely on third parties for the technology that we use to make some of our value-added paper products.  For example, Oji Paper of Japan has granted us the right to use its technology to manufacture and sell certain thermal papers in Brazil and to sell these products in some other countries.  If a third-party licensor of technology that we use refused to continue licensing its technology to us, our results of operations could be adversely affected.

          Various other risks could have a material adverse effect on our financial results. 

          Our operations are subject to various other risks affecting our forests and manufacturing processes, including fire, drought, disease, climate changes, strikes, post closings, shipping costs, electrical failures and factory explosions, which could have a material adverse effect on our financial results. 

Risks Relating to Brazil

          Brazilian economic and political conditions and perceptions of these conditions in the international market have a direct impact on our business and the market price of our preferred shares and ADSs. 

           Our operations are conducted in Brazil, and in 2005 we sold approximately 34% of our products in terms of volume to Brazilian customers.  Accordingly, our financial conditions and results of operations are substantially dependent on economic conditions in Brazil.  Brazil’s gross domestic product grew by 0.5% in 2003, 4.9% in 2004 and 2.3% in 2005.  We cannot assure you that gross domestic product will increase or remain stable in the future.  Future developments in the Brazilian economy may affect Brazil’s growth rates and, consequently, the consumption of pulp and paper.  As a result, these developments could impair our business strategies, financial condition or results of operations. 

          In the past, the Brazilian government has intervened in the Brazilian economy and occasionally made drastic changes in policy.  The Brazilian government’s actions to control inflation and effect other policies have included wage and price controls, currency devaluations, capital controls, and limits on imports.  Our business, financial condition and results of operations may be adversely affected by changes in government policies as well as general economic factors, including:

• currency fluctuations;

• inflation;

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• price instability;

• energy policy;

• interest rates;

• tax policy; and

• other political, diplomatic, social and economic developments in or affecting Brazil.

          Historically, the political scenario has influenced the performance of the Brazilian economy.  In the past, political crises have affected the confidence of investors and the general public, which resulted in economic deceleration and affected the trading prices of common shares issued by companies listed on the stock exchange.  At the end of 2002, Brazil elected a new president from the Workers’ Party, Luis Inácio Lula da Silva, known as Lula.  In the period leading up to and following President Lula’s election, there was substantial uncertainty regarding the policies that the new government would pursue, including the potential implementation of macroeconomic policies that differed significantly from those of the prior administration.  This uncertainty resulted in a loss of confidence in the Brazilian capital markets and a 34% devaluation of the real in 2002.  In 2003, the real appreciated 22% against the U.S. dollar and an additional 9% and 13% in 2004 and 2005, respectively.  In addition, in October 2006, elections will be held in all states of Brazil and at the federal level to elect new state governors and a new president.  It is impossible to foresee the possible outcome of these elections, or how the new president’s policies would affect the Brazilian economy or our business.  We cannot predict whether the government will continue its current policies or will pursue different policies, whether these new policies, if implemented, will be effective, and how investors and the capital markets will react to them.  Any substantial negative reaction to the policies of the Brazilian government could adversely affect our business, financial condition, results of operations or prospects and the market price of our preferred shares and ADSs.

          Inflation and certain governmental measures to combat inflation may contribute significantly to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets. 

          Brazil has, in the past, experienced extremely high rates of inflation.  More recently, according to the Índice Geral de Preços-Disponibilidade Interna, or IGP-DI, a general price inflation index, the Brazilian general price inflation rates were 8%, 12% and 1% in 2003, 2004 and 2005, respectively.  Inflation itself and certain governmental measures to combat inflation in the past have had significant negative effects on the Brazilian economy.  Our cash costs and operating expenses are substantially all in reais and tend to increase with Brazilian inflation because our suppliers and providers generally increase prices to reflect the depreciation of the value of the currency.  If the rate of Brazilian inflation increases more rapidly than any rate of appreciation of the U.S. dollar, then, as expressed in U.S. dollars, our operating expenses may increase and (assuming constant U.S. dollar sales prices) our profit margins decrease.  In addition, high inflation generally leads to higher domestic interest rates, and, as a result, our costs of real-denominated debt may increase.  See “Item 5—Operating and Financial Review and Prospects—Overview—Brazilian Economic Environment.”

          Exchange rate instability may adversely affect our financial condition and results of operations and the market price of our preferred shares and ADSs.

          Because a significant portion of our revenues and assets is denominated in reais and we have U.S. dollar-denominated debt and other liabilities, we may be adversely affected by any future devaluations of the real against the U.S. dollar.  The Brazilian currency has been devalued periodically during the last four decades.  See “Item 3—Key Information—Selected Financial Data—Exchange Rates.”

          Our production costs and operating expenses are substantially all in reais and will generally decrease, as expressed in U.S. dollars, as a result of any devaluation of the real.  If the rate of Brazilian inflation increases more rapidly than the rate of appreciation of the U.S. dollar against the real, then, as expressed in U.S. dollars, our operating expenses may increase and (assuming constant U.S. dollar sales prices) our profit margins decrease.  In addition, any significant devaluation of the real may produce exchange losses on unhedged debt denominated in foreign currency.

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          During 2001, the real experienced a period of significant devaluation, due in part to the economic and political uncertainties in Argentina, the global economic slowdown and the energy crisis in Brazil.  In 2001, the depreciation of the real relative to the U.S. dollar totaled 16%.  In 2002, the real depreciated 34% relative to the U.S. dollar, due in part to the continued economic and political uncertainties in emerging markets and the global economic slowdown.  In 2003 the real appreciated 22% against the U.S. dollar due to the positive results in Brazilian trade balance, which generated a record in excess of exports sales over imports, in addition to an increase in the confidence of the international markets, as compared to the period prior to the presidential elections.  In 2004 the real appreciated an additional 9% against U.S. dollar due to the positive results in the Brazilian trade balance, positive finance inflow (due to high interest rate), lower external vulnerability and the weakness of the U.S. dollar against other currencies.  For the same reasons, we witnessed another 13% appreciation of the real against the U.S. dollar during 2005.

          The Central Bank has intervened occasionally to control unstable movements in the foreign exchange rate.  We cannot predict whether the Central Bank will continue to let the real float freely.  Accordingly, it is not possible to predict what impact the Brazilian government’s exchange rate policies may have on us.  We cannot assure you that the Brazilian government will not in the future impose a band within which the real/U.S. dollar exchange rate could fluctuate or set a fixed exchange rate, nor can we predict what impact such an event might have on our financial condition or results of operations.

          Devaluations of the real relative to the U.S. dollar also create additional inflationary pressures in Brazil that may negatively affect us.  They generally curtail access to foreign financial markets and may require government intervention, including recessionary governmental policies.  See “—Inflation and certain governmental measures to combat inflation may contribute significantly to economic uncertainty in Brazil and to heightened volatility in the Brazilian securities markets.”  Devaluations also reduce the U.S. dollar value of distributions and dividends on our ADSs and the market price of our preferred shares and ADSs.

          Developments in other markets may adversely affect the market price of our preferred shares and ADSs. 

          The market for securities backed by Brazilian companies is influenced by economic and market conditions in Brazil and, to varying degrees, market conditions in other Latin American and emerging market countries.  Although economic conditions in such countries may differ significantly from economic conditions in Brazil, the reaction of investors to developments in these other countries may have an adverse effect on the market value of securities of Brazilian issuers.  Developments or conditions in other emerging market countries have at times significantly affected the availability of credit in the Brazilian economy and resulted in considerable outflows of funds and declines in the amount of foreign currency invested in Brazil.  Crises in other emerging market countries may hamper investor enthusiasm for securities of Brazilian issuers, including ours.  This could adversely affect the trading price of the ADSs and our preferred shares and could also make it difficult for us to access the capital markets and finance our operations in the future on acceptable terms, or at all.

          In addition, recent speculation about future increases in U.S. interest rates has created volatility in the emerging markets.  Future increases in U.S. interest rates may adversely affect the market price of our preferred shares and ADSs.

Risks Relating to Our Preferred Shares and ADSs

          Exchange controls and restrictions on remittances abroad may adversely affect holders of our ADSs. 

          You may be adversely affected if the Brazilian government imposes restrictions on the remittance to foreign investors of the proceeds of their investments in Brazil and, as it has done in the past, on the conversion of the real into foreign currencies.  These restrictions could hinder or prevent the conversion of dividends, distributions or the proceeds from any sale of preferred shares or ADSs, as the case may be, into U.S. dollars and the remittance of U.S. dollars abroad.  We cannot assure you that the government will not take this type of or similar measures in the future.  Holders of our ADSs could be adversely affected by delays in, or a refusal to grant, any required governmental approval for conversion of real payments and remittances abroad in respect of the preferred shares, including the preferred shares underlying the ADSs.  In such a case, our ADS depositary will distribute reais or hold the reais it cannot convert for the account of the ADS holders who have not been paid. 

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          Exchanging ADSs for the underlying preferred shares may have unfavorable consequences.

          The Brazilian custodian for the preferred shares must obtain an electronic certificate of registration from the Central Bank to remit U.S. dollars abroad for payments of dividends, any other cash distributions, or upon the disposition of the preferred shares and sales proceeds related thereto.  If you decide to exchange your ADSs for the underlying preferred shares, you will be entitled to continue to rely, for five business days from the date of exchange, on the ADS depositary’s electronic certificate of registration.  Thereafter, you may not be able to obtain and remit U.S. dollars or other foreign currencies outside Brazil upon the disposition of the preferred shares, or distributions relating to the preferred shares, and you will generally be subject to less favorable tax treatment on gains with respect to the preferred shares, unless you obtain your own electronic certificate of registration with the Central Bank, under Resolution No. 2,689 of January 26, 2000 of the National Monetary Council, which entitles foreign investors to buy and sell on the Brazilian stock exchanges.  If you attempt to obtain your own electronic certificate of registration, you may incur expenses or suffer significant delays in the application process.  Obtaining an electronic certificate of registration involves generating significant documentation, including completing and filing various electronic forms with the Central Bank and the CVM.  In order to complete this process, the investor will need to appoint at least one representative in Brazil with powers to perform certain actions relating to the foreign investment and will usually need to have a consultant or an attorney who has expertise in Central Bank and CVM regulations.  These expenses or delays could adversely impact your ability to receive dividends or distributions relating to the preferred shares or the return of your capital in a timely manner.  If you decide to exchange your preferred shares back into ADSs once you have registered your investment in the preferred shares, you may deposit your preferred shares with the custodian and rely on the ADS depositary’s electronic certificate of registration, subject to certain conditions.  We cannot assure you that the ADS depositary’s electronic certificate of registration or any certificate of foreign capital registration obtained by you may not be affected by future legislative or other regulatory changes, or that additional restrictions applicable to you, the disposition of the underlying preferred shares or the repatriation of the proceeds from disposition could not be imposed in the future.  See “Item 8—Financial Information—Dividend Policy and Dividends—Payment of dividends.”

          The relative volatility and illiquidity of the Brazilian securities markets may adversely affect holders of our preferred shares or ADSs.

          Investments in securities, such as the preferred shares or the ADSs, of issuers from emerging market countries, including Brazil, involve a higher degree of risk than investing in securities of issuers from more developed countries. 

          The Brazilian securities market is substantially smaller, less liquid, more concentrated and more volatile than major securities markets in the United States.  Accordingly, the ability of the holders to sell the preferred shares underlying the ADSs at a price and time at which holders wish to do so may be substantially limited.  The São Paulo Stock Exchange (Bolsa de Valores de São Paulo), or BOVESPA, the main Brazilian stock exchange, had a market capitalization of approximately US$ 655 billion as of April 28, 2006, and an average daily trading volume of approximately US$ 420 million and US$ 667 million in 2004 and 2005, respectively.  In comparison, the New York Stock Exchange had a market capitalization of US$ 14.3 trillion as of April 28, 2006, and an average daily trading volume of approximately US$ 46.1 billion and US$ 56.1 billion for 2004 and 2005, respectively.

          There is also significantly greater concentration in the Brazilian securities market than in major securities markets in the United States.  The ten largest companies in terms of market capitalization represented approximately 52% of the aggregate market capitalization of BOVESPA as of April 28, 2006.  The top ten stocks in terms of trading volume accounted for approximately 54.9% and 46.6% of all shares traded on BOVESPA, in  April 2005 and April 2006, respectively.

          Because we are subject to specific rules and regulations as a Brazilian company, holders of our preferred shares or ADSs have fewer and less well defined shareholders’ rights than investors in U.S. companies.

          Our corporate affairs are governed by our by-laws and the Brazilian corporate law, which differ from the legal principles that would apply if we were incorporated in a jurisdiction in the United States, such as Delaware or New York, or in certain other jurisdictions outside Brazil.  In addition, your rights or the rights of holders of the preferred shares under the Brazilian corporate law to protect your interests relative to actions taken by our board of directors or the holders of common shares may be fewer and less well defined than under the laws of other jurisdictions outside Brazil. 

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          Although Brazilian law imposes restrictions on insider trading and price manipulation, the Brazilian securities markets are not as highly regulated and supervised as the securities markets in the United States or certain other jurisdictions.  In addition, rules and policies against self-dealing and regarding the preservation of shareholder interests may be less well developed and enforced in Brazil than in the United States, potentially disadvantaging holders of our preferred shares and ADSs.  When compared to Delaware general corporation law, the Brazilian corporate law and practice have less detailed and less well established rules and judicial precedents relating to the review of management decisions under duty of care and duty of loyalty standards in the context of corporate restructurings, transactions with related parties and sale-of-business transactions.  In addition, shareholders must hold 5% of the outstanding share capital of a corporation to have standing to bring shareholders’ derivative suits, and shareholders ordinarily do not have standing to bring a class action. 

          Also, in accordance with Brazilian corporate law and our by-laws, holders of our preferred shares, and therefore of our ADSs, are not entitled to vote at meetings of our shareholders except in limited circumstances.  See “Item 10—Additional Information—Memorandum and Articles of Association.”

           Holders of ADSs may be unable to exercise preemptive rights with respect to our preferred shares. 

          You may not be able to exercise the preemptive rights relating to the preferred shares underlying your ADSs unless a registration statement under the Securities Act of 1933, as amended, or the Securities Act, is effective with respect to those rights or an exemption from the registration requirements of the Securities Act is available and the ADS depositary determines to make the rights available to you.  We are not obligated to file a registration statement with respect to the shares relating to these preemptive rights, and we cannot assure you that we will file any such registration statement.  Unless we file a registration statement or an exemption from registration applies, you may receive only the net proceeds from the sale of your preemptive rights by the ADS depositary or, if the preemptive rights cannot be sold, the rights will be allowed to lapse.  See “Item 10—Additional Information—Exchange Controls—Preemptive Rights.”

ITEM 4.  INFORMATION ON VCP

A.  History and Development of VCP

          We are incorporated under the laws of the Federative Republic of Brazil under the name Votorantim Celulose e Papel S.A., as a corporation with unlimited duration.  We have the legal status of a sociedade por ações, or a stock corporation, operating under the Brazilian corporate law.  Our principal executive offices are located at Alameda Santos, 1357, 6^th floor, 01419-908, São Paulo, SP, Brazil (telephone:  55-11-2138-4168/4261/4287).  Our agent for service of process in the United States is CT Corporation, 111 Eighth Avenue, New York, New York 10011.

          Currently, our industrial facilities consist of two integrated pulp and paper mills, Jacareí and Luiz Antônio, and two facilities exclusively dedicated to paper production, Piracicaba and Mogi das Cruzes, all located in the state of São Paulo.  At December 31, 2005, our installed capacity was 1,400,000 tons per year of pulp and 635,000 tons per year of coated, uncoated and specialty papers.  Approximately 68% of our paper sales volume and 9% of our pulp sales volume are sold to the domestic market.

          We also have a paper distribution division, KSR, with an extensive product line, including graphic papers and products.  We have an automated, modern warehouse system that permits efficient distribution and that is supported by a specialized transportation fleet for deliveries throughout Brazil.

          Our activities began in 1988 when the Votorantim group purchased Celpav Celulose e Papel Ltda., or Celpav, a pulp and paper producer based in the state of São Paulo.  We began production in 1991 after expanding and modernizing our facilities.  In September 1992, the Votorantim group purchased Indústrias de Papel Simão S.A., or Papel Simão.  In 1995, Celpav became a subsidiary of Papel Simão, and Papel Simão changed its name to Votorantim Celulose e Papel S.A.  We later transferred our operating assets to Celpav and, in July 1999, Celpav was merged into VCP.

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          In 1991, our annual capacity was 350,000 tons per year of pulp and 280,000 tons per year of paper.  With the acquisition of Papel Simão, the Votorantim group added 220,000 tons of pulp and 250,000 tons of paper to the annual pulp and paper production capacity, respectively.  Following the acquisition of Papel Simão, the Votorantim group’s combined pulp and paper operations constituted the third largest in Brazil in terms of sales.  We further increased our pulp production capacity by 230,000 tons in 1996 with the addition of a new pulp production line at the Jacareí mill.  We also added a new coater in 1996 at the Piracicaba mill, which increased our annual production capacity of thermal and carbonless paper to 40,000 tons per year and further production optimizations in 2001 raised the production capacity by 50,000 tons of pulp per year.  Our annual production capacity of coated paper increased to 175,000 tons per year with the addition of a new coater at the Jacareí mill in 1997 and the addition of a new on-line coater at the Piracicaba mill in 1998.  As a result of these additions and other optimization projects, our paper production capacity reached 635,000 tons per year in 2005.

          On December 29, 1999, we sold our 51% stake in Indústria de Papel de Salto Ltda., or Salto, to Arjo Wiggins Participações e Comércio Ltda., a subsidiary of Arjo Wiggins S.A., a French company, for a cash payment of US$ 23 million.  Salto produced security, industrial and other specialty papers, including paper used for bank notes, checks, identification cards, vouchers and bibles.  Under the terms of the sale agreement, we are obligated to indemnify Arjo Wiggins against certain losses in excess of amounts recorded.  In December 2004 we amended the agreement in which we were obligated to indemnify Arjo Wiggins.  The obligations are now limited to US$ 6 million.  We guarantee these obligations with a letter of guarantee in the amount of US$ 6 million through 2007.  To date, we have not paid any amounts under this indemnification provision, and we believe any amounts paid will not be significant.  We realized a gain of US$ 13 million on this sale.

          On April 19, 2000, we completed a registered offering of 7,920,000 ADSs.  Each ADS represented 500 preferred shares, and the ADSs were listed on the New York Stock Exchange under the symbol “VCP.”  Of the 7,920,000 ADSs being offered at that time, we sold 2,047,648 ADSs and certain of our shareholders sold the remaining 5,872,352 ADSs.  Concurrently, 440,000,000 preferred shares were sold in Brazil.

          On August 14, 2000, our board of directors approved the Jacareí expansion, which has expanded the pulp production capacity at our Jacareí mill by approximately 570,000 metric tons, raising our total current annual installed capacity from 850,000 in 2002 to 1.40 million metric tons per year in 2005.  The Jacareí expansion project included reforestation projects, which were completed at the same time as the Jacareí expansion.  We had invested a total of US$ 495 million in the Jacareí expansion.  The government-owned development bank, Banco Nacional de Desenvolvimento Econômico e Social—BNDES, or BNDES, financed part of our investment in the Jacareí expansion.  See “Item 4—Information on VCP—Property, Plant and Equipment—Expansions.” 

          On October 3, 2001, we purchased 28.0% of the voting shares (representing 12.35% of the total capital) of Aracruz Celulose S.A., or Aracruz, from the Mondi Group, for approximately US$ 370 million.  Aracruz is a Brazilian pulp exporter whose ADSs trade on the New York Stock Exchange under the symbol “ARA.”  We acquired our interest in Aracruz in order to increase our exposure to the international pulp market, and we accounted for this investment under the equity method.  We financed this acquisition with a bridge loan in the amount of US$ 370 million in 2001, which was refinanced in May 2002 with a US$ 380 million syndicated loan and fully paid in 2005.  See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Debt.”  Our acquisition of 28% of Aracruz’s voting shares was unconditionally approved by the Conselho Administrativo de Defesa Econômica, known as CADE, the Brazilian antitrust regulator, on November 25, 2003.  We reduced the book value of our investment in Aracruz to market price value at December 31, 2002.  The impairment provision of US$ 136 million was determined based on the market price of US$ 18.56 for the Aracruz ADRs on December 31, 2002, and it was charged directly to income.  On May 24, 2006, the market price for the Aracruz ADRs was US$ 47.48.

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          We do not expect to have significant operational involvement at Aracruz at this time.  A subsidiary of ours became a party to the Aracruz shareholders’ agreement, along with BNDESPAR, the Lorentzen Group and the Safra Group.  Under the shareholders’ agreement, our subsidiary is entitled to and has appointed three directors to the Aracruz board of directors, which currently consists of ten directors.  The shareholders’ agreement, which expires on May 11, 2008, provides that the maximum number of shares of voting stock of Aracruz to be held by any party to the shareholders’ agreement may not exceed 28% of the total outstanding shares of voting stock of Aracruz.  In addition, the shareholders’ agreement requires that each person or entity who acquires shares of voting stock of Aracruz from any of the parties to the shareholders’ agreement become a party to such agreement. 

          On December 1, 2001, VCP Exportadora e Participações S.A., or VCP Exportadora, indirectly acquired VCP North America Inc., incorporated in Delaware, United States, or VCP North America, and VCP Trading N.V. incorporated in Curaçao, or VCP Trading, from Votorantim International Holding N.V., for US$ 50,000 and US$ 30,000, respectively, for the purpose of centralizing our commercial operations in VCP Exportadora. 

          In January 2002, we incorporated VCP Florestal, which assumed all of the assets and liabilities relating to our forestry operations.  In March 2002, we incorporated VCP Overseas Holding KfT, or Overseas Holding, our wholly owned subsidiary incorporated in Hungary.  In June 2002, we incorporated St. Helen Holding III, B.V., located in Curaçao.

          In February 2003, Arapar S.A. and Lorentzen Empreendimentos S.A., collectively Grupo Lorentzen, on the one hand, and SODEPA, on the other hand, as shareholders of Aracruz, entered into an agreement pursuant to which each party agreed not to sell its shareholding in Aracruz without the consent of the other.

          As of December 31, 2003, we had a 50% stake in each of Voto-Votorantim I and Voto-Votorantim II.  We also had three wholly owned subsidiaries, VCP Terminais Portuários S.A., VCP Exportadora and VCP Florestal.  In April 2001, we incorporated VCP Exportadora as a wholly owned subsidiary, and in the fall of 2001 we incorporated Newark, which was used to acquire our interest in Aracruz. 

          In November 2004, we signed an agreement with Suzano Bahia Sul Papel e Celulose S.A., or Suzano, for the acquisition of the common and preferred stock of Ripasa S.A. Celulose e Papel, or Ripasa.  On March 31, 2005, we finalized the acquisition, through a 50% joint venture, of 77.59% (our interest – 38.795%) indirect interest in the voting capital and 46.06% (our interest – 23.03%) indirect interest in the total capital of Ripasa, for US$ 275 million.  A purchase option was also signed for the option to purchase 37,449,084 common shares and 12,388,719 preferred shares, totaling 22.41% of the voting stock and 13.45% of the total stock, to be exercised within six years, for a total amount of US$ 160 million.

          On January 26, 2005, in an Extraordinary General Meeting, our shareholders determined that VCP Florestal be merged into us to achieve cost reductions and increased business synergies between the two companies.  VCP Florestal was dissolved as a result of the merger and we succeeded it with respect to all rights and obligations thereof.  There was no increase in our capital stock as a result of the merger as we owned all the shares of VCP Florestal.

          On July 20, 2005, VCP and Suzano announced a corporate restructuring to be implemented in Ripasa, which would allow that company’s minority shareholders (around 1,300 shareholders) to migrate to VCP and Suzano in the following proportions (based on independent valuations):  each Ripasa preferred share would correspond to 0.0627 VCP preferred shares plus 0.1450 Suzano class “A” preferred shares, and each Ripasa common share would correspond to 0.0627 VCP preferred shares plus 0.1450 Suzano common shares.  This restructuring was examined by the CVM, which imposed no obstacles or restrictions on its realization; however, the restructuring was suspended by judicial decision.  Given the potentially lengthy period of time needed to reach a favorable outcome and the fact that the synergies generated by the acquisition of Ripasa are not being fully realized, on April 26, 2006, VCP and Suzano, in order to settle the judicial action and implement the restructuring, entered into an agreement with the group of Ripasa’s preferred shareholders, who had brought the action to block the acquisition.  Once the terms of the agreement are implemented and the restructuring is concluded,   Ripasa’s minority shareholders will receive shares of VCP and Suzano plus a complementary amount in cash equivalent to R$ 1.0538 for each Ripasa preferred share in their possession on the date of registration. The purchase of Ripasa is being analyzed by Brazilian antitrust authorities and is subject to their review and approval.  See “Competition” for more details about the Ripasa transaction.

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          In November 2005, we announced the beginning of the social and environmental licensing process for the implementation of a bleached eucalyptus pulp factory to be built in Rio Grande do Sul.  If implemented, this unit will occupy an area of approximately 450 to 500 hectares, located in the region of Rio Grande-Pelotas-Arroio Grande.  Overall investment in the factory and in the forest base is estimated at US$ 1.3 billion, and the expected annual volume is one million tons of pulp. We expect that an environmental licensing study will be completed in 2007.  The basic engineering and the technical proposals will be developed in 2008 and 2009, when the project will be approved by our board of directors. 

          In February 2006, we announced that Standard & Poor’s Ratings Services (S&P) assigned its ‘BBB-’ foreign and local currency global scale corporate credit ratings to VCP, an investment grade rating category.  According to S&P, the outlook is stable for VCP, which reflects the assumptions that VCP will improve its financial performance by 2006 based on the recovery of the domestic paper sector; will continue to adopt a prudent financial policy, presenting comfortable levels of cash holdings; and will start to show debt de-leverage at the same pace as its debt amortization, depending on future investment opportunities.

          In April 2006, for administrative and economic reasons, we merged VCP Exportadora e Participações S.A., VCP’s wholly owned subsidiary, into us and assumed all of the assets and liabilities relating to its export operations.

Capital Expenditures

          Our capital expenditures totaled US$ 247 million in 2005, US$ 218 million in 2004 and US$ 165 million in 2003.  The increase in capital expenditures from 2003 to 2005 was mainly due to large investment in a new forest reserve (land acquisition and plantation) in Rio Grande do Sul State, in the south of Brazil. 

          Although currently we do not have specific capital expenditure plans for future expansion projects, besides the new forest in the south of Brazil and debottlenecking of Jacareí Mill, we believe that the consolidation of our participation in Ripasa as a production unit, with 50% of volumes being sold by VCP, the corresponding synergies and our prior investments in our own facilities will allow us to continue to grow and continue to undertake our business plan.

          The table below sets forth a breakdown of our most significant capital expenditures for the periods indicated:

	For the years ended December 31,
	2005		2004		2003
	(in US$ millions)
Expansion	US$	32	US$	27	US$	33
Forests (includes land purchase)		131		112		65
Improvements/modernization		35		33		23
Other (includes maintenance and information technology)		49		46		44
Total	US$	247	US$	218	US$	165

          As part of our capital investment program for 2006, we intend to invest US$ 65 million in land acquisition and planting in Rio Grande do Sul, continuing our strategy of building a forest base in the south of Brazil and US$ 46 million for the debottlenecking of the Jacareí mill, that is expected to increase by 150,000 tons the pulp capacity of the mill over the 2005 to 2007 period.  We are also in the process of purchasing more land for forestry plants to reduce our dependence on raw materials from third parties.  The following table shows the estimated breakdown of planned capital expenditures during 2006, which is expected to be financed by cash generated from operations and by existing cash:

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	US$ in millions
Expansion projects	$	46
Forests (includes land purchase)		118
Improvements/modernization		27
Other (includes maintenance and information technology)		34
Total	$	225

B.       Business Overview

          We are one of the largest pulp and paper products companies in Brazil and the leading Brazilian producer of wood-free printing and writing papers and specialty papers in terms of net sales and total assets, according to Bracelpa.  We produce eucalyptus pulp, which is a high-quality variety of hardwood pulp.  In 2004 and 2005, we sold approximately 61% and 63%, respectively, of our pulp production to third parties, and we use the remainder internally to manufacture a wide range of printing and writing paper products, including coated and uncoated printing and writing papers, thermal papers, carbonless papers and other specialty papers.  Exports account for more than half of our 2005 revenues.  In 2004 and 2005, we sold approximately 65% and 66%, respectively, of our pulp and paper tonnage outside of Brazil.

Operations

          Our total sales volume was 1,175,003 tons in 2003, 1,459,079 in 2004 and 1,492,527 tons in 2005.  Our net revenues were US$ 816 million in 2003, US$ 1,010 million in 2004 and US$ 1,130 million in 2005.

          In 2005, 34% of the volume and 50% of total sales were derived from the domestic market compared to 35% and 51%, respectively, in 2004 and 41% and 54%, respectively, in 2003.  In the pulp market, the domestic market accounted for 9% of the sales volume and 8% of the revenues derived from pulp in 2005.  In the paper market, the domestic market accounted for 68% of the sales volume and for 76% of the revenues derived from paper in 2005.  The table below sets forth the percentages of our net revenues in 2005, 2004 and 2003 that correspond to the domestic and export markets and the breakdown by product of our net revenues:

	2005			2004			2003
Sales by market
Domestic		50	%		51	%		54	%
Export		50	%		49	%		46	%
Sales by product
Market Pulp		39	%		38	%		34	%
Paper		61	%		62	%		66	%

          In 2005, we produced 1,378,000 tons of eucalyptus pulp compared to 1,347,000 tons in 2004 and 1,166,100 tons in 2003.  In 2005, we sold 866,951 tons of this production as market pulp to third-party producers and we used the remainder to manufacture paper products.  Our production and related U.S. dollar-based exports of pulp also increased during 2005.  We sold US$ 275 million in 2003, US$ 385 million in 2004 and US$ 439 million in 2005.  The increase in our market pulp revenues from 2003 to 2005 was mainly due to the learning curve process of the new pulp line.

          In 2005, our sales volume of paper products increased to 625,576 tons from 614,648 tons in 2004.  This increase in sales is mainly explained by higher efficiency of production.  For the same reason, in 2004, our sales volume of paper products increased to 614,648 tons from 568,103 tons in 2003.  Uncoated and coated printing and writing paper sales accounted for 73% of our total paper products revenues in 2005 and 74% of our total paper products revenues in 2004.  The remainder of our revenues from paper products in 2005 and 2004 were made up of sales of special and chemical (thermal and carbonless) paper, accounting for 27% in 2005 and 26% in 2004 of paper sales.  Our printing and writing papers are used for a variety of business supplies, including notebooks, books, continuous forms, labels, brochures and magazines.  Our estimated market share in Brazil in 2005, based on data from Bracelpa, was 33% (or 43% when adding 50% of Ripasa’s share) for coated papers, 24% (33% when including Ripasa’s share) for uncoated cut-size papers and 17% (24% when including Ripasa’s share) for uncoated offset papers.  We sold 32% of our total printing and writing paper sales volume outside of Brazil in 2005 (29% in 2004).

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Our Ownership Structure

          We are part of the Votorantim group, one of the largest privately held Brazilian groups of companies.  The Votorantim group was founded in 1918 by Senator José Ermírio de Moraes and is controlled by the Ermírio de Moraes family.  The three core businesses of the Votorantim group are cement, aluminum and pulp and paper.  The Votorantim group is also involved in other industries, including metallurgy, financial services, chemicals and agribusiness.  In 2005, pulp and paper accounted for approximately 18% of the Votorantim group’s net revenues as measured under Brazilian GAAP.  The following chart shows our ownership structure as of December 31, 2005:

          

1          Our immediate parent company is Votorantim Participações S.A., or VPAR, which in turn is ultimately controlled by Hejoassu Administração Ltda., which is controlled by the Ermírio de Moraes family.

Our Business Strategy

          We intend to be one of the leaders in the pulp and paper industry, building on our competitive strengths with the aid of the Votorantim Management System (SGV – Sistema de Gestão Votorantim) in order to create sustainable value to our shareholders.  The principal components of our strategy are to:

• be an important player in the international pulp market, leveraging the structural competitive advantages in Brazil;

• have presence in the global reprographic paper market;

• consolidate our leadership position in the growing regional market for wood-free printing, writing, copying and specialty papers;

• expand our production capacity through both mill expansion and strategic acquisitions, alliances and joint ventures to meet increased demand in both the domestic and export markets; and

• achieve sales of 4 million tons per year of market pulp and 2 million tons per year of printing and writing papers by 2020.

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          Expand our presence in the international pulp market

          We intend to take advantage of our competitive strengths to increase our market share in the international pulp market.  In 2005, we sold approximately 91% of our market pulp tonnage outside of Brazil (91% in 2004), compared to 2% in 1996 when we began exporting.  The high forest yields due to climate and soil conditions in Brazil, the short harvest cycle, the high technology, productivity and sustainability of our forest operations and our use of cloning methods are important competitive advantages over producers in many other countries, and allow us to play an active and competitive role in the global pulp market.  Our investment in Aracruz and the Jacareí expansion reinforce our presence in the international pulp market.  Our investment in a new forest base in the South of Brazil is the source for future organic growth in the pulp business. 

          Maintain our leadership position in the growing regional market for coated, thermal and carbonless papers

          We are currently a market leader for value-added papers, such as coated papers, in Brazil.  We are also one of the market leaders for uncoated printing and writing paper in Brazil.  We expect domestic demand to grow along with the expected growth in the economy of Brazil over the next few years.  In order to consolidate our market position, we focus on long-term relationships with our customers by seeking to increase our understanding of our customers and their industries and to tailor our products to their specific needs.  Our investment in Ripasa strengthens our presence in the domestic coated and uncoated market.

          Continue to shift our paper sales mix toward higher margin products

          We believe that an improved product mix with more value-added products can increase operating margins even if average paper prices do not improve significantly.  In addition, these products are subject to less cyclical price variations.  Therefore, we seek to increase our production of value-added paper products, such as coated, thermal, carbonless and other specialty papers; our sales of these papers increased to approximately 50% of our net paper sales in 2005, from approximately 33% in 1997.  We are producing higher margin products to replace products that Brazilian consumers previously had to import, such as labels for beer and soft drinks.

          We have developed our production facilities for thermal and carbonless papers through a licensing arrangement with a leading producer in the area of chemical papers, Oji Paper, which allows us to benefit from Oji Paper’s technology.  We expect to continue to benefit from an increase in domestic demand, as well as to gain market share from imports of coated and specialty papers, which have become less competitive due principally to the continuous devaluation of the real from January 1999 through 2002.  Continuing a trend that initiated in 2003, in 2004 and 2005, we estimate that we lost approximately 7% of our coated paper domestic market share mainly to imports, which became more competitive as the real appreciated against the U.S. dollar.  We plan to take advantage of the opportunity to recover our market share when the real depreciates or stabilizes against the U.S. dollar.  We also will continue to work closely with our customers to develop new products.

          Increase operating efficiencies

          We intend to remain a low-cost producer of pulp and paper by continuing our ongoing program to increase operating efficiencies and reduce operating costs per unit.  We intend to continue to:

• focus on reducing wood costs through increased eucalyptus yields and reduced harvesting costs;

• focus on improving the efficiency of our operations through investment in harvesting equipment, production facilities and advanced information technology; and

• improve information flow to facilitate decision-making.

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          Continue to develop state-of-the-art technology in the forest area

          Technological research and improvement has made it possible to attain productivity records, together with less impact on the environment.  In the forest area, the gain in competitiveness is a result of the adoption of modern forestry practices and an intense research program.  Wood production per hectare reached 45-50 cubic meters, compared to 30 cubic meters recorded in 1987.  We use the most modern technology for planting, harvesting, storing and transporting with a completely mechanized system.  The genetic improvement of eucalyptus trees allowed for the plantings of clones of selected trees, resulting in higher productivity.  Today, 95% of planting is done with cloned seedlings. We have achieved speed, better seedling use and quality thanks to a pioneering procedure of multiplication of clones.

          Expand our forest and mill production capacity through both expansion and strategic acquisitions to meet increased demand in both the domestic and export markets

          We intend to further increase our production capacity through both the expansion of existing facilities (including the Jacareí expansion) and strategic acquisitions.

          We are also investing in a new forest base in the south of Brazil, preparing fiber supply for future growth.  Between 1996 and 2005, the average annual rate of paper consumption in Brazil increased by 5.5%¹.  In recent years, there has been a marked increase in paper consumption in Brazil.  We believe that demand for pulp and paper in the domestic and export markets will continue to grow over time.  We increased our pulp production capacity through our expansion project at our Jacareí mill to a production capacity of 1.4 million tons annually.  We expect to reach 1.5 million tons of pulp capacity after 2006, when the debottlenecking at the new line in Jacareí mill is completed.  We also closely monitor developments in the Brazilian and global pulp and paper industry.  We continue to pursue growth opportunities to create value for our shareholders through strategic acquisitions, alliances and joint ventures and we intend to participate in the continuing consolidation among pulp and paper producers, both domestically and internationally.

Our Products

          We produce a variety of pulp and paper products.  We produce pulp both for sale (market pulp) and for use in our paper production.  We sell hardwood bleached market pulp, both to the Brazilian domestic market and to the export market outside Brazil.  We produce coated and uncoated printing and writing paper and other specialty/chemical papers.  Within the printing and writing paper category, we produce cut-size, folio-size, and rolled products.  The following table sets forth the breakdown of our sales revenues for the periods indicated:

	Years ended December 31,
	2005			2004			2003
Market Pulp		39	%		38	%		34	%
Paper:
Uncoated (P&W/Cut Size)		31	%		33	%		37	%
Coated		14	%		12	%		13	%
Specialty / Chemical papers		16	%		17	%		16	%

Pulp

          Production

          The following table sets forth our total hardwood pulp production, total Brazilian hardwood pulp production, and our hardwood pulp production as a percentage of total Brazilian pulp production for the periods indicated:

¹ Source:  BRACELPA

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	Years ended December 31,
	2005			2004			2003
VCP’s production (in tons)		1,372,000			1,346,840			1,166,100
Total Brazilian production (in tons)		8,093,529			7,612,426			7,098,339
VCP’s production as percentage of total Brazilian  production		17.0	%		17.7	%		16.4	%

Sources:  Bracelpa and VCP.  Figures for Brazilian production changed due to updated reports released by Bracelpa.

          Sales

          In 2005, we sold 866,951 tons of bleached pulp as market pulp to third parties in the domestic market and outside of Brazil.  We had a 14% share of the Brazilian domestic market for bleached hardwood pulp in 2005.  In recent years, however, we have sought to increase our sales of market pulp outside of Brazil.  In 2005, approximately 91% of our market pulp sales volume was to customers located outside of Brazil.  The following table sets forth our net sales of pulp to the export market by geographic region for the periods indicated:

	Year ended December 31,
	2005				2004				2003
	Tons		% of Total		Tons		% of Total		Tons		% of Total
North America		75,987		9.7		85,544		11.2		85,566		16.1
Latin America		1,608		0.2		3,044		0.4		—		—
Europe		474,484		60.3		347,371		45.4		238,978		45.1
Asia/Middle East/Oceania		234,865		29.8		328,404		43.0		205,065		38.7
Africa		—		—		—		—		339		0.1
Total Exports		786,944		100.0		764,363		100.0		529,948		100.0

          In 2005 Santher was our largest domestic customer of pulp, followed by Arjo Wiggins and IBEMA.  Georgia Pacific, APP China, M-Real and PKS were our largest customers of pulp outside of Brazil.

          Demand for our pulp has generally exceeded our production capacity even during cyclical downturns of the pulp industry, and, according to a study conducted in April 2006 by Hawkins Wright, an independent international consulting firm, the projected average demand growth in the world for bleached eucalyptus kraft pulp, or BEKP, is 6.8% per year from 2005 to 2010 (and 1.1% per year for the total white pulp demand), while the total white pulp capacity (including BEKP) projected average growth is 2.2% per year in the same period.

          We have long-term sales contracts with substantially all of our customers in the domestic and the export markets.  These contracts generally provide for the sale of our market pulp at prices we announce each month.  These prices may vary among the different geographic areas where our customers are located.  Usually the price arrangements under our long-term contracts are consistent with prices for our other sales within the same region and follow the established list price of BEKP announced by major global pulp producers.  The sales contracts provide for early termination in the event of a material breach, the insolvency of one of the parties or force majeure events of extended duration.

Paper

          Our paper products can be divided into three major categories:

• uncoated printing and writing papers;

• coated printing and writing papers; and

• carbonless and thermal and other specialty papers.

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          The production and sale of uncoated printing and writing papers is our major line of paper business, accounting for approximately 51% of our total net paper sales and 90% of our paper exports in 2005 and 64% of our total net paper sales and 93% of our paper exports in 2004.  The following table provides a brief description of our principal paper products and lists the facilities where they are produced:

Product	Description	Facility
Coated printing and writing paper	Coated woodfree paper used for labels, self-adhesive, flexible packaging markets and publishing sector (magazine, book and catalogue) inserts brochures and other publications; pioneer line of coated cut-size paper for small/home office market designed for printing of high-resolution and high-quality images; coated paper to be used on labels for plastic PET soft drink packaging.	Jacareí Piracicaba
Uncoated printing and writing paper	Uncoated woodfree paper in reels, sheets and cut-size designed for maximum performance in photocopying machines and laser and inkjet printers, and alkaline offset paper.	Luiz Antônio Jacareí
Carbonless paper	Used to produce multi-copy forms for credit card receipts, invoices and other applications in place of traditional carbon paper.	Piracicaba
Thermal paper	Traditionally used in fax machines; new applications include supermarket receipts, bar code labels, toll tickets, water and gas bills and receipts for ATMs and credit card machines.	Piracicaba
Other specialty papers	Our specialty papers include art paper for catalogues, folders, letters, envelopes, etc.	Mogi das Cruzes

Source:  VCP.

Production

          Production of paper is a multi-stage process, which begins with the production of its principal raw material, pulp, from wood.  Throughout the production process from wood to paper, various pulp and paper products are produced that may be converted by us into value-added products or sold.

          We employ advanced, automated harvesting equipment in our forests.  On easily accessible terrain, the harvesting process involves a feller-buncher that cuts and gathers a number of trees and lays them in bundles in the forest.  Branches are removed by advanced equipment.  A skidder then carries the trees to a track area, where a log cutter removes the tops, cuts the trees into logs and loads the logs on trucks for transportation to the mill.  On difficult terrain, a harvester cuts, de-limbs and debarks the trees, then cuts them into logs and stacks them in bundles in the forest.  A forwarder carries the bundles to a loading area, where a loader loads the logs on trucks for transportation to the mill.  Recently, we acquired a simulator to train harvest equipment operators, which lowers the number of hours dedicated to employee training, in addition to reducing equipment-operating time.

          The logs are transported by truck from the forests.  The logs are then taken by conveyor belt to be debarked and chipped.  The chips are sent to digesters, where they are mixed with chemicals and cooked under pressure.  During this process, lignin and resins are removed from the wood.  The removed lignin is used as fuel for the pulp mill.

          In 2001, we introduced a new, more efficient production process whereby wood chips for the production of pulp are produced at plantation sites using portable chipping equipment.  With these new chipping machines, we are able to carry out chipping in the forest and thereby improve tree utilization and reduce noise levels at the mill.  In addition, forest residues are returned directly to the plantation soil, contributing to the recycling of nutrients.  Approximately 30% of the wood required for the Jacareí mill is supplied in the form of chips directly from the forest.

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          The unbleached pulp is then sent through the oxygen delignification process and the chemical bleaching process.  The cellulose fibers are screened, pressed and dried.  The dried pulp is cut into sheets and baled, resulting in market pulp.  In recent years, pulp customers, particularly in Europe, have preferred pulp that is bleached with little or no chlorine compounds due to environmental concerns relating to the bleaching process.  All of the phases in the pulp production process that have reduced amounts of chlorine create effluents, which are sent to an effluent treatment station, where approximately 90% of the organic charge is removed.

          To produce printing and writing paper, we use 100% short-fiber eucalyptus bleached pulp.  Once in the paper mill, the pulp is sent to refiners, which increases the level of resistance of the fibers for the production of specific grades of paper.  Certain materials are then added to the refined pulp to strengthen and improve the quality of the paper.  These additives include synthetic sizing and precipitated calcium carbonate (the alkaline process).  The mixture is pumped to the paper machine where the paper is pressed and dried.  Finally, the resulting paper is sent to be finished in accordance with client specifications.

          The following table sets forth our paper production, total Brazilian paper production, and our total paper production as a percentage of total Brazilian production for the periods indicated:

	Year ended December 31,
	2005			2004			2003
VCP’s production (in tons)		676,000			660,740			672,953
Total Brazilian paper and paperboard production (in tons)		8,597,716			8,452,411			7,811,137
VCP’s production as percentage of total Brazilian production		7.9	%		7.8	%		8.6	%

Sources:  Bracelpa and VCP.  Changes in figures for 2003 and 2004 are due to report updates from Bracelpa.

          Printing and Writing Paper.  According to Bracelpa, in 2005, we were Brazil’s third largest producer of uncoated offset paper and second largest producer of uncoated cut-size paper, and we ranked first in coated paper production.  During 2005, we produced 595,000 tons of printing and writing paper consisting of approximately 451,000 tons of uncoated and 144,000 tons of coated paper.  Our coated paper is used for a variety of purposes, including labels, inserts, brochures and magazine covers.  Uses for our uncoated paper include notebooks, books and continuous forms.  We produce coated and uncoated paper in reels and sheets and in cut-size paper.  We currently have estimated domestic market shares of 33%, 17% and 24% in the coated, uncoated (offset) and cut-size printing and writing markets, respectively.

          The following table sets forth our printing and writing paper production, total Brazilian printing and writing paper production and our production as a percentage of Brazilian production of such products for the periods indicated:

	Year ended December 31,
	2005			2004			2003
VCP’s production (in tons)		595,000			576,687			603,122
Uncoated paper (in tons)		451,000			444,052			488,787
Coated paper (in tons)		144,000			132,635			114,335
Total Brazilian production (in tons)		2,414,014			2,364,565			2,273,201
VCP’s percentage of Brazilian production		24.6	%		24.4	%		26.5	%

Sources:  Bracelpa and VCP.

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          Carbonless and Thermal Papers.  In 2005, we manufactured 60,000 tons of carbonless and thermal paper at our Piracicaba production facility.  We produce carbonless and thermal paper in reels and sheets for use as facsimile and medical paper as well as supermarket receipts, banking and commercial automation paper, bar code paper, toll tickets and commercial invoices.

          In addition, we have a technology transfer agreement with Oji Paper pursuant to which Oji Paper agreed to share secret formulae, processes, technical information and know-how developed by it for thermal paper.  The agreement also grants us an exclusive, non-assignable license to manufacture and sell certain thermal papers in Brazil and a non-exclusive, non-assignable license to sell such products in Latin America, Africa and the Middle East.   

          Other Specialty Papers.  We are one of the largest producers of specialty papers in Latin America.  In 2005, we produced 21,000 tons of other specialty papers from our Mogi das Cruzes facility, including art papers for catalogues, folders, letters and envelopes and finish foil for the furniture industry.

          The following table sets forth our carbonless, thermal and other specialty paper production, Brazilian carbonless, thermal and other specialty paper production as a total and our total production as a percentage of the total Brazilian production of such products for the periods indicated:

	Year ended December 31,
	2005		2004		2003
VCP’s carbonless and thermal paper production (in tons)		60,000		61,798		56,379
VCP’s other specialty paper production (in tons)		21,000		22,264		13,452
Total (in tons)		81,000		84,062		69,831

Sources:  VCP.

Sales

          We sell our paper products around the world.  The following table sets forth our net sales of paper to the export market by geographic region for the periods indicated:

	2005					2004					2003
	Tons		% of Total			Tons		% of Total			Tons		% of Total
North America		66,551		33.3%			62,726		34.9%			56,088		33.3%
Latin America(1)		53,767		26.9			43,756		24.4			32,251		19.2
Europe		61,173		30.7			53,889		30.0			47,469		28.2
Middle East/Asia/Africa/Other		18,216		9.1			19,158		10.7			32,404		19.3
Total Exports		199,707		100.0	%		179,529		100.0	%		168,212		100.0	%

(1)  Excluding Brazil.

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          The following table sets forth our domestic sales of specialty, carbonless and thermal paper, Brazilian specialty, carbonless and thermal paper sales, and our sales as a percentage of Brazilian sales for such products for the periods indicated:

	Year ended December 31,
	2005		2004		2003
VCP’s carbonless and thermal paper sales (in tons)		60,669		62,076		57,961
VCP’s other specialty paper sales(1) (in tons)		33,765		34,868		28,905
Total (in tons)		94,434		96,944		86,866

(1)	Includes sales of third-party products by KSR and sales of specialty papers produced at the Mogi das Cruzes mill.
Source:  VCP

          Printing and writing paper represents the largest category of paper exports from Brazil.  In 2004 and 2005, we exported 179,438 tons and 199,424 tons, respectively, of printing and writing paper, which primarily consisted of uncoated paper.

          The following table sets forth our exports and domestic sales of coated and uncoated papers for the periods indicated:

	Year ended December 31,
	2005			2004			2003
VCP’s exports (in tons)		199,424			179,438			167,663
Brazilian exports (in tons)		903,527			766,878			765,015
VCP’s percentage of Brazilian exports		22.1	%		23.4	%		21.9	%
VCP’s domestic sales (in tons)		331,434			338,175			313,024
Brazilian market (in tons)		1,496,003			1,568,887			1,420,189
VCP’s percentage of Brazilian market		22.2	%		21.6	%		22.0	%

Sources:  Bracelpa and VCP.

          The customer base for our paper products is very diversified.  None of our customers individually accounted for more than 10% of our domestic or international sales of paper products in 2005.

Raw Materials

          Wood

          Our pulp production is 100% based on bleached eucalyptus hardwood grown in sustainable forest plantations.  We use modern technologies that enable us to obtain high product quality in producing ECF pulp and VCF pulp.

          We rely exclusively on eucalyptus trees to meet our pulpwood requirements.  Eucalyptus trees in Brazil are among the fastest growing trees in the world.  High technology, climate and soil conditions in Brazil allow for eucalyptus tree harvest rotations of approximately seven years as compared to harvest rotations of approximately 10 to 12 years in Chile and up to 25 years in the United States.  The optimal time to harvest our trees is approximately seven years from the time of planting. 

          Energy and chemicals

          We use several sources to generate thermal and electrical energy for the pulp and paper production process, including biomass derived from wood debarking, chip screening rejects, fuel oil, natural gas and black liquor.  By producing electricity internally, we realize substantial savings compared to purchasing electrical energy in the open market.  In 2005, we generated approximately 59% of our energy requirements for the pulp and paper production process internally, of which 89% is from renewable fuels, such as biomass and black liquor, and 11% is from non-renewable fuels, such as fossil fuels (oil and gas).  Recovery boilers recycle substantially all of the chemicals used in the pulp production process.  We believe that our sources of supply will allow us to maintain a cost advantage in these areas for the foreseeable future.

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          In 2005 we purchased approximately 41% (34% in 2004) of our energy requirements from concessionaires, including CPFL—Companhia Paulista de Força e Luz (for the Luiz Antônio and Piracicaba facilities), Bandeirante (for the Jacareí and Mogi das Cruzes facilities) and Eletropaulo (for our headquarters), as well as from fuel oil and natural gas suppliers.  The increase in 2005 was due to a three month maintenance overhaul of a generator at the Luiz Antonio mill.  Approximately 37.7% of the voting shares of CPFL are indirectly owned by VBC, a joint venture that is 33% owned by VPAR, our indirect shareholder.  In 2006, we will start-up a new combined cycle gas turbine and heat recovery boiler in the Jacareí mill, and consequently will reduce the global percentage of our purchased electrical energy from 41% to around 25%.  We believe that the new gas turbine system will improve our already low dependence on external supplies of energy.  We believe our secure sources of supply will allow us to maintain a cost advantage in these areas for the foreseeable future.

          The pulp production process traditionally involved the use of elementary chlorine.  In recent years, demand for pulp that is bleached with little or no chlorine has grown significantly because of concerns over possible carcinogenic effects of chlorinated organic compounds released in water.  This pulp in which no elementary chlorine is used in its bleaching, is known as elementary chlorine-free pulp, or ECF.  It uses chlorine dioxide instead.  As a result, we only produce ECF pulp.  Our bleaching sequences are based mostly on oxygen compounds, such as oxygen, ozone and hydrogen peroxide, which are more environmentally friendly.  In addition, we have developed a bleaching process referred to as Votorantim chlorine-free, or VCF pulp, which utilizes a smaller amount of chlorine dioxide than the ECF process.  In 2005, 100% of our pulp was produced without the use of elementary chlorine.

          At December 31, 2005, we had long-term “take-or-pay” contracts with suppliers of chemical products for periods from 1 to 13 years.  Our contractual obligations in connection with such contracts are US$ 35 million per year.  See note 14(d) to our financial statements.

          In June 2005, we established a contingency plan to minimize the risk of a reduction in the natural gas supply from Bolivia, given the political turbulence in that country.  The natural gas consumption represents approximately 6.5% of our energy requirements.  The contingency plan assumes that up to 65% of our natural gas needs would be rationed.  The plan involves the proportional transition of our energy needs from natural gas to fuel oil.  This is possible given the flexible energy sources.  The replacement of natural gas by fuel oil would imply an increase in the consumption of fuel oil in the Jacareí and Piracicaba mills; however the impact on costs would not be material, representing less than 1% of our operating costs.  In 2005, approximately 49% of the natural gas’ apparent consumption in Brazil was supplied by imports from Bolivia.  Our needs of natural gas are fully supplied by Comgás (Companhia de Gás de São Paulo).  Comgás participates in a committee created together with the Federal government to identify risks and alternatives to minimize the impact of any natural gas rationing of Brazil’s industry. 

          Water

          We presently require about 40 cubic meters of water per ton of pulp.  The costs of obtaining our water were not a significant component of our total cost of raw materials in 2005.  We get our water from several rivers in the state of São Paulo, Brazil, including the Paraíba do Sul, Piracicaba, Mogi Guaçu and Tietê.  We believe our average water supplies are currently adequate and that our water consumption per ton is very low; particular in the Jacareí mill (32 cubic meters per ton) because of that facility’s use of more modern technology.

          Beginning in 2003, the Brazilian government imposed tariffs on the industrial use of river water.  For the Paraíba do Sul River, which is located near the Jacareí mill, the levying of tariffs related to water consumption started in the beginning of 2003.  From our experience to date, the imposition of such tariffs has not had a significant impact on our production costs.  The levying of tariffs for water consumption from the Piracicaba River may begin in 2006 or early next year.  For the other rivers from which we use water, the imposition of tariffs is unlikely to start before 2007.

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Transportation

          We use trucks that are owned and operated by independent contractors to transport wood from our forests to our production facilities.  Our forests are located an average distance of 287 kilometers from our pulp mills.  We also use trucks owned and operated by third parties to transport finished pulp and paper products from our facilities to our customers in Brazil and other regions in Latin America or to the port of Santos.  Santos is located on the coast of the state of São Paulo approximately 380 kilometers from the Luiz Antônio mill and 150 kilometers from the Jacareí mill.

          In 1998, we obtained a concession from the state government of São Paulo to operate a terminal and a warehouse in Santos under a renewable ten-year operational lease agreement with CODESP, which is the government-owned corporation that owns and operates the port.  This lease was non-cancelable during the initial period and is set to expire in 2007.  In September 2003, an amendment to the agreement renewed it for another ten years from September 2007 to September 2017.  The terminal has facilitated the growth of our exports because it allows us to load vessels with pulp directly from our terminal, thereby significantly reducing freight and handling costs.  Our yearly expense for this has been approximately US$ 0.1 million, and future annual lease payments under the CODESP lease will also be approximately US$ 0.1 million per year.  There is no contingent rent under the contract.  In addition, in 2001, we rented another warehouse at the terminal in Santos in anticipation of future increases of our pulp exports as a result of the Jacareí expansion.  This expanded our total warehouse area in Santos to 12,520 square meters from 9,550 square meters, and our total warehouse volume capacity in Santos increased to 38,000 tons from 28,000 tons.

          In December 2002, we signed a contract with MRS Logística S.A., or MRS, a private railway concession, in order to invest in a private railway from the Jacareí plant to the port of Santos to transport pulp to the port from the mill.  In March 2005, we signed another contract with MRS to transport wood to our Jacareí mill and also approved an investment to construct a railway terminal to receive this wood in the Jacareí plant.  The new wood terminal has been operational since October 2005 and has granted a relevant reduction on VCP’s wood transportation costs.  As part of our agreement with MRS in 2002 MRS was responsible for the reconstruction of the 27-kilometer railway and the investment in dedicated railway wagons, while we were responsible for the construction of the building of terminals inside the Jacareí plant and at the port of Santos.  Total investment was approximately US$ 9.4 million and we were responsible for 50% of the costs incurred, which has been disbursed.  The pulp transportation agreement also requires the transportation of a minimum tonnage, equivalent to US$ 7.4 million per year, over a ten-year period.  For the wood transportation agreement, the minimum tonnage requirement is equivalent to US$ 1.3 million per year, starting in 2006.  In 2005, we shipped 800,000 tons of pulp and 30,000 tons of wood through MRS and paid US$ 8.4 million to MRS. 

          In 2003, we hired logistic operators for inbound and outbound products for the plants in Jacareí and Luiz Antônio.  These services were outsourced to TNT Logistics and Wilson & Sons operators.  Two logistics operators (Wilson Sons and TNT) were contracted to handle all the operational activities, from receiving the raw material to delivering the product to the final customer.  This has resulted in lower costs, gains of scale, lower investment in infrastructure and greater specialization in providing services to clients.  For the wood sector, a multi-model solution combines rail and road transport to deliver forestry products to the industrial units.  Through an agreement with MRS Logística, the pulp is transported by train from the Jacareí unit to the port of Santos.  This cuts logistical costs by 25% compared with road transport.  We operate our own terminal in the port of Santos which also cuts costs and brings flexibility in exporting.  For paper exports, a system of loading the products which are already in pallets ensures the integrity of the product, dispenses with the need for containers and makes the sales process more flexible since there is no need to wait for ships to become available or be completely loaded.  Another logistical advantage comes from KSR, a paper distribution unit which is the leader in the sector in Brazil.  KSR plays a strategic role by reaching all regions of Brazil and servicing clients in areas such as printing, editorial, stationery, copying, small business, converters (forms, notebooks), newspaper and public bodies.  KSR has 27 affiliates and an automated storage system which results in a fast service, supported by a specialist fleet which can make deliveries throughout Brazil.

          We are also developing multimodal wood shipment projects (which include transportation by train and trucks), which we named Door to Door, in a partnership with ALL – América Latina Logística, or ALL, which was implemented in September 2003 to bring wood from Guaíba (Rio Grande do Sul) to São Paulo.  We invested US$ 0.3 million in this project to adapt railway wagons to load wood. 

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Marketing and distribution

          We sell our pulp and paper products in both the domestic and export markets.  In 2004 and 2005, approximately 91% and 92%, respectively, of our sales volume of market pulp and 29% and 32%, respectively, of our sales volume of paper products were made outside of Brazil.  Our internal sales staff consists of 67 employees operating throughout Brazil.  In addition, 285 employees (including 100 independent sales agents) are assigned to KSR, which is our paper distributor.

          Through KSR and our internal sales staff, we focus on developing close, long-term customer relationships by meeting the customer’s specific requirements.  We constantly seek to increase our understanding of our customers and their industries and to tailor our products to their specific needs.  See “Item 5 – Operating and Financial Review and Prospects—Research and development, patents and licenses, etc.” for a detailed description of our technology upgrades in the area of customer relationships.

          In 2002, we completed the implementation of a new management information technology system.  This system uses an SAP database to monitor in real time our business performance in conjunction with certain external industry indicators.  We believe that this system has enabled our management to identify financial risks and measure operational performance against our strategic objectives.

          In addition, we have created several online portals for the distribution of our products and we participate in the industry portal, Pakprint, together with Indústrias Klabin de Celulose e Papel S.A., or Klabin, International Paper, Suzano/Bahia Sul and Ripasa, which allows customers to purchase our products and track their orders via an online marketplace.

          Pulp

          Our internal sales staff handles substantially all of our domestic market pulp sales.  We sell pulp to other Brazilian paper producers, including Fábrica de Papel Santa Therezinha S.A. (a company specialized in production of tissue and special paper) and Arjo Wiggins Ltda. (the largest producer of security and fine papers).  In addition, due to the expansion of the Jacareí facility, we are selling substantially more market pulp abroad.  In order to distribute and market this additional market pulp, we operate our own terminal at the port of Santos, and we have contracted with local agents abroad to sell this market pulp in the international market.  The delivery of pulp is done through proper equipment and logistics, providing high productivity in all stages of the process.

          In April 2001, we incorporated VCP Exportadora, a wholly owned subsidiary, which was formed to ensure that we are well positioned in the global market for the production of pulp and uncoated copying paper, and that we maintain our position as a leader for coated paper in our regional market.  In addition to being an important component of our growth, VCP Exportadora and its subsidiaries play an important role in establishing direct relationships with our customers worldwide.  We also expect to incorporate or use subsidiaries abroad that will provide better access to our international customers and their international financial markets and will act as vehicles for future acquisitions outside Brazil.  Currently, our pulp and paper products are distributed overseas through VCP Overseas; Newark Financial Inc., or Newark, a wholly owned subsidiary of VCP Exportadora; VCP North America and VCP Trading.  In April 2006, for administrative and economic reasons, we merged VCP Exportadora e Participações S.A., VCP’s wholly owned subsidiary, into us and assumed all of the assets and liabilities relating to its export operations.

          Paper

          In 2005, approximately 68% of paper sales volume and 76% of our net revenues derived from paper came from the domestic market compared to 71% and 77%, respectively, in 2004.  We sell 16% of our paper products through KSR.  Domestically, KSR’s distribution network consists of 26 branches, which are strategically located with warehouses used for storage purposes, and a workforce composed of 100 independent sales agents.  In 2005, KSR was the segment leader in paper distribution in Brazil, with a market share of approximately 17% of the distribution sales.  Through KSR, we sell our paper products to approximately 18,000 customers, including small printers, stationery stores and industrial companies throughout Brazil, as well as the Brazilian government. 

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KSR also sells the products of other paper companies in areas where they do not compete with us, in both the export and domestic markets.  As a result, we are able to offer a wide range of complementary products, with prompt delivery.  In 2005, through KSR we had net revenues of US$ 112 million, representing 21% (US$ 95 million and 15%, respectively, in 2004) of our total consolidated paper sales in the domestic market.

          Sales of our products to our domestic customers are for cash, credit or through a program called the vendor program.  For purposes of this annual report, we have referred to our credit sales as the “non-vendor program.”

          The vendor program is available to some of our domestic customers, and approximately 22% of our domestic sales in 2005 were made by this method.  Under the vendor program, the customer agrees to pay the bank and the bank in turn pays us on behalf of the customer for the purchase price of the product.  We, as the vendor, act as a guarantor under the arrangement with the bank so that the customer can take advantage of lower interest costs.  The lower interest rate is a result of the bank typically looking to us, and not our individual customers, as the primary support for the credit risk.  The vendor program is a means by which the bank essentially finances customers’ purchases.

          A customer applying for the vendor program must first be approved by us.  If we determine that the customer is creditworthy, the customer enters into a standard-form agreement with the bank that is providing the financing, which is guaranteed by us.  The bank then forwards to us an amount of money equal to the purchase price of the products sold.  The standard-form agreement into which the customer enters with a bank specifies loan repayment terms that are generally more favorable than prevailing market rates because the customer receives the benefit of our financial strength through our guarantee.  We guarantee full repayment of the loan and, in the event of a customer default, the bank charges our cash account for the principal amount of the loan, plus interest, 15 days after the due date of the loan.  We closely monitor the collection of these amounts and are advised by the bank once amounts have been settled.  If we are called upon to settle the obligation with the bank, we pursue the customer through legal proceedings for final settlement of amounts due to us.  The accounting and management controls exercised over these “receivables” are no different from our systems in place to monitor our direct receivables due from direct sales customers.  We consider this vendor program to be an important component of our sales and marketing efforts and believe that the favorable credit terms we are able to offer our customers give us an additional competitive advantage.

          Additional tax benefits arise under this facility because the interest charged by the bank to the customer is not subject to the sales taxes that would otherwise accrue had we incorporated the finance charges into the sales value and billed the amount directly to our customer.

          Prior to October 1999, all of our customers that had good credit were allowed to purchase inventory on credit using either the vendor program or our payment terms.  We reviewed the customers’ payment history to determine how much credit we would extend to each customer, but, generally, the program was available to any customer that had an available credit limit and a good payment history with us.  Sales made under the vendor program were on the same terms as the cash price offered to that customer.  It was typically up to the customer to decide whether to pay cash, use the vendor program, or agree to the payment terms established by us.

          Under the terms of our vendor program, the maximum allowable term for payment is generally 180 days, though in the case of a few customers, we extend the term to 360 days.  The terms of the vendor program depend on the customer’s credit rating, which is based on our own internal credit review.

          We estimate that for 2003, 2004 and 2005, an average of approximately 2% of our total number of regular domestic customers (approximately 22%, 21% and 22%, respectively, of total domestic sales value) obtained our guarantee for their loans.  At December 31, 2005, we had 46 customers, but only 15 of them were active, under the vendor program, with the average amount per customer based on our vendor program exposure at US$ 9 million.  Our vendor program exposure was US$ 51 million at December 31, 2003, US$ 71 million at December 31, 2004 and US$ 57 million at December 31, 2005.

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          In October 1999, as part of our credit risk policies, we introduced more stringent credit risk criteria for the selection of customers to which we sell through the “vendor program.”  The selection criteria were established based on an internal credit score ranking (general and financial credit risk evaluation criteria).  Once we receive a sales order, we contact one of five banks with which we operate, and the bank arranges the terms and conditions of payment with the customer.  Since the implementation of this policy, we have reduced the customers to which we extend the vendor program from approximately 200 customers to approximately 50 customers.  This reduction was made due to the decline in bank charges and interest spreads (charged to customers by the banks) in Brazil and the resulting decrease in bank financing costs available directly to our customers.

          Historically, amounts of guarantees we have paid, net of amounts recovered from customers, have been negligible.  In 2005, 2004 and 2003, we recovered 100% of the amounts we paid under guarantees. 

          Our customers who make purchases using credit agree to payment terms that effectively include finance charges.  The finance charge on each sale is the difference between the amount the customer agrees to pay at the due date and the cash sales price.  The finance charges are recognized over the payment period and are included in financial income.

          We retain the same risk of loss on customer accounts under the vendor program that we do under our own non-vendor program.  To mitigate this risk, we continuously monitor the receivables under both programs and periodically update our assessment of each customer.  In addition, we continuously evaluate both vendor program receivables and our receivables for collectibility.

Competition

          The international markets for pulp and paper products are highly competitive and involve a large number of producers worldwide.  As an integrated pulp and paper producer, we compete not only with other integrated pulp and paper producers but also with companies that produce only pulp or paper.  Many of these producers have greater financial resources than we do.  Our production levels have been, and will continue to be small by comparison to overall world pulp and paper production, and the prices for our products will depend on prevailing world prices and other factors.

          According to Hawkins Wright (an “Outlook for Market Pulp” published in April 2006), at December 31, 2005, world market pulp capacity reached 51.5 million tons per year.  During 2005, capacity increased by 1.2 million tons per year, of which 0.4 million tons per year constituted bleached hardwood kraft pulp, mainly because of two hardwood mills in North America that were integrated to paper, representing an overall reduction of 785,000 tons of hardwood pulp.

          Based on 2005 net revenues of Brazilian pulp and/or paper producers, we were the second largest Brazilian producer, behind Aracruz.  In the domestic market, with respect to market pulp, we had the second largest Brazilian market share in terms of volume, with 14%, behind Lwarcel Celulose e Papel S.A., with 20%.

          According to Bracelpa, with respect to writing and printing uncoated paper, we were the third largest Brazilian producer in 2005 in terms of volume, producing more than Ripasa, but less than International Paper and Suzano/Bahia Sul.  In addition, in 2005, we were the leader in Brazil in the production of certain specialty papers and carbonless and thermal paper.  We had a leadership position in 2005 in coated paper in Brazil with a 33% market share followed by Ripasa and Suzano with a 20% market share.  Our main competitors in carbonless and thermal paper are located outside Brazil.

          On July 2, 2003, Aracruz announced the purchase of all shares of capital stock of Riocell S.A., or Riocell, from Klabin S.A. and Klabin do Paraná Produtos Florestais Ltda.  The Riocell mill is located in the state of Rio Grande do Sul.  Riocell produces bleached eucalyptus kraft pulp. 

          Aracruz and Stora Enso announced the start-up of their Veracel joint venture in May 2005 and full capacity was reached before year-end.  Bahia Sul announced that it would build a new 950,000 tons per year BEKP line, which would begin in the second half of 2007.

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          In November 2004, we signed an agreement with Suzano Bahia Sul Papel e Celulose S.A., or Suzano, for the acquisition of all of the common and preferred stock of  Ripasa.  On March 31, 2005, we finalized the acquisition, through a 50% joint venture, of 77.59% (our interest – 38.795%) indirect interest in the voting capital and 46.06% (our interest – 23.03%) indirect interest in the total capital of Ripasa, by the amount of US$ 278 million.  A purchase option was also signed for the sale of 37,449,084 common shares and 12,388,719 preferred shares, totaling 22.41% of the voting stock and 13.45% of the total stock, to be exercised within six years, for a total amount of US$ 160.31 million.  Following a restructuring of Ripasa, the remaining minority shareholders of Ripasa are expected to be issued a tender offer to exchange their shares for shares of VCP and Suzano.

          The purchase of Ripasa is being analyzed by Brazilian antitrust authorities and is subject to their review and approval. The acquisition of the controlling stake in Ripasa by us and Suzano was completed on March 31, 2005.  Under the terms of the acquisition

• 129,676,966 common shares and 41,050,819 preferred shares of Ripasa were acquired and paid for on March 31, 2005, representing 77.59% of the voting stock and 46.06% of the total stock, and

• 37,449,084 common shares and 12,388,719 preferred shares of Ripasa are to be acquired by purchase and sale options to be exercised within six years, representing 22.41% of the voting stock and 13.45% of the total stock.

          On July 20, 2005, VCP and Suzano announced a reestructuring plan for Ripasa, including a delisting of Ripasa through a share exchange by VCP’s and Suzano preferred shares.  Each of Ripasa’s preferred shares will correspond to 0.0072 VCP preferred shares and to 0.0167 Suzano class “A” preferred shares.  The reasons for the restructuring are: (i) to permit Ripasa’s current minority shareholders to hold VCP and Suzano shares, which were more liquid than those of Ripasa; and (ii) to allow future reorganization of Ripasa, which will permit cost reductions, operational gains, enhanced competitiveness and economies of scale for the companies. 

          The restructuring plan was analyzed and approved by the CVM; however, certain minority shareholders filed a judicial action to suspended the process.  On April 26, 2006, VCP and Suzano entered into a judicial agreement with a group of Ripasa’s preferred shareholders, with the aim of settling  the claims challenging  Ripasa’s corporate restructuring,  and implementing the restructuring, once the conditions in the agreement were met. 

          Once the conditions of the agreement are met (including suspension of the ongoing legal procedures relating to the restructuring, and the absence of any decision, judicial or administrative, that prevents or hinders the restructuring, or renders it inadvisable) and the restructuring concluded, which is expected to occur in July 2006, VCP and Suzano will pay the group of minority shareholders R$ 1.0538 for each Ripasa preferred share held by them (corresponding to an additional US$ 38 million cash disbursement by VCP).  VCP’s capital increased, in 2006, by R$ 573,629.83 from R$ 2,478,582,123.76 to R$ 3,052,211,393.59, upon the issuance of 12,532,009 preferred shares with no par value.  The acquisition of the share control in Ripasa and its future transformation into a production unit is still under analysis by the Brazilian antitrust authorities. 

          For additional information on the Ripasa acquisition, see note 4 to the financial statements.

Environmental policies

          As part of our commitment to sustainable development, we plan to develop one of the largest forested areas in the state of São Paulo with approximately 210,000 hectares located near our industrial plants, of which approximately 40% has been preserved as native forest and/or set aside for environmental recovery.  In partnership with various universities, we conduct research and monitor the fauna and flora of the region.  By the end of 2005, VCP owned a forest area of 285,000 hectares (including the ones in the State of São Paulo), of which 43% are preserved as conservation areas with native forests.  For conservation areas, environmental planning may adopt the following options: Planting and recovery of native species; recovery by means of natural regeneration; soil recomposition and others.

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          Since 2001, we have implemented a new integrated policy for quality of the environment, health and safety, based on the following principles:

• to fulfill the needs and expectations of investors, customers, suppliers, professionals, communities and other parties involved in our business;

• to operate responsibly and in compliance with laws, regulations and corporate commitments;

• to ensure the integrity, qualification and career development of our employees; and

• to provide continuous improvement in management systems and processes, including the prevention and reduction of wastes, accidents and adverse impacts on the environment.

          We use technologies that process and bleach pulp and paper wood pulp with ozone, which minimizes water consumption and reduces effluents and organic chlorine compounds.

          We have an electronic system that monitors and coordinates all our environmental activities to facilitate operational control, management of environmental risks and compliance with legal requirements at the Jacareí plant.

          We obtained an ISO 14001 (environmental) certification for the forestry area and for the industrial area of the Jacareí mill on January 2004.  The Luiz Antônio industrial unit was ISO 14001 certified for quality environmental management standards in 2005.  All integrated industries, forestry areas in São Paulo and the port terminal of Santos are certified as conforming to international standards.

Brazilian environmental regulation and investments

          The federal constitution assigns to the federal government, the states, the federal district and the municipalities the responsibility for environmental protection and preservation of the Brazilian fauna and flora.  However, the authority to enact laws and issue regulations with respect to environmental protection is granted jointly to the legislative branches of the federal government, the states and the federal district.  The municipalities may only issue regulations with respect to matters of local interest or to supplement federal and state laws.  The state agency for pollution control in the state of São Paulo is CETESB—Companhia de Tecnologia de Saneamento Ambiental, or CETESB.  Pursuant to the pollution control laws of the state of São Paulo, as enforced by CETESB, the installation, construction or expansion, as well as the operation, of industrial equipment likely to cause pollution must be licensed by CETESB.

          A renewable licensing system was introduced in São Paulo in December 2002, according to which previously issued licenses shall be renewed upon CETESB’s convocation.  .  The new licenses issued by CETESB under this system shall be valid for periods of up to six years for installation licenses and ten years for environmental licenses.  The use of efficient environmental management systems and the practice of environmental auditing are taken into account by CETESB in granting longer validity terms for licenses. Our operations are subject to various environmental laws and regulations issued by these authorities, including those relating to air emissions, effluent discharges, solid waste disposal, odor and reforestation.  During 2003, 2004 and 2005, our capital expenditures relating to environmental matters were approximately US$ 20 million, US$ 7 million and US$ 23 million, respectively.  Capital expenditures were allocated to environmental projects and expenses.  We cannot assure you, however, that the implementation of more stringent environmental regulations in the future will not require significant capital or other expenditures.  For a description of certain legal matters relating to environment regulation, see “Item 8—Financial Information—Consolidated Statements and Other Financial Information—Legal Matters.”

          In Brazil, individuals or legal entities that violate environmental laws can be punished by criminal sanctions that range from fines to imprisonment, in the case of individuals, or dissolution, in the case of legal entities.  In addition, administrative sanctions that can be imposed include, among others:

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• fines;

• partial or total suspension of activities;

• forfeiture or restriction of tax incentives or benefits; and

• forfeiture or suspension of participation in credit lines with official credit establishments.

          In addition to criminal and administrative sanctions, pursuant to Brazilian environmental laws, the violator must also repair the damage that was caused to the environment and/or indemnify third parties, regardless of the existence of actual fault.

          We have received a number of administrative warnings in the past five years for isolated violations of the maximum levels for emissions or effluents, including odors.  The largest payment we have made individually was related to a solid residue release that occurred on September 10, 2005, when an industrial embankment burst at the Jacareí unit and non-dangerous residues (class 2A) covered part of a road and a stream, causing reversible damage to the environment.  VCP took all necessary measures to reduce the damage to the environment and community.  VCP acted in a transparent manner by immediately notifying CETESB and other government agencies of the incident, as well as issuing a press release.  VCP was fined R$ 77,000 (or approximately US$ 32,000) by the government.  We developed a project to recover the industrial embankment and to reduce the damage to the environment,  representing an investment cost of approximately US$ 9 million, of which US$ 3 million were disbursed in 2005.

          Environmental indicators

          Our operating and production processes utilize natural resources and generate liquid effluents, residual wastes and air emissions which may adversely affect the environment.

          Liquid effluents

          Water is critical to the process of manufacturing pulp and paper.  We obtain water from the rivers that flow adjacent to our mills.  After the water has been used in the manufacturing process, we pass the effluents through mechanical and biological treatments before returning them to the rivers.  We also have emergency lagoons and tanks that enable us to avoid releasing untreated effluents into the rivers in the event of a problem with our effluent process.  Effluent characteristics are monitored constantly through chemical, physical and biological analyses.  We also have a spill control system to avoid disturbances in the wastewater treatment plant.

          Each of our units uses a two-stage process to treat the effluents generated during the production process.  During the first stage, solids such as fibers, clay and carbonates are removed from the effluents.  During the second stage, these solids undergo a biological treatment in which suspended and dissolved materials are broken down through the action of microorganisms.  We hired a third party to evaluate the quality of the effluents generated during the production process and with the results of these analyses, we implement actions to minimize the generation of effluents and maximize the reutilization in the process.  Our industrial units are developing alternatives that seek to reduce the consumption of water and the generation of effluents by optimizing the production process and increasing the reuse and recirculation of water.  In Jacareí mill, the closing circuit project reached a water reutilization rate of 85%.  In 2001, we completed construction of a new effluent treatment system at the Jacareí mill and completed an upgrade of the effluent treatment system at the Luiz Antônio facility.  For a description of the imposition of tariffs on river water use, see “—Raw materials—Water” above.

          Solid wastes

          We have identified productive uses for a portion of the solid waste generated during our pulp and paper production processes and have adopted the following programs for handling and disposal of such solid waste residue:

• co-processing with ceramic manufacturing companies (Piracicaba and Jacareí mills);

• licensed landfills (Jacareí and Mogi das Cruzes mills); and

• use in forests as soil correction agents (Luiz Antônio mill).

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          With respect to the co-processing activities at our Piracicaba and Jacareí facilities, we use industrial residue as the raw material to manufacture bricks.  Currently, the facility’s solid waste residue is being recycled and used in ceramic factories around the city.  We are presently reevaluating alternatives for the recycling of organic residue for energy purposes, and we are installing selective waste collection and recycling systems for the common areas at the Mogi das Cruzes mill.  We started using these selective waste collections and recycling systems at the Jacareí facility in 2001 and the Piracicaba and Luiz Antônio facilities in 2002.

          The remainder of solid waste is either sold to third parties for use in their production processes or disposed of in sanitary landfills.  The small amount of hazardous waste generated at our facilities is collected, treated and disposed of in accordance with the requirements of Brazilian law.

          Atmospheric emissions

          As a byproduct of production, certain compounds and particulate emissions are released into the atmosphere.  In order to control these emissions, the sources of these emissions are fitted with control equipment such as electrostatic precipitators, multi-cyclones and gas scrubbers, which minimize or remove certain particles and compounds from the emissions.  In order to control odor emissions, our Jacareí and Luiz Antônio mills use an efficient system for collection and incineration of odoriferous, diluted and concentrated gases and are outfitted with an alternative gas scrubber removal system to be used when incineration is not possible.  In addition, the auxiliary boilers, which previously burned fuel oil, were adapted to burn natural gas in 2001.  The expansion of the Jacareí facility included similar equipment and processes to control emissions.

          Forest preservation

          All our wood comes from tree plantations rather than native forests.  The land we manage is generally not of high enough quality to be used for other forms of agriculture.  Our cultivation program seeks to preserve the health of our forests, and Brazilian law requires that at least 20% of our land either be covered with native forests or cultivated with indigenous species of trees rather than eucalyptus or pine.

          Forestry Certification System

          In October 2002, VCP received ISO 9001/2000 and ISO 14001 certifications for forests located in Capão Bonito and Jacareí regions.  In February 2004, Luiz Antônio Mill received the ISO certification.  In 2003, VCP Florestal started the process for the FSC Certification.  The process should take from 18 to 24 months, taking into account that the overhaul occurred in February 2005.  VCP Florestal aims to have around 30% to 40% of the pulpwood production certified.

          Natural resources

          Since the 1990s, we have been harvesting eucalyptus through uniform micro-propagated seedlings from carefully selected trees.  The characteristics of the seedlings we select are matched to different growing regions and our products.  This method allows us to (1) greatly increase forestry productivity, (2) comply with environmental regulations, and (3) contribute to carbon reduction in the atmosphere.

          Pursuant to the Brazilian Forestry Code (Law No. 4,771 of September 15, 1965), we set aside a portion of our forests for preservation, conservation and environmental recovery.  These areas consist of either native forests or riparian buffer zones, or are maintained to satisfy specific ecological interests.  We also invest in environmental studies, together with domestic and international universities, research centers and renowned consultants, in order to improve the environmental conditions of our plantations, and ensure that we protect the native fauna in the areas in which we operate.  We created a program designed to protect and preserve the fauna of areas with distinctive environmental aspects.  This program has been implemented at Fazenda São Sebastião do Ribeirão Grande, a large private native forest in the Vale do Paraíba region, and at Várzea do Jenipapo in the Ribeirão Preto region.

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          Insurance

          We maintain insurance policies for our mills against fire, lightning and explosion by any cause up to US$ 176 million and electrical damages up to US$ 451,000.  We renewed this insurance on December 1, 2005.  However, we do not maintain insurance against fire, disease and other risks to our forests.  We have taken steps to prevent fires from occurring at our forests, including the maintenance of fire observation towers, a fleet of fire engines and teams of fire-fighting personnel, which we believe are safe and cost-effective methods of fire prevention.  Given the natural protection afforded by the dispersion of our forests, we do not believe that insuring our forests would be cost-effective.  We do not make provisions for risks of loss from fire and other casualties.  We expense for the necessary amount when the damage is incurred.  We have not suffered a material loss from either fire or disease in the forests that we harvest. 

Overview of the Pulp and Paper Industry

          Pulp Industry Overview

          Wood pulp is the principal ingredient in the manufacture of wood-containing paper.  Pulp is classified according to (a) the type of wood or fiber from which it is made, (b) the manner in which the wood or fiber is processed, and (c) whether it is bleached.

          There are two types of wood pulp that can be produced.  Hardwood pulp is produced using hardwood trees, such as eucalyptus, aspen, birch and acacia.  Pulp made from hardwood, such as eucalyptus, has short fibers and is generally better suited to manufacturing coated and uncoated printing and writing papers, tissue and coated packaging boards.  Short fibers are the best type for the manufacture of wood-free paper with good printability, smoothness, brightness and uniformity.  Softwood pulp is produced using softwood trees, such as pines and fir.  Pulp made from softwoods has long fibers and is generally used in manufacturing papers that require durability and strength, such as kraftliner, and those requiring high opacity, such as newsprint and directory papers.  We produce only hardwood pulp from planted eucalyptus trees.

          The pulp manufacturing process may determine a pulp’s suitability for particular end uses.  Mechanical pulp refers to pulp processed to leave in some lignin and other organic materials holding the wood fibers together.  Chemical pulp refers to pulp made using chemical processes to dissolve the lignin.  Among the various chemical processes for chemical pulp, the most common is the kraft process, which we use to produce our pulp.  The kraft process helps to maintain the inherent strength of the wood fibers and thus produces a pulp that is especially well suited for manufacturing printing and writing papers, specialty papers and tissue.

          Bleached pulp is used for a variety of purposes, including printing and writing papers, specialty papers and tissue.  Unbleached pulp is brown in color and is used in the production of wrapping paper, corrugated containers and other paper and cardboard materials.  Many companies, including us, have been using the ECF methods in their production of bleached pulp.  ECF is a bleaching process that does not utilize elementary chlorine and chlorine chemical compounds, respectively.  These two processes have been developed in part to eliminate any possible carcinogenic effects attributed to the dioxins that are produced during the bleaching process and released in the water.

          As a result of the variety of wood types and processes used to produce pulp, the pulp market has become increasingly specialized in terms of technical characteristics.  Hardwood and, particularly, eucalyptus pulp, exhibit many of the physical and chemical properties most valued by printing and writing paper manufacturers and other bleached pulp consumers, such as opacity, grade and printability.  As a result of increasing specialization, many manufacturers developed their own customized mix of pulp inputs known as “furnish” for use in their paper manufacturing.  In addition, as more paper manufacturers have come to appreciate the technical characteristics of hardwood pulp and rely upon a significant hardwood pulp component in their furnishings, the market for hardwood pulp has grown more rapidly than the market for softwood pulp.

          Eucalyptus is one of many types of hardwood used to make pulp.  We believe that for certain uses eucalyptus pulp is superior because of the greater consistency in the quality of its fibers and because it can improve paper’s opacity, formation and printability.  Eucalyptus pulp has gained wide acceptance among producers of printing and writing papers in Europe and among producers of tissue papers in North America because of its softness and absorbency.  In addition, eucalyptus trees generally grow straighter and have fewer branches than most other hardwood trees.  This allows for dense growth, easy harvesting and decreased need for pruning.

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          Paper Industry Overview

          There are six major groups of paper products produced by the paper industry:

• newsprint paper, used to print newspaper;

• printing and writing papers, used for a broad range of purposes, including writing, photocopying, commercial printing, business and computer forms;

• tissue papers, used to produce tissue, toilet papers and paper towels;

• packaging papers encompassing kraft paper, containerboard (corrugated paper and linerboard) and liquid packaging board;

• cardboard; and

• specialty papers.

          We produce printing and writing papers, specialty papers, and thermal and carbonless paper, a subcategory of specialty papers.

          Printing and writing papers are classified according to whether they are coated or uncoated, and whether the pulp from which they are made is chemically processed to eliminate lignin, called wood-free paper, or contains some lignin, called mechanical or wood-containing.  We make uncoated and coated wood-free printing and writing paper.

          Printing and writing paper is sold either in reels or in packages of pre-cut sheets, called cut-size.  We sell our paper in both reels and cut-size.  Reels of paper are used by manufacturers of paper products such as business forms, writing pads, packaged sheets of pre-cut paper, books and envelopes.  Customers require different size reels depending on the type of machines they use.  Cut-size paper is used in offices for general commercial purposes, such as photocopying and writing.  There has been a general trend in recent years toward the use of standardized pre-cut sheets rather than preprinted and continuous business forms and computer paper.  This trend has led many paper producers, including us, to reduce sales of reels and to integrate cutting machines in their paper mills, increasing their production of cut-size papers.

          The market for paper has a large number of producers and consumers and more product differentiation than the market for pulp.  Prices for paper are cyclical but are less volatile than pulp prices.  The prices for paper and paperboard have historically followed the trends of pulp prices.

          The key factors that drive paper prices are overall economic activity, capacity expansion and fluctuations in current exchange rates.  In the second half of 1994, the international paper market tightened dramatically as accelerated economic growth in the United States and end user inventory restocking pushed demand higher despite limited capacity expansion.  This tightening in the international market eased over the last several months of 1995, particularly for the commodity grades.  In 1996, paper became readily available and prices started to decrease, and continued to decrease through the first quarter of 1999.  Thereafter, prices for our various grades of paper have improved, reaching a peak in the first half of 2001.  Thereafter, international paper prices started to decrease again but not as strongly as pulp prices decreased, due to a more consolidated and less volatile market.

           In 2003 and in 2005, Brazilian paper companies increased their export volumes in order to compensate the demand reduction in the domestic market. The scenario for 2004 was quite different.  In 2004, the Brazilian economy presented a significant recovery, ending the year with an increase in GDP of 4.9%, causing the Brazilian paper sector to present an increase in sales.  Regarding the international market, although the appreciation of the real of approximately 9% in 2004 and 13% in 2005 impacted our revenues, the volume sold increased due to a good economic environment, especially for the North American and European markets.  After suffering some years at low price levels, international paper prices start a recovery in the first half of 2006, with price increases being announced in February, April and June 2006, in both North America and Europe.   

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          Although it is possible that market prices for paper will further decline in the future, or that there will not be sufficient demand for our products to enable us to operate our production facilities in an economical manner, we have been minimizing these risks by shifting our focus towards higher value-added products and by achieving a better sales mix.  We are also developing the flexibility to be able to allocate sales between domestic and export markets.  We plan to continue to increase our productivity significantly and to further increase our productivity through the modernization of our industrial plants and through improvements in our product mix. 

The Brazilian pulp and paper industry

          Brazil is predominantly a tropical country, with approximately 90% of its territory located north of the Tropic of Capricorn.  As a result, in most regions of Brazil, the soil and climate are very favorable to forest growth.  In Brazil, eucalyptus trees have short growing cycles of approximately seven years, compared to 10 to 12 years for eucalyptus trees in Chile and 25 years in the United States.  The production of wood in Brazil, therefore, requires less time and a smaller growing area than in North America and Europe, which results in higher yields.

          Brazil’s high technology and natural advantages in forestry make it one of the world’s lowest-cost producers of pulp, and in the last 20 years Brazil has become an important pulp exporter.  As one of the world’s lowest-cost producers of pulp, Brazilian pulp producers are able to weather more favorably than other producers through periods of low pulp demand.  This shorter maturing period also enables Brazilian producers to expedite the process of genetically improving the Eucalyptus species utilized.  In this manner, the Brazilian Eucalyptus is one of the pulping trees species that have evolved more rapidly and consistently over recent years, resulting in significant improvements in its productivity.

          Capitalizing on its advantages in pulp production, Brazil has developed a diversified paper industry with modern technology and a potential for growth in both the domestic and export markets.  In recent years, there has been a marked increase in paper consumption in Brazil, which is an important indicator of the economic development of a country.  Between 1994 and 2005, the average annual rate of paper consumption increased by approximately 4% per year, reaching 7.3 million tons in 2005, according to Bracelpa.  We believe that there is growth potential for domestic consumption, because per capita consumption is still low in comparison with developed countries.  Per capita consumption of paper is estimated at 39.5 kilos per year, according to PPI, a news and information provider for the pulp, paper, converting forest products and allied industries. 

          According to preliminary data from PPI, in 2005, Brazil was the eleventh largest paper producer and the seventh largest pulp producer in the world.  Brazilian pulp and paper companies have made large investments over the last ten years in order to compete more effectively and on a larger scale with traditional pulp suppliers in the international market.  In addition, technological development in the paper industry has been supported by the research efforts of major producers and by financing from BNDES. 

          Consolidation in the Brazilian pulp and paper industry is currently under way.  The table below shows the market participation of the five largest producers in terms of sales for the years indicated:

	Year ended December 31,
	2005		2004			2003			2002			2001			2000
	(in thousands tons)
Brazilian pulp production (1)		10,126.2		9,620.1			9,104.2			8,011.5			7,412.0			7,463.3
Brazilian paper production		8,597.7		8,452.4			7,811.1			7,661.2			7,437.8			7,187.8
Total pulp and paper production		18,723.9		18,072.5			16,915.3			15,672.7			14,743.8			14,651.1
Total five top producers		NA		10,987.2			10,547.0			9,810.7			9,125.0			8,099.9
% Top five		NA		60.8	%		62.4	%		62.6	%		61.9	%		55.3	%

(1)  Pulp numbers represent pulp volume produced.

Source:  Bracelpa.  As of June 24, 2006, Bracelpa has not released figures for the five largest producers.

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          Brazil produces both commodity grade paper, such as kraft linerboard, and more value-added paper products, such as thermal, carbonless and fiduciary paper.  Brazil is self-sufficient in all types of paper, except newsprint, coated paper and certain specialty grades.  The paper market is larger than the pulp market in terms of the numbers of producers, consumers and variety of products.  Paper prices tend to be less volatile than prices for pulp. 

Cyclical nature of world pulp prices

          World pulp prices are cyclical because demand for paper depends heavily on general economic conditions and because production capacity adjusts slowly to changes in demand.  From 1985 to mid-1989, market prices for bleached hardwood kraft pulp rose steadily.  Beginning in 1989, the recession in North America, Europe and Japan, combined with the start-up of a number of new or expanded pulp facilities, contributed to depressed prices that continued through 1993.  This decline in world pulp prices to the lowest levels in 20 years (on an inflation-adjusted basis) forced a number of pulp producers out of the market.  However, international demand began to recover in late 1993, with a corresponding increase in prices.

          In 1995, the international paper industry was in the second year of what is believed to be the strongest market upturn in its history.  A substantial portion of the industry reported record earnings levels in 1995 due to strong demand and surging prices.  Virtually all of the industry’s major grades were at, or near, record price levels as a result of tight supply and intense cost pressures (particularly for non-integrated paper producers that purchase pulp and, to a lesser extent, for non-integrated pulp producers that purchase fiber).

          The key supply-side factor during the 1995 upturn was an abnormally low rate of capacity expansion, a consequence of the industry’s poor performance during the 1989-1993 downcycle.  This low rate of capacity expansion led to a rapid tightening of markets that, in turn, caused the prices to increase sharply.

          By the last quarter of 1995, however, the international paper market began to show signs of strain.  Some of the reasons for this slackening were a slowdown in economic growth, particularly in the United States, more readily available supplies of certain grades of paper, due to improved mill productivity and the start-up of new machines, and a deceleration in end-user inventory building.  By January 1996, pulp prices were falling and continued to fall through the first quarter of 1999.  In the second quarter of 1999, international pulp prices began to rise and continued to rise throughout 2000.  After reaching a peak of around US$ 700 per ton in the second half of 2000, market pulp prices started to fall through the third quarter of 2001 primarily due to (1) inventory accumulation, (2) variations in the European Union unified currency, which raised the cost of pulp for the production of printing and writing papers and (3) the scheduled production downtime by Canadian producers, followed by that of U.S. manufacturers to combat growing inventory and maintain price levels.  At the beginning of 2001, Brazilian manufacturers, including us, slowed pulp production in response to the drop in demand and slowdown of the economy and to maintain a balance between supply and demand. 

          During the second half of 2001, market pulp prices were around US$ 400 per ton.  In the fourth quarter of 2001, the market pulp prices began to increase as a result of the industry-wide decline in inventory as several producers scheduled production downtime in order to reduce growing inventory and maintain price levels. 

          The average price for bleached eucalyptus kraft pulp, or BEKP, in 2002 was US$ 458 per ton (CIF North Europe).  Prices increased in the second quarter of 2002 and reached their highest level, US$ 510 per ton, in the third quarter of 2002.  The average price for BEKP in the fourth quarter of 2002 was US$ 470 per ton.  Pulp inventories also influenced prices with Norscan inventories totaling 1,339 thousand tons in June 2002, which was their lowest level since September 2000.

          In the beginning of 2003, prices started to increase primarily due to bad weather conditions in the southern part of the United States, which affected market pulp production and to production, curtailment in Asia caused by technical problems.  The average price for BEKP for the year ended December 31, 2003 was US$ 507 per ton. 

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          The pulp BEKP average price for the year 2004 was US$ 518 per ton.  China played an important role in 2004.  In the beginning of the year the international pulp consumption was greater than expected, especially from China, where pulp was needed for new plants, causing price increases throughout all regions during the first half of the year.  In the second semester of the year, the trend of pulp prices changed.  China took advantage of the combination of high initial inventories, accumulated in the first half of the year, and the seasonal low period to reduce its purchase volumes and resist rebuilding of inventories.  Also, European markets resistance to paper price increases, pressured by the appreciation of the euro in relation to the U.S. dollar, which reduced margins of these producers’ exports.  These conditions led to successive reductions in pulp prices over the third quarter of the year, closing at US$ 450 per ton in Asia, US$ 490 per ton in Europe and US$ 555 per ton in the United States.  As demand improved, international pulp prices began to increase in November of 2004 and in January, March and April of 2005, reaching US$ 570 per ton in Asia, US$ 600 per ton in Europe and US$ 635 per ton in the United States.  These prices remained stable during the second half of 2005, except in Asia where the price declined US$ 30 in the second half of the year.  The price of paper products, although less volatile than the price of pulp, experiences fluctuations in response to global demand and production and fluctuations in pulp prices.  During 2005 paper prices in the European and North American markets had not increased to match the increases in pulp prices, since the fourth quarter of 2004.  Therefore, margins for paper prices have continued to be low in those markets.  The first quarter of 2006 was marked by capacity adjustments and shut-downs, combined with a continuous expansion in global demand, which improved the international scenario, even during the northern-hemisphere winter, bringing prospects of new price increases.  In February, eucalyptus pulp prices went up by US$ 20 per ton in all regions.  In April we increased our price in the Asian markets to US$ 590 per ton.  The capacity adjustments also occurred on the paper side, and in the first half of 2006 we saw paper prices increasing for several grades in the United States and Europe.

          The following table sets forth the estimated cash production costs per ton of bleached hardwood kraft market pulp pre-sold in Northern Europe, Brazil and the United States for the third quarter of 2005, for producers in the regions indicated.  Cash production costs are total production costs less depreciation and depletion and does not include any transportation costs.  Amounts have been expressed on a per ton basis in U.S. dollars, with local currencies translated at prevailing exchange rates.  Particular producers may have production costs significantly above or below regional averages. 

BHKP operating costs, Q3 2005	Cash production costs (per ton)
Indonesia		US$         171
Brazil		200
Chile		272
Portugal		340
Finland		347
Spain		351
Sweden		351
France/Belgium		365
Southern U.S.		369
Eastern Canada		410
Source:  Hawkins Wright.

C.      Organizational Structure

          Our operations are conducted by Votorantim Celulose e Papel S.A. as the controlling and principal operating company.  We are a member of the Votorantim group, which has other interests in Brazil and abroad, principally in cement, metallurgy, agribusiness, chemicals and financial services.  In 2005, consolidated net sales of the Votorantim group reached approximately US$ 7.8 billion (US$ 6.3 billion in 2004) based on Brazilian GAAP, data translated to U.S. dollars at year end exchange rates, of which 18% (18% in 2004) represented pulp and paper activities.  Net consolidated sales include the industrial units of the Votorantim group, as well as Votorantim Finanças, which includes Banco Votorantim.  Our immediate parent company is VPAR, which in turn is controlled by Hejoassu Administração S.A.  Hejoassu is the formed by the Board Members of the Votorantim Group.  It is composed by family members, responsible for the main decisions and business strategies.  Hejoassu is controlled by the Ermírio de Moraes family.  See “Item 4—Information on VCP—Business Overview—Our Ownership Structure.”

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          On March 1, 2002, we incorporated VCP Overseas, our wholly owned subsidiary incorporated in Hungary.  In June 2002, we incorporated St. Helen Holding III, B.V., located in Curaçao.

          As of December 31, 2002, we had a 50% stake in Voto-Votorantim Overseas Trading Operations N.V. and three wholly owned subsidiaries, VCP Terminais Portuários S.A., VCP Exportadora and VCP Florestal.  In April 2001, we incorporated VCP Exportadora as a wholly owned subsidiary, and in the fall of 2001 we incorporated Newark, which was used to acquire our interest in Aracruz.

          In order to facilitate access to our international customers and to the international financial markets, we have established two subsidiaries of Newark, VCP Trading and VCP North America, to manage our exports to clients in Europe and in North America, respectively, until 2005.  As of January 2006 we have been performing the total export sales from VCP Overseas Holding Kft.

          In November 2004, we signed an agreement with Suzano Bahia Sul Papel e Celulose S.A., or Suzano, for the acquisition of all of the common and preferred stock of Ripasa S.A. Celulose e Papel, or Ripasa.  On March 31, 2005, we finalized the acquisition, through a 50% joint venture, of 77.59% (our interest – 38.795%) indirect interest in the voting capital and 46.06% (our interest – 23.03%) indirect interest in the total capital of Ripasa, by the amount of US$ 275 million.  A purchase option was also signed for the sale of 37,449,084 common shares and 12,388,719 preferred shares, totaling 22.41% of the voting stock and 13.45% of the total stock, to be exercised within six years, for a total amount of US$ 160.31 million.

          On January 26, 2005, in an Extraordinary General Meeting, our shareholders decided that VCP Florestal would merge into us to achieve cost reductions and increased business synergies between the two companies.  VCP Florestal was dissolved as a result of the merger and we succeeded it with respect to all rights and obligations thereof.  There was no increase in our capital stock as a result of the merger, due to the fact that we owned all the shares of VCP Florestal.

          On June 24, 2005 Voto-Votorantim IV, a wholly-owned subsidiary of VPAR, issued US$ 400 million, 7.75% Fixed Rate Notes due 2020 in the international capital market, under Rule 144A and Regulation S of the U.S. Securities Act of 1933.  VCP is a guarantor of 50% of the debt issued by Voto-Votorantim IV and in turn received US$ 200 million of the proceeds.  On September 6, 2005, we acquired a 50% interest in Voto-Votorantim IV and together with VPAR we are the guarantors for this operation.  Of the proceeds of US$ 200 million, US$ 125 million was used by St. Helen III to repay the debt incurred with Voto-Votorantim II.

          In April 2006, for administrative and economic reasons, we merged VCP Exportadora e Participações S.A., VCP’s 100% subsidiary, into us and assumed all of the assets and liabilities relating to our export operations.

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The chart below shows our economic structure as of April 30, 2006 (% of total capital):

D.       Property, Plant and Equipment

          All of our production facilities are located in the state of São Paulo.  We have forests in the State of São Paulo and timberlands in the State of Rio Grande do Sul which have been acquired since 2004.  The state of São Paulo accounts for more than 33% of Brazil’s gross domestic product, and is home to most of the domestic consumers of pulp and paper products.  In 2005, our forests (including purchased wood) were located an average of 287 kilometers from our pulp mills, and our facilities are located an average of 200 kilometers from Santos, which is the port facility that we use for most of our exporting activities.  The relatively short distance between our forests, our plants and most of our domestic customers results in relatively low transportation costs.

          We own and operate two mills that produce both pulp and paper and two mills that produce only paper.  At December 31, 2005, our aggregate nominal pulp production capacity was 1,435,000 tons per year and our nominal paper production capacity was 645,000 tons per year.  The following table sets forth the distance between our forests and our mills, the distance of these mills to the port of Santos, and the nominal capacity of each mill at December 31, 2005:

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Facility	Pulp/Paper	Distance from forest (pulp) or pulp mill (paper)	Distance from port of Santos	Pulp/Paper capacity (tons/year)	Major products
Jacareí	Pulp/Paper	350 km	150 km	1,050,000/185,000	Uncoated printing and writing paper; coated printing and writing paper
Luiz Antônio	Pulp/Paper	116 km	380 km	385,000/350,000	Uncoated printing and writing paper; offset, copier, laser printing and inkjet paper
Piracicaba	Paper	150 km	200 km	170,000	Thermal and carbonless paper; coated printing and writing paper
Mogi das Cruzes	Paper	50 km	100 km	20,000	Label paper; finish foil; soap wrapping board; light cardboard and other specialty papers

Source:  VCP.

Eucalyptus forests

          We obtain a majority of our wood from approximately 209,000 hectares of land located in the state of São Paulo.  We own approximately 63% of this land, with the remaining 37% leased from third parties, of which 51% are other companies of the Votorantim group.  See “Item 7—Major Shareholders and Related Party Transactions—Related Party Transactions—Leases of Forest Land.”  While we have enough wood to satisfy our requirements, from time to time and when the terms are attractive, we purchase wood from unrelated third parties for use in our paper and pulp mills.  In the year ended December 31, 2005, we consumed approximately 66% of our own wood and 34% of our wood from those third parties. 

          At December 31, 2005, we owned or leased approximately 450 different tracts of forests for cultivation, making our wood supplies relatively dispersed.  Our forests are located an average of 287 kilometers from our pulp mills.  In order to reduce the average distance from our forests to our mills, we did not renew the leases of forests that were relatively far from our mills and, instead, have purchased forests that are closer to our mills.  Brazilian law requires that at least 20% of the land we own either remains uncultivated or planted with indigenous species of vegetation.  Of our own forests, approximately 62% consists of planted eucalyptus forest, approximately 34% is reserved for preservation and the remainder is used for other activities. 

          Our strategic goal to guarantee fiber supply and ensure VCP’s long-term growth also includes the raising of a new forest area in the state of Rio Grande do Sul, currently with 76,000 hectares.  Growth in this region is driven by the availability of land at attractive costs, the proximity to Northern Uruguay (wood availability) and also the proximity to Rio Grande port, which will allow us the creation of an export platform.  The forestry productivity in this new area is similar to São Paulo forests and some other qualities of the region are the qualified labor force, the inter-modal transportation options and the favorable political, social and environmental conditions. 

          While the dispersion of our woodland entails some additional costs, we believe that it significantly reduces the risks of fire and disease.  We also seek to minimize fire risk by maintaining a system of fire observation towers and a fleet of 13 fire engines, all of which are manned by members of our fire-fighting teams.  Given the natural protection afforded by the dispersion of our forests, we do not believe that insuring our forests would be cost-effective.  We therefore assume all risks of loss from fire and other casualties.  In addition, we annually treat certain of our forests to prevent tree destruction by ants.  We have never suffered a material loss from either fire or disease in forests that we harvest.

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          As part of our reforestation efforts, in 2005, we planted approximately 22,700 hectares of eucalyptus in order to supply our wood requirements to produce pulp and also energy to supply Luiz Antônio and Jacareí mills.  The forests used to supply the Luiz Antônio mill typically yield between 40 and 45 cubic meters of pulpwood per hectare per year, while forests supplying the Jacareí mill generally yield between 45 and 50 cubic meters of pulpwood per hectare per year.  At seven years old, the normal time to harvest, these trees normally have an average productivity of 280 to 315 cubic meters of woodchip per hectare per year in Luis Antônio and 315 to 350 cubic meters per hectare per year in Jacareí.  These levels of productivity reflect the excellent climate conditions for growing eucalyptus trees in São Paulo State, with ample amounts of both sun and rain. 

          In 2005 we grew approximately 47 million seedlings at our nurseries, all of which were planted in our forests or supplied to the tree-farm project.  To develop our eucalyptus forests, we select seedlings after strict testing, which are denominated as clones and enter into the production process.  We operate three nurseries for seedling production.  We use both seeds and seedlings cloned from rooted cuttings, a method also known as “vegetative propagation,” to carry out the planting of our eucalyptus trees.  Vegetative propagation results in trees with wood fibers that are extremely homogeneous and permits the propagation of trees with the most favorable genetic characteristics for pulp production.  These characteristics include fast growth rate, good quality of wood fibers, resistance to disease and “self-pruning” trees with fewer branches.  Greater tree standardization provided by cloning also allows for increased mechanization in tree felling and transportation, and makes it easier to adjust equipment and machinery to topographical conditions.  Nowadays, almost 100% of the seedlings used by VCP are obtained through the “vegetative propagation” method. 

          We began to review concepts on community relations and the common good, as part of our contribution to social and economic development.  For example, we invited our neighbors in the state of Rio Grande do Sul to participate in a project in which we have already planted 23,000 hectares of eucalyptus.  We also launched the Forestry Savings program, an innovative way of cooperation and social inclusion involving our neighbors in the countryside.

Expansions

          We expect to spend approximately US$ 78 million in debottlenecking projects of which US$ 32 million were already disbursed in 2005 and US$ 46 million are expected to be disbursed in 2006.  This investment will further expand our annual pulp capacity by over 150,000 tons during the 2006-2007 period.  Simultaneously, we have been investing in the acquisition of land and eucalyptus plantations in the state of São Paulo, in the region surrounding our plant, and in forest reserves in the south of the state of Rio Grande do Sul in order to decrease our dependence on raw materials from third parties.  The project in the South also includes the construction of an industrial facility at the beginning of the next decade, for which socio-environmental licensing procedures have already begun.

ITEM 4A.  UNRESOLVED STAFF COMMENTS

          None.

ITEM 5.  OPERATING AND FINANCIAL REVIEW AND PROSPECTS

          You should read the following discussion in conjunction with our audited consolidated financial statements and accompanying notes and other financial information included elsewhere in this annual report, and in conjunction with the financial information included under “Item 3A—Key Information—Selected Financial Data.”  This section contains forward-looking statements that involve risks and uncertainties.  Our actual results may differ materially from those discussed in the forward-looking statements as a result of various factors, including, without limitation, those set forth in “Item 3D—Key Information—Risk Factors” and the matters set forth in this annual report generally.

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Overview

          We produce pulp and paper products in Brazil, including wood-free printing and writing papers and specialty papers. 

          Pulp.  We produce bleached eucalyptus pulp, part of which we sell domestically and internationally and the remainder of which we use for our paper business. 

          Paper.  We produce paper for the domestic and international markets.  As part of our strategy for paper products, we have continued to increase the proportion of our sales of value-added products, such as coated, thermal and carbonless and other specialty papers, and to remain as a leading market share producer of these value-added paper products in the domestic market.  The percentage of our net sales of these value-added products in relation to our total net sales for paper in the Brazilian market was 45% in 2003, 47% in 2004 and 49% for 2005.  In 2003, we continued to increase exports of uncoated papers despite the appreciation of the real against the U.S. dollar because the weak domestic market conditions lowered domestic demand and shifted our sales to the export market.  In 2004, with the recovery of the domestic economy, we directed our sales volume growth to the domestic market.  In 2003, we estimate that we lost approximately 3% of our coated paper domestic market share mainly to imports which became more competitive as the real appreciated against the U.S. dollar.  In 2004, the better scenario in the local market allowed us to increase our coated paper sales, but we lost market share due to the competition with imported products, as a consequence of the weaker foreign exchange rate.  In 2005, we continued to increase exports of uncoated papers despite the appreciation of the real against the U.S. dollar because the weak domestic market conditions lowered domestic demand and shifted our sales to the export market.  Our sales of paper outside Brazil as a percentage of our total sales of paper in terms of volume were 30% in 2003, 29% in 2004 and 32% for 2005.  While we increased our sales of coated papers in the last two years, we lost market share to imports in the coated paper domestic market in 2004 and in 2005, as the real appreciated during that years.  We intend to take advantage of the opportunity to recover our market share if the real depreciates or stabilizes against the U.S. dollar. 

          We have sought to increase the proportion of our production of value-added paper products, which have higher margins, using various strategies:  (1) in the domestic market, we are focusing our efforts on the increase of the proportion of our product mix devoted to coated, chemical and specialty papers, targeting specific segments of the market; and (2) in the export market, we increased sales of uncoated papers, especially cut-size.  We have increased our total volume of pulp sales due to the completion of the Jacareí expansion.  And we will increase even more during the 2006-2007 period due to the additional volume from the debottlenecking of this new line.  Since the new production line started up in December 2002, we have benefited from our ability to produce larger volumes of pulp at fixed costs that have not grown proportionally and from lower transportation costs relative to other producers.  See “Item 4—Information on VCP—Business Overview—Our Business Strategy.”  We have also responded to the increased demand in the international market by increasing our U.S. dollar-denominated pulp exports.

          The following table shows a breakdown of our total exports in 2004 and in 2005 in terms of volume by geographic location:

	Year ended December 31, 2005										Year ended December 31, 2004
	Pulp					Paper					Pulp					Paper
	Thousands of Tons		% of Total			Thousands of Tons		% of Total			Thousands of Tons		% of Total			Thousands of Tons		% of Total
North America		76.0		10	%		66.5		33	%		85.5		11	%		62.7		35	%
Latin America (1)		1.6		—			53.8		27	%		3.0		—			43.8		24	%
Europe		474.5		60	%		61.2		31	%		347.4		46	%		53.9		30	%
Asia and Africa		234.9		30	%		18.2		9	%		328.4		43	%		19.1		11	%
Total Exports		787.0		100	%		199.7		100	%		764.3		100	%		179.5		100	%

(1) Excluding Brazil.

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Prices

          All references to prices relate to average prices determined by dividing the net sales by the corresponding tonnage.

          Pulp.  Our pulp operations are affected by prevailing world market prices for pulp, the amount of pulp produced and sold worldwide, and the pulp requirements of our paper business.  The prices that we are able to obtain for our pulp depend upon prevailing world market prices, which historically have been cyclical and subject to significant fluctuations over relatively short periods of time.  The price of pulp is quoted in U.S. dollars.  Domestic sales of pulp are denominated in reais; however, as export sales, they generally reflect the international price of pulp, which is denominated in U.S. dollars.  In the first quarter of 2003, severe weather conditions reduced harvesting in the United States and resulted in reduced pulp production.  This factor, along with strong demand in China, reduced inventories and caused prices in the first quarter of 2003 to climb to US$ 570 per ton in the United States, US$ 540 per ton in Europe and US$ 510 per ton in Asia.  Due to seasonal factors, pulp prices declined moderately in the second half of 2003 to US$ 550 per ton in the United States, US$ 510 per ton in Europe and US$ 470 per ton in Asia by December 2003.  Pulp prices averaged US$ 507 per ton in 2003.  In the beginning of 2004, international pulp consumption was greater than expected, especially from China, where pulp was needed for new plants, causing price increases throughout all regions during the first half of the year.  At March 31, 2004, prices reached US$ 500 in Asia, US$ 520 in Europe and US$ 545 in the United States, and US$ 530, US$ 550 and US$ 585 respectively in June.  In the second semester of the year, the trend of pulp prices changed.  China took advantage of the combination of high initial inventories, accumulated in the first half of the year, and the seasonal low period to reduce its purchase volumes and resist rebuilding of inventories.  Also, European markets resist to paper prices increases.  The average price of pulp in 2004 was US$ 518 per ton.  As demand improved, international pulp prices began to increase in November 2004 and in January, March and April 2005, reaching US$ 570 per ton in Asia, US$ 600 per ton in Europe and US$ 635 per ton in the  United States.  These prices remained stable during the second half of 2005, except in Asia where the price declined US$ 30 in the second half of the year.  The first quarter of 2006 was marked by capacity adjustments and shutdowns, combined with a continuous expansion in global demand, which improved the international scenario, even during the northern-hemisphere winter, bringing prospects of new price increases.  In February, eucalyptus pulp prices went up by US$ 20 per ton in all regions.  In April, we increased our price in the Asian markets to US$ 590 per ton.  The capacity adjustments also occurred in the paper side, and in the first half of 2006 we saw paper prices increasing for several grades in the United States and Europe.

          The average C&F (Cost and Freight) price per ton for our export sales of bleached eucalyptus market pulp over the last several years was US$ 579 in 2000, US$ 382 in 2001, US$ 389 in 2002, US$ 456 in 2003, US$ 462 per ton in 2004, and US$ 511 per ton in 2005.  In the first quarter of 2006, the average C&F price increased to US$ 526 per ton.

          Paper.  Our paper operations are affected primarily by demand for paper in Brazil and by Brazilian economic conditions and, to a lesser extent, international paper prices.  Prices for printing and writing papers are generally linked to international prices.  In the second half of 2002, the devaluation of the real and the resulting increase in export volumes, especially for cut-size paper, created a shortage of paper in the domestic market and average prices increased by approximately 35% in reais, which partially offset the significant devaluation of the real.  In 2003, the real appreciated 22% against the U.S. dollar, but domestic paper prices remained fairly stable, resulting in higher prices in U.S. dollars.  In 2004, the real appreciated 9% against the U.S. dollar and the domestic market improved with the expectation of lower interest rates in Brazil, combined with a better scenario in the international markets.  As a result, domestic paper average prices increased an average of 8% in U.S. dollars, in 2004 compared to 2003.  In 2005, the real appreciated 13% against the U.S. dollar but the domestic market was weaker than expected, and this was combined with a weaker scenario in the international markets.  However, domestic average prices were almost stable in reais.  As a result, domestic paper average prices increased an average of 13% in U.S. dollars in 2005, as compared to 2004.  The price of paper products, although less volatile than the price of pulp, experiences fluctuations in response to global demand and production and fluctuations in pulp prices.  During 2005 paper prices in the European and North American markets had not increased to match the increases in pulp prices, since the fourth quarter of 2004.  Therefore, margins for paper prices have continued to be low in those markets. The first quarter of 2006 was marked by capacity adjustments and shutdowns, combined with a continuous expansion in global demand, which also improved the international scenario for paper.  In February and April 2006, international paper prices for cut-size papers increased in both the United States and Europe.  This improvement in international scenario for paper brought prospects of future new price increases. 

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          In response to the cyclical nature of the paper market, we have increased our production of value-added paper products, such as coated, thermal, carbonless and other specialty papers, which are less sensitive to cyclical price variations, and we have increased our export capacities to offset eventual weaker demand in the domestic market.

Costs and operating expenses

          Our principal costs of production are incurred in reais and consist of raw materials (primarily wood and chemicals), labor and depreciation.  In 2005 our cost has increased significantly in U.S. dollars as a result of the appreciation of the real, pressuring our margins.  Our business is capital intensive and a portion of our costs is fixed.  We seek to maintain high capacity utilization rates to benefit from economies of scale and production efficiencies resulting from the operation of large, efficient production facilities and machines.  As a percentage of net sales, selling and marketing expenses were 10% in 2003, 12% in 2004 and 12% in 2005.  The increase of 5% in the export volumes and higher freight costs in 2005 has not resulted in proportionally higher selling and marketing expenses because they were offset by other cost savings.  We generally pay up to 10% of the FOB price to export and shipping agents, which varies by geographic region and responsibilities.  General and administrative expenses as a percentage of net sales were 4% each in 2003 and 2004, and 5% in 2005.  In the first quarter of 2006, the real continued to appreciate against the U.S. dollar, but VCP increased its margins through reduction of fixed and variable costs and improvement of market conditions.

Financial income

          We derive financial income from several sources, including interest on cash and cash equivalents.  Since January 1, 2001, we have derived financial income from accessing low-cost foreign-currency financing and investing the proceeds in higher-yielding Brazilian financial instruments.  The unrealized gains from cross-currency interest-rate swap contracts are recorded at fair market value on our balance sheet as an asset and in our statement of income as “Foreign exchange gain (loss) and unrealized gain (loss) on swaps, net.”  We enter into these arrangements to reduce our exposure resulting from a possible devaluation of the real in relation to the U.S. dollar because a high proportion of our debt is denominated in U.S. dollars.  See “—Brazilian economic environment” and “—Liquidity and capital resources—Debt.”

Financial expenses

          We incur financial expenses from several sources, including short-term debt and long-term debt.  We principally seek long-term financing to fund our projects, which are generally of a long-term nature.  Short-term debt is comprised of U.S. dollar-denominated working capital from commercial banks and short-term secured loans.  Long-term debt consists of both U.S. dollar, mainly due to pre-payment export loans, and real-denominated debt, borrowed from BNDES.  We have consistently derived profits from arbitrage when we borrow funds in U.S. dollar-denominated liabilities and invest amounts in real-denominated assets despite the hedging costs involved, but we do not incur such debt in order to gain from that arbitrage.  Additionally we consider the natural hedging from the funds of exports when deciding to incur such arbitrage.  We provide no assurance that such favorable results will be earned in the future or that we will continue with these arbitrage transactions.  See “—Liquidity and capital resources.”

Discussion on critical accounting policies

          Critical accounting policies are those that are important both to the portrayal of our financial condition and results and that require our management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain.  As the number of variables and assumptions affecting the possible future resolution of the uncertainties increase, those judgments become even more subjective and complex.  In order to provide an understanding about how our management forms its judgments about future events, including the variables and assumptions underlying the estimates, and the sensitivity of those judgments to different circumstances, we have identified the following critical accounting policies:

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• revenue recognition and accounts receivable;

• impairment of investments and intangible assets;

• forest development costs and impairment tests;

• deferred taxes;

• tax contingencies; and

• employee benefits and other related matters.

          Revenue recognition and accounts receivable

          We recognize revenue and associated costs of sales at the time our products are delivered to our customers or when title and associated risks pass to our customers.  Revenue is recorded net of sales returns of US$ 7 million in 2005 (US$ 6 million in 2004 and US$ 8 million in 2003).  Our customers that purchase on credit agree to payment terms that effectively include finance charges.  The finance charge on each sale is the difference between the amount the customer agrees to pay at the due date and the cash sale price.  The finance charges are recognized over the payment period and are included in financial income.  Recognition of revenue for our two segments and for domestic and export sales is based on the following principles:

          Paper - domestic market:  Sales are either on cash or credit terms (normally 30, 60, 90 days) or through our vendor program.  Credit sales receivables are discounted to present values as our price list is dependent on the length of credit granted.  Revenue is recognized when the customer takes delivery of the product either upon delivery to the customer’s carrier (Incoterms FOB) or premises (Incoterms CIF).  Sales through our vendor program are made to certain of our pre-qualifying domestic customers, and represented approximately 22% of our domestic sales in 2005 (2004 - 21%; 2003 - 22%).  Under the vendor program, the customer agrees to pay the bank and the bank in turn pays us on behalf of the customer for the purchase price of the product.  We guarantee full repayment of the loan for which the maximum allowable term for payment is generally 180 days, though in the case of a few customers, we extend the term to 360 days.

          We estimate that for 2005, 2004 and 2003, an average of approximately 2% of our total number of regular domestic customers (approximately 22%, 21% and 22%, respectively, of total domestic sales value) obtained our guarantee for their loans.

          Paper - export market: export orders are normally met by our own or third-party warehouses located close to strategic markets.  These sales are recognized when products are delivered to the carrier and risks have passed to the customer, that is, the Company delivers the goods, cleared for export to the carrier nominated by the buyer at the named place.  Incoterms CIF and Incoterms FOB terms determine timing of revenue recognition.

          Pulp - domestic market: in 2005 none of our customers qualified for sales through our vendor program (2004 - none; 2003 - one), credit terms of up to 270 days were extended by the bank.  Remaining sales are primarily under credit terms which do not exceed 30 days.  Revenue recognition is consistent with that applied to paper sales.

          Pulp - export market: all export orders are normally satisfied by own or third party warehouses located close to strategic markets.  These sales are recognized when products are delivered to the carrier and risks have passed to the customer.  Exports to Asia are on a cost and freight basis with a named port of destination.

          We recognize revenue and associated costs of sales at the time our products are delivered to our customers or when title and the associated risks pass to our customers.

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          Discounting of short-term receivables and interest income

          Our customers that purchase on credit agree to payment terms that effectively include finance charges.  The finance charge on each sale is the difference between the amount the customer agrees to pay at the due date and the cash sale price at date of sale.  The finance charges are recognized over the payment period and are included in financial income, and accounts receivable from these transactions, including short-term receivables, are discounted to present value.

          Vendor program

          Some of the sales of our products to certain of our domestic customers are performed through a program called the “vendor program,” where the purchases from us are financed by a bank that has established a direct financing program.

          Under the vendor program, (1) the bank finances the customers’ purchases (by making a payment to us on behalf of the customers in cash equal to the amount of the purchase price payable by the customers) and (2) we issue separate guarantees in which we guarantee payment to the bank in the event that the relevant customer fails to pay the bank.  No separate fee is received by us for the guarantee. The risk of the vendor program is exactly the same as the direct sale.

          Under the vendor program, a separate note agreement exists between the bank and the customer, and the customer is considered to be the primary obligor under that note agreement.  Under our guarantee contract with the bank, we are considered a secondary obligor of a specified percentage of the amount (in some cases up to the full amount) that the bank finances for the customer.  Although the “receivables” are payable by our customers directly to the banks under the vendor financing program, we closely monitor the collection of these amounts and are advised by the bank once amounts have been settled.  In the event of a default by a customer under the vendor-financing program with the banks, the bank will charge, pursuant to the guarantee, our checking account established with the bank in the amount of the default.  Accordingly, during the period of the guarantee, we assess any contingent liabilities that may arise from the guarantee.

          Under the vendor program, we recognize revenue as the goods are delivered to our customers or when title and associated risks pass to our customers.

          Allowance for doubtful accounts

          The allowance for doubtful accounts is recorded in an amount we consider sufficient to cover any probable losses on realization of our accounts receivable from our customers and is included under selling expenses; no adjustment is made to net sales revenue.  Our accounting policy for establishing the allowance for doubtful accounts reserve is summarized as follows:

• all overdue invoices over R$100,000 (equivalent to US$42,722 at the December 31, 2005 exchange rate) are individually analyzed by our accounting department, in connection with the legal, collection and credit departments, in order to measure the amount of the probable expected losses, and, consequently, to determine the allowance for doubtful accounts to be recorded; and

• overdue invoices of less than R$100,000 are reviewed by our collection and credit department in order to identify probable losses to be recorded based on our knowledge of the customer’s credit history and current situation.

          Impairment of investments and intangible assets

          We acquired 28.0% of the voting capital and 12.0% of the total capital of Aracruz on October 3, 2001, for US$ 370 million, generating goodwill on our portion of the underlying fair value of the net assets of US$ 155 million.  Financial Accounting Standards Board Statement, or SFAS No. 142, “Goodwill and Other Intangible Assets,” was applied in connection with our acquisition, and no amortization of the goodwill generated as a result of this acquisition has been recorded.

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          Accounting Principles Board Opinion No. 18, “The Equity Method of Accounting for Investment in Common Stock,” requires us to determine if, among other factors, a decrease in market value is other than a temporary impairment.  As the quoted market price of the investee’s publicly traded stock during 2002 was consistently quoted below book value, a one-off impairment provision was recorded in 2002 based on the market price of US$ 18.56 for the Aracruz ADRs on December 31, 2002.  The impairment charge of US$ 136 million (gross of deferred income tax effects of US$ 46 million) was taken directly as a charge to income (“Equity loss of investee”).  The deferred tax effect of US$ 34 million is included in “Deferred income tax benefit.”  At May 24, 2006, the Aracruz ADR was quoted at US$ 47.48. Considering the market price for the Aracruz ADR today, there would be no impairment provision since it is above the acquisition price of approximately US$29 per ADR of Aracruz.

          Forest development costs

          Forest development costs, primarily project implementation costs (preparation of soil, planting, pest control and clearing, etc.) and similar ongoing development costs are capitalized as incurred.  Until December 31, 2000, forests were normally harvested three times over a 21-year period, and we amortized 60% of accumulated costs at the time of the first harvest, 26% of accumulated costs through the second harvest plus 65% of costs incurred since the first harvest, and the remaining costs at the time of the third harvest.  As a result of improvements in forest management techniques, including genetic improvement in trees, beginning on January 1, 2001, we now harvest and replant our forests approximately every seven years and capitalized costs are expensed at the time of each harvest.  Depletion of forests is computed on the unit-of-production method, based on the volume of timber harvested in each period.  Software costs capitalized are amortized on a straight-line basis over five years.

          Deferred taxes

          We recognize deferred tax assets and liabilities based on the temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities.  If we or one of our subsidiaries operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, we evaluate the need to establish a valuation allowance against all or a significant portion of our deferred tax assets resulting in an increase in our effective tax rate.  Due to our enrollment in the REFIS program (Programa de Recuperação Fiscal), a Brazilian tax recovery program, we could elect annually for each year from 2001 to 2004 to calculate and pay our income taxes either based on the provisions of REFIS (an estimated tax basis which is based on net sales for the year adjusted by financial income and other income) or actual pre-tax income.  We opted to be taxed under the REFIS basis until 2004.  From 2005 on, we have been taxed again on the basis of taxable income.  

          Tax contingencies

          We are currently involved in certain tax proceedings and have filed claims to avoid payment of taxes that we do not believe are due.  When tax obligations are clearly established by current legislation, even though we are contesting the tax and may not have settled amounts allegedly due, we fully provide for the obligation and related charges.  As discussed in note 14 to our audited consolidated financial statements at and for the year ended December 31, 2005, in the case of tax assessments or other contingent liabilities, we have accrued our estimate of the costs for the resolution of these claims when we consider loss of our claim to be probable.  The tax contingencies and obligations which are being disputed relate primarily to value-added sales and excise taxes, taxes on revenue, social security contributions, income tax and tax on bank account transactions.  These estimates have been developed in consultation with outside legal counsel handling our defense in these matters and were based upon an analysis of potential results.

          Employee benefits and other related matters

          In March 2000 we launched a defined contribution plan which provides pension and post-retirement benefits.  We also contribute to the Government pension, welfare and redundancy plans on behalf of our employees and these contributions are expensed as incurred.  Most of our employees are members of unions, with which we enter into collective-bargaining arrangements annually.  The liability for future compensation for employee vacations is accrued as earned.

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          We have adopted SFAS 106, “Employers’ Accounting for Post-retirement Benefits Other than Pensions,” which requires a provision for the costs of post-retirement benefits expected to be paid to current, former or inactive employees upon retirement.  Expenses relating to benefits we provide to our current employees are expensed as incurred whereas those relating to retired employees (current as well as expected in the future) and their dependents are accounted for in accordance with SFAS 106.

Brazilian economic environment

          Our results of operations and financial condition, as reported in our financial statements, have been affected by the rate of Brazilian inflation and the rate of devaluation of the Brazilian currency against the U.S. dollar.

          Effects of inflation and impact of the Real Plan.  Since the introduction of the real as the Brazilian currency in July 1994, inflation was controlled until January 1999, when it increased due to the devaluation of the real.  During periods of high inflation, such as those prior to the introduction of the real (when inflation rates reached approximately 80% a month in March 1990), real wages in Brazilian currency tended to fall because salaries typically did not increase at the same rate as inflation.  The effect was a progressive decline in purchasing power of wage earners.  The reduction and stabilization of inflation following the implementation of the Real Plan resulted in increased spending on consumer goods (including paper), higher real income growth, increased consumer confidence and the increased availability of credit.  It also resulted in relatively higher labor costs.

          The table below shows the Brazilian general price inflation (according to the IGP-DI), devaluation of the real against the U.S. dollar and the period-end exchange rate and average exchange rates for the periods shown:

	Year ended December 31,
	2005			2004			2003			2002			2001
Inflation (IGP-DI)		1	%		12	%		8	%		26	%		10	%
Devaluation (appreciation) of the real vs. U.S. dollar		(13	)%		(9	)%		(22	)%		34	%		16	%
Year/period-end exchange rate—US$1.00(1)	R$	2.34		R$	2.65		R$	2.89		R$	3.53		R$	2.32
Average (daily-weighted) exchange rate(1) US$1.00	R$	2.44		R$	2.93		R$	3.08		R$	2.92		R$	2.35

(1) The average (daily) exchange rate is the sum of the closing exchange rates at the end of each business day divided by the number of business days in the period.

          Effects of exchange rate variation and inflation on our financial condition and results of operations.  The devaluation of the real has had and will continue to have multiple effects on our results of operations.  Our statements of operations expressed in reais are translated to U.S. dollars at the average rate for the relevant period.  The amount in U.S. dollars for the relevant period in the statements of operations will be reduced at the same rate as the real has devalued in relation to the U.S. dollar over the period to which it is being compared.

          Although we present our financial statements in U.S. dollars, our functional currency is the real.  The devaluation has had the following additional effects on our results of operations:

• the translation effects of our U.S. dollar transactions (cash, cash equivalents, held-to-maturity investments, loans and the unrealized gains and losses from cross-currency interest rate swap contracts, among others) are recorded in our statements of income.  In 2003, we recorded a US$14 million net foreign exchange loss.  In 2004, we recorded a net foreign exchange gain of US$12 million.  In 2005, we recorded a net foreign exchange loss of US$5 million.

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• our non-monetary assets, primarily inventories and property, plant and equipment, are translated to U.S. dollars at the period-end exchange rates.  Any depreciation of the real against the U.S. dollar will be reflected as a charge directly to shareholders’ equity, including the decrease in book value of property, plant and equipment in reais when translated to U.S. dollars.  These currency translation effects are beyond our management’s control.  Accordingly, in our statement of changes in shareholders’ equity for 2003, we recorded a translation gain of US$206 million directly to shareholder’s equity, without affecting net income, reflecting the 22% appreciation of the real against the U.S. dollar.  In 2004, we recorded a translation gain of US$114 million to reflect the 9% appreciation of the real against the U.S. dollar.  In 2005, we recorded a translation gain of US$180 million to reflect the 13% appreciation of the real against U.S. dollar.

          Additionally, inflation and exchange rate variations have had, and may continue to have, effects on our financial condition and results of operations.  One significant effect of inflation and exchange rate variations on us concerns our costs and operating expenses.  Our cash costs (i.e., costs other than depreciation and depletion) and operating expenses are substantially all in reais and tend to increase with Brazilian inflation because our suppliers and service providers generally increase prices to reflect Brazilian inflation.  As expressed in U.S. dollars, however, these increases are typically offset at least in part by the effect of the appreciation of the U.S. dollar against the real.  If the rate of Brazilian inflation increases more rapidly than the rate of appreciation of the U.S. dollar, then, as expressed in U.S. dollars, our costs and operating expenses may increase, and (assuming constant U.S. dollar sales prices) our profit margins decrease.  If the rate of appreciation of the U.S. dollar exceeds the rate of Brazilian inflation, then, as expressed in U.S. dollars, our costs and operating expenses may decrease and (assuming constant U.S. dollar sales prices) our profit margins increase.

          The exchange rate variations have had the following additional effects on our results of operations:

• The 22% appreciation of the real in 2003 caused our production costs to increase when expressed in U.S. dollars.  However, although the exchange rate at December 31, 2003 reflected an appreciation of the real against the U.S. dollar when compared to December 31, 2002, the average exchange rate for 2003 when compared to 2002 presented a devaluation of the real against the U.S. dollar.  This had a positive impact on our export margins as most of our operating costs are denominated in reais.  Exports represented 46% of our total net revenues in 2003.

• In 2004, the Brazilian currency appreciated 9% in relation to the U.S. dollar, causing a increase in our production costs when expressed in U.S. dollars and also negatively impacted our exports, which represented 49% of our total net revenues in that year.

• In 2005, the Brazilian currency appreciated a further 13% in relation to the U.S. dollar, causing an additional increase in our production costs when expressed in U.S. dollars and also negatively impacted our exports, which represented 50% of our total net revenues in that year.

• Because the price of pulp in Brazil traditionally has followed the international price of pulp in U.S. dollars, the price in reais increases for sales to the domestic market when the real devalues against the U.S. dollar, and decreases when the real appreciates against the U.S. dollar, reducing revenues.

• Because our costs and operating expenses are generally in reais, the devaluation had the effect of decreasing these costs when reported in U.S. dollars in 2001 and 2002, while in 2003, 2004 and in 2005 the appreciation of the real resulted in the increase of these costs when reported in U.S. dollars.

          The devaluation of the real impacts the amount of dividends or interest on equity available for distribution to our shareholders when measured in U.S. dollars.  Amounts of dividends or interest on equity reported as available for distribution in our statutory accounting records prepared under Brazilian GAAP will decrease or increase when measured in U.S. dollars as the real depreciates or appreciates, respectively, against the U.S. dollar.  In addition, the devaluation of the real creates foreign exchange gains and losses, which are included in the results of operations determined under Brazilian GAAP and which affect the amount of unappropriated earnings available for distribution.  In 2005 on a consolidated basis, we and our subsidiaries recorded under Brazilian GAAP foreign exchange and monetary gains (including gains from foreign currency swaps) of R$ 327 million (equivalent to US$ 140 million) compared to gains of R$ 190 million (equivalent to US$ 65 million) in 2004 and gains of R$ 25 million in 2003 (equivalent to US$ 9 million).  On December 3, 2003 we changed our dividend policy.  For further information on the new policy, see “—Dividend Policy.”

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          We have entered into financial instruments to mitigate the effects of foreign exchange variations on our U.S. dollar-denominated debt.  We believe entering into these financial instruments partially protected our net assets from the significant devaluations of the real in 1999 and 2002.  We entered into cross-currency interest rate swap contracts to offset losses generated by our U.S. dollar-denominated loans.  These contracts have protected us from the significant losses that would otherwise have been charged to income at the time of the devaluation.  Although our debt totaled US$ 1,042.4 million at December 31, 2002 (94% of which was U.S. dollar-denominated), we recorded a net foreign exchange loss of US$ 11 million in 2002 (1%) while the real devalued by 34%.  In 2003, we recorded a net foreign exchange loss of US$ 14 million, which mainly resulted from exchange rate transactions.  In 2004, we recorded a net foreign exchange gain of US$ 12 million.  In 2005, we recorded a net foreign exchange loss of US$ 5 million.  See “—Liquidity and Capital Resources—Capital Expenditures.”

          Effects of International Crises on the Brazilian Economy.  International crises have adversely impacted the Brazilian economy from time to time.  For example, the 1997 Asian crisis and the 1998 Russian crisis contributed to the need for the Central Bank to devalue the real in the beginning of 1999.  In 2000, Brazilian financial markets were negatively affected by volatility on the U.S. Nasdaq markets and the decline in value in the technology sector.  In 2001, the Brazilian economy was negatively affected by the country’s energy crisis, the Argentine political and economic crisis and the terrorist attacks in the United States on September 11, 2001.  In 2002, the Brazilian economy was negatively affected by uncertainties caused by the country’s elections, the political and economic uncertainties in other emerging markets and the threat of war in Iraq.  In 2003, due to the macroeconomic situation and political and economic measures of the new Brazilian government, the financial market has been more confident in Brazil’s economic performance, reflected by a considerable decline in Brazil’s sovereign risk and the appreciation of real against the U.S. dollar.  In 2004, Brazil’s economic and political environment was more stable than in 2003, which lead to significant increase in the country’s GDP and a positive impact in the financial market.  The appreciation of the euro against the U.S. dollar also benefited Brazilian paper producers in the European printing and writing paper markets.  In 2005, although Brazil’s economic growth was not strong, we faced a stable global economic environment and surplus of external accounts, which led to a positive impact in the financial market, reducing the country’s sovereign risk and strengthening the real against the U.S. dollar. 

A.     Operating Results

Recent Developments - First Quarter 2006 Results

          On April 13, 2006, we announced our unaudited interim financial results for the first quarter of 2006.   Paper sales in the domestic market were 8% higher than the same period of 2005.  Export volumes of paper also increased 8% when compared to the first quarter of 2005, while total pulp sales increased 9%, due to higher production volumes. Shut-downs of pulp and paper mills worldwide were greater than expected, which caused an increase in international prices of these products.  

          Net revenue increased 20%, while sales volumes increased 9% when compared to the same period in 2005 due to a 12% increase in exports and a 3% increase in sales in the domestic market.  Overall we sold 380,000 tons, a record for a first quarter of the year.  The percentage of revenues from the paper business increased to 61% from 59% of total sales year-on-year, and the revenues from the pulp business were accordingly 39%, down from 41% in the first quarter of 2005.  This change was mainly due to higher paper prices, also positively affected by the appreciation of the real. 

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          Net income was US$ 92 million in the first quarter of 2006, compared to US$ 61 million in the same period in 2005.  Our results improved principally because of fixed and variable cost savings in our operations, despite the strengthening of the local currency.

          Capital expenditures were US$ 62 million in the first quarter of 2005, of which US$ 29 million was invested in forestry (land acquisition, planting and forest maintenance), compared to US$ 36 million in the same period in 2005, of which US$ 20 million were invested in forestry (land acquisition, planting and forest maintenance).

          Given the potentially lengthy period of time needed to reach a favorable judicial outcome and the fact that the synergies generated by the acquisition of Ripasa were not being fully taken advantage of, on April 26, 2006, VCP and Suzano, aiming to remove the judicial barriers and implement the Ripasa restructuring plan, entered into an agreement with a group of Ripasa’s preferred shareholders, representing all the shareholders who questioned the operation.  Once the terms of the agreement are implemented and the restructuring is concluded, Ripasa’s minority shareholders will receive shares of VCP and Suzano plus a complementary amount in cash equivalent to R$ 1.0538 for each Ripasa preferred share in their possession on the date of registration.  See “Item 4--Competition” for more details about the Ripasa transaction.

Results of operations

          The following table sets forth certain items derived from our statements of income for the periods indicated:

	Year ended December 31,
	2005			2004			2003
	(US$ in millions)
Net sales	US$	1,130		US$	1,010		US$	816
Cost of sales		(654	)		(518	)		(421	)
Gross profit		476			492			395
Selling and marketing expenses		(138	)		(121	)		(82	)
General and administrative expenses		(55	)		(40	)		(33	)
Other operating expenses, net		(36	)		(6	)		(12	)
Operating profit	US$	247		US$	325		US$	268

          The following table sets forth certain items derived from our statements of income as a percentage of net sales for the years indicated (certain totals may not add due to rounding):

	Year ended December 31,
	2005			2004			2003
Net sales		100	%		100	%		100	%
Cost of sales		(58	)		(51	)		(52	)
Gross margin		42			49			48
Selling and marketing expenses		(12	)		(12	)		(10	)
General and administrative expenses and other operating expense, net		(8	)		(5	)		(4	)
Operating profit		22			32			33
Financial income		7			4			8
Financial expenses		(11	)		(7	)		(9	)
Foreign exchange gains (losses) and unrealized gains (losses) on swap, net		—			1			(2	)
Income tax benefit (expenses)		1			(4	)		(3	)
Equity in earnings of affiliates		5			3			2
Net income		23	%		30	%		30	%

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          We operate in two business segments:  pulp and paper, which together account for 100% of our sales.  The following table sets forth, by reportable segment, our net sales as determined in accordance with U.S. GAAP:

	Year ended December 31,
	2005		2004		2003
Pulp:
Volumes (in tons)
Domestic		80,007		80,068		76,952
Export		786,944		764,363		529,948
Total		866,951		844,431		606,900
Average prices (U.S. dollars per ton)
Domestic	US$	464	US$	423	US$	440
Export		511		462		456
Net sales (in thousands of US$)
Domestic		37,107		33,866		33,826
Export		402,372		353,143		241,607
Total	US$	439,479	US$	387,009	US$	275,433
Paper:
Volumes (in tons)
Domestic
Uncoated printing and writing		207,919		224,778		206,499
Coated printing and writing		123,515		113,397		106,525
Chemical / Special		94,434		96,944		86,866
Export
Uncoated printing and writing		179,563		166,163		163,902
Coated printing and writing		19,861		13,275		3,761
Chemical / Special		284		91		550
Total		625,576		614,648		568,103
Average prices (in US$per ton)
Domestic		1,238		1,098		1,022
Export		818		808		783
Net sales (in thousands of US$)
Domestic	US$	527,386	US$	477,767	US$	408,548
Export		163,392		145,054		131,765
Total	US$	690,778	US$	622,821	US$	540,313
Combined:
Volumes (in tons)
Domestic		505,875		515,187		476,842
Export		986,652		943,892		698,161
Total		1,492,527		1,459,079		1,175,003
Average prices (in US$per ton)
Domestic	US$	1,116	US$	993	US$	928
Export		573		528		535
Net sales (in thousands of US$)
Domestic		564,493		511,633		442,374
Export		565,764		498,197		373,372
Total	US$	1,130,257	US$	1,009,830	US$	815,746

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Year ended December 31, 2005 compared to year ended December 31, 2004

          Introduction

          The average exchange rate for 2005 was R$ 2.44 to US$ 1.00 compared to R$ 2.93 to US$ 1.00 for 2004.  In 2005, we faced favorable market conditions for pulp because of non-recurring factors, such as a hurricane in Sweden, an environment-related shutdown in Chile and a strike in Finland combined with continuous global demand.  These factors led to increasing international pulp prices, driven by low inventories.  On the paper side, we have seen a weak domestic market and had to increase our exports even in a low exchange rate scenario combined with low international prices. 

          Net sales

          Net sales increased by 12% to US$ 1,130 million in 2005 from US$ 1,010 million in 2004, with an increase in both sales and prices of all products, especially in the export market.  This increase was primarily attributable to higher efficiency in production of both pulp and paper reflecting in higher sales volume.  Sales volume increased by 2% to 1,492,527 tons in 2005 from 1,459,079 tons in 2004.  Approximately 50% of our net sales in 2005 were made in the domestic market compared to 51% in the same period in 2004.  This reduction is due to an increase of PIS/COFINS tax (from 3.65% on revenues to 9.25% on revenues net costs and expenses, on a value added basis) for sales in the local market, thus decreasing our net domestic revenues.  This effect was partially offset by higher prices in local sales.  Our revenue mix in 2005 was 61% for paper and 39% for pulp compared to 62% and 38%, respectively, in 2004.

          Pulp.  In the pulp segment, sales volume increased by 3% to 866,951 tons in 2005 from 844,431 tons in 2004.  The increase in volume was due to greater market pulp production as a result of higher efficiency at the Jacareí mill and also due to good market conditions.  Net sales attributable to pulp increased by 13% to US$ 439 million in 2005 from US$ 387 million in 2004.  This increase was due to the additional production volume and to the 11% higher average prices of pulp in the international market.  Pulp exports constituted 92% and 91% of revenues and sales volume, respectively, of pulp in 2005 compared to 91% in the same period in 2004, for both revenues and sales volume.

          In the domestic market, the volume of pulp sold remained stable in 2005 (80,000 tons) compared to the same period in 2004.  Revenues from domestic pulp sales as a percentage of total pulp net revenues increased by 9% in 2005 to US$ 37 million from US$ 34 million in 2004.  This increase was mainly due to higher domestic prices in U.S. dollars in the local market, the prices of which follow international markets.

          Paper.  In the paper segment, total volumes increased by 2%, driven by higher export volumes that grew 11%.  Domestic sales volumes decreased by 2% in 2005 compared to 2004, mainly due to lower market demand primarily of uncoated printing and writing papers, which was affected by a reduced demand from educational programs and lower exports from notebook producers.  Net sales attributable to paper increased by 11% to US$ 691 million in 2005, from US$ 623 million in 2004, mainly due to a 9% increase in the average price of paper.  The domestic market accounted for 76% of paper revenues in 2005 compared to 77% in 2004, also affected by the PIS/COFINS tax increase.

          In 2005, we increased export volumes in order to offset the lower demand in the local markets for uncoated papers.  In 2005, domestic prices in reais decreased by only 1% compared to 2004. When we exclude the negative effect of PIS/COFINS tax increase, domestic sales attributable to coated papers increased 20% in US dollar terms and 9% in volume.  The increase of coated and special paper exports reflected higher demand  from the  Mercosur market..

          Cost of sales

          Cost of sales increased by 26% to US$ 654 million in 2005 from US$ 518 million in 2004.  This increase was mostly due to the negative impact of a stronger real on our costs denominated in reais, increases in cost of some specific raw materials, labor and oil and higher production volumes.  These variations were partially offset by productivity gains and some cost savings.  The increase in labor costs was due to wage increases under our collective bargaining agreements negotiated in October 2004 and October 2005.  For the same reasons, the cost per unit sold increased by 23% in 2005 as compared to 2004. 

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          Our gross margin decreased to 42% in 2005 compared to 49% in 2004 mainly due to the increase in the cost per unit sold, partially offset by higher average prices.

          Selling and marketing expenses

          Sales expenses increased by 14% to US$ 138 million in 2005, equivalent to 12% of net revenue, compared to US$ 121 million in 2004, also equivalent to 12% of net revenue.  This increase resulted mainly from higher volumes of exported products and an increase in our selling expenses denominated in local currency, negatively affected by the appreciation of the real.

          General and administrative expenses

          General and administrative expenses increased by 38% to US$ 55 million in 2005 from US$ 40 million in 2004.  The increase was mainly attributable to the negative effect of the appreciation of the real on our expenses denominated in local currency, in addition to increases in wages and third-party contracts.  As a percentage of net sales, general and administrative expenses increased from 4% in 2004 to 5% in 2005.

          Operating profit

          Operating profit decreased by 24% to US$ 247 million in 2005 from US$ 325 million in 2004.  This decrease was primarily due to higher production costs in U.S. dollars and higher sales, general and administrative expenses, partially offset by higher average prices, productivity gains and cost reductions. 

          Pulp (including intersegment transactions at market values).  Operating profit attributable to pulp decreased by 18% to US$ 147 million in 2005 from US$ 180 million in 2004.  This decrease was primarily due to higher production costs in U.S. dollars, partially offset by an 11% increase in pulp average price and 3% higher volumes.

          Paper (including intersegment transactions at market values).  Operating profit attributable to paper decreased by 31% to US$ 100 million in 2005 from US$ 145 million in 2004.  This decrease was primarily due to higher production costs in U.S. dollars, partially offset by a 9% increase in the average price of paper average and 2% higher volumes.

          Financial income

          Financial income increased by 98% to US$ 79 million in 2005 from US$ 40 million in 2004.  The increase is primarily due to treasury operations and the positive effect of the appreciation of the real on loans denominated in foreign currency.  We use derivative instruments to mitigate the effects of volatility of interest rates on U.S. dollar-denominated borrowings (principally export credits) and local interest rates available on real-denominated investments and recorded an increased gain in 2005 on these transactions compared with 2004.  The amount we earned from these transactions was recorded as financial income.

          Financial expenses

          Financial expenses increased to US$ 119 million in 2005 from US$ 69 million in 2004.  The increase was primarily due to higher indebtedness derived from the funds raised for the acquisition of Ripasa and higher international interest rates (principally LIBOR).  The increase was partially offset by new loans with lower spread over LIBOR.

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          Foreign exchange gains (losses) and unrealized gains (losses) on swap, net

          Foreign exchange losses amounted US$ 5 million in 2005 from gains of US$ 12 million in 2004.  This result was primarily due to the appreciation of the real against the U.S. dollar and the fair-value adjustments on swap contracts.  The gains (losses) recorded on foreign-currency based transactions, which are mainly U.S. dollar-denominated debt or gains (losses) from cross-currency interest rate swap contracts, are translated to U.S. dollars and reported in our statement of income.

          Income tax expense

          In 2005, we recorded an income tax benefit of US$ 8 million compared to an income tax expense of US$ 36 million in 2004.  The effective tax rate decreased from 12% in 2004 to (4)% in 2005.  This decrease primarily arose from the deductibility of a charge for interest attributed to capital (a tax deductible distribution similar to a dividend) and difference in foreign income tax rates.   

          Equity in earnings of affiliates

          The equity in earnings of affiliates increased to US$ 54 million in 2005 from US$ 31 million in 2004.  This increase was primarily due to higher results on our investments in Aracruz Celulose S.A. and the acquisition of 23% stake in Ripasa Celulose e Papel S.A. on March 31, 2005.

          Net income

          As a result of the foregoing, net income decreased by 13% to US$ 264 million in 2005 compared to US$ 303 million in 2004.

Year ended December 31, 2004 compared to year ended December 31, 2003

          Introduction

          The average exchange rate for 2004 was R$ 2.93 to US$ 1.00 compared to R$ 3.08 to US$ 1.00 for 2003.  In 2004, favorable market conditions, such as the growth of the economy in the United States, Europe and other major economies, combined with an increasing Brazilian market that resulted in higher domestic sales volume and a more stable foreign exchange rate.  These factors coincided with a recovery in international pulp prices, driven by low inventories.  Due to these favorable conditions, we were able to improve our presence in the domestic market and to supply our long-term international customers. 

          Net sales

          Net sales increased by 24% to US$ 1,010 million in 2004 from US$ 816 million in the same period in 2003 with an increase in both sales and prices of all products, especially in the export market.  This increase was primarily attributable to higher production of pulp due to the full capacity operation of the Jacareí mill.  Sales volume increased by 24% to 1,459,079 tons in 2004 from 1,175,003 tons in the same period in 2003.  Approximately 51% of our net sales in 2004 were made in the domestic market compared to 54% in the same period in 2003.  Our revenue mix in 2004 was 62% paper and 38% pulp compared to 66% and 34%, respectively, in the same period in 2003.

          Pulp.  In the pulp segment, sale volumes increased by 39% to 844,431 tons in 2004 from 606,900 tons in 2003.  The increase in volume was due to increased market pulp production as a result of the use of full production capacity with the end of the learning curve at the Jacareí project and also due to good market conditions.  Net sales attributable to pulp increased by 41% to US$ 387 million in 2004 from US$ 275 million in 2003.  This increase was due to the additional production volume and to the 1% higher average prices of pulp in the international market.  Pulp exports constituted 91% of revenues and sales volume, respectively, of pulp in 2004 compared to 88% in the same period in 2003, for both revenues and sales volume.

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          In the domestic market, the volume of pulp sold remained stable in 2004 (80,000 tons) compared to 2003.  Revenues from domestic pulp sales as a percentage of total pulp net revenues decreased to 9% in 2004 from 12% in 2003.  This decrease was mainly due to a higher demand in the international markets.

          Paper.  In the paper segment, domestic sales volumes increased by 9% in 2004 compared to the same period in 2003, mainly due to better market demand, primarily of coated and uncoated printing and writing papers.  Net sales attributable to paper increased by 15% to US$ 623 million in 2004 from US$ 540 million in 2003, mainly due to a 6% increase in the average price of paper.  The domestic market accounted for 77% of paper revenues in 2004 compared to 76% in 2003.

          In 2004, we focused in the domestic market in order to take advantage of the better demand given the local economic growth.  In 2004, domestic prices in reais increased by 1% compared to the same period in 2003.  Net sales attributable to cut size paper increased 24% in volume.  However, prices decreased 5% due to competition in this segment.  The increase of coated and special paper exports resulted from a higher sales participation on Mercosur.

          Cost of sales

          Cost of sales increased by 23% to US$ 518 million in 2004 from US$ 421 million in the same period in 2003.  This increase was mostly due to higher costs of wood, labor and raw materials, in addition to the negative impact of a lower exchange rate on our costs denominated in reais.  The increase in the cost of wood was due to the greater distance from the forests to our mills, increased purchases of wood from third parties and, to a lesser extent, to the higher costs of transportation as a result of higher fuel costs.  The increase in labor costs was due to wage increases under our collective bargaining agreements negotiated in October 2003 and October 2004.  The cost per unit sold decreased by 1% in 2004 as compared to the same period in 2003.  This decrease was due to an increase of pulp in the mix of products (with a lower unit cost of production) and productivity gains, which fully offset the higher costs mentioned above.

           Our gross margin increased to 49% in 2004 compared to 48% in 2003 mainly due to the increase in the sale prices in the domestic market and lower cost per unit sold.

          Selling and marketing expenses

          Sales expenses increased by 48% to US$ 121 million in 2004, equivalent to 12% of net revenues, compared to US$ 82 million in 2003.  This increase resulted mainly from higher volumes of exported products, resulting in higher international freight and other costs related to exports.

          General and administrative expenses

          General and administrative expenses increased by 21% to US$ 40 million in 2004 from US$ 33 million in 2003.  The increase was attributable to higher wages and third-party contracts.  Expenses were significantly impacted by the effect of a lower exchange rate since most of our expenses were denominated in reais.  As a percentage of net sales, general and administrative expenses remained stable at 4% in 2004.

          Operating profit

          Operating profit increased by 21% to US$ 325 million in 2004 from US$ 268 million in 2003.  This increase was primarily due to higher average prices, higher volumes of exported products and lower cost per unit, partially offset by higher sales, general and administrative expenses. 

          Pulp (including intersegment transactions at market values).  Operating profit attributable to pulp increased by 28% to US$ 180 million in 2004 from US$ 140 million in 2003.  This increase was primarily due to a 1% increase in pulp sale prices, a 39% increase in volumes and productivity gains.

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          Paper (including intersegment transactions at market values).  Operating profit attributable to paper increased by 13% to US$ 145 million in 2004 from US$ 128 million in 2003.  This increase was primarily due to a 7% increase in paper sale prices in U.S. dollars, and an 8% increase in volumes. 

          Financial income

          Financial income decreased by 38% to US$ 40 million in 2004 from US$ 65 million in 2003.  The decrease is primarily due to a provision for COFINS tax on financial income, which had not been recorded in 2003.  We use derivative instruments to mitigate the effects of volatility of interest rates on dollar-denominated borrowings (principally export credits) and local interest rates available on real-denominated investments and recorded an increased gain in 2004 on these transactions compared with 2003.  The amount we earned from these transactions was recorded as financial income.

          Financial expenses

          Financial expenses decreased to US$ 69 million in 2004 from US$ 71 million in 2003.  The decrease was primarily due to the renegotiation of the pre-payment and the extension of the duration of debt from 2 to 3.49 years. 

          Foreign exchange gains (losses) and unrealized gains (losses) on swap, net

          Foreign exchange gains amounted US$ 12 million in 2004 from losses of US$ 14 million in  2003.  This result was primarily due to the appreciation of the real against the U.S. dollar and the fair-value adjustments on swap contracts.  The gains recorded on foreign-currency based transactions, which are mainly U.S. dollar-denominated debt or gains from cross-currency interest rate swap contracts, are translated to U.S. dollars and reported in our statement of income.

          Income tax expense

          In 2004, we recorded an income tax expense of US$ 36 million compared to an income tax expense of US$ 23 million in 2003.  The effective tax rate increased from 9% in 2003 to 12% in 2004.  This increase primarily arose from the tax on the interest on equity distributed by Aracruz and the tax on the mark-to-market gains from the cross-currency interest rate swaps contracts.  

          Equity in earnings of affiliates

          The equity in earnings of affiliates increased to US$ 31 million in 2004 from US$ 19 million in 2003.  This increase was primarily due to higher results on our investments in Aracruz Celulose S.A.

          Net income

          As a result of the foregoing, net income increased by 24% to US$ 303 million in 2004 compared to US$ 244 million in the same period in 2003.

B.     Liquidity and Capital Resources

Liquidity

          Our principal sources of liquidity have historically been represented by cash generated from operations and short-term and long-term borrowings.  We believe these sources will continue to be adequate to meet our currently anticipated use of funds, which include working capital, investment in capital expenditures, debt repayment and dividend payments.

          We have historically made capital investments in order to, among other things, increase our production and modernize our facilities.  We also review acquisition and investment opportunities.  We may fund these investments through internally generated funds, the issuance of debt or equity or a combination of these methods. 

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          At December 31, 2005, our cash and cash equivalents (which exclude investments held to maturity, available for sale securities and unrealized gains from swaps) increased to US$ 261 million primarily due to the cash generated in our operation and the increase in long-term loans.  These sources were partially offset by the payment for the acquisition of a 23% stake in Ripasa, capital investments made, particularly in forestry assets, as well as the increase in working capital due to higher level of sales in 2005. Cash and cash equivalents of US$ 151 million in 2004 was reduced primarily due to the payment of interim dividends, capital investments made as well as the increase in working capital. 

          At December 31, 2005, we had approximately US$ 576 million (of a total of US$ 707 million) in deposits and investments with our affiliate, Banco Votorantim S.A., and US$ 54 million (of a total of US$ 77 million) in unrealized loss from cross-currency interest rate swap contracts with Banco Votorantim S.A. See “Item 7—Major Shareholders and Related Party Transactions—Related Party Transactions” and note 12 to our financial statements.

          At December 31, 2004, our cash, cash equivalents and held-to-maturity investments (current portion) were US$ 220 million, of which US$ 213 million were denominated in U.S. dollars and the remainder in reais.  At December 31, 2005, our cash, cash equivalents and available for sale securities (current portion) were US$ 707 million, of which US$ 155 million were denominated in U.S. dollars and the remainder in reais.

          At December 31, 2004, our balance sheet presented a working capital balance of US$ 114 million.  At December 31, 2005, our balance sheet presented a working capital balance of US$ 719 million.  We do not expect to have any difficulty in meeting our short-term obligations.

          Sources of funds

          Operating activities provided net cash flows of US$ 223 million in 2005 compared to US$ 255 million in 2004 and US$ 238 million in 2003. 

          Financing activities, which include short-term and long-term secured and unsecured borrowings and debt repayments, generated net cash flows of US$ 505 million in 2005, compared to negative net cash flows of US$ 258 million generated in 2004 and net cash flows of US$ 39 million in 2003. 

          At December 31, 2003, our debt was US$ 1,146 million (of which US$ 479 million had short-term maturities) representing an increase of US$ 107 million over the debt recorded at December 31, 2002.  At December 31, 2004 our debt was US$ 945 million.  The long-term position amounted to 60% in 2004 compared to 58% in 2003.  Approximately 83% of the debt was denominated in foreign currencies.  At December 31, 2004, we had net debt (total long- and short-term financing less cash position and held-to-maturity investments) of US$ 469 million compared to net debt of US$ 502 million at December 31, 2003, as a result of strong cash generation during the period partially offset by disbursements for the expansion of the plant.

          At December 31, 2005 our debt was US$ 1,496 million.  The long-term position amounted to 86% in 2005 compared to 60% in 2004.  Approximately 88% of the debt was denominated in foreign currencies.  At December 31, 2005, we had net debt (total long- and short-term financing less cash position and held-to-maturity or available for sale investments) of US$ 866 million compared to net debt of US$ 469 million at December 31, 2004, as a result of the payment for the acquisition of a 23% stake in Ripasa, capital investments made, particularly in forestry assets, as well as the increase in working capital.  These investments were partially offset by the cash generation during the period. 

          In 2003 and 2004, we continued to try to maintain a low exposure to U.S. dollar liabilities.  At December 31, 2003, our net exposure to U.S. dollar liabilities was a negative amount of US$ 47 million.  At December 31, 2004, our net exposure to U.S. dollar liabilities was US$ 8 million, which means that our assets in foreign currency were lower than our liabilities because we were underhedged.  In 2005, taking advantage of the decreasing Brazil’s Sovereign Risk and exchange rate, we changed our hedge policy and increase our exposure limit to foreign currency liabilities up to 10 months of exports.  At December 31, 2005, our net exposure to U.S. dollar liabilities was US$ 273 million.

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Uses of funds

          Investing activities, including production capacity increases in Jacareí and Luiz Antônio mills, the development of forestry assets (land acquisition, planting and forest maintenance) and other capital expenditures consumed net cash flows of US$ 97 million in 2003, US$ 148 million in 2004 and US$ 615 million in 2005.  The increase in 2005 is mainly explained by the acquisition of a 23% stake in Ripasa (US$ 275 million) and the purchase of available for sale securities (US$ 110 million).

          Our significant uses of cash included the repayment of our debt totaling US$ 428 million in 2003 and US$ 588 million in 2004.  In 2005, repayment of debt totaled US$ 363 million.

Debt

           At December 31, 2005, our total debt was US$ 1,496 million, consisting of US$ 211 million in short-term debt (14% of total debt), including the current portion of long-term debt and represented an increase of US$ 551 million on the debt recorded at December 31, 2004.  At December 31, 2004, our total debt was US$ 945 million, consisting of US$ 376 million in short-term debt (40% of total debt), including the current portion of long-term debt and represented a decrease of US$ 201 million on the debt recorded at December 31, 2003. 

          Most of our U.S. dollar-denominated borrowings are either advances made in respect of our export sales or international bank loans, which have lower interest rates compared to domestic financings.  For our expansion projects, we also use long-term financing in reais from BNDES.  At December 31, 2005, our total long-term financing with BNDES was US$ 185 million, US$ 26 million higher than the amount at December 31, 2004.

          In October 2001, Newark Financial Inc., or Newark, a wholly owned subsidiary of VCP Exportadora e Participações S.A., or VCP Exportadora, our wholly owned subsidiary, received a bridge financing for US$ 370 million to finance the acquisition of our stake in Aracruz.  On May 23, 2002, VCP Trading and VCP North America entered into a US$ 380 million credit agreement with ABN Amro Bank N.V., as administrative agent, The Bank of New York, as collateral agent, and a syndicate of banks, with an original maturity in May 2005.  All of the proceeds from the credit agreement were advanced to Newark (US$ 304 million by VCP Trading and US$ 76 million by VCP North America) as a prepayment trade financing between Newark, VCP Trading and VCP North America.  Newark used the proceeds from these advances to pay in full the 2001 bridge financing and to make certain payments in connection with the credit agreement.  The obligations of VCP Trading and VCP North America under the credit agreement were guaranteed directly or indirectly by Newark, VCP Exportadora and us.  As a guarantor under this credit agreement, we were subject to a number of material covenants including, among others: limitations on our ability to incur debt; limitations on the existence of liens on our properties; limitations on transactions with related parties, which generally must be on terms no less favorable than those that could be obtained in a comparable arm’s-length transaction; and maintenance of certain financial ratios.  The loans under the credit agreement were secured by liens on certain collateral, including receivables arising under agreements entered into by Newark, VCP Trading or VCP North America with its respective customers for the sales of certain products.  The loan was fully repaid in May 2005.

          On June 25, 2003, VCP and VPAR jointly formed the Voto-Votorantim Overseas Trading Operations II Limited, based in Cayman Islands, known as Voto-Votorantim II, with the sole purpose of raising funds.  On July 28, 2003, Voto-Votorantim II issued US$ 250 million 5.75% notes due 2005, which were jointly and severally guaranteed by us, VPAR and Cimento Rio Branco S.A., also a member of the Votorantim group, with our guarantee obligation limited to 50% of the outstanding amount of the notes.  Of this amount, Voto-Votorantim II advanced US$ 125 million, which was guaranteed by VCP and VCP Exportadora, to St. Helen III and such proceeds were used to prepay, in part, the US$ 203 million loan from ABN AMRO Bank.  On July 28, 2003, the credit agreement was amended to reflect the new terms of the financing pursuant to which the new amount outstanding with ABN AMRO Bank was reduced to US$ 78 million, and as of September 2003, at a fixed rate of 4.25% per year for a period of one year and with the option to renew for another year thereafter.  The loan was fully repaid by St. Helen III to Voto-Votorantim II on June 27, 2005, with the proceeds of the notes issued by Voto-Votorantim IV described below.

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          The indentures for each issue of notes by Voto-Votorantim I and Voto-Votorantim II, respectively, contained a number of material covenants, among others:  limitations on our ability to incur debt; limitations on the existence of liens on our properties; limitations on transactions with related parties, which generally must be on terms no less favorable than those that could be obtained in a comparable arm’s-length transaction; and maintenance of certain financial ratios.

          On January 23, 2004, Voto-Votorantim Overseas Trading Operations III Limited, or Voto-Votorantim III, a Cayman Islands limited liability company and a wholly owned subsidiary of VPAR, issued US$ 300 of 7.875% Notes due 2014 in the international capital markets.  Under the terms of the indenture, we are a guarantor of the notes for an amount of up to 15% of the outstanding amount of the notes, which corresponds to the total amount received by us under the indenture.

          The indenture for the issue of notes by Voto-Votorantim III contains a number of covenants including, among others:

• limitations on our ability to incur debt;

• limitations on the existence of liens on our properties; and

• limitations on transactions with related parties, which generally must be on terms no less favorable than those that could be obtained in comparable arm’s-length transactions.

          We act as guarantor, together with other members of the Votorantim group, for up to US$ 150 million of obligations of Votorantrade N.V. under a US$ 300 million export finance agreement between VCP Exportadora and Votorantrade N.V., as borrower, dated as of November 29, 2001.  As part of an amendment executed on April 26, 2004, VCP Trading N.V. assumed half of the US$ 300 million debt that was previously held by Votorantrade N.V.  However, VCP Exportadora and VCP’s financial obligations under such agreement were not amended. This export financing matures in November 2006. 

          Our long-term debt also consists of export credits and import credits with a number of financial institutions.  The lines of credit with respect to export credits generally mature within 24 to 60 months.  Upon shipment, the export credits are associated with that specific, identifiable shipment.  The export credits are repaid with the proceeds of the export receipts from the specific shipment.  At December 31, 2005, the outstanding amount of export credits was US$ 936 million.  The export credits bear annual interest of LIBOR plus 1.49%, for an effective rate of 5.95%.  At December 31, 2005, there was no outstanding amount of import credits.  We have also entered into various pre-export agreements.  See notes 11(a) and 11(b) to our financial statements.

          On June 24, 2005 Voto-Votorantim Overseas Trading Operations IV Limited, or Voto-Votorantim IV, a wholly owned subsidiary of Votorantim Participações, issued US$ 400 million of 7.75% Notes due 2020 that were placed with investors in North America, Europe, Asia and Latin America.  VCP is a guarantor of 50% of the 7.75% Notes due 2020 and in turn received US$ 200 million of the proceeds.

          The indenture for the issue of notes by Voto-Votorantim IV contains a number of covenants including, among others:

• limitations on our ability to incur debt;

• limitations on the existence of liens on our properties; and

• limitations on transactions with related parties, which generally must be on terms no less favorable than those that could be obtained in comparable arm’s-length transactions.

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          On June 27, 2005, the US$ 200 million corresponding to VCP’s guarantee and proceeds was used to repay noteholders of Voto-Votorantim I, for half of the US$ 400 million issue that matured on June 2, 2005 and also guaranteed 50% by VCP.  The remaining US$ 200 million of Voto-Votorantim I was repaid by other members of the Votorantim group.

          As of June 28, 2005, Voto-Votorantim I and Voto-Votorantim II investors were fully repaid and VCP’s outstanding guarantees from international capital markets issues by Voto-Votanrtim III and Voto-Votorantim IV were as follows:

Primary obligor / Issue date	Obligations	Outstanding guarantee amount at December 31, 2005	Date of Expiration of guarantee	Beneficiary
Voto-Votorantim III /January 23, 2004	US$300 million notes issuance	US$      45 million	January 23, 2014	Noteholders and the trustee
Voto-Votorantim IV / June 24, 2005	US$400 million notes issuance	US$   200 million	June 24, 2020	Noteholders and the trustee
Total		US$   245 million

          Note: The guarantees provided by us are in favor of VCP only

          BNDES, the parent of BNDESPAR, one of our principal shareholders, has been an important source of debt financing.  At December 31, 2005, the BNDES loans amounted to US$ 185 million related to the capacity increase projects, all of which was in reais.  The BNDES loans are secured by liens on property, plant and equipment, and a lien on certain land, and by personal guarantees of an owner of Hejoassu, the ultimate parent of the Votorantim group.  Our loans with BNDES bear interest at 3.0% to 4.5% per annum on the principal amount and are indexed using either the Taxa de Juros de Longo Prazo, or TJLP, a nominal long-term interest rate that includes an inflation factor.  Part of the loan is indexed by the UMBNDES which is a weighted average exchange variation on a basket of currencies, predominantly U.S. dollars, held by BNDES.  At December 31, 2005, the TJLP was fixed at 9.75% per year, and during 2005 averaged 9.75% per year.  In the first quarter of 2006 the TJLP was reduced to 9% per year and in the second quarter of 2006 to 8.15% per year. 

          At December 31, 2005, the amount of our short-term debt (including current portion of our long-term debt) was US$ 211 million.  At December 31, 2005, the amount of maturities of our long-term debt excluding current portion was as follows: 

Year	Amount
	(US$ in millions)
2007		39
2008		97
2009		198
2010		501
2011 and thereafter		450
Total		1,285

          At December 31, 2005, all of our short-term debt related to trade financing was secured.  At December 31, 2005, the outstanding amount of that short-term debt was US$ 132 million, with a weighted average interest rate of 4.6%, compared to US$ 79 million at December 31, 2004, with a weighted average interest rate of 2.4%.

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Capital expenditures

          During 2005, we invested US$ 247 million in capital expenditures, representing an increase of 13% from the US$ 218 million invested in 2004, and 50% higher than the amount invested in 2003 of US$ 165 million.  Of this amount, US$ 131 million was spent on forestry assets (land acquisition, planting and forest maintenance), and the remaining US$ 116 million was invested in the expansion, modernization and sustaining of our plants. 

Commitments and contingencies

          We are subject to numerous commitments and contingencies with respect to tax, labor and other claims.  See “Item 8—Financial Information—Consolidated Statements and Other Financial Information—Legal Matters,” and note 14 to our audited consolidated financial statements and discussions on our critical accounting policies.

          The significant contractual obligations and commitments that affect our liquidity are short-term debt, long-term debt, take-or-pay contracts, leases and capital expenditures.

          At December 31, 2005, we had made provisions in the amount of US$ 172 million, for civil, labor and tax legal proceedings, in long-term liabilities, compared to US$ 104 million in 2004.  We have made judicial escrow deposits under the custodianship of a court held under our name (included in “Other assets—other” in our balance sheet) in the amount of US$ 87 million at December 31, 2005 for certain proceedings.  The position of such provisions for tax and other litigation and deposits is as follows:

	2005				2004
	Deposits		Provisions		Deposits		Provisions
Tax-related		83		157		24		93
Civil-related				4				4
Labor-related		4		11		2		7
Total	87		172		26		104

          We are one of the guarantors, together with other companies of the Votorantim group, of the US$ 300 million notes issued by Voto-Votorantim III and the US$ 400 million issued by Voto-Votorantim IV.  At December 31, 2005, we had loans outstanding totaling US$ 245 million.  For additional information on our commitments and contingencies, see “Item 7—Major Shareholders and Related Party Transactions—Related Party Transactions” and note 14 to our audited consolidated financial statements.

          The following is a summary of the guarantees provided by us in favor of other companies of the Votorantim group: 

Primary obligor	Obligations	Outstanding guarantee amount at December 31, 2005	Date of Expiration of guarantee	Beneficiary
Voto-Votorantim III	US$300 million notes issuance	US$     45 million	January 23, 2014	Noteholders and the trustee
Voto-Votorantim IV	US$400 million notes issuance	US$   200 million	June 24, 2020	Noteholders and the trustee
Total		US$  245 million

          Note: The guarantees provided by us are in favor of VCP only

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          We estimate that, for 2003, 2004 and 2005, an average of approximately 2% of our total number of regular domestic customers (approximately 22%, 21% and 22% respectively, of total domestic sales value) obtained our guarantee for their loans.  At December 31, 2003, 2004 and 2005 we had 11, 11 and 15 customers, respectively, under the vendor program with the average amount per customer based on our vendor program exposure at US$ 4million, US$ 4 million and US$ 9 million, respectively. Our vendor program exposure was US$ 51 million at December 31, 2003, US$ 71 million at December 31, 2004 and US$ 57 million at December 31, 2005.  See “Item 4—Information on VCP—Marketing and Distribution—Paper.”

Buyback programs

          We carried over 1,177,000 preferred shares bought from the 2000 buyback program up to February 2002, when we began selling these shares.  We sold 1,177,000 preferred shares in 2002 and 2003 at the weighted average selling price of R$ 25.28 per share.  The minimum price was R$ 17.35 per share and the maximum price was R$ 32.24 per share.  At December 31, 2002, treasury shares totaled 721,500 preferred shares, respectively.  From September 30, 2003, we sold most of our treasury shares and at December 31, 2003, treasury shares totaled 7,900 preferred shares.  At December 31, 2004, treasury shares totaled 157,200 preferred shares.

          On May 13, 2004, our board of directors authorized a buyback program of our shares in the open market, which, after purchase, would be held in treasury to be sold and/or cancelled.  The maximum amount of shares to be purchased was 1,716,000.  This buyback program terminated on May 13, 2005. 

          On May 17, 2005, our board of directors authorized a buyback program of our shares in the open market, which, after purchase, would be held in treasury to be sold and/or cancelled.  The maximum amount of shares to be purchased was 8,000,000, an amount below the legal limit of 10% of the total outstanding shares.  This buyback program terminated on May 16, 2006.  We have not renewed the program; however, our board of directors could authorize a new buyback program whenever they believe it is necessary.  In this last program, VCP purchased 1,050,700 shares from the market with an average price of R$ 28.21 per share or approximately US$ 13 per share.  On May 17, 2006 we held 1,081,500 shares in treasury.

          In December 2004, VCP made a reverse split in order to bring the unit value of their quotations to a more appropriate level from the market’s perspective, as well as to facilitate any transactions involving such Shares.  Previously only blocks of 1,000 shares were negotiable on the São Paulo Stock Exchange (Bovespa).  The reverse split also adjusted the ADR ratio to 1:1, i.e. one ADR is now equivalent to one preferred share.

Reverse Stock Split

          On October 18, 2004, the extraordinary general meeting approved the reverse stock split of our shares, under the terms of article 12 of Law nº 6,404/76, at the ratio of 200 shares for one share of the respective type.

          In December 2004 the reverse stock split converted our 38,322,699,553 shares, with no par value, representing our entire subscribed capital into 191,613,498 shares, of which 105,702,452 are shares of common stock and 85,911,046 are shares of preferred stock.

          Our ADSs traded at the New York Stock Exchange, within the period stipulated for the adjustment of holdings, split at the ratio of one ADS to two point five ADSs; and the ratio of the ADS changed to one ADR to one preferred share.

          For additional information on our debt, see notes 10 and 11 to our financial statements.

C.     Research and development, patents and licenses, etc. 

          During 2005, 2004 and 2003, we spent approximately US$ 1 million per year on research and development.  We direct research and development activities towards increasing eucalyptus wood and quality yields, making our production more efficient, developing new products and improving the quality of our products.  We maintain close links with various universities and private research institutes.  As an integrated producer of pulp and paper, we have sought to gain an even better understanding of the whole production process.  We attempt to identify the characteristics of both wood and pulp that are essential for the production of high quality paper.

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          Capital expenditures in research and development are integrated in all of the phases of the production process through pioneering initiatives.  Through these initiatives, we started production of whiter and better quality alkaline paper produced from 100% hardwood fiber, adopted micro-cuttings for cloning selected trees to produce rooted cuttings, and developed new products for the market.  Currently, we are the only manufacturer in Brazil of high-resolution coated papers designed for labels for inkjet printing and coated paper that is resistant to humidity.  Our research and development are aimed at satisfying market demand for quality products appropriate for specific applications.

          We participate in two eucalyptus genome projects. FORESTs, which is sponsored by the Eucalyptus Genome Consortium, a consortium of Brazilian pulp, paper and wood product companies, and FAPESP (The State of São Paulo Research Foundation).  The Eucalyptus Genome Project seeks to (i) develop the eucalyptus genetic sequence (the results of the partial sequencing already made results in 130,000 ESTs - Expressed Sequence Tags), (ii) identify the genes responsible for patterns in wood quality, drought and disease resistance and nutrient absorption, and (iii) create tools for marker assisted selection.  FORESTs, which started in May 2000, has a budget of approximately US$ 3.5 million and will take place over a period of approximately five years.  We have committed to fund approximately 30% of this amount for the project.  The consortium will own the results of the project, and we are entitled to full access to the technology resulting from the project.  The FORESTs project is in its intermediate phase.  In May 2003, Ripasa, Suzano Bahia/Sul, Duratex and us, the four companies investing in this project, began selecting researchers interested in presenting proposals for the second and last phase of the project.  The project has consumed US$ 1million, but will be finalized at the cost of US$ 3.2 million.  We cannot assure if or when we are going to have economic return on the project.

          We are participating in another project, the GENOLYPTUS Project, which recently began with the support of the Brazilian Ministry of Science and Technology.  The project involves seven universities, three Embrapa centers and 12 major forest-based companies.  The funding for the project comes from the government (70%) and the consortium of forestry companies (30%).  The focus of the GENOLYPTUS project is to generate a suite of experimental resources and genomic tools to discover, map, validate and further investigate genes of economic importance in species of eucalyptus.  The main objective of the project is to translate this knowledge to improved forest tree breeding and production technologies.  Embrapa started the second stage of Genolyptus Project in November 2004.  The program formed the world’s largest genome data bank about eucalyptus.  In June 2005, Embrapa transferred copies of the genomic data bank to the companies.  The objective is that companies develop improved genetic varieties based on this data.  The project involves investments of US$ 3 million, US$ 2 million of which was invested by the Ministry of Science and Technology.  The other US$ 1 million will be invested by the consortium.  The third stage of the project will last until 2007 with the objective of mapping the eucalyptus gene. 

          We also contribute to research activity by Allelyx, a company of the Votorantim group, which is studying the CSDV (citrus sudden death virus) in order to obtain a modified plant that would resist this virus.

D.     Trend Information

          The primary trends which influence our sales and production and inventory levels are:  the patterns and cycles of pulp purchases by paper producers, pulp and paper prices, the level of pulp inventory in the hands of pulp producers in the global market, global economic conditions and the effect of currency fluctuations.

          We continue to pursue growth opportunities to create value for our shareholders through business expansion, strong operational performance and profitability and/or technological and product improvements, always in the context of a long-term strategic focus. 

          For additional information regarding trends in our business, see “Item 4B.  Business—Our Business Strategy” and “Item 5A - Operating Results.”  For risks affecting our business, see “Item 3D - Risk Factors.”

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E.       Off-Balance Sheet Arrangements

          We participate in a number of off-balance sheet arrangements, principally relating to guarantees and take or pay contracts.  We also have a number of swap transactions that are described in “Item 11.  Quantitative and Qualitative Disclosures about Market Risk.”  All of these transactions are further described elsewhere in this annual report.

F.       Tabular Disclosure of Contractual Obligations

          The following table and discussion provide additional disclosure regarding our material contractual obligations and commercial commitments as of December 31, 2005.

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
	(in millions of U.S. dollars)
Total debt commitments (1)		1,483		198		136		699		450
Interest payable		13		13		—		—		—
Capital lease obligations (2)		48		43		5		—		—
Operating leases (3)		12		2		4		4		2
Purchase obligations (4)		418		80		132		78		128
Pension contribution		14		2		4		5		3
Total		1,988		338		281		786		583

(1)	Includes loans and financings shown in our financial statements, less interest payable.
(2)	Includes any agreements with suppliers of our assets (including for the Jacareí project).
(3)	Includes land leases and wood supply.
(4)	Includes take-or-pay contracts.

          The above table does not reflect contractual commitments discussed in “Item 5E - Off-Balance Sheet Arrangements” above.

ITEM 6.  DIRECTORS, SENIOR MANAGEMENT AND EMPLOYEES

A.  Directors and Senior Management

          We are managed by our Conselho de Administração, or board of directors, composed of at least three and at most ten members, and our Diretoria, or board of officers, composed of at least three and at most ten members (each an executive officer).  From our general shareholders’ meeting at April 20, 2005 we had a permanent Conselho Fiscal, or fiscal committee, which is composed of at least three and at most five members.

Board of Directors

          According to our by-laws, our board of directors is required to meet at least three times a year and when called by the chairman or by the majority of members of the board of directors.  Our board of directors met thirteen times during 2005 (three ordinary and ten extraordinary meetings).  Our board of directors is responsible for, among other things, establishing our general business policies and for electing our executive officers and supervising their management.  The board of executive officers meets periodically to review production, commercial and financial operations.

          According to our by-laws, the members of the board of directors are elected by the holders of our common shares at the general meeting of shareholders.  Members of the board of directors serve two-year terms.  The terms of the current members, elected at our shareholders’ general meeting on April 20, 2005, expire in 2007.

          Pursuant to Brazilian corporate law, shareholders of publicly traded companies such as us that together hold preferred shares representing at least 10% of our total share capital for at least three months are entitled to appoint one member of our board of directors as long as no multiple voting procedure has been requested.  Until 2005, the board members that may be elected by holders of preferred shares shall be chosen from a list of three names drawn up by our controlling shareholder.  The holders of our preferred shares have not yet elected any member of our board of directors.

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          Set forth below are the name, age and position of each member of our board of directors elected at our shareholders’ general meeting on April 20, 2005:

Name	Age	Position
José Roberto Ermírio de Moraes(1)	48	Chairman
Fábio Ermírio de Moraes(2)	44	Vice-Chairman
Carlos Ermírio de Moraes(3)	50	Member
Clóvis Ermírio de Moraes Scripilliti(4)	47	Member
José Luciano Duarte Penido	58	Member

(1)	José Roberto Ermírio de Moraes is the son of José Ermírio de Moraes Filho, who passed away in 2001.
(2)	Fábio Ermírio de Moraes is the son of Ermírio Pereira de Moraes, who was once a board member.  He is also the cousin of José Roberto Ermírio de Moraes.
(3)	Carlos Ermírio de Moraes is the son of Antonio Ermírio de Moraes, who was once a board member.  He is also the cousin of José Roberto Ermírio de Moraes.
(4)	Clóvis Ermírio de Moraes Scripilliti is the son of Clovis Scripilliti, who passed away in 2000.  He is also the cousin of José Roberto Ermírio de Moraes.

Board of Executive Officers

          Our executive officers are responsible for our day-to-day management.  The executive officers have individual responsibilities established by our by-laws and by the board of directors and are independent from the Ermírio de Moraes family, our ultimate controlling shareholders.  The executive officers are elected by the board of directors for one-year terms, although any executive officer may be removed by the board of directors before the expiration of his term.  The current term of all our executive officers ends on April 30, 2007.  

          Set forth below are the name, age and position of each of our executive officers elected on April 28, 2006:

Name	Age	Position
José Luciano Duarte Penido	58	President & Chief Executive Officer
Francisco Fernandes Campos Valério	58	Technical & Industrial Officer
Luiz Carlos Ganzerli	58	Human Resource & Organizational Development Officer
Sérgio Marnio Gandra Vaz	62	Paper Business Officer
Valdir Roque	55	Chief Financial Officer & Investor Relations Officer
José Maria de Arruda Mendes Filho	52	Forest Operations Officer
Antonio Sergio Pinzan de Almeida	44	Pulp Business Officer

Biographical Information

          José Roberto Ermírio de Moraes.  Mr. José Roberto Ermírio de Moraes has been the chairman of our board of directors since 1992 and was our president from 1992 to April 26, 2002. He is the Chief Executive Officer of Votorantim Industrial and member of Executive Committee of Votorantim Group, and he has a B.A. in Metallurgy Engineering from the Armando Alvares Penteado Foundation College in São Paulo, Brazil. 

          Fábio Ermírio de Moraes.  Mr. Fábio Ermírio de Moraes is a mechanical engineer and has been working for the Votorantim Group since 1985.  Chairman of the Board of Directors of Votorantim Cimentos, Director Vice-President of Votorantim Industrial and Member of the Executive Committee of Votorantim Group.

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          Carlos Ermírio de Moraes.  Mr. Carlos Ermírio de Moraes has been working for the Votorantim Group since 1983.  He is the President of the Board of Directors of CPFL (Cia. Paulista de Força e Luz) and a member of the Board of Directors of VBC Energia S/A (Votorantim, Bradesco and Camargo Energia). 

          Clóvis Ermírio de Moraes Scripilliti.  Mr. Scripilliti has served as a member of our board of directors since 2000.  He is the President of Family Council and a member of the Executive Committee of Votorantim Group.  He studied Metallurgy Engineering at Mackenzie University in São Paulo, Brazil. 

          José Luciano Duarte Penido.  Mr. Penido has served as our chief executive officer since January 5, 2004.  Prior to that, he was the president of Samarco Mineração S.A. for eleven years.  He is also the vice-president of the Minas Gerais Industry Federation, where he directs the Enterprise Citizenship Council.  He has a degree in mining engineering from the Federal University of Minas Gerais.

          Francisco Fernandes Campos Valério.  Mr. Valério joined us in January 1998.  He previously worked in senior positions at Bahia Sul, Aracruz, Suzano, Braskraft Florestal e Industrial and Olinkraft Celulose e Papel.  He holds a B.A.  in Mechanical Engineering from the Universidade Federal de Santa Catarina, Brazil. 

          Luiz Carlos Ganzerli.  Mr. Ganzerli was first elected an executive officer in February 2000.  He previously held positions in the human resources and organizational development departments at Roche Químicos e Farmacêuticos from 1999 to 2000 and Alpargatas Santista Textil S.A. from 1994 to 1999.  He holds a B.A.  in Business Administration from Mogi das Cruzes University, Brazil. 

          Sérgio Marnio Gandra Vaz.  Mr. Vaz has been our business director since 1992.  He previously held positions in the sales and marketing areas of Unilever Brasil from 1970 to 1988.  In 1988, he was the commercial director at Indústrias de Papel Simão S.A. and KSR Comércio e Indústria de Papel S.A., both bought by VCP in 1992.  He holds a B.A.  in Business Administration from FEA, the Administration and Economics College of the University of São Paulo, Brazil, and has taken specialization courses in Managing Marketing at IMD International, Switzerland and at Dynamic Global Market at the Kellogg School/Northwestern University, United States. 

          Antonio Sérgio Pinzan de Almeida.  Mr. Almeida joined the company in 1990, as a Sales Manager in the paper division. In 1996 Mr. Almeida has structured the pulp business, and has been responding for this business since the beginning of its activities. He has been working in Trading Companies and Industries for more than twenty years, always focused in the international markets and holds a B.A. in Business Administration from FASP, Brazil and Master Business Administration from FEA/USP, Universidade de São Paulo, Brazil.

          Valdir Roque.  Mr. Roque has been our chief financial officer and our Investor Relations director since 1994.  He previously worked at Monsanto do Brasil S.A. as Treasurer, and at General Electric and Ford.  He has completed postgraduate courses in Business Administration at the Getúlio Vargas Foundation in São Paulo, Brazil, holds a B.A.  in Economics from the Catholic Pontifice University in São Paulo, Brazil and has taken specialized courses in financial management at the Stanford Business School, California in the United States and IMD in Lausanne, Switzerland. 

          José Maria de Arruda Mendes Filho.  Mr. Mendes is a forest engineer and has been working for the Votorantim Group since 1982, when he started at Companhia de Cimento Portland Itaú.  He joined VCP in 1988 to develop the forest area of the company and to supply the pulp mills.  He has a degree in forest engineering from ESALQ/USP, Universidade de São Paulo, Brazil, and also a master degree from USP. He has been VCP’s forest operations’ director since August 2004.

Fiscal Committee

          Under the Brazilian Corporate Law, the Conselho Fiscal (Fiscal Committee) is a corporate body independent of management and a company’s external auditors.  In the past, a Conselho Fiscal was not typically equivalent to or comparable with a U.S. audit committee; its primary responsibility had been to monitor management’s activities, review the financial statements, and report its findings to the shareholders.  However, pursuant to an exemption under the SEC rules regarding the audit committees of listed companies, a foreign private issuer is not required to have a separate audit committee composed of independent directors if it has a board of auditors established and selected pursuant to home country legal or listing provisions expressly requiring or permitting such a board and such board meets certain requirements. 

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Pursuant to this exemption, our Conselho Fiscal exercises the required duties and responsibilities of a U.S. audit committee to the extent permissible under Brazilian Corporate Law.  To comply with the SEC rules, the board of auditors meets the following standards:  it is separate from the full board, its members are not elected by management, no executive officer is a member, and Brazilian law sets forth standards for the independence of the members.  In addition, in order to qualify for the exemption, the board of auditors, to the extent permitted by Brazilian law (as discussed further below): 

a.	is responsible for the appointment, retention, compensation and oversight of the external auditors (including the resolution of disagreements between management and the external auditors regarding financial reporting);
b.	is responsible for establishing procedures for the receipt, retention and treatment of complaints regarding accounting, internal accounting controls or auditing matters, and procedures for the confidential, anonymous submission by employees of concerns regarding questionable accounting or auditing matters;
c.	has the authority to engage independent counsel and other advisors as it determines necessary to carry out its duties; and
d.	receives appropriate funding from the company for payment of compensation to the external auditors, for any advisors and ordinary administrative expenses.

          As a foreign private issuer, we decided to modify our Conselho Fiscal to comply with the exemption requirements.  Our Board of Directors approved the delegation to the Conselho Fiscal of certain additional responsibilities and the Conselho Fiscal and the Board of Directors adopted an additional charter that delegates to the Conselho Fiscal the duties and responsibilities of a U.S. audit committee to the extent permitted under Brazilian Corporate Law.  Because Brazilian Corporate Law does not permit the Board of Directors to delegate responsibility for the appointment, retention and compensation of the external auditors and does not provide the board or the Conselho Fiscal with the authority to resolve disagreements between management and the external auditors regarding financial reporting, the Conselho Fiscal cannot fulfill these functions.  Therefore, in addition to its oversight responsibilities, the Conselho Fiscal may only make recommendations to the Board of Directors with respect to the appointment, retention and compensation of the external auditors, and with regard to resolution of disagreements between management and the external auditors, the Conselho Fiscal may only make recommendations to management and the board.

          Under the Brazilian Corporate Law, the Conselho Fiscal may not contain members who are members of the Board of Directors or the executive committee, or who are employees of VCP or the Votorantim group, or a spouse or relative of any member of our management.  In addition, the Brazilian Corporate Law requires that Conselho Fiscal members receive a remuneration at least 10% of the average amount paid to each executive officer.  The Brazilian Corporate Law requires a Conselho Fiscal to be composed of a minimum of three and a maximum of five members and their respective alternates.

          Our Conselho Fiscal is composed of three members who are elected at the annual shareholders’ meeting, with terms lasting until the next annual shareholders’ meeting after their election.  Under the Brazilian Corporate Law, holders of preferred shares have the right to elect separately one member of the Conselho Fiscal.  Also, under the Brazilian Corporate Law, minority groups of shareholders that hold at least 10% of the voting shares also have the right to elect separately one member of the Conselho Fiscal.  In any event, however, the common shareholders have the right to elect the majority of the members of the Conselho Fiscal.  Set forth below are the names, ages and positions of the members of our Conselho Fiscal and their respective alternates, as of April 28, 2006, the date of the last annual shareholders’ meeting. 

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Name	Age	Length of Term	Year First Elected	Position
João Carlos Hopp	76	one year	2001	Member
Geraldo Gianini	55	one year	2006	Alternate
Miguel Roberto Gherrize (1)	67	one year	2005	Member
Sérgio Seidiyu Yatabe	50	one year	2005	Alternate
José Carlos de Brito	67	one year	2005	Member
Antonio Arena Neto	64	one year	2005	Alternate

(1) Miguel Roberto Gherrize is the audit committee financial expert.

B.  Compensation

          According to our by-laws, our directors do not receive any compensation.  As of the year ended December 31, 2005, the aggregate compensation, including cash and benefits-in-kind, paid to our executive officers (a total of seven persons at the time) was approximately R$ 4.5 million (corresponding to US$ 1.8 million).

C.  Board Practices

          Our board of directors generally meets three times a year and when called by the chairman or by the majority of the members of the board of directors.  Our board of directors met thirteen times during 2005.  Our board of directors is responsible for, among other things, establishing our general business policies and for electing our executive officers and supervising their management.  The board of executive officers meets periodically to review production, commercial and financial operations.

          According to our by-laws, the members of the board of directors are elected by the holders of our common shares at the general meeting of shareholders.  Members of the board of directors serve two-year terms.  The terms of the current members expire on April 30, 2007.

D.  Employees

          As of December 31, 2005, we employed 3,620 persons.  We use subcontractors for many of our forestry operations and for substantially all of the transportation of wood, pulp and other raw materials.  These subcontractors employed 5,014 persons for our business as of December 31, 2005.  Approximately 85% of the workers in our forests are employed by third parties, predominantly in areas such as maintenance and security.  See “Item 4—Information on VCP—Business Overview—Raw Materials—Wood” and “Item 4—Information on VCP—Business Overview—Transportation.”  We are in compliance with all local, state and federal worker health and safety regulations.

          Several unions represent our employees and we consider the unions to be well organized.  Collective bargaining agreements relating to forest workers were renewed in 2005 and expire in November 2006.  Collective bargaining agreements relating to other employees that expired in September 2005 were renewed for another year, with the employees receiving a 7% pay increase and a R$ 700.00 advance for employees hired before September 30, 2005.  We are currently engaged in negotiations to renew the agreements for another year.  Since 1989, we have experienced four labor strikes, all of which affected the pulp and paper industry generally and lasted an average of three days.  We believe we have good relationships with our employees.

          In March 2000, we began to participate in a Votorantim group pension plan, which was made available to all of our employees.  For more detailed information, see “—Defined Contribution Pension Plan” below.

          In December 2005 we provisioned for the costs of post-retirement benefits expected to be paid to current, former or inactive employees upon retirement. For more detailed information, see “—Post-retirement Benefit Plan” below.

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Defined Contribution Pension Plan

          In March 2000 we began co-sponsoring a multi-employer defined contribution plan of the Votorantim Group which is available to all of our employees.  For employees below a certain income level we match the employee’s contribution limited to 1.5% of the employee’s compensation.  For employees above that income level we match the employee’s contribution up to 6% of the employee’s compensation.  At our option we may also make additional contributions.  Our contributions vest in varying percentages depending on the employee’s years of service and will fully vest upon the employee’s retirement, death or disability, provided the employee has at least one year of service.  Our contributions were US$ 2 million in 2005.

Profit Sharing Plan

          Pursuant to Brazilian federal law, companies operating in Brazil are required to share profits with employees beginning from fiscal year 1996.  In 1996, we instituted a profit sharing plan for our employees in addition to providing health and life insurance, transportation, meals and training.  Pursuant to the program, each employee’s share of profits is linked to our operational and financial results.  Employees are eligible to receive payment of up to one month’s salary payable in February of each year.  Part of the profit sharing payment relating to the income for that year is advanced in August.  Payment is granted if defined goals set by management are achieved by the process or industrial unit in which the employee works and based on the individual performance of the employee.  Several unions that represent our employees have agreed to this profit sharing plan.

Post-retirement Benefit Plan

          The actuarial liability relates to our proportion of the costs of a hospital facility we share with co-sponsors. Although the not-for-profit hospital is funded by multiple-employers, it has no separate assets and costs are apportioned among the sponsors based on usage.  No liability had been recorded prior to 2005.  Contributions paid to the hospital in the year ended December 31, 2005 and 2004 amounted to US$ 1 million.

          Based on the report of our independent actuary, the accumulated post-retirement benefit obligation and accrued benefit cost (no plan assets) was US$ 21 million.

	Percentage
Weighted-average assumptions as of December 31, 2005
Discount rate		8.5
Health care cost trend on covered changes		3.0
	US$
Components of net periodic benefit cost for 2006
Interest cost		2
Total net periodic benefit cost (benefit)		2

          It has been assumed, for measurement purposes, that health care cost trends for 2006 will not be considerably different from 2005.  Our actuaries are unable to project the direction and pattern of changes in the assumed trend rates, the ultimate trend rates, nor can they estimate when the rates are expected to be achieved.  A one-percentage-point change in assumed health care cost trend rates would have the following effects in 2005 (all other assumptions have been held constant):

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	One-percentage- point increase		One-percentage -point decrease
Sensitivity of retiree welfare results
On total service and interest cost components		0.3		(0.3	)
On post-retirement benefit obligation		2.0		(2.0	)

E.  Share Ownership

          As of December 31, 2005, the members of our board of directors and our officers, on an individual basis and as a group, directly own less than 1% of our preferred shares and none of our common shares.  For information on the beneficial ownership by the Ermírio de Moraes family, see “Item 7—Major Shareholders and Related Party Transactions—Major Shareholders.”  The following table lists the amount of shares held directly by each individual member of our board of directors or executive officer and their representative percentage relative to the total outstanding shares as of April 30, 2006:

	Common					Preferred
	Number of Shares		Percentage of the Total Outstanding Shares			Number of Shares			Percentage of the Total Outstanding Shares
Board of Directors
José Roberto Ermírio de Moraes		0		0	%		1			0	%
Fábio Ermírio de Moraes		0		0	%		1			0	%
Clóvis Ermírio de Moraes Scripilliti		0		0	%		1			0	%
Carlos Ermírio de Moraes		0		0	%		1			0	%
José Luciano Penido (*)		0		0	%		1(*	)		0	%
Executive Officers
José Luciano Penido(*)		0		0	%		1(*	)		0	%
Francisco Fernandes Campos Valério		0		0	%		3,000			0	%
Luiz Carlos Ganzerli		0		0	%		0			0	%
Sérgio Marnio Gandra Vaz		0		0	%		18			0	%
Valdir Roque		0		0	%		0			0	%
José Maria de Arruda Mendes Filho...		0		0	%		15			0	%
Antônio Sérgio Pinzan de Almeida...		0		0	%		0			0	%
Total		0		0	%		3,038			0	%

Source: Itaú Custódia.

(*)  Mr.  José Luciano Penido is part of both the Board of Directors and Executive Officers and he owns only 1 preferred share of VCP.

ITEM 7.  MAJOR SHAREHOLDERS AND RELATED PARTY TRANSACTIONS

A.  Major Shareholders

          The following table sets forth the principal holders of common and preferred shares and their respective shareholdings as of April 30, 2006:

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	Common					Preferred					Total
Shareholders	Shares		(%)			Shares		(%)			Shares		(%)
	(in million of shares, except percentages)
Votorantim Participações S.A.		94,022,846		88.95			3		0			94,022,849		49.07
Nova HPI Participações Ltda.		11,679,604		11.05			0		0			11,679,604		6.10
Total Votorantim group		105,702,450		100.00	%		3					105,702,453		55.17
BNDES Participações S.A.		0		0			6,576,539		7.66			6,576,539		3.43
Treasury Stock		2		0			1,081,499		1.26			1,081,501		0.56
Public (Free Float)		0		0			78,253,005		91.09			78,253,005		40.84
Total		105,702,452		100.00	%		85,911,046		100.00	%		191,613,498		100.00	%

          The ultimate beneficial owner, in each case, of more than 5% of our common shares through intermediate holdings companies is the Ermírio de Moraes family who, in the aggregate, beneficially owns 100% of our voting common shares.  The Ermírio de Moraes family does not own any of our preferred shares.  All holders of our voting common shares have the same voting rights.  Each of our directors, other than José Luciano Duarte Penido  has material beneficial interests in trust holdings.

B.  Related-Party Transactions

          We have engaged in a number of transactions with related parties. 

Distributions and Sales Outside of Brazil

          In 2002 and 2003, we sold approximately 56% and 17%, respectively, of our exports through Votorantrade, a member of the Votorantim group engaged in the sale and distribution of certain of the Votorantim group’s products, with offices in various locations throughout the world.  In 2004 and 2005, all of our exports were sold through VCP Overseas Holding KfT by VCP Trading and VCP North America.  From 2006 on, all of our exports are sold through VCP Overseas Holding KfT by VCP Overseas Holding Limited, Budapest, the Switzerland branch of our international subsidiary.

Banco Votorantim S.A.

          We have entered into a number of financial transactions with or through Banco Votorantim S.A., or Banco Votorantim, a financial institution controlled by the Votorantim group and its affiliates.  At December 31, 2005 we had approximately US$ 576 million (of a total of US$ 707 million) in deposits and available-for-sale securities with Banco Votorantim and US$ 54 million in unrealized losses from cross-currency interest rate swap contracts with Banco Votorantim. 

Votocel

          In January 2004, we entered into a service contract with Votocel pursuant to which we provide Votocel information technology and human resources services for a fee of R$ 2.4 million per year.  The term of the contract is one year, renewable annually on terms to be negotiated by Votocel and us at the time of renewal.  On May 31, 2005, we renewed this contract until December 31, 2005, adding a value of US$ 1.8 million.  We believe that this service contract is on terms that are fair and reasonable to us.  In 2005, Votorantim Group sold 100% of Votocel to a third party and since then it is not a related party any more. 

Guarantees

          At December 31, 2005, we guaranteed US$ 245 million of debt of other members of the Votorantim group which pertains to the aggregate amount of debt issued in the international capital markets.  In each case, the Outstanding guarantee amount at December 31, 2005 pertains to the amount of proceeds that were received by us and/or our subsidiaries on the issue date.  The remaining debt raised was received and also guaranteed by other members of the Votorantim group.  The US$ 245 million corresponding to VCP is made up of the following;

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Primary obligor	Obligations	Issue Date	Outstanding guarantee amount at December 31, 2005	Date of Expiration of guarantee	Beneficiary
Voto-Votorantim Overseas Trading Operations III Limited.	US$300 million notes issuance	January 23, 2004	US$     45 million	January 23, 2014	Noteholders and the trustee
Voto-Votorantim Overseas Trading Operations IV Limited.	US$400 million notes issuance	June 24, 2005	US$   200 million	June 24, 2020	Noteholders and the trustee
Total			US$   245 million

Note: The guarantees provided by us are in favor of VCP only

          Each of the primary obligors listed above are special purpose companies established with the sole purpose of issuing debt.  As such, upon maturity of the debt issued, which is also the date of expiration of the guarantee, we will either repay lenders or seek to refinance the maturing debt.

          The BNDES loans are secured by property, plant and equipment and a lien on certain land and personal guarantees of an owner of Hejoassu, our ultimate parent company.

          We believe the other companies of the Votorantim group, whose debt we guarantee, are creditworthy and we do not expect to be called on to make payments on our guarantees.  In addition, given our ability to obtain short-term financing, we do not believe that there is substantial risk of illiquidity even if we are called upon to make payments under our guarantees, individually or in the aggregate.  See “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources—Commitments and Contingencies” for a summary of the guarantees we provided in favor of other companies of the Votorantim group.  For additional information on our commitments and contingencies, see note 14 to our audited consolidated financial statements.

Leases of Forest Land

          At December 31, 2005, we leased approximately 77,700 hectares of forestland, or approximately 63% of the land devoted to our forestry operations.  Approximately 26,000 hectares of the planted area are leased from other companies of the Votorantim group (other than our subsidiaries).  The leases, most of which commenced in 1991, are typically for a term of 21 years, which covers approximately three harvest cycles.  The lease payments are equivalent to 30% of the market prices of the wood produced on the property and are payable after each harvest, based on market prices. 

BNDESPAR

          A shareholder of our preferred shares, BNDESPAR is a wholly owned subsidiary of BNDES, the Brazilian economic development bank owned by the Brazilian federal government.  We have entered into a number of financing transactions with BNDES.  At December 31, 2005, we had an aggregate of US$ 185 million in outstanding loans to BNDES denominated in reais that we borrowed to fund expansion and modernization projects.  The BNDES loans are secured by liens on land, equipment and property (including the Jacareí mill), and by personal guarantees of an owner of Hejoassu, the ultimate parent of the Votorantim group.  Our loans with BNDES bear interest at 3% per annum on the principal amount and are indexed using the TJLP, a nominal long-term interest rate that includes an inflation factor.  US$ 27 million bear an interest rate of 12.86% (the UMBNDES Index).  The UMBNDES Index is a weighted average rate based on the exchange rate of a basket of currencies, predominantly the U.S. dollar, held by BNDES.  At December 31, 2005, the TJLP was fixed at 9.75%, and during 2005 averaged 9.75% per year.  See notes 11 and 12 to our consolidated financial statements.   

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          For additional information regarding related-party transactions, see “Item 5 – Operating and Financial Review and Prospects – Liquidity and Capital Resources” and note 12 to our consolidated financial statements.

C.  Interests of Experts and Counsel

          Not applicable. 

ITEM 8.  FINANCIAL INFORMATION

          Our consolidated financial statements include the accounts of VCP and our directly and indirectly controlled subsidiaries: VCP Exportadora e Participações S.A. (“VEP”), VCP Florestal Ltda. (merged into VCP on January 1, 2005), St. Helen Holding III B.V., Normus Emprendimentos e Participações Ltda., Newark, VCP Overseas Holding KFT, VCP North America Inc. and VCP Trading N.V. (Netherlands Antilles), all of which are wholly owned.  Significant intercompany accounts and transactions have been eliminated in the consolidation.  The 12.35% owned equity investee, Aracruz Celulose S.A., in which we acquired our interest during 2001 (Note 4) and our 50-percent-owned equity investees, Voto-Votorantim Overseas Trading Operations N.V., Voto-Votorantim Overseas Trading Operations II Limited and Voto-Votorantim Overseas Trading Operations IV Limited respectively, are accounted for using the equity method. 

          On March 31, 2005, Ripasa Participações S.A. (“Ripar”), a joint venture in which we own 50%, acquired a 46.06% interest in the total capital and 77.59% interest in the voting capital of Ripasa S.A. Celulose e Papel (“Ripasa”), a Brazilian pulp and paper producer.  We account for our interest in Ripar using the equity method of accounting.

A.  Consolidated Statements and Other Financial Information

          See “Item 3—Key Information—Selected Financial Data” and “Item 18—Financial Statements.”

Legal Matters

          We are party to administrative proceedings and lawsuits that are incidental to the normal course of our business.  These include general civil, tax and employee litigation and administrative proceedings.  At December 31, 2005, we were defendants in 1,237 labor lawsuits filed by our former employees and former employees of our subcontractors and 380 civil proceedings.  We believe that we will prevail in the majority of these lawsuits, and do not consider that, if decided against us, these proceedings individually or in the aggregate will have a material adverse effect on us or on our financial condition.  At December 31, 2005, our provisions for legal proceedings were  US$ 172 million, of which US$ 157 million related to tax disputes and approximately US$ 15 million related to civil and labor proceedings.  We believe that our provisions for legal proceedings are sufficient to meet probable and reasonably estimable losses in the event of unfavorable court decisions and that the ultimate outcome of these matters will not have a material effect on our financial condition or results of operations.  We cannot estimate the amount of all potential costs that we may incur or penalties that may be imposed on us other than those amounts for which we have provisions.

          On May 22, 2002, we (along with many other Brazilian companies) received a notice from the Central Bank requesting that we provide information regarding our remittances abroad to certain exporters of equipment imported by us.  We responded to the Central Bank within the 30-day period with the information that was requested.  In spite of this, the Central Bank issued a fine in the amount of US$ 14 million.  We presented our defense to the Central Bank to refute the payment of the fine, and we succeeded in the first hearing in 2005, but this lawsuit remains subject to appeal.  We believe that our chances of success are high because we have the documents necessary to prove the transactions.

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          We have instituted a number of legal proceedings in which we are seeking a refund or contesting the imposition of certain taxes.  For example, in 1999, we filed a lawsuit challenging the 1% increase in the COFINS tax rate (from 2% to 3%), a tax on revenues.  Although we have obtained a legal injunction, based on advice from our legal counsel and reflecting rulings by the Federal Supreme Court, we accrued US$ 55 million relating to this claim, from 2002 through 2004.  In December 2005 we made a judicial deposit of US$ 55 million following an unfavorable decision of the Supreme Court.  During 2005, we recorded an additional US$ 21 million related to the 1% increase in the COFINS tax rate. 

          In addition, we are party to certain lawsuits and administrative proceedings before various courts and governmental agencies with respect to certain other tax liabilities arising in the ordinary course of our business.  We cannot assure you that we will be successful in obtaining the right to these tax credits or in contesting the imposition of these taxes. 

          For more information on our lawsuits, see note 14 to our audited consolidated financial statements.

Dividend Policy and Dividends

          General

          In order to determine the amounts available for dividend distribution, we are subject to the following procedures, established by the Brazilian corporate law.  We must allocate 5% of our annual net income, determined in accordance with the requirements of the Brazilian corporate law, to a legal reserve until the legal reserve equals 20% of our share capital as of the end of the most recent fiscal year.  However, we are not required to make any allocations to our legal reserve in respect of any fiscal year in which such reserve, when added to our other capital reserves, exceeds 30% of our capital.  The legal reserve may be used only to offset any accumulated deficit or to increase our share capital and may not be distributed.  At December 31, 2005, the legal reserve outstanding balance was R$ 175 million, equivalent to US$ 75 million at the December 31, 2005 exchange rate.

          According to the Brazilian corporate law, after allocation of any amounts to the legal reserve, we may, subject to shareholders’ approval, make allocations from the remaining balance to a contingency reserve against future losses.

          At the end of each fiscal year, all shareholders are entitled to receive a mandatory dividend, also known as the mandatory distribution.  For the mandatory distribution, we must distribute at least 25% of the net income after taxes, after deducting the accumulated losses and after deducting any amounts allocated to employee’s and management participation, and as reduced or increased, as the case may be, by the following amounts:

• the amount allocated to the legal reserve; and

• the amount allocated to the contingency reserve and any amount written off in respect of the contingency reserve accumulated in previous fiscal years.

          Under the Brazilian corporate law, the amount by which the mandatory distribution exceeds the “realized” portion of net income for any particular year may be allocated to the unrealized income reserve and the mandatory distribution may be limited to the “realized” portion of net income.  The “realized” portion of net income is the amount by which “net income” exceeds the sum of (1) our net positive results, if any, from the equity method of accounting for earnings and losses of our subsidiaries and certain affiliates, and (2) the profits, gains or income obtained on transactions maturing after the end of the following fiscal year.  As amounts allocated to the unrealized income reserve are realized in subsequent years, such amounts must be added to the dividend payment relating to the year of realization.

          The amounts available for distribution are determined on the basis of financial statements prepared in accordance with the requirements of the Brazilian corporate law.  In addition, amounts arising from tax incentive benefits or rebates are appropriated to a separate capital reserve in accordance with the Brazilian corporate law.  This investment incentive reserve is not normally available for distribution, although it can be used to absorb losses under certain circumstances, or be capitalized.  Amounts appropriated to this reserve are not available for distribution as dividends.

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          The Brazilian corporate law permits a company to pay interim dividends out of preexisting and accumulated profits for the preceding fiscal year or semester, based on financial statements approved by its shareholders.  The dividends we paid in 2005 relate to profits accounted up to December 31, 2004.

          Unappropriated retained earnings, as reported in our U.S. GAAP financial statements, represent retained earnings after appropriations specified in the Brazilian corporate law as described in the fourth paragraph under “—General.”  Unappropriated retained earnings in U.S. GAAP have no relevant impact on U.S. investors since the distributable earnings are those recorded in our books in accordance with Brazilian GAAP.  The appropriated reserve balances in the U.S. GAAP financial statements at the balance sheet dates reflect the underlying Brazilian statutory accounts translated at historical exchange rates.  The unappropriated retained earnings balance in the U.S. GAAP financial statements does not reflect amounts available for distribution.  At December 31, 2005, in our legal books prepared in accordance with Brazilian GAAP, we had unappropriated retained earnings (sum of the accounts Reserve for Accumulated Financial Results (Reserva de Resultados Acumulados) and Reserve for Retained Earnings (Reserva  de Lucros)) of R$ 1,469 million, equivalent to US$ 628 million at the exchange rate at December 31, 2005.  We had unappropriated retained earnings of US$ 461 million at December 31, 2004 and US$ 559 million at December 31, 2003 at the exchange rate at the referred dates.  Unappropriated retained earnings as reported in accordance with Brazilian GAAP may be used to make additional discretionary dividend payments, but we cannot assure you that we will make dividend payments out of these unappropriated retained earnings in the foreseeable future.  No dividend distribution can be made if an accumulated deficit is reported in accordance with Brazilian GAAP, unless the negative balance is reversed by releasing other reserves.

          The devaluation of the real impacts the amount available for distribution when measured in U.S. dollars.  Amounts reported as available for distribution in our statutory accounting records prepared under Brazilian GAAP will decrease or increase when measured in U.S. dollars as the real depreciates or appreciates, respectively, against the U.S. dollar.  In addition, the devaluation of the real creates foreign exchange gains and losses that are included in the results of operations determined under Brazilian GAAP and which affect the amount of unappropriated earnings available for distribution.  At December 31, 2005, on a consolidated basis, we and our subsidiaries recorded under Brazilian GAAP foreign exchange losses and monetary variation (including gains from foreign currency swap contracts and excluding Aracruz’s foreign exchange gain on equity) of R$ 116,999 million (equivalent to US$ 50 million at the average exchange rate for 2005).

          Mandatory distribution

          Under our by-laws, at least 25% of our adjusted net income for the preceding fiscal year must be distributed as a mandatory annual dividend.  The dividend must be distributed within 60 days of the annual shareholders’ meeting at which the distribution is approved, unless a shareholders’ resolution determines another date for distribution, which may not be later than the end of the fiscal year in which such dividend was declared.  Pursuant to our by-laws, holders of preferred shares are not entitled to a fixed or minimum dividend, but have the right to receive dividend payments per share that are 10% greater than those paid to holders of common shares.  The mandatory distribution is based on a percentage of adjusted net income, which may not be lower than 25%, rather than a fixed monetary amount per share.  The Brazilian corporate law permits, however, a public company to suspend the mandatory distribution of dividends if the board of directors reports to the shareholders’ meeting that the distribution would be incompatible with the financial condition of the company, subject to approval by the shareholders’ meeting and review by the Conselho Fiscal.  The board of directors must file a justification for a dividend suspension with the CVM within five days of the date of the shareholders’ meeting.  Profits not distributed by virtue of the suspension mentioned above must be attributed to a special reserve and, if not absorbed by subsequent losses, must be paid as dividends as soon as the financial situation of the company permits such payments.  The rules regarding suspension apply to the holders of preferred shares and, consequently, to the holders of ADSs.  The mandatory distribution may also be limited to the “realized” portion of net income, as described under “—General.”  On December 3, 2003 we changed our dividend policy.  For further information on the new policy, see “Dividend Policy.”

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          Payment of dividends

          We are required by the Brazilian corporate law to hold an annual shareholders’ meeting by April 30 of each year at which, among other things, the shareholders have to decide on the payment of our annual dividend.  Under the Brazilian corporate law, dividends are required to be paid within 60 days following the date the dividend was declared, unless a shareholders’ resolution sets forth another date of payment, which must occur prior to the end of the fiscal year in which such dividend was declared.  A shareholder has a three-year period from the dividend payment date to claim dividends (or interest payments as described under “—Additional payments on shareholders’ equity”) in respect of its shares, after which we will have no liability for such payments.

          We may prepare financial statements semiannually or for shorter periods.  Our board of directors may declare a distribution of dividends based on the profits reported in semiannual financial statements.  The board of directors may also declare a distribution of interim dividends based on profits previously accumulated or in profits reserve which are reported in such financial statements or in the last annual financial statement approved by resolution taken at a shareholders’ meeting.

          In general, shareholders who are not residents of Brazil must register their equity investment with the Central Bank to have dividends, sales proceeds or other amounts with respect to their shares eligible to be remitted outside of Brazil.  The preferred shares underlying the ADSs are held in Brazil by Banco Itaú S.A., also known as the custodian, as agent for the depositary, which is the registered owner on the records of the registrar for our shares.  The current registrar is Banco Itaú S.A.  The depositary registers the preferred shares underlying the ADSs with the Central Bank and, therefore, is able to have dividends, sales proceeds or other amounts with respect to the preferred shares remitted outside Brazil.

          Payments of cash dividends and distributions, if any, are made in Brazilian reais to the custodian on behalf of the depositary, which then converts such proceeds into U.S. dollars and causes such U.S. dollars to be delivered to the depositary for distribution to holders of ADSs.  In the event that the custodian is unable to convert immediately the Brazilian currency received as dividends into U.S. dollars, the amount of U.S. dollars payable to holders of ADSs may be adversely affected by devaluations of the Brazilian currency that occur before the dividends are converted.  Under the current Brazilian corporate law, dividends paid to persons who are not Brazilian residents, including holders of ADSs, will not be subject to Brazilian withholding tax, except for dividends declared based on profits generated prior to December 31, 1995, which will be subject to Brazilian withholding income tax at varying tax rates.  See “Item 10—Additional Information—Taxation—Certain Brazilian tax consequences.”

          Dividend policy

          The declaration of annual dividends, including dividends in excess of the mandatory distribution, requires approval by the vote of the majority of the holders of our common stock and will depend on many factors.  These factors include our results of operations, financial condition, cash requirements, future prospects, our credit ratings, macroeconomic conditions and other factors deemed relevant by our shareholders.  Our shareholders have historically acted on these matters at the recommendation of our board of directors.  Within the context of our tax planning, we may in the future determine that it is to our benefit to distribute interest attributed to shareholders’ equity.

          On December 3, 2003, our board of directors approved a change in our dividend policy.  Under the new policy, we intend to pay dividends and/or interest on equity based on 60% of “free cash flow.”  “Free cash flow” is expected to be an amount equal to “EBITDA” minus “changes in working capital,” minus “income taxes” and minus “capital expenditures” and will be based upon our financial statements prepared in accordance with the Brazilian corporate law, Brazilian GAAP and the rules and regulations of the CVM and Bovespa.  “EBITDA” means operating profit before financial expenses (income) and gains (losses) from certain investments accounted for by the equity method plus depreciation, amortization and depletion; “changes in working capital” means the net cash provided by (or used in) the decrease (increase) of current assets and the increase (decrease) of current liabilities; “income tax” means the income tax and social contribution effectively paid by us and “capital expenditures” means the net cash used in our capital expenditures, in each case as such items appear in the income statement and/or the statement of cash flows contained in our year-end financial statements prepared in accordance with the requirements of the Brazilian corporate law.

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          The new policy went into effect in 2004 and will apply to any future distribution of dividends and/or interest on equity, as well as to any distribution related to the 2003 fiscal year.  It is anticipated that, given the cyclical nature of our pulp and paper business, distributions of dividends and/or interest on equity will be made once a year.

          The declaration of annual dividends, including dividends in excess of the mandatory distribution, will continue to require approval by the majority of our common stockholders and will continue to depend on many factors, including our results of operations, financial condition, cash requirements, future prospects, credit ratings, macroeconomic conditions and other factors deemed relevant by our shareholders and board of directors.  We may change or rescind our dividend policy at any time.

          Dividends

          The following table sets forth the dividends paid to holders of our capital stock since fiscal year 2001. The amounts in the table below relate to cash dividends declared, which differ from the dividends reported in U.S. dollars in the statement of changes in shareholders’ equity in our consolidated financial statements due to translation effects recorded through to the date of dividend payment.

First payment date	Fiscal year		Common shares		Preferred shares		Common shares(1)		Preferred shares(1)
			(in R$ per share)				(in US$ per share)
June 21, 2002		2001		0.4614		0.5075		0.1621		0.1783
June 20, 2003		2002		0.5711		0.6282		0.1977		0.2174
May 10, 2004		2003		1.1928		1.3121		0.3798		0.4177
November 5, 2004		2004		0.3999		0.4399		0.1419		0.1561
May 13, 2005		2004		0.2080		0.2280		0.0842		0.0923
May 10, 2006 (2)		2005		1.4069		1.5476		0.6834		0.7518

(1)	Based on declared cash amount in R$translated to U.S. dollars at the exchange rate on the first payment date.
(2)	Dividends distributed as Interest on Equity (ISE).  Amounts are gross of the 15% withholding tax.

          The dividends we paid amounted to US$ 40 million in 2003, US$ 104 million in 2004 and US$ 88 million in 2005.

          At our annual shareholders’ general meeting held on April 28, 2006, our shareholders approved the payment of dividends in the amount of approximately R$ 280 million (approximately US$ 136 million), which represented approximately 54% of adjusted net income in reais for the year 2005, in accordance with the Brazilian corporate law.  Holders of our preferred shares have the right to receive a dividend per share of 10% more than that paid to the common shares.

B.  Significant Changes

          No significant changes or events have occurred after the close of the balance sheet date at December 31, 2005, other than the events already described in this annual report.  See “Item 4A—Information on VCP—History and development of VCP—Competition” for more details on the corporate restructuring of Ripasa.

          For a summary of our announced unaudited financial results for the first quarter of 2006, see “Item 5A.  Operation Results—Recent Developments.”

ITEM 9.  THE OFFER AND LISTING

A.  Offer and Listing Details

          Before the offering of 7,920,000 ADSs, on April 13, 2000, or the ADS Offering, there was no active public market for the ADSs.  The ADSs are listed on the New York Stock Exchange under the trading symbol “VCP.”  Our preferred shares trade on the São Paulo Stock Exchange under the symbol “VCPA4” (prior to December 3, 1999 we traded under the symbol “PSIM4”).  At April 30, 2006, we had approximately 5,945 shareholders of record.  

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Market Price Information

          The table below sets forth, for the periods indicated, the reported high and low closing sale prices in nominal reais for each preferred shares on the São Paulo Stock Exchange.  The table also sets forth, for the periods indicated, the reported high and low sales prices per ADS assuming that ADSs had been outstanding on such dates and translated into U.S. dollars, as from the second quarter of 2000, at the commercial market rate for the sale of U.S. dollars at the last day of each respective quarter.  See “Item 3—Key Information—Selected Financial Data—Exchange Rates” for information with respect to exchange rates applicable during the periods set forth below:

		Reais per Preferred Share		U.S. dollars per ADS
		High	Low	High	Low
2000:
	Annual	17.00	9.80	9.30	5.03
2001:
	Annual	17.30	10.00	7.10	4.50
2002:
	Annual	24.44	15.00	8.45	5.00
2003:
	First Quarter	27.08	23.20	7.88	6.40
	Second Quarter	26.00	19.20	8.20	6.53
	Third Quarter	32.40	21.80	11.16	7.68
	Fourth Quarter	36.78	28.78	12.82	9.76
	Annual	36.78	19.20	12.82	6.40
2004:	First Quarter	41.00	33.00	14.26	11.55
	Second Quarter	42.00	33.20	14.49	10.72
	Third Quarter	44.00	38.00	15.02	12.53
	Fourth Quarter	43.53	36.02	16.55	12.66
	Annual	44.00	33.00	16.55	10.72
2005:	First Quarter	39.37	31.55	15.69	12.72
	Second Quarter	32.28	25.38	13.30	10.61
	Third Quarter	28.54	24.71	13.40	11.10
	Fourth Quarter	29.00	23.39	13.55	11.40
	Annual	39.37	23.39	15.69	10.61
Share price for the most recent six months:
	December 2005	29.00	25.55	12.75	11.75
	January 2006	28.90	27.45	12.78	12.22
	February 2006	32.50	27.20	15.27	12.38
	March 2006	35.01	30.33	16.18	14.25
	April 2006	34.79	32.51	16.56	15.20
	May 2006	36.56	30.80	17.58	13.28.

          On May 23, 2006, the last reported closing sale price for the preferred shares on the São Paulo Stock Exchange was R$ 31.27 per preferred share, equivalent to US$ 13.66 per ADS translated at the exchange rate of R$ 2.29 per US$ 1.00, the commercial market rate on that date.

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          On April 13, 2000, we issued preferred shares in the form of ADSs issued by Citibank N.A., as depositary, and became a registered company with the Commission and were listed on the New York Stock Exchange.  Our offering raised US$ 118.8 million (before underwriting discounts and commissions), we received US$ 29.8 million (before expenses) and the selling shareholders received US$ 85.4 million (before expenses).  On April 30, 2002, the CVM approved The Bank of New York as our replacement depositary bank.  On May 17, 2002, the Commission declared effective the Form F-6 filed in connection with the change of depositary.

          On December 12, 2003 BNDESPAR and certain Votorantim companies completed a secondary global offering of 9,217,318 ADSs (or its equivalent in preferred shares).  On December 19, 2003, BNDESPAR sold an additional 1,127,148 ADSs (or its equivalent in preferred shares) pursuant to an overallotment option granted to the underwriters.  We did not receive any proceeds from that offering.

B.  Plan of Distribution

          Not applicable.

C.  Markets

Trading on the São Paulo Stock Exchange

          Settlement of transactions conducted on the São Paulo Stock Exchange is effected three business days after the trade date.  Delivery of, and payment for, shares is made through the facilities of separate clearinghouses for each exchange, which maintain accounts for member brokerage firms.  The seller is ordinarily required to deliver the shares to the clearinghouse on the second business day following the trade date.  The clearinghouse for the São Paulo Stock Exchange is Companhia Brasileira de Liquidação e Custódia, or CBLC. 

          In order to better control volatility, the São Paulo Stock Exchange has adopted a “circuit breaker” system pursuant to which trading sessions may be suspended for a period of 30 minutes or one hour whenever the indices of these stock exchanges fall below the limits of 10% and 15%, respectively, in relation to the index registered in the previous trading session. 

          The São Paulo Stock Exchange is less liquid than the New York Stock Exchange or other major exchanges in the world.  At April 28, 2006, the aggregate market capitalization of the 339 companies listed on the São Paulo Stock Exchange was equivalent to approximately US$ 655 billion, and the ten largest companies listed on the São Paulo Stock Exchange represented approximately 52% of the total market capitalization of all listed companies.  Although any of the outstanding shares of a listed company may trade on a Brazilian stock exchange, in most cases fewer than half of the listed shares are actually available for trading by the public, the remainder being held by small groups of controlling persons, by governmental entities or by one principal shareholder.  On April 28, 2006, we accounted for approximately 0.5% of the market capitalization of all listed companies on the São Paulo Stock Exchange. 

          Trading on the São Paulo Stock Exchange by non-residents of Brazil is subject to certain limitations under Brazilian foreign investment and tax legislation.  See  “Item 10—Additional Information—Memorandum and Articles of Association” and “Item 10—Additional Information—Exchange Controls.”

Regulation of Brazilian Securities Markets 

          The Brazilian securities markets are regulated by the CVM, which has authority over stock exchanges and the securities markets generally, by the Conselho Monetário Nacional, the National Monetary Council, and by the Central Bank, which has, among others, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. 

          Under the Brazilian corporate law, a corporation is either public (companhia aberta), such as we are, or closely held (companhia fechada).  All publicly held companies, including us, are registered with the CVM and are subject to reporting requirements, in order to be allowed to have their securities offered to the public and to be listed in a Brazilian stock exchange.  Our preferred shares are traded on the São Paulo Stock Exchange but may be traded privately subject to certain limitations or on the Brazilian over-the-counter market.  The Brazilian over-the-counter market consists of direct trades in which a financial institution registered with the CVM serves as intermediary. 

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          We have the option to ask that trading in securities on the São Paulo Stock Exchange be suspended in anticipation of a material announcement.  Trading may also be suspended at the initiative of the São Paulo Stock Exchange or the CVM based on or due to a belief that a company has provided inadequate information regarding a material event or has provided inadequate responses to the inquiries by the CVM or the São Paulo Stock Exchange, among other reasons. 

          The Brazilian securities law, the Brazilian corporate law and the regulations issued by the CVM, the National Monetary Council and the Central Bank provide, among other things, disclosure requirements and restrictions on insider trading, price manipulation and protection of minority shareholders.  However, the Brazilian securities markets are not as highly regulated and supervised as the U.S. securities markets or markets in some other jurisdictions.

Differentiated Levels of Corporate Governance

          On November 14, 2001, we agreed to comply with heightened corporate governance and disclosure requirements established by the São Paulo Stock Exchange in order to qualify for a differentiated listing qualification as a company admitted to the “Level 1 of Corporate Governance Requirements.”

          To become a Level 1 company, an issuer must agree to (i) ensure that shares of the issuer representing 25% of its total capital are effectively available for trading; (ii) adopt offering procedures that favor widespread ownership of shares whenever making a public offering; (iii) comply with minimum quarterly disclosure standards; (iv) follow stricter disclosure policies with respect to transactions made by controlling shareholders, directors and officers involving securities issued by the issuer; (v) disclose any existing shareholders’ agreements and stock option plans; and (vi) make a schedule of corporate events available to the shareholders.

Significant Differences between our Corporate Governance Practices and NYSE Corporate Governance Standards

          We are subject to the NYSE corporate governance listing standards.  As a foreign private issuer, the standards applicable to us are considerably different than the standards applied to U.S. listed companies.  Under the NYSE rules, we are required only to:  (i) have an audit committee or audit board, pursuant to an applicable exemption available to foreign private issuers, that meets certain requirements, as discussed below, (ii) provide prompt certification by our chief executive officer of any material non-compliance with any corporate governance rules, and (iii) provide a brief description of the significant differences between our corporate governance practices and the NYSE corporate governance practice required to be followed by U.S. listed companies.  The discussion of the significant differences between our corporate governance practices and those required of U.S. listed companies follows below.

Majority of Independent Directors

          The NYSE rules require that a majority of the board must consist of independent directors.  Independence is defined by various criteria, including the absence of a material relationship between the director and the listed company.  Brazilian law does not have a similar requirement.  Under Brazilian law, neither our board of directors nor our management is required to test the independence of directors before their election to the board.  However, both the Brazilian Corporate Law and the CVM have established rules that require directors to meet certain qualification requirements and that address the compensation and duties and responsibilities of, as well as the restrictions applicable to, a company’s executive officers and directors.  While our directors meet the qualification requirements of the Brazilian Corporate Law and the CVM, we do not believe that our directors would be considered independent under the NYSE test for director independence.

          The Brazilian Corporate Law and our bylaws require that our directors be elected by our shareholders at a general shareholders’ meeting.  All of our directors are elected by, and represent, our controlling shareholders.

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Executive Sessions

          NYSE rules require that the non-management directors must meet at regularly scheduled executive sessions without management.  The Brazilian Corporate Law does not have a similar provision.  According to the Brazilian Corporate Law, up to one-third of the members of the board of directors can be elected from management.  No member of our executive committee serves as a director.  The directors are not expressly empowered to serve as check on management and there is no requirement that our directors meet regularly without management.  As a result, our directors do not typically meet in executive sessions. 

Nominating/Corporate Governance Committee

          NYSE rules require that listed companies have a Nominating/Corporate Governance Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, identifying and selecting qualified board member nominees and developing a set of corporate governance principles applicable to the company.  We are not required under applicable Brazilian law to have a Nominating Committee/Corporate Governance Committee, and accordingly, to date, have not established such a committee.  The directors are elected by our shareholders at a general shareholders’ meeting.  Our corporate governance practices are adopted by the entire board.   

Compensation Committee

          NYSE rules require that listed companies have a Compensation Committee composed entirely of independent directors and governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities, which include, among other things, reviewing corporate goals relevant to CEO compensation, evaluating CEO performance and approving CEO compensation levels and recommending to the board non-CEO compensation, incentive-compensation and equity-based plans.  We are not required under applicable Brazilian law to have a Compensation Committee.  Under the Brazilian Corporate Law, the total amount available for compensation of our directors and executive officers and for profit-sharing payments to our executive officers is established by our shareholders at the annual general meeting.  The board of directors is then responsible for determining the individual compensation and profit-sharing of each executive officer, as well as the compensation of our board and committee members.  In making such determination, the board reviews the performance of each executive officer and each of the goals they were supposed to achieve during the year.

Audit Committee

NYSE rules require that listed companies have an audit committee that (i) is composed of a minimum of three independent directors who are all financially literate, (ii) meets the SEC rules regarding audit committees for listed companies, (iii) has at least one member who has accounting or financial management expertise and (iv) is governed by a written charter addressing the committee’s required purpose and detailing its required responsibilities.  However, as a foreign private issuer, we need only to comply with the requirement that the audit committee, or audit board in our case, meet the SEC rules regarding audit committees for listed companies.  The Brazilian Corporate Law requires companies to have a non-permanent Conselho Fiscal composed of three to five members who are elected at the general shareholders’ meeting.  The Conselho Fiscal operates independently from management and from a company’s external auditors.  Its main function is to monitor the activities of management, examine the financial statements of each fiscal year and provide a formal report to our shareholders. 

          We have a permanent Conselho Fiscal that consists of three members and three alternates.  The members of our Conselho Fiscal are all financially literate and one member has accounting expertise that qualifies him as an audit committee financial expert.  In order to comply with the exemption requirements that allow our Conselho Fiscal to act as an audit committee pursuant to SEC rules, our Board of Directors approved the delegation to the Conselho Fiscal of certain additional responsibilities and the Conselho Fiscal and the Board of Directors adopted an additional charter that delegates to the Conselho Fiscal the duties and responsibilities of a U.S. audit committee to the extent permitted under Brazilian Corporate Law.  For a further discussion of our Conselho Fiscal, see “Item 6C.  Board Practices—Conselho Fiscal.” 

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Shareholder Approval of Equity Compensation Plans

          NYSE rules require that shareholders be given the opportunity to vote on all equity compensation plans and material revisions thereto, with limited exceptions.  Under the Brazilian Corporate Law, shareholders must approve all stock option plans.  In addition, any issuance of new shares that exceeds our authorized share capital is subject to shareholder approval.  We have no equity compensation plans.

Corporate Governance Guidelines

          NYSE rules require that listed companies adopt and disclose corporate governance guidelines.  We have not adopted any formal corporate governance guidelines beyond those required by applicable Brazilian law.  We believe that the corporate governance guidelines applicable to us under Brazilian corporate law are consistent with the guidelines established by the NYSE. 

Code of Business Conduct and Ethics

          NYSE rules require that listed companies adopt and disclose a code of business conduct and ethics for directors, officers and employees, and promptly disclose any waivers of the code for directors or executive officers.  Applicable Brazilian law does not have a similar requirement.  However, we have recently amended our code of ethics to comply with the requirements of the Sarbanes-Oxley Act and the NYSE rules.  We believe our code, as amended, substantially addresses the matters required to be addressed by the NYSE rules.  A copy of our Code of Ethics has been filed as Exhibit 11.1 to this annual report.  For a further discussion of our Code of Ethics, see “Item 16B – Code of Ethics.”

Internal Audit Function

          NYSE rules require that listed companies maintain an internal audit function to provide management and the audit committee with ongoing assessments of the company’s risk management processes and system of internal control.  Brazilian law does not require that companies maintain an internal audit function.  However, as a best practice, we maintain an internal audit function, which is co-assisted by Deloitte Touche Tohmatsu in an outsourced partnership.  Our internal audit function is under the supervision of the Chief Executive Officer, assuring the necessary independence and competence to assess the design of our internal control over financial reporting, as well as to test its effectiveness as required by Section 404 of the Sarbanes-Oxley Act of 2002.

D.  Selling Shareholders

          Not applicable.

E.  Dilution

          Not applicable.

F.  Expenses of the Issue

          Not applicable.

ITEM 10.  ADDITIONAL INFORMATION

A.  Share Capital

          Not applicable.

B.  Memorandum and Articles of Association

          Our by-laws are filed as Exhibit 1 to this annual report.

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C.  Material Contracts

Shareholders’ Agreement of Aracruz Celulose S.A.

          A subsidiary of ours became a party to the Aracruz shareholders’ agreement, along with BNDESPAR, the Lorentzen Group and the Safra Group.  Under the shareholders’ agreement, our subsidiary will be entitled to appoint three directors to the Aracruz’s board, which currently consists of ten directors.  The shareholders’ agreement, which expires in 2008, provides that the maximum number of shares of voting stock of Aracruz to be held by any party to the shareholders’ agreement may not exceed 28% of the total outstanding shares of voting stock.  In addition, the shareholders’ agreement requires that each person or entity who acquires shares of voting stock of Aracruz from any of the parties to the shareholders’ agreement become a party to such agreement.

          On February 7, 2003, the Lorentzen Group and the Safra Group announced the signing of an agreement in which the Lorentzen Group and the Safra Group agreed that, until the termination of the existing Aracruz shareholders’ agreement, a sale by either party of its voting interest in Aracruz must be approved by the other party.  This new agreement provides that (i) neither party may take any action or omit to take any action which results in the extension or renewal of the existing shareholders’ agreement, and (ii) after May 11, 2008 (the date of termination of the existing shareholders’ agreement), (A) the sale by either party shall be subject to rights of first refusal by the other party and to “tag-along” rights (the right of a party to the agreement to sell on a pro rata basis its shares if another party is selling shares) and (B) in the event of a sale by either of them to a third party, the purchaser must adhere to the provisions of the new agreement. 

Technology Transfer Agreements

          We entered into a technology transfer agreement with Oji Paper pursuant to which Oji Paper agreed to share secret formulae, processes, technical information and know-how developed by it for thermal and carbonless paper.  The agreement also granted us an exclusive, non-assignable license to manufacture and sell certain carbonless and thermal papers in Brazil and a non-exclusive, non-assignable license to sell such products in Latin America, Africa and the Middle East.  Oji Paper receives quarterly royalties based on net sales.  The sum of the quarterly royalties in each of the years ended December 31, 2003 and 2004 was approximately US$ 1.3 million in each year.  In 2005, this amount was reduced to less than US$ 1.0 million because the technology transfer agreement expired in October 2004, and we have renewed it, but only for the thermal papers.

          For additional information on our material contracts, see “Item 5—Operating and Financial Review and Prospects—Liquidity and Capital Resources.”

D.  Exchange Controls

          There are no restrictions on ownership of our common shares or preferred shares by individuals or legal entities domiciled outside Brazil.  However, the right to convert dividend payments and proceeds from the sale of common shares or preferred shares into foreign currency and to remit such amounts outside Brazil are subject to exchange control restrictions and foreign investment legislation which generally require, among other things, obtaining an electronic registration with the Central Bank.

          Under Resolution No. 2,689, foreign investors may invest in almost all financial assets and engage in almost all transactions available in the Brazilian financial and capital markets, provided that some requirements are fulfilled.  In accordance with Resolution No. 2,689, the definition of foreign investor includes individuals, legal entities, mutual funds and other collective investment entities that are domiciled or headquartered abroad.

          Investors under Resolution No. 2,689 who do not reside in a “tax haven,” or a country that does not impose income tax or in which the maximum income tax rate is lower than 20%, are entitled to favorable tax treatment.  See “—Taxation—Certain Brazilian Tax Consequences.”

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          Resolution No. 1,927 provides for the issuance of depositary receipts in foreign markets in respect of shares of Brazilian issuers.  An application was filed to have the ADSs approved by the Central Bank and the CVM under Annex V, and we received final approval before the ADS Offering.

          An electronic registration, which replaced the amended Certificate of Registration, was issued in the name of the depositary with respect to the ADSs and is maintained by the Custodian on behalf of the Depositary.  This electronic registration was carried on through the SISBACEN.  Pursuant to the electronic registration, the Custodian and the Depositary are able to convert dividends and other distributions with respect to the preferred shares represented by the ADSs into foreign currency and remit the proceeds outside Brazil.  In the event that a holder of ADSs exchanges the ADSs for preferred shares, the holder will be entitled to continue to rely on the Depositary’s electronic registration for only five business days after the exchange.  Thereafter, a holder must seek to obtain its own electronic registration.  Unless the preferred shares are held pursuant to Resolution No. 2,689 by a duly registered investor or a holder of preferred shares who applies for and obtains a new electronic registration, that holder may not be able to obtain and remit abroad U.S. dollars or other foreign currencies upon the disposition of the preferred shares, or distributions with respect thereto.  In addition, if the foreign investor resides in a tax haven jurisdiction or is not an investor registered pursuant to Resolution No. 2,689, the investor will also be subject to less favorable tax treatment.

Preemptive Rights

          Each of our shareholders has a general preemptive right to subscribe for shares or convertible securities in any capital increase, in proportion to its shareholding, except in the event of the grant and exercise of any option to acquire shares of our capital stock.  A minimum period of 30 days following the publication of notice of the issuance of shares or convertible securities is allowed for exercise of the right, and the right is negotiable.  However, according to our by-laws, our board of directors can eliminate this preemptive right or reduce the 30-day period in case we issue debentures that are convertible into shares or shares within the limits authorized by the by-laws:  (i) through a stock exchange or through a public offering or (ii) through an exchange of shares in a public offering to acquire control of another company. 

          In the event of a capital increase that would maintain or increase the proportion of capital represented by preferred shares, the holders of preferred shares, except as described above, would have preemptive rights to subscribe to our newly issued preferred shares.  You may not be able to exercise the preemptive rights relating to the preferred shares underlying your ADSs unless a registration statement under the Securities Act is effective with respect to the shares to which the rights relate or an exemption from the registration requirements of the Securities Act is available and the ADS depositary determines to make the rights available to you.  In the event of a capital increase that would reduce the proportion of capital represented by preferred shares, the holders of the preferred shares, except as described above, would have preemptive rights to subscribe for preferred shares in proportion to their shareholdings, and for common shares, only to the extent necessary to prevent dilution of their interest in their shares.  See “Item 3—Key Information—Risk Factors—Risks Relating to Our Preferred Shares and ADSs—You may not be able to exercise preemptive rights with respect to our preferred shares.”

Right of Withdrawal

          The Brazilian corporate law provides that, under certain circumstances, a shareholder has the right to withdraw its equity interest from the company and to receive payment for the portion of shareholders’ equity attributable to its equity interest.  Such right of withdrawal may be exercised by a dissenting or non-voting shareholder, including any holder of preferred shares, if a vote of at least 50% of voting shares authorizes us:

• to establish new classes of preferred shares or to disproportionately increase an existing class of preferred shares relative to the other classes of shares, unless such action is provided for or authorized by the by-laws (our by-laws currently authorize such action);

• to modify a preference, privilege or condition of redemption or amortization conferred on one or more classes of preferred shares, or to create a new class with greater privileges than the existing classes of preferred shares;

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• to reduce the mandatory distribution of dividends;

• to change our corporate purpose;

• to merge with another company (including if we are merged into one of our controlling companies) or to consolidate;

• to transfer all of our shares to another company or in order to make us a wholly owned subsidiary of such company, known as an incorporação de ações;

• to approve the acquisition of control of another company at a price which exceeds certain limits set forth in the Brazilian corporate law;

• to approve our participation in a centralized group of companies, as defined under the Brazilian corporate law, and subject to the conditions set forth therein; or

• to conduct a spin-off that results in (a) a change of our corporate purposes, except if the assets and liabilities of the spun-off company are contributed to a company that is engaged in substantially the same activities, (b) a reduction in the mandatory dividend or (c) any participation in a centralized group of companies, as defined under Brazilian corporate law.

          In addition, in the event that the entity resulting from a merger, or incorporação de ações, a consolidation or a spin-off of a listed company fails to become a listed company within 120 days of the shareholders’ meeting at which such decision was taken, the dissenting or non-voting shareholders may also exercise their withdrawal. 

          Only holders of shares adversely affected by the changes mentioned in the first and second items above may withdraw their shares.  The right of withdrawal lapses 30 days after publication of the minutes of the relevant shareholders’ meeting.  In the first two cases mentioned above, however, the resolution is subject to confirmation by the preferred shareholders, which must be obtained at a special meeting held within one year.  In those cases, the 30-day term is counted from the date the minutes of the special meeting are published.  We would be entitled to reconsider any action giving rise to withdrawal rights within 10 days following the expiration of such rights if the withdrawal of shares of dissenting shareholders would jeopardize our financial stability. 

          The Brazilian corporate law allows companies to redeem their shares at their economic value as set forth in the Brazilian corporate law, subject to certain requirements.  Because our by-laws currently do not provide that our shares be subject to withdrawal at their economic value, our shares would be subject to withdrawal at their book value, determined on the basis of the last balance sheet approved by the shareholders.  If the shareholders’ meeting giving rise to withdrawal rights occurs more than 60 days after the date of the last approved balance sheet, a shareholder may demand that its shares be valued on the basis of a new balance sheet that is of a date within 60 days of such shareholders’ meeting. 

          According to the Brazilian corporate law, in events of consolidation, merger, incorporação de ações, participation in a group of companies, and acquisition of control of another company, the right to withdraw does not apply if the shares meet certain tests relating to liquidity and dispersal of the type or class of shares in question on the market.  In these cases, shareholders will not be entitled to withdraw their shares if the shares are a component of a general stock index in Brazil or abroad, as defined by the Brazilian securities commission, and the shares held by persons unaffiliated with the controlling shareholder represent more than half of the outstanding shares of the relevant type or class.

E.  Taxation

          The following discussion contains a description of the material Brazilian and United States federal income tax consequences of the purchase, ownership and disposition of preferred shares or ADSs but does not purport to be a comprehensive description of all the tax considerations that may be relevant to these matters based upon the particular circumstances of a holder.

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          This summary is based upon tax laws of Brazil and the United States as in effect on the date of this prospectus, which are subject to change, possibly with retroactive effect, and to differing interpretations.  You should consult your own tax advisors as to the Brazilian, United States or other tax consequences of the purchase, ownership and disposition of preferred shares or ADSs, including, in particular, the effect of any U.S. federal estate, gift, or alternative minimum taxes, and non-U.S., state or local tax laws.

          Although there is presently no income tax treaty between Brazil and the United States, the tax authorities of the two countries have had discussions that may culminate in such a treaty.  No assurance can be given, however, as to whether or when a treaty will enter into force or how it will affect the U.S. holders of preferred shares or ADSs.

Certain Brazilian tax consequences

          The following discussion, subject to the limitations therein, summarizes certain Brazilian tax consequences of the acquisition, ownership and disposition of preferred shares or ADSs, as the case may be, by a holder that is not domiciled in Brazil for purposes of Brazilian taxation, or by a holder of preferred shares with an investment in preferred shares registered with the Central Bank as a U.S. dollar investment (in each case, a “non-Brazilian holder”).  It is based on Brazilian law as currently in effect, and, therefore, any change in such law may change the consequences described below.  Each non-Brazilian holder should consult his or her own tax adviser concerning the Brazilian tax consequences of an investment in preferred shares or ADSs.

Taxation of dividends

          As a result of tax legislation adopted on December 26, 1995, dividends based on profits generated after January 1, 1996, including dividends paid in kind, payable by us in respect of preferred shares, are exempt from withholding income tax.  Stock dividends with respect to profits generated before January 1, 1996 are not subject to Brazilian tax, provided that the stock is not redeemed by us or sold in Brazil within five years after distribution of such stock dividends.  Dividends relating to profits generated prior to January 1, 1996 may be subject to Brazilian withholding income tax at varying rates, depending on the year the profits were generated.

Taxation of gains

          Gains realized outside Brazil by a non-Brazilian holder on the disposition of ADSs to another non-Brazilian holder are not subject to Brazilian tax.  According to Provisional Measure No. 135 Enacted on October 30, 2003, which came into force on January 1, 2004, the disposition of assets located in Brazil by a non-Brazilian holder may become subject to taxation in Brazil.  Although we believe that the ADSs do not fall within the definition of assets located in Brazil for the purposes of Provisional Measure No. 135, considering the general and unclear scope of Provisional Measure No. 135 and the lack of a judicial court ruling in respect thereto we are unable to predict whether our belief will ultimately prevail in the Brazilian courts.

          The withdrawal of ADSs in exchange for preferred shares is not subject to Brazilian tax.  The deposit of preferred shares in exchange for ADSs may be subject to Brazilian capital gain tax at the rate of 15%, if the amount previously registered with the Central Bank as a foreign investment in the preferred shares is lower than (1) the average price per preferred share on a Brazilian stock exchange on which the greatest number of such shares were sold on the day of deposit; or (2) if no preferred shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of preferred shares were sold in the 15 trading sessions immediately preceding such deposit.  In this case, the difference between the amount previously registered and the average price of the preferred shares, calculated as above, shall be considered a capital gain.  On receipt of the underlying preferred shares, the non-Brazilian holder registered under Resolution No. 2,689 will be entitled to register the U.S. dollar value of such shares with the Central Bank as described below in “— Registered Capital.”  However, if this non-Brazilian holder does not register under Resolution No. 2,689, it will be subject to the less favorable tax treatment described below.

          Non-Brazilian holders are generally subject to income tax imposed at a rate of 15% on gains realized on sales or exchanges of preferred shares if the transaction is carried out outside any Brazilian stock, future or commodities exchange.  Gains realized by a non-Brazilian holder upon the redemption of preferred shares will be treated as gain from the disposition of such preferred shares occurring outside of a stock exchange and will accordingly be subject to tax at a rate of 15%.

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          Non-Brazilian holders are subject to income tax, at a rate of 20%, on gains realized on sales or exchanges in Brazil of preferred shares that occur on the Brazilian stock exchanges, unless such a sale is made by a non-Brazilian holder who is not a resident in a “tax haven” (as described below) and (1) such sale is made within five business days of the withdrawal of the preferred shares in exchange for ADSs and the proceeds thereof are remitted abroad within such five-day period, or (2) such sale is made under Resolution No. 2,689 by registered non-Brazilian holders who obtain registration with the CVM.  In these two last cases, the gains realized are exempt from income tax.  The gain realized from transactions on the Bovespa is the difference between the amount in Brazilian currency realized on the sale or exchange and the acquisition cost, measured in Brazilian currency, without any correction for inflation, of the shares sold.  The gain realized as a result of a transaction that occurs other than on the Bovespa is the positive difference between the amount realized on the sale or exchange and the acquisition cost of the preferred shares, both values in reais; there are grounds, however, to hold that the gain realized should be calculated based on the foreign currency amount registered with the Central Bank, such foreign currency amount to be translated into Brazilian currency at the commercial market rate.  There is no assurance that the current preferential treatment for holders of ADSs and non-Brazilian holders of preferred shares under Resolution No. 2,689 will continue in the future or that it will not be changed in the future.

          Any exercise of preemptive rights relating to the preferred shares will not be subject to Brazilian taxation.  Any gain on the sale or assignment of preemptive rights relating to the preferred shares by a holder of preferred shares, or by the depositary on behalf of holders of the ADSs, will be subject to Brazilian taxation at the same rate applicable to the sale or disposition of preferred shares.

Interest attributed to shareholders’ equity

          Distribution of a notional interest charge attributed to shareholders’ equity in respect of the preferred or common shares as an alternative form of payment to shareholders who are either Brazilian residents or non-Brazilian residents, including holders of ADSs, is subject to Brazilian withholding income tax at the rate of 15%.  Such payments, subject to certain limitations, are deductible for Brazilian income tax and for social contribution purposes as long as the payment of a distribution of interest is credited to a shareholder’s account and approved at our general meeting of shareholders.  Current Brazilian corporate law establishes that a notional interest charge attributed to shareholders’ equity can either be accounted for as part of the mandatory dividend or not.  In case the payment of such interest is accounted for as part of the mandatory dividend, we would be required to pay an additional amount to ensure that the net amount received by the shareholders, after the income tax, is at least equal to the mandatory dividend.  The distribution of interest attributed to shareholders’ equity would be proposed by our board of directors and subject to subsequent declaration by the shareholders at a general meeting.

Beneficiaries resident or domiciled in tax havens or low tax jurisdictions

          Law No. 9,779/99, in effect as of January 1, 1999, states that, with the exception of certain prescribed circumstances, income derived from operations by a beneficiary, resident or domiciled in a country considered as a tax haven, is subject to withholding income tax at a rate of 25%.  Accordingly, if the distribution of interest attributed to shareholders’ equity is made to a beneficiary resident or domiciled in a tax haven, the income tax rate applicable will be 25% instead of 15%.  Capital gains for gains realized are not subject to this 25% tax even if the beneficiary is a resident in a tax haven.  A tax haven jurisdiction is considered to be any country or location, (i) which does not impose income tax or imposes income tax at a maximum rate lower than 20% or (ii) where internal legislation imposes restrictions on the disclosure of the shareholding composition or ownership of investments.

Other Brazilian taxes

          There are no Brazilian inheritance, gift or succession taxes applicable to the ownership, transfer or disposition of preferred shares or ADSs by a non-Brazilian holder.  However, some Brazilian states may impose gift and estate taxes on gifts made or inheritances bestowed by individuals or entities not resident or domiciled within such state to individuals or entities residing or domiciled within such state in Brazil.  There are no Brazilian stamp, issue, registration, or similar taxes or duties payable by holders of preferred shares or ADSs.

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          Tax on bank account transactions (CPMF)

          As a general rule, financial transactions or CPMF tax is imposed on any removal of funds from accounts at banks.  Transactions by the depositary or by holders of preferred shares that involve the transfer of Brazilian currency through Brazilian financial institutions will be subject to the CPMF tax.  When non-Brazilian holders transfer the proceeds from the sale or assignment of preferred shares by an exchange transaction, the CPMF tax is imposed on the amount to be remitted abroad in Brazilian reais.  The responsibility for the collection of the CPMF tax is borne by the financial institution that carries out the relevant financial transaction.  The CPMF tax is generally imposed on bank account debits at a current rate of 0.38%.  President Luis Inácio Lula da Silva has sent over to the Brazilian Congress a Proposal for Constitutional Amendment (PEC) No. 41 of 2003 as part of the Brazilian Tax Reform.  According to such proposal, the assessment of CPMF was extended to December 31, 2007 at a 0.38% rate.  In the event we perform any exchange transaction in connection with ADSs or preferred shares, we will be responsible for collecting the CPMF tax.

          Taxation of foreign exchange transactions (IOF/Câmbio)

          Pursuant to Decree No. 2,219 of May 2, 1997, IOF/Câmbio may be imposed upon the conversion of Brazilian currency into a foreign currency (e.g., for purposes of paying dividends and interest) and on the conversion of foreign currency into Brazilian currency.  Except under specific circumstances, there is no current IOF tax on such conversions, but the Minister of Finance has the legal power to increase the rate to a maximum of 25% at any time, but only in relation to future transactions.

          Tax on bonds and securities transactions (IOF/Títulos)

          Law No. 8,894/94 created the Tax on Bonds and Securities Transactions (the IOF/Títulos), which may be imposed on any transactions involving bonds and securities, even if these transactions are performed on Brazilian stock, futures or commodities exchanges.  The applicable rate for these transactions is currently 0%, although the executive branch may increase the rate up to 1.5% per day, but only with respect to futures transactions.

          Social Contribution Tax (COFINS and PIS)

          The Federal government enacted law No. 10,833/03, which created the non-cumulative COFINS, which came into effect in February 2004.  The COFINS tax previously charged at a flat rate of 3.0% on revenues was increased to 7.6% on revenues less certain costs and expenses on a value-added basis.  Similarly, the PIS tax was increased from a flat rate of 0.65% on revenues to 1.65% on revenues less certain costs and expenses on a value-added.  These new value-added taxes allowed for certain credits in the basis of calculation such as raw materials, services and certain finance expenses.  Sales of investments (shares and fixed assets) are not considered in the calculation of these taxes.

Registered capital

          The amount of an investment in preferred shares held by a non-Brazilian holder who qualifies under Resolution No. 2,689 and obtains registration with the CVM, or by the depositary representing such holder, is eligible for registration with the Central Bank; such registration (the amount registered is referred to as registered capital) allows the remittance of foreign currency outside Brazil, converted at the commercial market rate, acquired with the proceeds of distributions on, and amounts realized with respect to dispositions of, such preferred shares.  The registered capital for each preferred share purchased as part of the international offering, or purchased in Brazil after that date, and deposited with the Depositary will be equal to its purchase price in U.S. dollars.  The registered capital for a preferred share that is withdrawn upon surrender of an ADS will be the U.S. dollar equivalent of (i) the average price of a preferred share on the Brazilian stock exchange on which the greatest number of such shares was sold on the day of withdrawal, or (ii) if no preferred shares were sold on that day, the average price on the Brazilian stock exchange on which the greatest number of preferred shares was sold in the 15th trading session immediately preceding such withdrawal.  The U.S. dollar value of the preferred shares is determined on the basis of the average commercial market rates quoted by the Central Bank on such date (or, if the average price of preferred shares is determined under clause (ii) above, the average of such quoted rates on the same 15 dates used to determine the average price of the preferred shares).

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          A non-Brazilian holder of preferred shares may experience delays in effecting such registration, which may delay remittances abroad.  Such a delay may adversely affect the amount in U.S. dollars received by the non-Brazilian holder.

U.S. federal income tax consequences

          The following discussion summarizes the principal U.S. federal income tax considerations relating to the purchase, ownership and disposition of preferred shares or ADSs by a U.S. holder (as defined below) holding such preferred shares or ADSs as capital assets (generally, property held for investment).  This summary is based upon the Internal Revenue Code of 1986, as amended (the “Code”), Treasury regulations, administrative pronouncements of the U.S. Internal Revenue Service (the “IRS”) and judicial decisions, all as in effect on the date hereof, and all of which are subject to change (possibly with retroactive effect) and to differing interpretations.  This summary does not describe any implications under state, local or non-U.S. tax law, or any aspect of U.S. federal tax law other than income taxation.

          This summary does not purport to address all the material federal income tax consequences that may be relevant to the U.S. holders of the preferred shares or ADSs, and does not take into account the specific circumstances of any particular investors, some of which (such as tax-exempt entities, banks or other financial institutions, insurance companies, broker-dealers, traders in securities that elect to use a mark-to-market method of accounting for their securities holdings, regulated investment companies, real estate investment trusts, U.S. expatriates, investors liable for the alternative minimum tax, partnerships and other pass-through entities, investors that own or are treated as owning 10% or more of our voting stock, investors that hold the preferred shares or ADSs as part of a straddle, hedge, conversion or constructive sale transaction or other integrated transaction and U.S. holders (as defined below) whose functional currency is not the U.S. dollar) may be subject to special tax rules.

          As used below, a “U.S. holder” is a beneficial owner of preferred shares or ADSs that is, for U.S. federal income tax purposes:

(i)	an individual citizen or resident of the United States;
(ii)	a corporation (or entity taxable as a corporation) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
(iii)	an estate the income of which is subject to U.S. federal income tax regardless of its source; or
(iv)	a trust if (A) a court within the United States is able to exercise primary supervision over the administration of the trust and one or more United States persons have the authority to control all substantial decisions of the trust or (B) the trust has a valid election in effect under applicable U.S. Treasury Regulations to be treated as a U.S. person.

          If a partnership or other entity taxable as a partnership holds preferred shares or ADSs, the tax treatment of a partner will generally depend on the status of the partner and the activities of the partnership.  Partners of partnerships holding preferred shares or ADSs should consult their tax advisors.

          In general, for U.S. federal income tax purposes, holders of American Depositary Receipts evidencing ADSs will be treated as the beneficial owners of the preferred shares represented by those ADSs.

Taxation of Distributions

          In general, distributions with respect to the preferred shares or ADSs (which likely would include distributions of interest on shareholders’ equity, as described above under “– Certain Brazilian tax consequences – Interest attributed to shareholders’ equity”) will, to the extent made from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles, constitute dividends for U.S. federal income tax purposes. 

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          If a distribution exceeds the amount of our current and accumulated earnings and profits, as so determined, it will be treated as a non-taxable return of capital to the extent of the U.S. holder’s tax basis in the preferred shares or ADSs, and thereafter as capital gain.  As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes. 

          The gross amount of any dividends (including amounts withheld in respect of Brazilian taxes) paid with respect to the preferred shares or ADSs generally will be subject to U.S. federal income taxation as ordinary income and will not be eligible for the dividends received deduction allowed to corporations.  Dividends paid in Brazilian currency will be included in the gross income of a U.S. holder in a U.S. dollar amount calculated by reference to the exchange rate in effect on the date the dividends are received by the U.S. holder, or in the case of dividends received in respect of ADSs, on the date the dividends are received by the depositary or its agent, whether or not converted into U.S. dollars.  A U.S. holder will have a tax basis in any distributed Brazilian currency equal to its U.S. dollar amount on the date of receipt, and any gain or loss recognized upon a subsequent disposition of such Brazilian currency generally will be foreign currency gain or loss that is treated as U.S. source ordinary income or loss.  If dividends paid in Brazilian currency are converted into U.S. dollars on the day they are received by the U.S. holder or the depositary or its agent, as the case may be, U.S. holders generally should not be required to recognize foreign currency gain or loss in respect of the dividend income.  U.S. holders should consult their own tax advisors regarding the treatment of any foreign currency gain or loss if any Brazilian currency received by the U.S. holder or the depositary or its agent is not converted into U.S. dollars on the date of receipt.

          Subject to certain exceptions for short-term and hedged positions, the U.S. dollar amount of dividends received by an individual with respect to the ADSs will be subject to taxation at a maximum rate of 15% if the dividends represent “qualified dividend income.”  Dividends paid on the ADSs will be treated as qualified dividend income if (i) the ADSs are readily tradable on an established securities market in the United States and (ii) we were not in the year prior to the year in which the dividend was paid, and are not in the year in which the dividend is paid, a passive foreign investment company (“PFIC”).  The ADSs are listed on the New York Stock Exchange, and should qualify as readily tradable on an established securities market in the United States so long as they are so listed.  However, no assurances can be given that the ADSs will be or remain readily tradable.  Based on our audited financial statements as well as relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our 2005 taxable year.  In addition, based on the our audited financial statements and current expectations regarding the value and nature of its assets, the sources and nature of its income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for our 2006 taxable year.  Because these determinations are based on the nature of our income and assets from time to time, and involve the application of complex tax rules, no assurances can be provided that we will not be considered a PFIC for the current (or any past or future tax year).

          Based on existing guidance, it is not entirely clear whether dividends received with respect to the preferred shares (to the extent not represented by ADSs) will be treated as qualified dividend income, because the preferred shares are not themselves listed on a U.S. exchange.  In addition, the U.S. Treasury Department has announced its intention to promulgate rules pursuant to which holders of ADSs or preferred stock and intermediaries though whom such securities are held will be permitted to rely on certifications from issuers to establish that dividends are treated as qualified dividends.  Because such procedures have not yet been issued, we are not certain that we will be able to comply with them.  U.S. Holders of ADSs and preferred shares should consult their own tax advisors regarding the availability of the reduced dividend tax rate in the light of their own particular circumstances.

        Dividends paid by us generally will constitute income from non-U.S. sources and will be subject to various classification and other limitations for U.S. foreign tax credit purposes.  Subject to generally applicable limitations under U.S. federal income tax law, Brazilian withholding tax imposed on such dividends, if any, will be treated as a foreign income tax eligible for credit against a U.S. holder’s U.S. federal income tax liability (or at a U.S. holder’s election if it does not elect to claim a foreign tax credit for any foreign taxes paid during the taxable year, all foreign income taxes paid may instead be deducted in computing such U.S. holder’s taxable income).  In general, special rules will apply to the calculation of foreign tax credits in respect of dividend income that is subject to preferential rates of U.S. federal income tax.  U.S. holders should be aware that the IRS has expressed concern that parties to whom ADSs are released may be taking actions that are inconsistent with the claiming of foreign tax credits by U.S. holders of ADSs. Accordingly, the discussion above regarding the creditability of Brazilian withholding tax on dividends could be affected by future actions that may be taken by the IRS.

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Taxation of Capital Gain

          Deposits and withdrawals of preferred shares by U.S. holders in exchange for ADSs will not result in the realization of gain or loss for U.S. federal income tax purposes.

          In general, gain or loss, if any, realized by a U.S. holder upon a sale or other taxable disposition of preferred shares or ADSs will be subject to U.S. federal income taxation as capital gain or loss in an amount equal to the difference between the amount realized on the sale or other taxable disposition and such U.S. holder’s adjusted tax basis in the preferred shares or ADSs.  Such capital gain or loss will be long-term capital gain or loss if at the time of sale or other taxable disposition the preferred shares or ADSs have been held for more than one year.  Under current U.S. federal income tax law, net long-term capital gain of certain U.S. holders (including individuals) is eligible for taxation at preferential rates.  The deductibility of capital losses is subject to certain limitations under the Code.  Gain, if any, realized by a U.S. holder on the sale or other disposition of preferred shares or ADSs generally will be treated as U.S. source gain for U.S. foreign tax credit purposes.  Consequently, if a Brazilian withholding tax is imposed on the sale or disposition of preferred shares, a U.S. holder that does not receive sufficient foreign source income from other sources may not be able to derive effective U.S. foreign tax credit benefits in respect of such Brazilian withholding tax.  Alternatively, a U.S. holder may take a deduction for all foreign income taxes paid during the taxable year if it does not elect to claim a foreign tax credit for any foreign taxes paid during the taxable year.  U.S. holders should consult their own tax advisors regarding the application of the foreign tax credit rules to their investment in, and disposition of, preferred shares or ADSs.

Passive Foreign Investment Company Rules

          Based upon our current and projected income, assets and activities, we do not expect the preferred shares or ADSs to be considered shares of a PFIC for our current fiscal year or for future fiscal years.  However, because the determination of whether the preferred shares or ADSs constitute shares of a PFIC will be based upon the composition of our income and assets, and entities in which we hold at least a 25% interest, from time to time, and because there are uncertainties in the application of the relevant rules, there can be no assurance that the preferred shares or ADSs will not be considered shares of a PFIC for any fiscal year.  If the preferred shares or ADSs were shares of a PFIC for any fiscal year, U.S. holders (including certain indirect U.S. holders) may be subject to adverse tax consequences, including the possible imposition of an interest charge on gains or “excess distributions” allocable to prior years in the U.S. holder’s holding period during which we were determined to be a PFIC.  If we are deemed to be a PFIC for a taxable year, dividends on our ADSs would not be “qualified dividend income” subject to preferential rates of U.S. federal income taxation.  U.S. holders should consult their own tax advisors regarding the application of the PFIC rules to the preferred shares or ADSs.

U.S. Backup Withholding and Information Reporting

          A U.S. holder of preferred shares or ADSs may, under certain circumstances, be subjected to information reporting and “backup withholding” with respect to certain payments to such U.S. holder, such as dividends  paid by our company or the proceeds of a sale of preferred shares or ADSs, unless such U.S. holder (i) is a corporation or comes within certain other exempt categories, and demonstrates this fact when so required, or (ii), in the case of backup withholding, provides a correct taxpayer identification number, certifies that it is a U.S. person and that it is not subject to backup withholding, and otherwise complies with applicable requirements of the backup withholding rules.  Backup withholding is not an additional tax.  Any amount withheld under these rules will be creditable against a U.S. holder’s U.S. federal income tax liability, provided the requisite information is timely furnished to the IRS.

F.  Dividends and Paying Agents

          Not applicable.

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G.  Statements by Experts

          Not applicable.

H.  Documents on Display

          We are subject to the informational requirements of the Securities Exchange Act of 1934, as amended, pursuant to which we file reports and other information with the Commission.  These materials, including this annual report and the accompanying exhibits, may be inspected and copied at the Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C.  20549.  Copies of the materials may be obtained from the Public Reference Room of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.  The public may obtain information on the operation of the Commission’s Public Reference Room by calling the Commission in the United States at 1-800-SEC-0330.  In addition, material we filed can be inspected at the offices of the New York Stock Exchange at 20 Broad Street, New York, New York 10005, on which our ADSs are listed.

          We also file electronically financial statements and other periodic reports with the CVM.  The CVM website is www.cvm.gov.br.

          Copies of our annual reports on Form 20-F and accompanying documents and our by-laws will be available for inspection at our headquarters or our website at www.vcp.com.br.  The information on our website is not part of this annual report.

I.  Subsidiary Information

          Not required.

ITEM 11.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

          We are exposed to various market risks, including changes in foreign currency exchange rates and interest rates.  Market risk is the potential loss arising from adverse changes in market rates and prices, such as foreign currency exchange rates and interest rates.

General

          We use cross-currency interest rate swap contracts in the market to reduce our foreign currency exposure and also take into account the natural hedge provided by our exports in determining our hedging needs.  We establish strict internal policies with respect to our currency exposure positions and revise these policies from time to time in response to new economic information on the macroeconomic environment in Brazil.  The exposure to foreign currency risk is guided by closely monitored policies.  We also invest in instruments linked to exchange variations.

          We also use cross-currency interest rate swap contracts to mitigate the volatility of foreign exchange rate fluctuations on our U.S. dollar-denominated debt.  The unrealized gains and losses on these contracts are recorded on our balance sheet as assets or liabilities and in our statement of income in “Foreign exchange gains (losses) and unrealized gains (losses) on swaps, net.”

          These financial instruments have been used extensively as part of a defined financial strategy designed to optimize opportunities in the Brazilian foreign exchange and interest rate markets.  Like many other Brazilian exporters, we have had access to U.S. dollar-denominated sources of long-term financing in the form of export prepayments or credits.  Opportunities arise between the lower interest rates payable on the U.S. dollar-denominated export credits and borrowings, the proceeds of which are invested in real-denominated cash, cash equivalents and held-to-maturity investments, which provide higher yields.

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          At present, we, along with other Brazilian companies, have limited sources of long-term financing denominated in reais.  We believe we have access to a sufficient number of foreign-currency financing sources to meet our needs without resorting to more expensive real-denominated financing.

          Our foreign currency debt reflects a strategy to continue raising funds in U.S. dollars, and to invest the proceeds in investments bearing higher interest rates in the Brazilian market.  We succeeded in lengthening the average maturity of our debt over time.  The percentage of our short-term debt (i.e., the debt, including the current portion of long-term debt, maturing within 12 months) compared to our total debt was 40% at December 31, 2004 and 14% at December 31, 2005.

Foreign currency risk

          Our foreign currency exposure gives rise to market risks associated with exchange rate movements against the U.S. dollar.  Foreign currency-denominated liabilities as of December 31, 2004 included borrowings denominated mainly in U.S. dollars.  Our sales outside of Brazil are largely U.S. dollar-denominated, while sales of pulp within Brazil are denominated in reais but based on U.S. dollar prices, with most of our operating costs being denominated in reais.  Our export revenues and cross-currency interest rate swap contracts partially mitigate the exposure arising from our U.S. dollar-denominated debt.  We evaluate the macroeconomic situation and its impact on our financial position on a weekly basis.

          The specific foreign currency risks which have caused us to enter into swap contracts to protect ourselves against a possible devaluation of the real were associated with the exposures generated by our U.S. dollar-denominated (short- and long-term) debt.  The contracts mitigate these risks by committing the counterparties and ourselves to positions in foreign currency, thereby offsetting, to the extent of these contracts, the effects of currency fluctuations on our foreign currency debts.  The management of our net exposure position takes into account a number of current and projected economic factors and market conditions.  At December 31, 2004 and 2005, the notional amounts of our outstanding foreign currency swap contracts were US$ 259 million and US$ 609 million, respectively, and their fair values were US$ 47 million and US$ 77 million (reversal), respectively.  The weighted average pay rates on our outstanding foreign currency swap contracts are floating rate-based on the Certificado de Depósito Interbancário, or CDI.  The fair values of our cross-currency interest rate swap contracts were estimated based on quoted market prices of comparable contracts.  The table below provides information on our debt outstanding as of December 31, 2005.  The amounts have been translated into U.S. dollars based on the exchange rate prevailing on December 31, 2005, as determined by the Central Bank (R$ 2.3407 for US$ 1.00), as of December 31, 2005.

	Expected maturity date
(US$ in millions)	2006		2007		2008		After 2008		Total
Short-term debt:
Reais
U.S. dollars		132								132
Total short-term debt (including current portion of long-term debt)		132								132
Reais		34		33		33		57		157
U.S. dollars		45		6		64		1,092		1,207
Total long-term debt		79		39		97		1,149		1,364
Total		211		39		97		1,149		1,496

          We incurred most of this debt mainly to mitigate our risk in relation to the position of the interest rate differentials between real-denominated financial instruments (cash and cash equivalents and held-to-maturity investments) and our foreign currency export credits and to finance the acquisition of Ripasa in a venture with Suzano Bahia Sul Celulose e Papel.  See “Item 5—Operating and Financial Review and Prospects—Liquidity and capital resources—Capital expenditures.”  We believe that, given our level of assets and resources, we should have sufficient cash and sources of working capital to meet our debt service.

97

          On December 31, 2005, the carrying value of our U.S. dollar-denominated short-term debt was US$ 132 million and our U.S. dollar- and real-denominated long-term debt, including the current portion, was US$ 1,364 million.

          We estimate that the foreign currency-denominated component of our paper costs does not exceed 10% of our total costs.  We are self-sufficient in pulp, the principal raw material used in producing paper products.  The energy, labor and other domestic components of our paper production costs are denominated in reais and, together with the cost of pulp, account for almost 90% of our paper costs.  Although, in the long term, there is a clear correlation between international U.S. dollar-denominated pulp prices, reflecting the international nature of this commodity, and the prices we are able to charge, fluctuations in exchange rate are not always immediately reflected in our domestic prices.  In the long term, when the international price of pulp increases, the domestic price follows and our domestic sales in reais also increase.  In the short term, our domestic prices may deviate from the international U.S. dollar-denominated pulp prices.  Timing of the fluctuations in exchange rate reflected in our prices may vary with the type of product, generally as follows:

• immediately for commodity products, such as pulp and uncoated wood-free paper;

• with a relatively short lag for coated papers, due to the sale of imported products in the domestic market; and

• with some lag for other specialty papers with limited exposure to external factors.

          The percentage of our debt subject to fixed and floating interest rates is as follows:

	As of December 31,
	2005			2004
Floating rate debt:
•     Denominated in U.S. dollars		86	%		85	%
•     Denominated in reais		3	%		4	%
Subtotal		89	%		89	%
Fixed rate debt:
•     Denominated in U.S. dollars		11	%		11	%
Subtotal		11	%		11	%
Total		100	%		100	%

          Our cross-currency interest rate swap contracts are effected to mitigate the potential foreign currency exchange losses which would be generated by our U.S. dollar-denominated liabilities in the event of a devaluation.  We make our export sales in U.S. dollars, which helps us to mitigate potential losses in the event of a devaluation.

Interest rate risk

          Our floating interest rate exposure is primarily subject to the variations of LIBOR as it relates to U.S. dollar-denominated borrowings and to the variations of the TJLP, an annual long-term interest rate that includes an inflation factor and is determined quarterly by the Central Bank.  On December 31, 2004, the TJLP was fixed at 9.75%, and during 2004 averaged 11% per year.  On December 31, 2005, the TJLP was fixed at 9.75%, and during 2005 averaged 9.75% per year.  The interest rate on our cash, cash equivalents and held-to-maturity investments denominated in reais is based on the CDI rate, the benchmark interest rate set by the interbank market on a daily basis.

98

          The table below provides information about our significant interest rate-sensitive instruments.  For variable interest rate debt, the rate presented is the weighted average rate calculated as of December 31, 2005.

	2006		2007		2008		After 2008		Total		Fair value(1)
	(U.S.$in millions)
Assets:
Cash and cash equivalents denominated in reais		223		—		—		—		223		223
Cash and cash equivalents denominated in U.S. dollars		38		—		—		—		38		38
Available-for-sales investments denominated in reais		207		54		—		—		261		261
Available-for-sales investments denominated in U.S. dollars		30		—		155		—		185		185
Total cash, cash equivalents and available-for-sales investments		498		54		155		—		707		707
Liabilities:
Short-term debt:
Floating rate, denominated in U.S. dollars		132		—		—		—		132		132
Floating rate, denominated in reais										—		—
Total short-term debt		132		—		—		—		132		132
Long-term debt:
Floating rate, denominated in U.S. dollars		—		—		—		—		—		7
Fixed rate, denominated in U.S. dollars		46		6		64		1,092		1,207		1,207
Floating rate, denominated in reais		33		33		33		57		157		157
Total long-term debt		79		39		97		1,149		1,364		1,371
Total debt		211		39		97		1,149		1,496		1,503

(1)	The methodology used to determine the fair value included in the table above is described in note 13 to our audited consolidated financial statements.
(2)	Held-to-maturity or Available-for-sale investments.

Cross-currency interest rate swaps

          We primarily use derivatives to hedge our U.S. dollar-denominated debt.  Because a large portion of our debt is denominated in U.S. dollars, we protect ourselves from the effects of unfavorable exchange movements by entering into cross-currency interest rate swap contracts or Brazilian public bonds.  See note 13 to our audited consolidated financial statements for a discussion of the accounting policies for derivatives and other financial instruments.

99

          Our counterparties are financial institutions, including Banco Votorantim, a member of the Votorantim group.  Banco Votorantim is a commercial banking institution and is subject to Central Bank regulations.  The rates that we negotiate with Banco Votorantim generally reflect those available in the current financial market.  Our treasury department also compares these rates to those offered by other banks before closing the deal in order to assure that we receive the most favorable terms and conditions available for each transaction.

          At December 31, 2005, almost all swap transactions were conducted with Banco Votorantim and refer to reais-to-U.S. dollar swap contracts.  Our swap activities are contracted specifically to fulfill our needs.  See note 12 to our audited consolidated financial statements.

          The table below provides information about our cross-currency interest rate swap contracts:

	As of December 31, 2005
	Expected maturity date
Cross-currency interest rate swap contracts notional amount	2006	2007	2008	After 2008	Total	Fair Value of assets (liabilities)(1)		Average paying rate in reais	Average  receiving rate
U.S. dollars to reais	350	150	19	—	519	(71	)	100% of Brazilian Interbank Interest Rate	11.3% per year
Yen to U.S. dollars	—	—	—	45	45	(6	)	4.25% per year	7.92% per year
Total	350	150	19	45	564	(77	)

(1) The methodology used to determine the fair value included in the table above is described in note 13 to our audited consolidated financial statements.

ITEM 12.  DESCRIPTION OF SECURITIES OTHER THAN EQUITY SECURITIES

          Not applicable.

PART II

ITEM 13.  DEFAULTS, DIVIDEND ARREARAGES AND DELINQUENCIES

          None.

ITEM 14.  MATERIAL MODIFICATIONS TO THE RIGHTS OF SECURITY HOLDERS AND USE OF PROCEEDS

          None.

ITEM 15.  CONTROLS AND PROCEDURES

          Management, with the participation of our chief executive officer and our chief financial officer, after evaluating the effectiveness of our disclosure controls and procedures (as defined in the U.S. Securities Exchange Act of 1934 under Rules 13a-15(e)) as of the end of the period covered by this annual report, has concluded that, as of that date, our disclosure controls and procedures were effective to provide reasonable assurance that information required to be disclosed by us in the reports we file or submit under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms, and is accumulated and communicated to management, including our chief executive officer and chief financial officer, to allow timely decisions regarding required disclosure.

100

          There was no change in our internal control over financial reporting that occurred in the period covered by this annual report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

ITEM 16A.  AUDIT COMMITTEE FINANCIAL EXPERT

          On April 27, 2005 we determined that Miguel Roberto Gherrize is our “audit committee financial expert,” serving on our Conselho Fiscal.  Mr. Gherrize is independent, as required by rules of the New York Stock Exchange. 

ITEM 16B.  CODE OF ETHICS

          Our board of directors has adopted a code of ethics that applies to the members of our financial department, including our chief executive officer, our chief financial officer and our chief accounting officer.  No waivers, either explicit or implicit, of provisions of the code of ethics were granted to our chief executive officer, chief financial officer or chief accounting officer in 2005.  A copy of our Code of Ethics has been filed as Exhibit 11.1 to this annual report.

          Our code of ethics addresses, among others, the following topics:

• honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

• full, fair, accurate, timely, and understandable disclosure in reports and documents that we file with, or submit to, the SEC and in other public communications made by us;

• compliance with applicable governmental laws, rules and regulations; and

• the prompt internal reporting of violations of the code of the appropriate person or persons identified in the code.

ITEM 16C.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

          The following table sets forth by category of service the total fees for services performed by PricewaterhouseCoopers Auditores Independentes during the fiscal years ended December 31, 2005, 2004 and December 31, 2003.

	Year Ended December 31,
	2005		2004		2003
	(in thousands of U.S. dollars)
Audit Fees	US$	285	US$	246	US$	107
Audit-Related Fees(1)		5		29		199
All Other Fees		—		74		5
Total	US$	290	US$	349	US$	311

(1) Includes fees charged in connection with the review of the income tax returns of Votorantim Celulose e Papel S.A.

101

Audit Fees

          Audit fees in 2005, 2004 and 2003 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes in connection with the audit of our annual financial statements and reviews of quarterly financial statements and statutory audits of our subsidiaries. 

Audit-Related Fees

          Audit-related fees in 2005, 2004 and 2003 consisted of the aggregate fees billed by PricewaterhouseCoopers Auditores Independentes in connection with analysis of compliance by us of Sarbanes-Oxley provisions and services related to audits performed in connection with public offerings of our shares. 

Tax Fees

          We did not pay any tax fees in 2005, 2004 and 2003.

All Other Fees

          The aggregate of all other fees, other than those described above billed by PricewaterhouseCoopers Auditores Independentes in 2004 and 2003 were related to risk management advice and analysis or review of business plan or planning processes (but not design or implementation thereof or performance of management functions). 

Pre-Approval Policies and Procedures

          Our Board of Directors approves all audit, audit-related, tax and other services provided by PricewaterhouseCoopers Auditores Independentes.  Any services provided by PricewaterhouseCoopers Auditores Independentes that are not specifically included within the scope of the audit must be pre-approved by our board of directors in advance of any engagement.  Under the Sarbanes-Oxley Act of 2002, audit committees are permitted to approve certain fees for audit-related, tax and other services pursuant to a de minimis exception prior to the completion of an audit engagement.  In 2005, 2004 and 2003 none of the fees paid to PricewaterhouseCoopers Auditores Independentes were approved pursuant to the de minimis exception.

ITEM 16D. EXEMPTIONS FROM THE LISTING STANDARDS FOR AUDIT COMMITTEES

          Under the listed company audit committee rules of the NYSE and the SEC, effective July 31, 2005, we had to comply with Exchange Act Rule 10A-3, which requires that we either establish an audit committee composed of members of the Board of Directors that meets specified requirements or designate and empower our Conselho Fiscal to perform the role of the audit committee in reliance on the exemption set forth in Exchange Act Rule 10A-3(c)(3).  In our assessment, our Conselho Fiscal is able to act independently in performing the responsibilities of an audit committee under the Sarbanes-Oxley Act of 2002 and to satisfy the other requirements of Exchange Act Rule 10A-3.  For a further discussion of our Conselho Fiscal and the audit committee exemption, see “Item 6C.  Board Practices—Conselho Fiscal.”

ITEM 16E. PURCHASES OF EQUITY SECURITIES BY THE ISSUER AND AFFILIATED PURCHASERS

          In 2005, we sold 126,400 preferred shares held in treasury in the market for a total amount of US$ 1 million, and we repurchased 1,050,700 preferred shares at a total cost of US$ 12 million to be held in treasury and sold and/or cancelled at a future date.  At December 31, 2005 a total of 1,081,500 preferred shares were held in treasury.

102

PART III

ITEM 17.  FINANCIAL STATEMENTS

          Not applicable.

ITEM 18.  FINANCIAL STATEMENTS

          The following financial statements are filed as part of this annual report, together with the report of Independent Registered Public Accounting Firm:

Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets as of December 31, 2005 and 2004	F-3
Consolidated Statements of Income for the years ended December 31, 2005, 2004 and 2003	F-5
Consolidated Statements of Cash Flows for the years ended December 31, 2005, 2004 and 2003	F-7
Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2005, 2004 and 2003	F-9
Notes to Consolidated Financial Statements	F-11

          Aracruz - Report of Independent Registered Public Accounting Firm

          All schedules for which provision is made in the applicable accounting regulations of the Commission are not required under the related instructions or are inapplicable and therefore have been omitted.

ITEM 19.  EXHIBITS 

Exhibit Number	Description
1*	English translation of the By-laws.
2**	Form of Amended and Restated Deposit Agreement among us, The Bank of New York, as depositary, and the Owners and Beneficial Owners of American Depositary Receipts, including the form of American Depositary Receipts.
2.4***	Indenture, dated January 23, 2004, among Voto-Votorantim Overseas Trading Operations III Limited, as issuer, The Bank of New York, as trustee, The Bank of New York, as transfer agent, paying agent and registrar, The Bank of Tokyo-Mitsubishi Ltd., London Branch, as principal paying agent, and Votorantim Participações S.A., Votorantim Celulose e Papel S.A., Cimento Rio Branco S.A., and Companhia Níquel Tocantins, as guarantors.
2.5+	Indenture, dated June 24, 2005, among Voto-Votorantim Overseas Trading Operations IV Limited, as issuer, The Bank of New York, as trustee, The Bank of New York, as transfer agent, paying agent and registrar, The Bank of Tokyo-Mitsubishi Ltd., London Branch, as principal paying agent, and Votorantim Participações S.A., Votorantim Celulose e Papel S.A., Cimento Rio Branco S.A., and Companhia Níquel Tocantins, as guarantors.
3.3****	Terms of Adhesion to the Shareholders’ Agreement of Aracruz Celulose S.A., dated November 1, 2001.

103

4.1+	US$ 102,000,000 Export Prepayment Agreement dated as of May 12, 2004 among VCP Exportadora e Participações Ltda, Votorantim Celulose e Papel S.A. - VCP, VCP Trading N.V., ABN AMRO Bank N.V., and Banco Santander Central Hispano, London Branch.
4.2+	US$ 123,000,000 Offshore Facility Agreement dated as of July 5, 2004 among VCP Trading N.V., Votorantim Celulose e Papel S.A. – VCP, ABN AMRO Bank N.V., and Banco Bradesco.
4.3+	US$ 50,000,000 Export Prepayment Agreement dated as of March 29, 2005 by and between Votorantim Celulose e Papel S.A. – VCP and ABN AMRO Bank N.V.
4.4+	US$ 100,000,000 Export Prepayment Agreement dated as of July 22, 2005 among Votorantim Celulose e Papel S.A. - VCP, VCP Exportadora e Participações Ltda, VCP Trading N.V. and Banco Santander Central Hispano, London Branch.
6+	See Note 2(m) to our financial statements for information explaining how earnings per share information was calculated.
8+	See Note 2(h) to our financial statements for information regarding our subsidiaries.
11.1***	English translation of Code of Ethics.
12.1+	Rule 13a-14(a)/15(d)-14(a) Certificate of Chief Executive Officer.
12.2+	Rule 13a-14(a)/15(d)-14(a) Certificate of Chief Financial Officer.
13.1+	Section 1350 Certification of Chief Executive Officer.
13.2+	Section 1350 Certification of Chief Financial Officer.

*	Incorporated herein by reference to our annual report on Form 20-F filed on June 30, 2005 (File No. 001-15018).
**	Incorporated herein by reference to our registration statement on Form F–6 filed on March 25, 2002 (File No. 333-84964).
***	Incorporated herein by reference to our annual report on Form 20-F filed on June 30, 2004 (File No. 001-15018).
****	Incorporated herein by reference to our annual report on Form 20-F filed on May 21, 2002 (File No. 001-15018).
+	Filed herewith.

104

SIGNATURES

     The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

VOTORANTIM CELULOSE E PAPEL S.A.
By:	/s/ Valdir Roque
Name:	Valdir Roque
Title:	Chief Financial Officer
By:	/s/ José Luciano Duarte Penido
Name:	José Luciano Duarte Penido
Title:	Chief Executive Officer

Date: June  29, 2006

105

Votorantim Celulose
e Papel S.A.
Consolidated Financial Statements
as at December 31, 2005 and 2004,
and for the Three Years Ended
December 31, 2005
and Report of Independent Registered
Public Accounting Firm

	Page
Index to Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheet	F-3
Consolidated Statements of Income	F-5
Consolidated Statements of Cash Flows	F-7
Consolidated Statements of Changes in Shareholders’ Equity	F-9
Notes to the Consolidated Financial Statements	F-11

Report of Independent Registered
Public Accounting Firm

To the Board of Directors and Shareholders
Votorantim Celulose e Papel S.A.

In our opinion, based on our audits and the report of other auditors, the accompanying consolidated balance sheets and the related consolidated statements of income, of changes in shareholders’ equity and of cash flows present fairly, in all material respects, the financial position of Votorantim Celulose e Papel S.A. and its subsidiaries at December 31, 2005 and 2004, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2005 in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We did not audit the financial statements as at and for the year ended December 31, 2005 and 2004, of Aracruz Celulose S.A., an affiliate, the investment in which totaled US$ 262 million and US$ 243 million respectively and for which the equity in earnings of affiliate, included in net income, totaled US$ 42 million and US$ 28 million for the years then ended. Those statements were audited by other auditors whose report thereon has been furnished to us, and our opinion expressed herein, insofar as it relates to the amounts included for Aracruz Celulose S.A., is based solely on the report of the other auditors. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits and the report of other auditors provide a reasonable basis for our opinion.

São Paulo, January 17, 2006

PricewaterhouseCoopers
Auditores Independentes

F - 2

Votorantim Celulose e Papel S.A.

Consolidated Balance Sheets at December 31

In millions of U.S. dollars, except number of shares

	2005		2004
Assets
Current assets
Cash and cash equivalents		261		151
Held-to-maturity securities		—		69
Available for sale securities		446		—
Trade accounts receivable, net		212		175
Inventories		157		130
Recoverable taxes		57		49
Deferred income tax		7		—
Other		24		13
		1,164		587
Investment in affiliates, including goodwill		596		249
Property, plant and equipment, net		1,758		1,443
Other assets
Held-to-maturity securities		—		209
Unrealized gains from cross currency interest rate swaps		—		47
Recoverable taxes		31		32
Deferred income tax		89		43
Judicial deposits		87		26
Other		6		8
		213		365
		3,731		2,644

F - 3

Votorantim Celulose e Papel S.A.
Consolidated Balance Sheets at December 31
In millions of U.S. dollars, except number of shares	(continued)

	2005			2004
Liabilities and shareholders’ equity
Current liabilities
Trade payables		64			45
Short-term debt		132			79
Current portion of long-term debt		79			297
Unrealized loss from currency interest rate swaps		6			—
Payroll, profit sharing and related charges		20			15
Income taxes		—			18
Taxes payables		21			8
Interest attributable to capital payable		103			—
Other		20			11
		445			473
Long-term liabilities
Long-term debt		1,285			569
Unrealized loss from currency interest rate swaps		71			—
Accrued liabilities for legal proceedings		172			104
Post-retirement benefits		21			—
		1,549			673
Commitments and contingencies (Note 14)
Shareholders’ equity
Preferred shares, no par value, 280,000,000 shares authorized, 85,911,046 shares issued and outstanding		785			785
Common shares, no par value, 140,000,000 shares authorized, 105,702,452 shares issued and outstanding		1,053			1,053
Additional paid-in capital		29			29
Treasury shares, at cost, 2005 - 1,081,500 preferred shares; 2004 - 157,200 preferred shares		(13	)		(2	)
Appropriated retained earnings		72			60
Unappropriated retained earnings		487			440
Accumulated other comprehensive deficit
Cumulative translation adjustments		(687	)		(867	)
Net unrealized gains on available for sale securities		11			—
		1,737			1,498
		3,731			2,644

The accompanying notes are an integral part of the consolidated financial statements.

F - 4

Votorantim Celulose e Papel S.A.

Consolidated Statements of Income

In millions of U.S. dollars, except number of shares

	2005			2004			2003
Net operating revenue
Domestic sales (net of sales taxes: 2005 - US$183;  2004 - US$119 and 2003 - US$123)		564			512			443
Export sales (including related party sales: 2003 - US$58)		566			498			373
		1,130			1,010			816
Operating costs and expenses
Cost of sales		654			518			421
Selling and marketing		138			121			82
General and administrative		55			40			33
Other operating expenses, net		36			6			12
		883			685			548
Operating income		247			325			268
Non-operating income (expense)
Financial income		79			40			65
Financial expense		(119	)		(69	)		(71	)
Foreign exchange gain (loss) and unrealized gain (loss) on swaps, net		(5	)		12			(14	)
		(45	)		(17	)		(20	)
Income before taxes on income and equity in affiliates		202			308			248
Current income tax expense
Domestic		(45	)		(47	)		(37	)
Foreign		(6	)		(6	)		(3	)
Deferred income tax benefit		59			17			17
Income before equity in affiliates		210			272			225
Equity in earnings of affiliates		54			31			19
Net income		264			303			244

F - 5

Votorantim Celulose e Papel S.A.
Consolidated Statements of Income
In millions of U.S. dollars, except number of shares	(continued)

	2005		2004		2003
Net income applicable to preferred shares		124		143		115
Net income applicable to common shares		140		160		129
Net income		264		303		244
Basic and diluted earnings - in U.S. dollars
Per preferred share or ADS		1.46		1.67		1.34
Per common share		1.33		1.51		1.22
Weighted average number of shares outstanding (thousand)
Preferred		85,451		85,773		85,510
Common		105,702		105,702		105,702

The accompanying notes are an integral part of the consolidated financial statements.

F - 6

Votorantim Celulose e Papel S.A.

Consolidated Statements of Cash Flows

In millions of U.S. dollars

	2005			2004			2003
Cash flows from operating activities
Net income		264			303			244
Adjustments to reconcile net income to cash provided by operating activities
Foreign exchange (gain) loss and unrealized (gain) loss on swaps, net		5			(12	)		14
Equity in earning of affiliates		(54	)		(31	)		(19	)
Deferred income tax		(59	)		(17	)		(17	)
Depreciation and depletion		117			89			72
Loss on disposal of property, plant and equipment		9			5			7
Decrease (increase) in assets
Trade accounts receivable		(4	)		(17	)		5
Inventories		(6	)		(21	)		(28	)
Other assets		(38	)		(15	)		(3	)
Decrease in liabilities		(11	)		(29	)		(37	)
Net cash provided by operating activities		223			255			238
Cash flows from investing activities
Held-to-maturity securities purchased, net of proceeds on sale		6			48			55
Available for sale securities purchased, net of proceeds on sale and matured securities		(110	)		—			—
Acquisition of an interest in affiliate (Note 4 (a))		(275	)		—			—
Interest attributable to capital and dividends received		11			22			13
Acquisition of property, plant and equipment		(247	)		(218	)		(165	)
Net cash used in investing activities		(615	)		(148	)		(97	)
Cash flows from financing activities
Short-term debt		55			42			(23	)
Long-term debt
Third parties
Borrowings		869			347			364
Repayments		(324	)		(558	)		(420	)
Related parties
Borrowings		43			46			163
Repayments		(39	)		(30	)		(8	)
Treasury shares
Acquisition		(12	)		(2	)		—
Sales		1			1			3
Dividends paid		(88	)		(104	)		(40	)
Net cash provided by (used in) financing activities		505			(258	)		39

F - 7

Votorantim Celulose e Papel S.A.
Consolidated Statements of Cash Flows
In millions of U.S. dollars	(continued)

	2005			2004			2003
Effect of exchange rate changes on cash and cash equivalents		(3	)		12			20
Net increase (decrease) in cash and cash equivalents		110			(139	)		200
Cash and cash equivalents at beginning of year		151			290			90
Cash and cash equivalents at end of year		261			151			290
Supplemental cash flow information
Cash paid during the year for
Income tax		43			34			31
Interest		65			61			59
Non-cash transactions
Acquisition of property, plant and equipment financed by suppliers		—			—			2

The accompanying notes are an integral part of the consolidated financial statements.

F - 8

Votorantim Celulose e Papel S.A.

Consolidated Statements of Changes in Shareholders' Equity

In millions of U.S. dollars, except number of shares

	2005			2004			2003
Preferred shares
At beginning of year		785			553			553
Transferred from unappropriated retained earnings		—			232			—
At end of year		785			785			553
Common shares
At beginning and end of year		1,053			767			767
Transferred from unappropriated retained earnings		—			286			—
At end of year		1,053			1,053			767
Additional paid-in-capital
At beginning of year		29			29			24
Gain on sale of treasury shares		—			—			5
At end of year		29			29			29
Treasury shares
At beginning of year		(2	)		(1	)		(4	)
Preferred shares sold (2005 - 126,400; 2004 - 114,500 and 2003 - 713,600)		1			1			3
Preferred shares purchased (2005 - 1,050,700; 2004 - 263,800)		(12	)		(2	)		—
At end of year		(13	)		(2	)		(1	)
Appropriated retained earnings
At beginning of year		60			46			31
Transferred from unappropriated retained earnings		12			14			15
At end of year		72			60			46
Unappropriated retained earnings
At beginning of year		440			773			584
Net income		264			303			244
Transferred to preferred shares		—			(232	)		—
Transferred to common shares		—			(286	)		—
Transferred to appropriated retained earnings		(12	)		(14	)		(15	)
Dividends and interest attributed to capital
Preferred		(97	)		(49	)		(19	)
Common		(108	)		(55	)		(21	)
At end of year		487			440			773

F - 9

Votorantim Celulose e Papel S.A.
Consolidated Statements of Changes in Shareholders' Equity
In millions of U.S. dollars, except number of shares	(continued)

	2005			2004			2003
Cumulative translation adjustments
At beginning of year		(867	)		(981	)		(1,187	)
Gain for the year		180			114			206
At end of year		(687	)		(867	)		(981	)
Net unrealized gains on available for sale securities
At beginning of year (2004 and 2003 in affiliates)		—			(1	)		(1	)
Transferred to results of operations (retained earnings)		—			1			—
Gain for the year, net of tax of US$6		11			—			—
At end of year		11			—			(1	)
Shareholders’ equity at end of year		1,737			1,498			1,185
Comprehensive income
Net income		264			303			244
Unrealized gains on available for sale securities		11			—			—
Translation adjustments		180			114			206
Comprehensive income		455			417			450

The accompanying notes are an integral part of the consolidated financial statements.

F - 10

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

1	Operations
	Votorantim Celulose e Papel S.A. and its subsidiaries (the “Company”, “VCP” or “we”) is a limited liability company constituted in accordance with the laws of the Federative Republic of Brazil and headquartered in the state of São Paulo.
	We produce eucalyptus pulp which we use in our own integrated paper manufacturing facilities or, to a lesser extent, sell in the domestic and foreign markets. We also have forestry operations which produce the pulp wood required for our production. Our business has experienced, and is likely to continue to experience, cycles relating to available industry capacity and general industry economic conditions. Our sales (volumes and prices) are affected by such conditions which are beyond our control. We are a member of the Votorantim Group, which has other interests in Brazil and abroad, principally in cement, metallurgy, agribusiness, chemicals and financial services.
	Our preferred shares are traded on the São Paulo Stock Exchange under the symbol “VCPA4.” Our American Depositary Shares (“ADSs”) are traded on the New York Stock Exchange under the symbol “VCP”. Each ADS represents one of our preferred shares.
2	Significant Accounting Policies
(a)	Basis of presentation
	The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”), which differ in certain respects from the accounting principles applied by the Company in its financial statements prepared in accordance with accounting practices generally accepted in Brazil (“Brazilian GAAP”) as filed with the Comissão de Valores Mobiliários (Brazilian Securities Commission or “CVM”), or for other statutory purposes in Brazil.
(b)	Translation of financial statements
	We transact the majority of our business in Brazilian Reais (R$) and, therefore, have adopted the Brazilian Real as the functional currency and have selected the United States dollar as our reporting currency. The U.S. dollar amounts for all years presented have been translated from Reais amounts in accordance with the criteria set forth in Statement of Financial Accounting Standards (“SFAS”) 52, “Foreign Currency Translation”. Assets and liabilities are translated from the functional currency to the reporting currency using the official exchange rates reported by the Brazilian Central Bank at the balance sheet date (December 31, 2005 - US$1.00 : R$2.3407; December 31, 2004 - US$1.00 : R$2.6544; December 31, 2003 - US$1.00 : R$2.8892).

F - 11

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	Revenue, expenses and gains and losses are translated from the functional currency to the reporting currency using the monthly weighted-average exchange rates for the year. Capital accounts are recorded at historical exchange rates. Translation gains and losses are recorded in the Cumulative Translation Adjustments account (“CTA”) in shareholders’ equity.
(c)	Principles of consolidation
	Our consolidated financial statements include the accounts of VCP and our directly and indirectly controlled subsidiaries: VCP Exportadora e Participações Ltda. (“VEP”), VCP Florestal Ltda. (merged into VCP on January 1, 2005), St. Helen Holding III B.V., Normus Emprendimentos e Participações Ltda., Newark Financial Inc. (“Newark”), VCP Overseas Holding KFT, VCP North America Inc. (United States) and VCP Trading N.V. (Netherlands Antilles), all of which are wholly owned. Significant intercompany accounts and transactions have been eliminated in the consolidation. The 12.35% owned equity investee, Aracruz Celulose S.A. (“Aracruz”), in which we acquired our interest during 2001 and our 50% owned equity investees, Voto - Votorantim Overseas Trading Operations N.V. (“VOTO”), Voto - Votorantim Overseas Trading Operations II Limited. (“VOTO II”) and Voto - Votorantim Overseas Trading Operations IV Limited. (“VOTO IV”) respectively, are accounted for using the equity method.
	On March 31, 2005, Ripasa Participações S.A. (“Ripar”) a joint venture in which we own 50%, acquired a 46.06% interest in the total capital and 77.59% interest in the voting capital of Ripasa S.A. Celulose e Papel (“Ripasa”), a Brazilian pulp and paper producer. We account for our interest in Ripar using the equity method of accounting.
(d)	Cash and cash equivalents
	We consider all highly liquid investments with a maturity at acquisition of three months or less to be cash equivalents.
(e)	Available for sale securities
	We consider debt securities as available for sale securities when we intend to sell the securities before its maturity. Available for sale securities are presented based on quoted market prices and the unrealized gain or loss, net of taxes, is recorded in shareholders’ equity until the maturity or sale date, when the gain or loss is transferred to the financial income in the statement of income.
(f)	Held-to-maturity investments
	We consider debt securities as held-to-maturity when we intend and have the ability to hold the securities to maturity. Held-to-maturity securities are carried at cost plus accrued income which is included in financial income in the statement of income.

F - 12

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(g)	Inventories
	Inventories, including timber, are stated at average acquisition or production cost, which is lower than market.
(h)	Investment in affiliates, including goodwill
	Investments in affiliates in which we have the ability to exercise significant influence over the operating and financial policies are accounted for under the equity method.
	Goodwill as well as other intangible assets with indefinite lives is tested annually for impairment.
(i)	Property, plant and equipment
	Property, plant and equipment are stated at cost of acquisition or construction, including interest during the construction period. Expenditures which materially extend the useful lives of the existing facilities and equipment are capitalized. We depreciate property, plant and equipment using the straight-line method at rates we judge to be compatible with the useful lives, principally 25 years for plant and equipment, 10 years for furniture and fixtures and five years for vehicles. Depletion of forests is computed on the unit-of-production method, based on the volume of timber harvested in each period. Software costs capitalized are amortized on a straight-line basis over five years.
	Forest development costs, primarily project implementation costs (preparation of soil, planting, pest control and clearing etc.) and on-going development costs are capitalized as incurred. As a result of improvements in forest management techniques, including genetic improvement in trees, we harvest and replant our forests approximately every seven years. Capitalized costs are expensed at the time of each harvest.
	We review our property, plant and equipment for possible impairment whenever events or changes in circumstances indicate that the carrying value of an asset or group of assets may not be recoverable on the basis of undiscounted future cash flows. The reviews are carried out at the lowest level of groups of assets to which we are able to attribute identifiable future cash flows. Asset groups are forestry projects or production facilities for paper and pulp. We adjust the net book value of the underlying assets if the sum of the expected future cash flows is less than book value. These reviews to date have not indicated the need to recognize any impairment.
(j)	Income taxes
	Brazilian taxes on income consist of federal income and social contribution taxes, the latter being a federal tax based on adjusted taxable income determined under Brazilian tax regulations. There are no taxes levied by state or local authorities on income in Brazil.

F - 13

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	For the purposes of these financial statements, we have applied SFAS 109 “Accounting for Income Taxes”, for all periods presented. The effect of adjustments made to reflect the requirements of US GAAP as well as the differences between the tax basis of non-monetary assets have been recognized as temporary differences for the purpose of recording deferred income taxes.
	Current and non-current deferred tax assets and liabilities are presented separately.
(k)	Revenues and expenses
	We recognize revenue and associated costs of sales at the time our products are delivered to our customers or when title and associated risks pass to our customers. Revenue is recorded net of sales returns of US$7 in 2005 (US$6 in 2004 and US$8 in 2003). Our customers that purchase on credit agree to payment terms that effectively include finance charges. The finance charge on each sale is the difference between the amount the customer agrees to pay at the due date and the cash sale price. The finance charges are recognized over the payment period and are included in financial income. Recognition of revenue for our two segments and for domestic and export sales is based on the following principles:
	Paper - domestic market
	Sales are either on cash or credit terms (normally 30, 60, 90 days) or through our vendor program. Credit sales receivables are discounted to present values as our price list is dependent on the length of credit granted. Revenue is recognized when the customer takes delivery of the product either upon delivery to the customer’s carrier (FOB) or premises (CIF). Sales through our vendor program are made to certain of our pre-qualifying domestic customers, and represented approximately 22% of our domestic sales in 2005 (2004 - 21%; 2003 - 22%). Under the vendor program, the customer agrees to pay the bank and the bank in turn pays us on behalf of the customer for the purchase price of the product. We guarantee full repayment of the loan for which the maximum allowable term for payment is generally 180 days, though in the case of a few customers, we extend the term to 360 days.
	We estimate that for 2005, 2004 and 2003, an average of approximately 2% of our total number of regular domestic customers (approximately 22%, 21% and 22%, respectively, of total domestic sales value) obtained our guarantee for their loans.
	Paper - export market
	Export orders are normally met by own or third party warehouses located close to strategic markets. These sales are recognized when products are delivered to the carrier and risks have passed to the customer, that is, the Company delivers the goods, cleared for export to the carrier nominated by the buyer at the named place. CIF and FOB terms determine timing of revenue recognition.

F - 14

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	Pulp - domestic market
	In 2005 none of our customers qualified for sales through our vendor program (2004 - none; 2003 - one), credit terms of up to 270 days were extended by the bank. Remaining sales are primarily under credit terms which do not exceed 30 days. Revenue recognition is consistent with that applied to paper sales.
	Pulp - export market
	All export orders are normally satisfied by own or third party warehouses located close to strategic markets. These sales are recognized when products are delivered to the carrier and risks have passed to the customer. Exports to Asia are on a cost and freight basis with a named port of destination.
	Research and development expenses are charged to expense as incurred and totaled approximately US$1 in each of 2005, 2004 and 2003. Start-up expenses of new facilities and restructuring charges are also directly expensed.
	Shipping and handling costs are charged to selling and marketing expenses and totaled approximately US$75, US$76 and US$52 in 2005, 2004 and 2003, respectively.
(l)	Comprehensive income
	We report comprehensive income in accordance with SFAS 130, “Reporting Comprehensive Income”, and have elected to present this in the Statement of changes in shareholders’ equity. In our case, comprehensive income comprises the results of our operations, the translation adjustments included in the CTA component of shareholders’ equity and the changes in the fair value of available for sale securities.
(m)	Earnings per share
	In conformity with SFAS 128, “Earnings per Share”, we have presented earnings per share for each class of shares, taking into account that the preferred shares are entitled to a dividend 10% greater than that paid to the common shares. The computation has been made as if the net income for each period will be fully distributed. Earnings may be capitalized or otherwise appropriated; consequently such earnings would no longer be available as dividends. Therefore, there is no assurance that preferred shareholders will receive a 10% premium on undistributed earnings. We may also pay dividends through interest attributed to capital in accordance with our by-laws.
	Following the reverse stock split of our shares and ADSs on October 18, 2004 (Note 16), we retroactively adjusted all shares and ADS data to take account of the reverse split.

F - 15

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(n)	Use of estimates
	The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities and the reported amounts of revenues and expenses.  Estimates are used for, but not limited to: accounting for allowance for doubtful accounts, selection of depreciable lives of assets, asset impairments, tax valuation allowances, contingencies and other similar evaluations. Actual results could differ from those estimates.
(o)	Employee benefits and other related matters
	In March 2000 we launched a defined contribution plan which provides pension and post-retirement benefits (Note 19). We also contribute to the Government pension, welfare and redundancy plans on behalf of our employees and these contributions are expensed as incurred. Most of our employees are members of unions, with which we enter into collective-bargaining arrangements annually. The liability for future compensation for employee vacations is accrued as earned.
	We adopt SFAS 106, “Employers’ Accounting for Post-retirement Benefits Other than Pensions”, which requires a provision for the costs of post-retirement benefits expected to be paid to current, former or inactive employees upon retirement. Expenses relating to benefits we provide to our current employees are expensed as incurred whereas those relating to retired employees (current as well as expected in the future) and their dependents are accounted for in accordance with SFAS 106.
(p)	Environmental matters
	Our production facilities and forestry operations are subject to a number of environmental risks which we seek to mitigate by strict operating procedures and investments in pollution control equipment and systems. Ongoing environmental compliance expenditures are expensed as incurred and new equipment and systems are capitalized. We believe that no provision for losses related to environmental matters is currently required based on prevailing laws and regulations in Brazil.
3	Recently Issued Accounting Pronouncements
	The Financial Accounting Standards Board (“FASB”) recently issued a number of Statements of Financial Accounting Standards and interpretations; neither of the standards or interpretations described below had or are expected to have a material impact on the financial position and results of operations of the Company.

F - 16

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(a)	In November 2004, the FASB issued SFAS 151, Inventory Costs an amendment of ARB 43, Chapter 4, which addresses inventory pricing. This statement clarifies the accounting for abnormal amounts of idle facility expenses, freight, handling costs, and spoilage. Under previous guidance, paragraph 5 of ARB 43, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs that are considered to be “so abnormal” are treated as current period charges. This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of “so abnormal.” In addition, this Statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. The provisions of this Statement shall be effective prospectively for inventory costs incurred during fiscal years beginning after June 15, 2005.
(b)	In December 2004, the FASB issued SFAS 153, “Exchanges of Nonmonetary Assets - an amendment of APB 29”, to eliminate the exception for nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. SFAS 153 is effective for nonmonetary assets exchanges occurring in fiscal periods beginning after June 15, 2005.
(c)	In March 2005, the FASB issued FASB Interpretation 47, “Accounting for Conditional Asset Retirement Obligations”.  This statement requires companies to recognize a liability for the fair value of a legal obligation to perform asset retirement obligations that are conditional on a future event if the amount can be reasonably estimated.  This statement becomes effective on December 31, 2005.  Management has previously evaluated the application of FASB Statement 143 to its operations and concluded that no material effects would be expected.  Management will consider this Interpretation from 2005 in the event a conditional asset retirement obligation arises.
(d)	In June 2005, the FASB issued SFAS 154, “Accounting Changes and Error Corrections, a replacement of APB 20 and FASB Statement 3”.  SFAS 154 requires retrospective application to financial statements of prior periods for changes in accounting principles as if such principles had always been used. The cumulative effect of the change is reflected in the carrying value of assets and liabilities as of the first period presented and the offsetting adjustments are recorded to opening retained earnings. This statement is effective January 1, 2006. The Company will apply this statement as of January 1, 2006 as such changes in accounting principles occur.
(e)	In July 2005, the FASB issued FSP no. APB 18-1, “Accounting By an Investor for Its Proportionate Share of Accumulated Other Comprehensive Income of an Investee Accounted for Under The Equity Method in Accordance with APB Opinion 18 Upon a Loss of Significant Influence”, which requires that when equity method accounting ceases upon the loss of significant influence of an investee, the investor’s proportionate share of the investee’s other comprehensive income should be offset against the carrying value of the investment. To the extent this results in a negative carrying value, the investor should adjust the carrying value to zero and record the residual balance through earnings. The Company will apply this Statement in the fiscal period beginning January 1, 2006 as the need arises.

F - 17

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(f)	In November 2005, the FASB issued FSP FAS 115-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”, which outlines a three-step model for identifying investment impairments in debt and equity securities within the scope of Statement 115 and cost-method investments. The three steps involve (i) determining whether the investment is impaired, (ii) evaluating whether the impairment is other-than- temporary, and (iii) if the impairment is other-than-temporary, recognizing an impairment loss. The FSP carries forward the disclosure requirements of issue 03-1, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments.” The Company will begin applying this guidance as of January 1, 2006 as circumstances arise.
4	Acquisition of Affiliates
(a)	Ripasa
	On November 10, 2004, we signed an agreement to acquire an interest in Ripasa through a venture with Suzano Bahia Sul Papel e Celulose S.A. (“Suzano”). The agreement was consummated on March 31, 2005 when Ripar was constituted by VCP and Suzano upon each contributing US$275 in exchange for equal shareholder rights and responsibilities, including equal direct and indirect holdings in the capital of Ripasa. On March 31, 2005, Ripar acquired and paid for 129,676,966 common shares and 41,050,819 preferred shares of Ripasa, representing 77.59% of the voting share capital and 46.06% of the total stock, the reais equivalent, at that date, of US$550.
	Pursuant to the November 10, 2004 agreement, VCP and Suzano have a call option to acquire 37,449,084 common shares and 12,388,719 preferred shares of Ripasa, representing 22.41% of the voting stock and 13.45% of the total stock for a twelve-month period starting on the fifth anniversary of the closing date, for the reais equivalent, at that date, of US$160 plus interest. The shareholders of Ripasa who are party to the agreement have a put option which may require Ripar to acquire all their common and preferred shares during a period of five years from the closing date. The shareholder agreement between VCP and Suzano provides for certain rights of first refusal in relation to their respective interest in Ripar.
	On July 20, 2005, the Boards of Directors of VCP, Suzano and Ripasa, approved the corporate restructuring that would allow Ripasa’s minority shareholders to exchange their interests in Ripasa for VCP and Suzano stock, in equal parts. The restructuring involves two phases: (i) the merger of Ripasa into Ripar and (ii) the distribution of assets to VCP and Suzano, in equal parts. The restructuring will be submitted for approval at the general meetings of the respective companies. At the completion of the restructuring, Ripasa’s minority shareholders will become shareholders in VCP and Suzano, in accordance with the Protocol and Justification of Share Merger and Distribution (“Protocol”) that VCP, Suzano, Ripasa and Ripar executed on July 20, 2005.

F - 18

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	This transaction is being analyzed by Brazilian antitrust authorities and is subject to their review and approval.
	On August 29, 2005, the Extraordinary General Meeting of Ripasa, which had been called to discuss the proposal, was suspended through an injunction without any decisions having been taken. The companies are pursuing legal measures to assure the shareholders meeting is reconvened, as soon as possible, with the objective of implementing the restructuring program.
	Our share of the distributable retained earnings of Ripasa is restricted to the equivalent of US$9 at December 31, 2005.
(b)	Aracruz
	On October 3, 2001, Newark acquired 127,506,457 common shares of Aracruz, representing 28.00% of the voting share capital and 12.35% of the total stock of Aracruz, for US$370, when we became a member of the controlling group of Aracruz, together with the Lorentzen and Safra Group, (each member owning 28% of the voting shares and with three seats on the board of directors), and BNDESPAR (with 12.5% of the voting shares and one seat on the board of directors). The excess of the cost of our investment in Aracruz over our portion of the underlying fair value of the net assets amounted to US$155.
	Aracruz’s condensed balance sheet and statement of operations at December 31 are as follows:

	2005		2004
Currents assets		1,095		833
Property, plant, and equipment, investments in affiliated company and other assets		2,669		2,697
Current liabilities		485		275
Long-term debt (long-term portion)		1,010		1,223
Other long-term liabilities		304		218
Shareholders’ equity		1,965		1,814
Net sales		1,345		1,167
Operating income		447		357
Net income		341		227

Our share of the distributable retained earnings of Aracruz is restricted to the equivalent of US$35 at December 31, 2005. Dividends and interest attributable to capital received from Aracruz during 2005, totaled US$11 (2004 totaled US$22).

F - 19

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	A goodwill impairment provision was determined based on the market price of US$18.56 for the Aracruz ADRs on December 31, 2002, of US$136 (gross of deferred income tax effects of US$46) and was charged directly to income. The deferred tax effect is included in “Deferred income tax benefit”. At December 31, 2005, Aracruz ADSs traded at US$40.01.
5	Income Taxes
	Income taxes in Brazil include federal income tax and social contribution. The composite tax rate on adjusted taxable income is 34%. From 2001 to 2004 we elected to calculate and pay our income taxes based on the provisions of REFIS (an estimated tax basis which is based on a percentage of net sales adjusted by financial income and other income). As from 2005, taxes on income are based on adjusted taxable income determined under Brazilian tax regulations.
(a)	Income tax analysis
	The statutory rate applied to income before taxes is reconciled to income tax expense as follows:

	2005			2004			2003
Income before income taxes		202			308			248
Income tax expense at statutory tax rate - 34%		(69	)		(105	)		(84	)
Reconciliation of statutory to effective rate
Effect of REFIS election		—			69			61
Benefit from interest attributable to capital		42			—			—
Difference in foreign income tax rates and other permanent differences		35			—			—
Income tax (expense) benefit		8			(36	)		(23	)

F - 20

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(b) Analysis of deferred tax balances

	2005			2004
Deferred tax assets
Tax loss carryforwards		7			13
Tax effects on impairment of Aracruz (Note 4 (b))		46			46
Cross currency interest rate swap contracts		30			—
Post-retirement benefits		7			—
Provisions		28			7
Others		1			1
Total deferred tax assets		119			67
Deferred tax liabilities
Accelerated depreciation and US GAAP adjustments		(17	)		(17	)
Cross currency interest rate swap contracts		—			(7	)
Tax effect on unrealized gains on available for sale securities		(6	)		—
Total deferred tax liabilities		(23	)		(24	)
Net deferred tax assets		96			43
Less: current portion		(7	)		—
Non-current portion		89			43

We recognize deferred tax assets and liabilities based on the temporary differences between the financial statement carrying amounts and the tax basis of assets and liabilities. If we or one of our subsidiaries operate at a loss or are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period over which the underlying temporary differences become taxable or deductible, we evaluate the need to establish a valuation allowance against all or a significant portion of our deferred tax assets resulting in an increase in our effective tax rate.

F - 21

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

6 Securities

	Available for sale		Held-to-maturity
	2005		2004
In reais
Securities		207		—
Foreign Government Bonds		54		41
Credit linked notes		30		—
In U.S. dollars
Brazilian Government Bonds		155		223
VOTO III		—		14
Total - current and non-current		446		278

Maturity periods	2005
Due in less than one year		237
Due in one to five years		209
		446

Due to requirements to fund future investments in our operations and the acquisition shares of Ripasa, we reviewed the classification of the entire security portfolio classified as held-to-maturity in the second quarter of 2005. At the time we invested in these securities, and in each reporting period through that date, our intention had been to hold them through maturity. As a result of our review, we reclassified the full portfolio to the ‘available for sale’. Upon the transfer, securities were adjusted to their fair values and the difference between the carrying amounts of the securities at the date of transfer and their fair value as of such date was recognized, net of the related tax effects, in “Net unrealized gains on available for sale securities” directly in shareholders’ equity.

F - 22

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

7 Trade Accounts Receivable

	2005			2004
Domestic receivables		124			101
Export receivables, denominated in U.S. dollars		95			79
Allowance for doubtful accounts		(7	)		(5	)
		212			175

	No single customer represented more than 10% of our trade accounts receivables balance or net sales.
8	Inventories

	2005		2004
Finished products		64		57
Work in process		8		7
Raw materials and supplies		82		63
Imports in transit and other		3		3
		157		130

9 Property, Plant and Equipment

	2005			2004
Land		155			114
Buildings		138			113
Machinery, equipment and installations		1,393			1,136
Forests		315			272
Other		174			156
Construction in progress		93			78
		2,268			1,869
Accumulated depreciation and depletion		(510	)		(426	)
		1,758			1,443

Interest capitalized on construction in progress in each of the periods was: 2005 - US$5; 2004 - US$4 and 2003 - US$7.

F - 23

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

10	Short-term Debt
	Short-term debt represents commitments under recourse provisions to honor export receivables transferred to banks accounted for as secured borrowings (ACEs), bearing an annual average interest rate of 4.6% at December 31, 2005 (2004 - 2.4%). Historically, we have not incurred significant losses in connection with such recourse provisions.
11	Long-term Debt

	Interest rate December 31, 2005		2005			2004
Third parties
In U.S. dollars
Export credits (prepayment)		5.95		936			444
Syndicated bank loan				—			88
Others				1			3
Total third parties				937			535
Related parties
In U.S. dollars
VOTO II loan				—			125
VOTO III loan		7.88		41			47
VOTO IV loan		7.75		201			—
In reais
Banco Nacional de Desenvolvimento Econômico e Social (“BNDES”)
TJLP		13.11		158			132
UMBNDES		12.86		27			27
Total related parties				427			331
Total debt				1,364			866
Less: current portion				(79	)		(297	)
Long-term portion				1,285			569

• LIBOR (London Interbank Offered Rate) at December 31, 2005 was 4.63% p.a. (2004 - 2.78%).

• TJLP (“Taxa de juros de longo prazo”), a long-term interest rate fixed quarterly by the Brazilian Central Bank. At December 31, 2005 and 2004, the TJLP was 9.75% p. a.

F - 24

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

• The UMBNDES is a weighted average exchange variation on basket of currencies, predominantly U.S. dollars, held by BNDES.

(a)	Export credits
	In July 2005, we signed an Export Prepayment contract with Banco Santander Central Hispano London Branch for US$100 at LIBOR plus 1.58%. Payments are due through 2012 in instalments to match export shipments. The financings are guaranteed by export contracts
	In May 2005, we signed an Export Prepayment contract with ING Bank N.V. and Bayerishe Hypo und Vercinsbank for US$50 at LIBOR plus 1.5% and US$100 at LIBOR plus 1.49%, respectively. Payments are due through 2012 in installments to match export shipments. The financings are guaranteed by export contracts.
	In March 2005, we signed an Export Prepayment Agreement with a pool of banks in the aggregate amount of US$300 at LIBOR plus 1.63%. Payments are due through 2012 in installment to match export shipments. We utilized US$275 to finance the acquisition of our investment in Ripasa and the financings are guaranteed by export contracts by the borrowers, VCP and VEP. VCP is the primary obligor and has unconditionally and irrevocably agreed that if payments are not made, VCP will pay the lenders, which are ABN Amro Bank, Banco Santander Central Hispano and BNP Paribás, such outstanding amounts at the due date.
	In May and July 2004, we signed an Export Prepayment Agreement and an Offshore Facility Agreement with a pool of banks in the aggregate amount of US$350 at LIBOR plus 2.00% due through 2011 in installments to match export shipments. The funds were released in 2004. The financings are guaranteed by export contracts by the borrowers, which are VEP and VCP Trading N.V. VCP is the primary obligor and has unconditionally and irrevocably, agreed that if the borrowers fail to make any payments, we will pay to the lenders, which are ABN Amro Bank N.V., Banco Santander Central Hispano and Banco Bradesco S.A., such outstanding amounts at the due date.
(b)	Syndicated bank loan
	In October 2001, our wholly owned subsidiary VEP, through its wholly owned subsidiary Newark, received a bridge financing of US$370 to finance the acquisition of our interest in Aracruz. In May 2002, Newark raised US$380 in a credit agreement with ABN AMRO Bank N.V, which it used to pay in full the bridge financing and to make certain payments in connection with the credit agreement. The loan was fully repaid in May 2005.

F - 25

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(c)	VOTO II loan
	In July 2003, together with Votorantim Participações (“VPAR”), our ultimate controlling shareholder, we jointly formed VOTO II, a 50% owned affiliated company based in the Cayman Islands, for the sole purpose of raising funds. VOTO II issued US$250, 5.75% Bonds due in June 2005 in the international market, under Regulation S and on-lent US$125 to each of St. Helen III (our consolidated subsidiary) and St. Helen II (owned by VPAR). Together with VPAR and Cimento Rio Branco S.A., a company also under common control of our shareholder VPAR, we are the guarantors for this operation. The loan was fully repaid by St. Helen III to VOTO II on June 27, 2005 with the proceeds of the loan from VOTO IV described below.
(d)	VOTO III Loan
	In January 2004, VPAR formed VOTO III, a company based in the Cayman Islands, for the sole purpose of raising funds. VOTO III issued US$300, 7.875% Bonds due 2014 in the international market. We received 15% of the total amount issued or US$45 for which we are the guarantors.
(e)	VOTO IV loan
	On June 24, 2005 VOTO IV, a wholly-owned subsidiary of VPAR, issued US$400, 7.75% Fixed Rate Notes due 2020 in the international market, under Rule 144A and Regulation S. VCP is a guarantor of 50% of the debt issued by VOTO IV and in turn received US$200 of the proceeds. On September 6, 2005, we acquired a 50% interests in VOTO IV and together with VPAR we are the guarantors for this operation. From the proceeds of US$200, US$125 was used by St. Helen III to repay the debt incurred with VOTO II.
(f)	BNDES
	On May 20, 2005, we signed a financing agreement with BNDES for a total equivalent to US$93 for the purpose of financing acquisition of timberlands. Part of the loan, equivalent to US$79, bears interest at TJLP plus 4.5% per annum. The remaining balance is indexed to the UMBNDES plus 4.5% per annum and carries annual interest of 12.64%. This financing will mature in July 2015. VCP has drawn down US$42 to date.
(g)	Other guarantees
	The BNDES loans are secured by property, plant and equipment and a lien on certain land and personal guarantees of an owner of VPAR.
(h)	Long-term debt maturities
	At December 31, 2005, the long-term position of long-term debt maturities is as follows:

F - 26

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

2007	39
2008	97
2009	198
2010	501
After 2011	450
	1,285

(i)	Covenants
	We are subject to a number of material affirmative and negative covenants including, among others: limitations on our ability to incur debt; limitations on the existence of liens on our properties; limitations on transactions with related parties, which generally must be on terms no less favorable than those that could be obtained in a comparable arm’s-length transaction; and maintenance of certain financial ratios calculated based on Brazilian GAAP.
12	Related Parties
	Balances and transactions with related parties are as follows:

	Nature and business purpose of transactions	2005		2004
Cash, cash equivalents and held-to- maturity investments	Surplus cash funds invested with Group financial institutions
Votorantim Group
Banco Votorantim S.A.		576		336
VOTO III bonds		-		14
Unrealized gains (losses) from cross currency interest rate swaps Votorantim Group Banco Votorantim S.A.	Arising from swap contract transactions in which the Group financial institution acts as counter-party	(54	)	27
Long-term loans from related parties Votorantim Group	Loans from related parties
VOTO II		-		125
VOTO III		41		47
VOTO IV		201		-
BNDES (shareholder)		185		159
Suppliers from related parties Ripasa	Purchases of wood, pulp and paper	12		-

F - 27

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

Revenue, income and expenses from transactions with related parties were as follows:

	2005		2004		2003
Export sales revenue		—		—		65
Financial income		52		35		17
Financial expenses		115		53		51

	Export sales revenue primarily relates to sales made to Votorantrade N.V.; financial income arises from loans made to related parties and investments made in Banco Votorantim S.A.; and financial expenses represent mainly losses on cross currency interest rate swaps, including their respective fair values.
13	Financial Instruments
	We primarily use cross currency interest rate swap contracts and Brazilian Government bonds indexed to the U.S. dollar to hedge our U.S. dollar denominated debt. By entering into these contracts or purchasing Brazilian Government bonds, we partially protect ourselves from the effects of unfavorable exchange movements. Accordingly, if the Real devalues against the U.S. dollar and results in a foreign exchange loss, we are at least in part protected by an offsetting gain from the swap contracts.
	We used the following methods and assumptions in estimating the fair value disclosures of our financial instruments:
	•	Held-to-maturity investments: the fair value of our held-to-maturity investments were estimated based on market rates for securities with similar terms and maturities.
	•	Long-term and short-term debt: the fair values of our long-term debt were estimated based on available quoted rates for loans of substantially similar terms and maturities.
	The fair values of our cross currency interest rate swap contracts were estimated based on quoted market prices of comparable contracts. At December 31, 2005 and 2004 the notional amounts of our outstanding cross currency interest rate swap contracts were US$564 and US$259, respectively and their fair values of US$34 and US$55, respectively. The actual cash settlements on the contracts occur at times specified in each agreement.

F - 28

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

The carrying amounts and fair values of our financial instruments at December 31 were as follows:

	2005						2004
	Carrying amount			Fair value			Carrying amount		Fair value
Cash and cash equivalents		261			261			151		151
Held-to-maturity securities
VOTO III bonds		—			—			14		15
Brazilian Government Bonds denominated in U.S. dollars		—			—			223		313
Foreign Government Bonds denominated in reais		—			—			41		41
Available for sale securities
Securities tradable		207			207			—		—
Brazilian Government Bonds denominated in U.S. dollars		155			155			—		—
Credit linked notes		30			30			—		—
Foreign Government Bonds denominated in reais		54			54			—		—
Unrealized gains (losses) from cross currency interest rate swaps currency interest rate swaps		(77	)		(77	)		47		47
Short-term debt		132			132			79		79
Long-term debt		1,364			1,371			866		873

14

Commitments and Contingencies

We are party to certain legal proceedings in Brazil arising in the normal course of business, and have made provisions when we believe that we can reasonably estimate probable losses. In connection with some of these proceedings we have made deposits (in “Other assets”) which will only be released to us upon a judgment in our favor. The position of such provisions for tax and other litigation and deposits is as follows:

	2005				2004
	Deposits		Provisions		Deposits		Provisions
Tax-related		83		157		24		93
Labor-related		4		11		2		7
Civil-related		—		4		—		4
		87		172		26		104

F - 29

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

The activity in our provision account was as follows:

	2005		2004			2003
At beginning of year		104		56			27
Provisions for new legal proceedings		54		45			23
Translation adjustment		14		5			6
Amounts paid to settle litigation		—		(2	)		—
At end of year		172		104			56

(a)	Tax-related
	In 1999, we filed a lawsuit challenging the 1% increase in the COFINS tax rate (from 2% to 3%), a tax on revenues. Although we have obtained a legal injunction, based on advice from our legal counsel and reflecting rulings by the Federal Supreme Court, we accrued US$55 relating to this claim, from 2002 through 2004. In December 2005 we made a judicial deposit of US$55 following an unfavorable decision of the Supreme Court. During 2005, we recorded an additional US$21 related to the 1% increase in the COFINS tax rate.
	During 2002, we filed a lawsuit challenging the inclusion of the ICMS (Value-added sales tax) in the computation basis for the COFINS tax, relating the period from 1996 to 2003, as well as our deductibility of recoverable ICMS originated from raw material used for tax exempt paper products. We have accrued and deposited US$ 26 relating to this claim.
	In 1996, we filed a judicial claim to assure our right to the deductibility of inflation-indexed depreciation (an uplift of 70%) arising from a government economic stabilization program in January 1989. We obtained a favorable decision enabling the partial deduction of an uplift of 43%. Based on advice from our legal counsel, we have accrued US$ 7 relating to this claim.
(b)	Other unprovided possible losses
	VCP is party to a substantial number of other legal proceedings in the normal course of its business involving possible risk of loss, in addition to the lawsuits and administrative proceedings discussed above.
	Management does not believe that such legal proceedings will, individually or in the aggregate, have a material adverse affect on our business, results of operations or financial condition, and therefore, no provisions have been recorded based on management’s assessment of the probability of loss.

F - 30

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

These possible losses, at December 31, are as follows:

	2005		2004
Tax-related		112		21
Civil-related		13		11
Labor-related		11		8
		136		40

(c)	Sale of affiliate
	In 1999, we sold our 51% interest in Indústria de Papel de Salto Ltda. Under the terms of the sale, we have indemnified the purchaser against certain losses in excess of amounts recorded limited to US$6 through 2007. No amounts have been paid under this indemnification 2005 and we believe such amounts if ultimately paid, if any, will not be significant.
(d)	Commitments
	We do not maintain insurance for our forests; rather, our policy is to self-insure against fire, disease and other risks to our forests. We have taken measures to mitigate these risks, but any losses from damage outside of our control would be for our own account.
	We provide guarantees to banks, not in excess of 180 days, although in exceptional cases, this is extended to 360 days, which finance sales to certain of our selected customers. We recognize revenue on these sales at the time our products are delivered which is the time we transfer title to our customers. Under the vendor program we are the secondary obligor to the bank and monitor the amount due from the customer to the bank. We periodically review the adequacy of our allowance for estimated losses and adjust our allowance accordingly. At December 31, 2005, customer guarantees provided by us totaled US$ 57, including interest (US$ 71 at December 31, 2004). Our guarantees are usually secured by the personal guarantee of the customer’s owner.
	We lease timberlands under operating leases from other companies of the Votorantim Group as a source for raw material for our products. The leases, most of which commenced in 1991, are typically for a term of 21 years. Lease payments, equal to 30% of the market value of the timber harvested on the property, are payable after each harvest. We guarantee to the lessor a minimum harvest payment. Payments under these operating leases were US$ 2 in 2005 and US$ 1 in 2004 and 2003.
	We have commitments for capital expenditures amounting to US$ 48 at December 31, 2005.

F - 31

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

We have long-term “Take-or-Pay” contracts with suppliers of chemical products for periods from 1 to 13 years. The contractual obligations in connection with such contracts are US$ 35 per year.

The following is a summary of guarantees issued to other companies of the Votorantim Group:

			Outstanding guarantee amount
Primary obligor	Obligations	Beneficiary	2005	2004
VOTO I	US$ 400 notes issuance	Noteholders and the trustee		200
VOTO II	US$ 250 notes issuance	Noteholders and the trustee		125
VOTO III	US$ 300 notes issuance	Noteholders and the trustee	45	45
VOTO IV	US$ 400 notes issuance	Noteholders and the trustee	200

15	Segment Information
(a)	Segment information
	The following information about segments is based upon information used by our senior management to assess the performance of our operating segments and decide on the allocation of resources. This approach is required by SFAS 131, “Disclosure about Segments of an Enterprise and Related Information”, and has been applied for all periods presented. Our paper and pulp operations are based solely in Brazil. Intersegment revenues are accounted for at amounts which approximate those that would be obtained in a sale to third parties.
	The accounting policies underlying the financial information provided for the segments are based on Brazilian GAAP. We evaluate segment performance information generated from the statutory accounting records, except for the effects of our affiliates Aracruz and Ripar which are proportionally consolidated in our Brazilian GAAP financial statements but are not included in information used by our senior management to assess the performance of our segments. The local currency information related to statement of income data has been translated to U.S. dollars, for convenience purposes, at the average rate of each year presented. The information as at the balance sheet dates has been translated at the respective year-end exchange rates.

F - 32

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	2005			2004			2003
Net operating revenue - Brazilian GAAP
Pulp		440			385			276
Paper		704			634			557
Reconciling item to US GAAP
Pulp		(1	)					(1	)
Paper		(13	)		(9	)		(16	)
Total net operating revenue - US GAAP		1,130			1,010			816
Intersegment sales of pulp to paper segment		249			214			196
Net operating revenue before intersegment  sales eliminations - US GAAP		1,379			1,224			1,012
Depreciation and depletion expense – Brazilian GAAP
Pulp		89			69			61
Paper		31			23			17
Reconciling items to US GAAP
Pulp		(2	)		(2	)		(5	)
Paper		(1	)		(1	)		(1	)
Depreciation and depletion  expense - US GAAP		117			89			72

There are certain differences between the methodologies we use to determine the operating profit shown in the following table and operating profit reported in our US GAAP statement of income. For segment reporting purposes we defer start-up costs of new facilities and amortize them against operating profit over the subsequent 10 years. We allocate depreciation to segments based on property, plant and equipment amounts which have been indexed for inflation, rather than the historical real amounts. Also, we depreciated our machinery, equipment and installations over 10 years up to December 31, 1996 and over 25 years thereafter. These differences are reconciled as follows:

F - 33

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	2005			2004			2003
Segment operating income - Brazilian GAAP
Pulp		155			177			137
Paper		113			150			127
Operating income under Brazilian GAAP		268			327			264
Reconciling items to US GAAP
Depreciation and amortization expense
Pulp		2			2			5
Paper		1			1			1
Start-up costs
Pulp		—			—			(1	)
Paper		—			—			—
Other adjustments
Pulp		(10	)		1			(1	)
Paper		(14	)		(6	)		—
Total pulp		147			180			140
Total paper		100			145			128
Operating income - US GAAP		247			325			268
Segment assets
Pulp		1,167			943
Paper		513			433
Total segment assets per Brazilian GAAP		1,680			1,376
Reconciling items to US GAAP
Pulp		44			41
Paper		34			26
Total pulp		1,211			984
Total paper		547			459
Property, plant and equipment - US GAAP		1,758			1,443
Capital expenditures per Brazilian GAAP
Pulp		188			178			119
Paper		54			36			39
Reconciling items to US GAAP
Capitalized interest
Pulp		4			3			5
Paper		1			1			2
Total capitalized interest		5			4			7
Total pulp		192			181			124
Total paper		55			37			41
Capital expenditures - US GAAP		247			218			165

F-34

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(b)	Export sales by region
	The following table includes our sales made directly to unaffiliated customers (the final customers) as well as our sales made to Votorantrade N.V. and related parties (also a member of the Votorantim Group) to the final customers.

	2005				2004				2003
	Paper		Pulp		Paper		Pulp		Paper		Pulp
Europe		50		243		45		164		39		109
Middle East and Asia		10		120		9		150		9		94
North America		54		39		53		37		46		38
South America, other than Brazil		44		—		33		—		25		—
Africa		5		1		4		3		13		—
		163		403		144		354		132		241

16	Shareholders’ Equity
	Our by-laws require that we pay a dividend to our common and preferred shareholders of at least 25% of our annual net distributable income determined in accordance with Brazilian Corporate Law. Preferred shareholders are entitled to receive a dividend per share 10% higher than that paid to common shareholders. In 2005, 2004 and 2003 we paid dividends in excess of the mandatory amount.
	The preferred shareholders may not vote at shareholders meetings but have priority in repayment of their capital, in the case of liquidation.
	In accordance with the Brazilian Corporate Law and our by-laws we are required to make annual appropriations to certain reserves (“Appropriated retained earnings”). These comprise mainly (a) 5% of the net income in our statutory accounts which must be transferred to a legal reserve until such reserve reaches 20% of our share capital and (b) appropriation of an amount equal to income tax rebates available for investments in certain underdeveloped regions of Brazil to an investment incentive reserve. The legal and investment incentives reserves cannot be used to distribute dividends to our shareholders.
	Brazilian law permits the payment of dividends only in “reais”, limited to the unappropriated retained earnings in our financial statements prepared in accordance with Brazilian GAAP.

F - 35

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

Brazilian companies are permitted to pay limited amounts of interest attributable to capital to shareholders and treat such payments as an expense for Brazilian income and social contribution tax purposes. This notional interest distribution is treated for accounting purposes as a deduction from shareholders’ equity in a manner similar to a dividend. Interest attributable to capital is treated as a dividend for purposes of the mandatory dividend payable. A 15% tax is withheld and paid by upon credit of the interest.

The devaluation of the Real impacts the amount available for distribution when measured in U.S. dollars. Amounts reported as available for distribution in our statutory accounting records prepared under Brazilian GAAP will decrease or increase when measured in U.S. dollars as the real depreciates or appreciates, respectively, against the U.S. dollar. The devaluation of the real results in net foreign exchange losses which are included in the statement of income determined under Brazilian GAAP and which reduces the amount of unappropriated earnings available for distribution. At December 31, 2005, we had unappropriated retained earnings of R$ 1,469 million (2004 - R$ 1,224 million) in our statutory books, equivalent, at the exchange rate at December 31, 2005, to US$ 628 (2004 - US$ 461).

Dividends paid per shares in U.S. dollars were as follows:

	2005	2004	2003
Preferred	0.45	0.58	0.22
Common	0.41	0.52	0.20

	On December 3, 2003, the Board of Directors approved a change in VCP’s dividend policy. Under the new policy, VCP intends to pay dividends and/or interest attributable to capital based on 60% of “free cash flow”. Free cash flow is expected to be an amount equal to “EBITDA” (defined as operating profit excluding net financial income (expense), amortization, depreciation and depletion and equity gain (loss) of affiliate) minus changes in working capital, minus income tax and social contribution effectively paid by VCP and minus capital expenditures and will be based upon VCP’s financial statements prepared in accordance with Brazilian GAAP.
	On October 18, 2004, the Extraordinary General Meeting approved the following proposals:
(a)	increase of subscribed capital stock, from US$1,320 to US$1,838, by means of capitalization of part of unappropriated retained earnings without issue of new shares;
(b)	a reverse stock split dividing the entire subscribed capital of the Company, by 200 resulting in 191,613,498 shares, of which 105,702,452 are shares of common stock and 85,911,046 are shares of preferred stock;

F - 36

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

(c)	a reverse split of our American Depositary Shares - ADSs traded on the New York Stock Exchange, each of which had previously represented 500 preferred shares, to represent one preferred share per ADS.
	We have retroactively adjusted all shares and ADS data to take account of the reverse split.
17	Concentration of Credit Risk
	We are potentially subject to credit risk with respect to our cash equivalents, held-to-maturity investments, available for sales securities, trade receivables, guarantees provided to banks which finance our customers, and derivative contracts. We limit our risk associated with cash equivalents, held-to-maturity investments and available for sales securities by placing our investments with highly rated financial institutions and we only take out derivative contracts with financially sound counter-parties. With respect to trade receivables and guarantees, provided to banks financing our customers, we perform initial and ongoing credit evaluations of our customers and, when deemed necessary, obtain collateral or letters of credit to protect our interests. Additionally, most of our export sales to the USA and Europe are secured by letters of credit. We establish an allowance for doubtful accounts against receivables we believe will not be fully collected.
18	Financial Income and Financial Expense

	2005		2004			2003
Financial income
Interest income on cash equivalents		32		39			21
Realized and unrealized gain on held-to-maturity securities		13		15			27
available for sale securities		22		—			—
Interest income on credit sales		7		4			2
Other (including taxes)		5		(18	)		15
		79		40			65
Financial expenses
Interest and charges on U.S. dollar debt		62		39			53
Interest and charges on Real debt		16		16			15
Indexation and interest charges on contingencies		17		—			—
Tax on checking accounts - CPMF		10		7			6
Other		14		7			(3	)
		119		69			71

F - 37

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

19	Retirement benefits
(a)	Defined contribution plan
	In March 2000 we began co-sponsoring a multi-employer defined contribution plan of the Votorantim Group which is available to all of our employees. For employees below a certain income level we match the employee’s contribution limited to 1.5% of the employee’s compensation. For employees above that income level we match the employee’s contribution up to 6% of the employee’s compensation. At our option we may also make additional contributions. Our contributions vest in varying percentages depending on the employee’s years of service and will fully vest upon the employee’s retirement, death or disability, provided the employee has at least one year of service. Our contributions were US$ 2 in 2005, US$ 2 in 2004 and US$ 1 in 2003.
(b)	Post-retirement benefits
	The actuarial liability relates to our proportion of the costs of a hospital facility we share with co-sponsors. Although the not-for-profit hospital is funded by multiple-employers, it has no separate assets and costs are apportioned among the sponsors based on usage. No liability had been recorded prior to 2005. Contributions paid to the hospital in the year ended December 31, 2005 and 2004 amounted to US$ 1.
	Based on the report of our independent actuary, the accumulated post-retirement benefit obligation and accrued benefit cost (no plan assets) was US$ 21.

	Percentage
Weighted-average assumptions as of December 31, 2005
Discount rate	8.5
Health care cost trend on covered changes	3.0

	US$
Components of net periodic benefit cost for 2006 Interest cost	2
Total net periodic benefit cost (benefit)	2

It has been assumed, for measurement purposes, that health care cost trends for 2006 will not be considerably different from 2005. Our actuaries are unable to project the direction and pattern of changes in the assumed trend rates, the ultimate trend rates, nor can they estimate when the rates are expected to be achieved. A one-percentage-point change in assumed health care cost trend rates would have the following effects in 2005 (all other assumptions have been held constant):

F - 38

Votorantim Celulose e Papel S.A.

Notes to the Consolidated Financial Statements

In millions of U.S. dollars, unless otherwise stated

	One-percentage- point increase	One-percentage- point decrease
Sensitivity of retiree welfare results
On total service and interest cost components	0.3	(0.3	)
On post-retirement benefit obligation	2.0	(2.0	)

*          *          *

F - 39

EX-2.5

Exhibit 2.5

VOTO—VOTORANTIM OVERSEAS TRADING OPERATIONS IV LIMITED,
as the Company,

JPMORGAN CHASE BANK, N.A.
as Transfer Agent, Paying Agent and Registrar,

J.P. MORGAN BANK LUXEMBOURG S.A.
as Luxembourg Paying Agent,

J.P. MORGAN TRUST BANK LTD.
as Principal Paying Agent,

VOTORANTIM PARTICIPAÇÕES S.A.
VOTORANTIM CELULOSE E PAPEL S.A.
and
CIMENTO RIO BRANCO S.A.
as Guarantors

— and —

JPMORGAN CHASE BANK, N.A.
as Trustee

_____________________________

INDENTURE

Dated as of June 24, 2005

_____________________________

U.S.$400,000,000

7.75% Notes due 2020

TABLE OF CONTENTS

			Page
ARTICLE 1 DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION			2
	SECTION 1.1.	Definitions	2
	SECTION 1.2.	Compliance Certificates and Opinions	16
	SECTION 1.3.	Form of Documents Delivered to Trustee	16
	SECTION 1.4.	Acts of Holders; Record Dates	17
	SECTION 1.5.	Notices, Etc. to Trustee, Company and Subsidiary Guarantors	19
	SECTION 1.6.	Notice to Holders; Waiver	20
	SECTION 1.7.	Effect of Headings and Table of Contents	21
	SECTION 1.8.	Successors and Assigns	21
	SECTION 1.9.	Separability Clause	21
	SECTION 1.10.	Benefits of Indenture	21
	SECTION 1.11.	Governing Law	21
	SECTION 1.12.	Legal Holidays	22
	SECTION 1.13.	Submission to Jurisdiction; Agent for Service; Waiver of Immunities	22
	SECTION 1.14.	Currency of Account; Conversion of Currency:  Foreign Exchange Restrictions	23
	SECTION 1.15.	Counterparts	25
ARTICLE 2 SECURITY FORMS			26
	SECTION 2.1.	Forms Generally	26
	SECTION 2.2.	Form of Face of Security	27
	SECTION 2.3.	Form of Reverse of Security	29
	SECTION 2.4.	Form of Trustee’s Certificate of Authentication	35
ARTICLE 3 THE SECURITIES			36
	SECTION 3.1.	Title and Terms	36
	SECTION 3.2.	Denominations	37
	SECTION 3.3.	Execution, Authentication, Delivery and Dating	37
	SECTION 3.4.	Global Securities; Registration, Registration of Transfer and Exchange	38
	SECTION 3.5.	Mutilated, Destroyed, Lost and Stolen Securities	43
	SECTION 3.6.	Payment of Interest; Interest Rights Preserved	44
	SECTION 3.7.	Persons Deemed Owners	45
	SECTION 3.8.	Cancellation	45
	SECTION 3.9.	Computation of Interest	46
	SECTION 3.10.	CUSIP numbers	46
	SECTION 3.11.	Paying Agents; Discharge of Payment Obligations; Indemnity of Holders	46
ARTICLE 4 SATISFACTION AND DISCHARGE			48
	SECTION 4.1.	Satisfaction and Discharge of Indenture	48
	SECTION 4.2.	Application of Trust Money	49
ARTICLE 5 REMEDIES			50
	SECTION 5.1.	Events of Default	50
	SECTION 5.2.	Collection of Indebtedness and Suits for Enforcement by Trustee	52
	SECTION 5.3.	Trustee May File Proofs of Claim	53
	SECTION 5.4.	Trustee May Enforce Claims Without Possession of Securities	53
	SECTION 5.5.	Application of Money Collected	53
	SECTION 5.6.	Limitation on Suits	54
	SECTION 5.7.	Unconditional Right of Holders to Receive Principal, Premium and Interest	54
	SECTION 5.8.	Restoration of Rights and Remedies	54
	SECTION 5.9.	Rights and Remedies Cumulative	55

i

	SECTION 5.10.	Delay or Omission Not Waiver	55
	SECTION 5.11.	Control by Holders	55
	SECTION 5.12.	Waiver of Past Defaults	55
ARTICLE 6 THE TRUSTEE			56
	SECTION 6.1.	Certain Duties and Responsibilities	56
	SECTION 6.2.	Notice of Defaults	57
	SECTION 6.3.	Certain Rights of Trustee	57
	SECTION 6.4.	Not Responsible for Recitals or Issuance of Securities	58
	SECTION 6.5.	May Hold Securities	58
	SECTION 6.6.	Money Held in Trust	59
	SECTION 6.7.	Compensation and Reimbursement	59
	SECTION 6.8.	Disqualification; Conflicting Interests	60
	SECTION 6.9.	Corporate Trustee Required; Eligibility	60
	SECTION 6.10.	Resignation and Removal; Appointment of Successor	60
	SECTION 6.11.	Acceptance of Appointment by Successor	61
	SECTION 6.12.	Merger, Conversion, Consolidation or Succession to Business	62
	SECTION 6.13.	Preferential Collection of Claims Against the Company	62
	SECTION 6.14.	Appointment of Authenticating Agent	62
ARTICLE 7 HOLDERS, LISTS AND REPORTS BY TRUSTEE AND THE COMPANY			64
	SECTION 7.1.	Company to Furnish Trustee; Names and Addresses of Holders	64
	SECTION 7.2.	Preservation of Information; Communications to Holders	64
	SECTION 7.3.	Reports by Trustee	65
ARTICLE 8 MERGER, CONSOLIDATION, ETC.			66
	SECTION 8.1.	Mergers, Consolidations and Certain Sales of Assets	66
	SECTION 8.2.	Successor Substituted	67
ARTICLE 9 SUPPLEMENTAL INDENTURES			68
	SECTION 9.1.	Supplemental Indentures Without Consent of Holders	68
	SECTION 9.2.	Supplemental Indentures with Consent of Holders	68
	SECTION 9.3.	Execution of Supplemental Indentures	69
	SECTION 9.4.	Effect of Supplemental Indentures	70
	SECTION 9.5.	Reference in Securities to Supplemental Indentures	70
ARTICLE 10 COVENANTS			71
	SECTION 10.1.	Payment Under the Securities and the Guarantees	71
	SECTION 10.2.	Maintenance of Office or Agency	71
	SECTION 10.3.	Money for Security Payments to Be Held in Trust	72
	SECTION 10.4.	Maintenance of corporate existence	73
	SECTION 10.5.	Maintenance of Properties	73
	SECTION 10.6.	Payment of Taxes and Other Claims	73
	SECTION 10.7.	Provision of Financial Information	74
	SECTION 10.8.	Statement by Officers as to Default	74
	SECTION 10.9.	Waiver of Certain Covenants	74
	SECTION 10.10.	Payment of Additional Amounts	75
	SECTION 10.11.	Negative Covenants of the Company	76
	SECTION 10.12.	Limitation on Liens of the Guarantors	78
	SECTION 10.13.	Transactions with Affiliates and Related Persons	80
	SECTION 10.14.	Performance Obligations Under Other Documents	80
	SECTION 10.15.	Compliance with Laws	81
	SECTION 10.16.	Maintenance of Government Approvals	81
	SECTION 10.17.	Maintenance of Insurance	81
	SECTION 10.18.	Maintenance of Books and Records	81
	SECTION 10.19.	Ranking	82

ii

	SECTION 10.20.	Notice of Certain Events	82
	SECTION 10.21.	Further Actions	82
	SECTION 10.22.	Additional Information for Rating Agencies	83
ARTICLE 11 REDEMPTION OF SECURITIES			84
	SECTION 11.1.	Redemption For Tax Reasons	84
	SECTION 11.2.	Optional Redemption	85
	SECTION 11.3.	Applicability of Article	85
	SECTION 11.4.	Election to Redeem; Notice to Trustee	85
	SECTION 11.5.	Notice of Redemption	85
	SECTION 11.6.	Deposit of Redemption Price	86
	SECTION 11.7.	Securities Payable on Redemption Date	86
ARTICLE 12 DEFEASANCE AND COVENANT DEFEASANCE			87
	SECTION 12.1.	Option to Effect Defeasance or Covenant Defeasance	87
	SECTION 12.2.	Defeasance and Discharge	87
	SECTION 12.3.	Covenant Defeasance	87
	SECTION 12.4.	Conditions to Defeasance or Covenant Defeasance	88
	SECTION 12.5.	Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions	90
	SECTION 12.6.	Reinstatement	90
	SECTION 12.7.	Repayment to Company	90
ARTICLE 13 GUARANTEES			91
	SECTION 13.1.	Guarantees	91
	SECTION 13.2.	Delivery of the Guarantees	93
	SECTION 13.3.	Guarantors May Consolidate, Etc., on Certain Terms	93
	SECTION 13.4.	Release of Guarantors	93
ARTICLE 14 LETTER OF CREDIT			94
ARTICLE 15 MEETINGS OF HOLDERS OF SECURITIES			96
	SECTION 15.1.	Purposes for Which Meetings May Be Called	96
	SECTION 15.2.	Call, Notice and Place of Meetings	96
	SECTION 15.3.	Persons Entitled to Vote at Meetings	96
	SECTION 15.4.	Quorum; Action	97
	SECTION 15.5.	Determination of Voting Rights; Conduct and Adjournment of Meetings	97
	SECTION 15.6.	Counting Votes and Recording Action of Meetings	98

EXHIBITS
EXHIBIT A	FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF RESTRICTED GLOBAL SECURITY TO REGULATION S GLOBAL SECURITY	A-1
EXHIBIT B	FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF REGULATION S GLOBAL SECURITY TO RESTRICTED GLOBAL SECURITY	B-1
EXHIBIT C-I	FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO RESTRICTED GLOBAL SECURITY	C-I-1
EXHIBIT C-II	FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO REGULATION S GLOBAL SECURITY	C-II-1
EXHIBIT D-1	FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF NON-GLOBAL REGULATION S SECURITY TO RESTRICTED GLOBAL SECURITY	D-1-1
EXHIBIT D-2	FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF NON-GLOBAL REGULATION S SECURITY TO REGULATION S GLOBAL SECURITY	D-2-1
EXHIBIT E	CERTIFICATE OF EXTENSION OF MATURITY	E-1
EXHIBIT F	FORM OF CURRENCY INCONVERTIBILITY/NON-TRANSFER EVENT NOTICE	F-1
EXHIBIT G	FORM OF NOTICE OF NON-PAYMENT	G-1

iii

THIS INDENTURE, dated as of June 24, 2005, among VOTO-Votorantim Overseas Trading Operations IV Limited, a limited liability company duly organized and existing under the laws of the Cayman Islands (the “Company”), having its principal office at Walkers SPV Limited, Walker House, Mary Street, P.O. Box 908GT, George Town, Grand Cayman, Cayman Islands, Votorantim Participações S.A., a validly organized corporation (sociedade anônima)duly organized under the laws of the Federative Republic of Brazil (“VPAR”), Votorantim Celulose e Papel S.A., a validly organized corporation (sociedade anônima)duly organized under the laws of the Federative Republic of Brazil (“VCP”), and Cimento Rio Branco S.A., a validly organized corporation (sociedade anônima)duly organized under the laws of the Federative Republic of Brazil (“CRB”, each of VPAR, VCP and CRB being a “Guarantor” and together, the “Guarantors”), JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), J.P. Morgan Bank Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd., a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).

RECITALS OF THE COMPANY AND THE GUARANTOR

WHEREAS, the Company has duly authorized the creation of an issue of U.S.$400,000,000 aggregate principal amount of its 7.75% Notes due 2020 (the “Securities”) of substantially the tenor and amount hereinafter set forth, and to provide therefore the Company has duly authorized the execution and delivery of this Indenture.

WHEREAS, each of the Guarantors has duly authorized the execution and delivery of this Indenture to provide for their respective Guarantee with respect to the Securities as set forth in this Indenture.

WHEREAS, the Holders will receive the benefit of the Letter of Credit which will provide for certain payments to the Trustee, on behalf of the Holders, limited, at any one time outstanding, to the Stated Amount, upon receipt by the Issuing Bank of evidence of the satisfaction of each of the conditions for drawing funds set forth in the Letter of Credit, including the occurrence and continuation of a Currency Inconvertibility/Non-Transfer Event.

WHEREAS, all things necessary (i) to make the Securities, when executed by the Company and authenticated and delivered hereunder and duly issued by the Company, the valid obligations of the Company, (ii) to make the Guarantees of the Guarantors, each of which when executed by the respective Guarantors and endorsed on the Securities executed, authenticated and delivered hereunder, the valid obligations of the respective Guarantors, (iii) to make this Indenture a valid agreement of the Company and each of the Guarantors, (iv) to make the Letter of Credit Agreement a valid agreement of VPAR and the Banks and (v) to make the Letter of Credit a valid agreement of the Issuing Bank and the Trustee, all in accordance with their respective terms, have been done.

NOW, THEREFORE, THIS INDENTURE WITNESSETH:

For and in consideration of the premises and the purchase of the Securities by the Holders thereof, it is mutually agreed, for the equal and proportionate benefit of all Holders of the Securities, as follows:

ARTICLE 1

DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION

SECTION 1.1.     Definitions

For all purposes of this Indenture, except as otherwise expressly provided or unless the context otherwise requires:

(1)	the terms defined in this Article have the meanings assigned to them in this Article and include the plural as well as the singular;
(2)	all other terms used herein that are defined in the Trust Indenture Act, either directly or by reference therein, have the meanings assigned to them therein;
(3)	all accounting terms not otherwise defined herein have the meanings assigned to them in accordance with Brazilian GAAP, and except as otherwise herein and expressly provided, the term “Brazilian GAAP”, with respect to any computation required or permitted hereunder, shall mean Brazilian GAAP as is generally accepted at the date of such computation;
(4)	the words “herein”, “hereof” and “hereunder” and other words of similar import refer to this Indenture as a whole and not to any particular Article, Section or other subdivision;
(5)	all references in this Indenture, the Securities and the Guarantees to interest in respect of any Security shall be deemed to include all Additional Amounts, if any, in respect of such Security, unless the context otherwise requires, and express mention of the payment of Additional Amounts in any provision hereof or thereof shall not be construed, without more, as excluding reference to Additional Amounts in those provisions hereof or thereof where such express mention is not made; all references in this Indenture, the Securities and the Guarantees to principal in respect of any Security shall be deemed to include any Redemption Price payable in respect of such Security pursuant to any redemption hereunder (and all such references to the Stated Maturity of the principal in respect of any Security shall be deemed to include the Redemption Date with respect to any such Redemption Price), and express mention of the payment of any Redemption Price in any provision hereof or thereof shall not be construed as excluding reference to any Redemption Price in those provisions hereof or thereof where such express reference is not made); and
(6)	All references in this Indenture to “$”, “U.S.$”, “dollars” or “United States dollars” shall refer to the lawful currency of the United States of America.

2

“Act”, when used with respect to any Holder, has the meaning specified in Section 1.4.

“Additional Amounts” has the meaning specified in Section 10.10.

“Affiliate” of any Person means any other Person controlling or controlled by or under direct or indirect common control with such Person.  For the purposes of this definition, “control”, when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise; and the terms “controlling” and “controlled” have meanings correlative to the foregoing.

“Agent Member” means any member of, or participant in, the Depositary.

“Applicable Procedures” has the meaning set forth in Section 3.4(c)(2).

“Bankruptcy Law” means Title 11, United States Code, the or any similar Brazilian, Cayman Island, federal or state law relating to bankruptcy, insolvency, receivership, winding-up, suspension of payments, liquidation, reorganization or relief of debtors or the law of any other jurisdiction relating to bankruptcy, insolvency, receivership, winding-up, suspension of payments, liquidation, reorganization or relief of debtors or any amendment to, succession to or change in any such law.

“Bankruptcy Order” means any court order made in a proceeding pursuant to or within the meaning of any Bankruptcy Law, containing an adjudication of bankruptcy or insolvency, or providing for liquidation, receivership, winding-up, dissolution, “concordato” or reorganization, or appointing a custodian of a debtor or of all or any substantial part of a debtor’s property, or providing for the staying, arrangement, adjustment or composition of indebtedness or other relief of a debtor.

“Banks” has the meaning specified in the Letter of Credit Agreement.

“Base Currency” has the meaning set forth in Section 1.14.

“Board of Directors” means the board of directors of the Company.

“Board Resolution” means a duly adopted resolution of the Board of Directors in full force and effect at the time of determination and certified by at least two Directors of the Company and delivered to the Trustee.

“Brazil” means the Federative Republic of Brazil and any ministry, department, authority (including the Central Bank) or statutory corporation or other entity (including a trust), owned or controlled directly or indirectly by the Federative Republic of Brazil or any of the foregoing.

“Business Day” means any day except (i) a Saturday, Sunday or (ii) any other day on which banks in New York City, London or São Paulo, Brazil are authorized or required by law to close.

3

“Calculation Agent” means Banco de Investimentos Credit Suisse First Boston S.A., and its successors and assigns.

“Capital Lease Obligation” of any Person means the obligation to pay rent or other payment amounts under a lease of (or other Indebtedness arrangements conveying the right to use) real or personal property of such Person which is required to be classified and accounted for as a capital lease or a liability set forth on a balance sheet of such Person in accordance with Brazilian GAAP (a “Capital Lease”).  The stated maturity of such obligation shall be the date of the last payment of rent or any other amount due under such lease prior to the first date upon which such lease may be terminated by the lessee without payment of a penalty.  The principal amount of such obligation shall be the capitalized amount thereof that would appear on the face of a balance sheet of such Person in accordance with Brazilian GAAP.

“Capital Stock” of any Person means any and all shares, interests, participations or other equivalents (however designated) of corporate stock or other equity participations, including quotas in a Brazilian limited liability quota company (limitada)or partnership interests, whether general or limited, of such Person.

“Central Bank” means the Central Bank of Brazil or any successor entity.

“Change of Law” has the meaning specified in Section 11.1.

“Clearstream” means Clearstream Banking, société anonyme or its successors.

“Closing Date” means the date on which the Securities are first authenticated and delivered under this Indenture.

“Company” means the Person named as the “Company” in the first paragraph of this instrument until a successor Person shall have become such pursuant to the applicable provisions of this Indenture and thereafter “Company” shall mean such successor Person.

“Company Request” or “Company Order” means a written request or order signed in the name of the Company by at least two Directors of the Company and delivered to the Trustee.

“Comparable Treasury Issue” means the United States Treasury security or securities selected by an Independent Investment Banker as having an actual or interpolated maturity comparable to the remaining term of the Securities to be redeemed that would be utilized, at the time of selection and in accordance with customary financial practice, in pricing new issues of corporate debt securities of a comparable maturity to the remaining term of such Securities.

“Comparable Treasury Price” means, with respect to any redemption date (1) the average of the Reference Treasury Dealer Quotations for such redemption date, after excluding the highest and lowest such Reference Treasury Dealer Quotation or (2) if the Trustee obtains fewer than four such Reference Treasury Dealer Quotations, the average of all such quotations.

4

“Consolidated Net Tangible Assets” means, on a consolidated basis (but excluding Votorantim Finanças S.A. and its Subsidiaries), VPAR’s total assets, less current liabilities, less depreciation, amortization and depletion, less goodwill, trade names, trademarks, patents and other intangibles, calculated based on the most recent balance sheet delivered by VPAR to the Trustee pursuant to the Indenture.

“Coordinating Bank” means Credit Suisse First Boston (Bahamas) Limited, and its successors and assigns.

“Corporate Trust Office” means the principal office of the Trustee in The City of New York, New York, at which at any particular time its corporate trust business shall be principally administered, which at the date hereof is located at 4 New York Plaza, 15^th Floor, New York, New York, 10004 Attention:  Worldwide Securities Services and such other offices as the Trustee may designate from time to time.

“corporation” means a corporation, association, company, limited liability company, joint-stock company or business trust.

“Currency Inconvertibility/Non-Transfer Event” has the meaning specified in the Letter of Credit Agreement.

“CVM” means the Comissao de Valores Mobiliários of Brazil or any successor agency thereto.

“Default” means an event that with the passing of time or the giving of notice or both shall constitute an Event of Default.

“Defaulted Interest” has the meaning specified in Section 3.6.

“Depositary” means, with respect to the Securities issuable or issued in whole or in part in the form of one or more Global Securities, DTC for so long as it shall be a clearing agency registered under the Exchange Act, or such successor as the Company shall designate from time to time in an Officers’ Certificate delivered to the Trustee.

“Designated Subsidiary” of the Company or any Guarantor means any present or future direct or indirect Subsidiary of the Company or the Guarantors other than (1) Votorantim Finanças S.A., Banco Votorantim S.A., Votorantim Bank Limited or BV Financeira, Credito, Financiamento e Investimento S.A., and (ii) any direct or indirect subsidiary of Votorantim Finanças S.A. which is principally engaged in the financial services business and related activities.

“Director” means a member of the Board of Directors.

5

“Disqualified Stock” of any Person means any Capital Stock of such Person which, by its terms (or by the terms of any security into which it is convertible or for which it is exchangeable), or upon the happening of any event, matures or is mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or is redeemable at the option of the holder thereof, in whole or in part, on or prior to the final Stated Maturity of the Securities.

“Drawing Certificate” has the meaning specified in the Letter of Credit.

“DTC” means The Depository Trust Company.

“Ermírio de Moraes Family” means, at any time, Mr. Antonio Ermírio de Moraes, Mr. Ermírio Pereira de Moraes, Mrs. Maria Helena de Moraes Scripilliti and Mr. José Ermírio de Moraes Filho, and all of their descendants.

“Euroclear” means the Euroclear Bank S.A./N.V. as operator of the Euroclear system or its successors.

“Event of Default” has the meaning specified in Section 5.1.

“Exchange Act” means the United States Securities Exchange Act of 1934, as amended (or any successor act) and the rules and regulations thereunder.

“Expiration Date” has the meaning set forth in Section 1.4.

“Fitch” has the meaning specified in the Letter of Credit Agreement.

“GAAP” means accounting practices adopted in the applicable country from time to time.

“Global Security” means, as the context may require, any or all of the Regulation S Global Security(ies) and the Restricted Global Security(ies).

“Government Agency” means a public legal entity or public agency, created by any competent authority, or any other legal entity now existing or hereafter created, or now or hereafter owned or controlled, directly or indirectly, by any such public legal entity or public agency including any central bank.

“Government of Brazil” has the meaning specified in the Letter of Credit Agreement.

“guarantee” by any Person means any obligation, contingent or otherwise, of such Person guaranteeing, or having the economic effect of guaranteeing, any Indebtedness of any other Person (the “primary obligor”) in any manner, whether directly or indirectly, and including, without limitation, any obligation of such Person, (i) to purchase or pay (or advance or supply funds for the purchase or payment of) such Indebtedness or to purchase (or to advance or supply funds for the purchase of) any security for the payment of such Indebtedness, (ii) to purchase property, securities or services for the purpose of assuring the holder of such Indebtedness of the payment of such Indebtedness, or (iii) to maintain working capital, equity capital or other financial statement condition or liquidity of the primary obligor so as to enable the primary obligor to pay such Indebtedness

6

(and “guaranteed,” “guaranteeing” and “guarantor” shall have meanings correlative to the foregoing); provided, however, that the guarantee by any Person shall not include endorsements by such Person for collection or deposit, in either case, in the ordinary course of business; and provided further that the Incurrence by a Designated Subsidiary of the Company of a Lien permitted under clause (iv) of Section 10.12 shall not be deemed to constitute a guarantee by such Designated Subsidiary of any purchase money debt of the Company secured thereby.

“Guarantee” means the joint, several, unconditional and irrevocable guarantees by the respective Guarantors of the due and punctual payment of the principal (and premium, if any) and interest (including any Additional Amounts) on, the Securities provided that the liability of each of VCP and CRB will be limited to 50% of the Outstanding amount of the Securities.

“Guarantors”, as of any time, has the meaning specified in the first paragraph of this Indenture.

“Guarantor Subsidiary” means any Subsidiary of any Guarantor or of two or more Guarantors on a collective basis.

“Hejoassu” means Hejoassu Administraçao S.A., a Brazilian corporation.

“Holder” means a Person in whose name a Security is registered in the Security Register (or, in the case of a joint holding, the first named thereof).

“Incur” means, with respect to any Indebtedness or other obligation of any Person, to create, issue, incur (by conversion, exchange or otherwise), assume, guarantee or otherwise become liable in respect of such Indebtedness or other obligation including by acquisition of Subsidiaries or the recording, as required pursuant to Brazilian GAAP or otherwise, of any such Indebtedness or other obligation on the balance sheet of such Person (and “Incurrence”, “Incurred”, “Incurrable” and “Incurring” shall have meanings correlative to the foregoing); provided, however, that a change in Brazilian GAAP that results in an obligation of such Person that exists at such time becoming Indebtedness shall not be deemed an Incurrence of such Indebtedness and that neither the accrual of interest nor the accretion of original issue discount shall be deemed an Incurrence of Indebtedness; provided further, however, that the Company or any Guarantor may elect to treat all or any portion of revolving credit debt commitments, whether or not then Outstanding, of the Company, any such Guarantor or a Subsidiary as being incurred from and after any date beginning the date the relevant revolving credit commitment is extended to the Company, any such Guarantor or a Subsidiary, by furnishing notice thereof to the Trustee, and any borrowings or reborrowings by the Company, any such Guarantor or a Subsidiary under such commitment up to the amount of such commitment designated by the Company or any such Guarantor as Incurred shall not be deemed to be new Incurrences of Indebtedness by the Company, any such Guarantor or such Subsidiary.

7

“Indebtedness” means (without duplication), with respect to any Person, whether recourse is to all or a portion of the assets of such Person and whether or not contingent, (i) every obligation of such Person for money borrowed, (ii) every obligation of such Person evidenced by bonds, debentures, notes or other similar instruments, including any such obligations incurred in connection with the acquisition of property, assets or businesses, (iii) every reimbursement obligation of such Person with respect to letters of credit, bankers’ acceptances or similar facilities issued for the account of such Person, (iv) every obligation of such Person issued or assumed as the deferred purchase price of property or services (including securities repurchase agreements but excluding trade accounts payable or accrued liabilities arising in the ordinary course of business which are payable on customary trade terms or which are being contested in good faith), (v) all Receivables Sales of such Person, together with any obligation of such Person to pay any discount, interest, fees, indemnities, penalties, recourse, expenses or other amounts in connection therewith, (vi) all obligations to redeem Disqualified Stock issued by such Person, (vii) every Net Obligation under Interest Rate and Currency Protection Agreements of such Person, (viii) every Capital Lease Obligation of such Person, and (ix) every obligation of the type referred to in clauses (i) through (viii) of another Person and all dividends of another Person the payment of which, in either case, such Person has guaranteed.

The “amount” or “principal amount” of Indebtedness at any time of determination represented by any Receivables Sale shall be the amount of the unrecovered capital or principal investment of the purchaser (other than the Company, any Guarantor or any Wholly Owned Designated Subsidiary of the Company or any such Guarantor) thereof for which the seller of the Receivables remains obligated, excluding amounts representative of yield or interest earned on such investment.  In no event shall Indebtedness include any liability for taxes.

“Indenture” means this instrument as originally executed or as it may from time to time be supplemented or amended by one or more indentures supplemental hereto entered into pursuant to the applicable provisions hereof.

“Independent Investment Banker” means one of the Reference Treasury Dealers appointed by the Company.

“Intercompany Bond Documents” means the fiscal and paying agency agreements, placement agreements, custody agreements, and global notes executed in connection with the Intercompany Bonds.

“Intercompany Bonds” means the U.S.$150,000,000 8.5% fixed-rate bond due 2005 issued on December 27, 1996 by VCP (and currently the obligation of VCP Exportadora e Participações S.A., as successor to VCP’s obligations under that bond) and guaranteed by VPAR (formerly S.A. Indústrias Votorantim, or SAIV), VCP and CRB, the U.S.$150,000,000 8.5% fixed-rate bond due 2005 issued on December 27 1996 by VPAR (Formerly SAIV and currently the obligation of Votorantim Cimentos Ltda., successor to VPAR’s obligations under that bond) and guaranteed by VPAR, VCP and CRB, the U.S.$50,000,000 8.5% fixed-rate bond due 2005 issued on June 27, 1997 by VCP

8

(and currently the obligation of VCP Exportadora e ParticipaÕões S.A., as successor to VCP’s obligations under that bond) and guaranteed by VPAR (formerly S.A. Industrias Votorantim), VCP and CRB, and the U.S.$50,000,000 8.5% fixed rate bond due 2005 issued on June 27, 1997 by VPAR (formerly S.A. Industrias Votorantim and currently the obligation of Votorantim Cimentos Ltda., successor to VPAR’s obligations under that bond) and guaranteed by VPAR, VCP and CRB, each as amended from time to time.

“Interest Payment Date” means the Stated Maturity of an installment of interest on the Securities.

“Interest Rate or Currency Protection Agreement” of any Person means any forward contract, futures contract, swap, option, hedge or other financial agreement or arrangement (including, without limitation, caps, floors, cottars and similar agreements) relating to, or the value of which is dependent upon, interest rates or currency exchange rates or indices.

“Investment” by any Person means any direct or indirect loan, advance or other extension of credit or capital contribution (by means of transfers of cash or other property to others or payments for property or services for the account or use of others, or otherwise) to, or purchase or acquisition of Capital Stock, bonds, notes, debentures or other securities or evidence of Indebtedness issued by, any other Person, including any payment on a guarantee of any obligation of such other Person, but excluding any loan, advance or extension of credit to an employee of the Company, any of the Guarantors or any Designated Subsidiaries in the ordinary course of business, accounts receivables and other commercially reasonable extensions of trade credit.

“Issuing Bank” means Credit Suisse, acting through its Cayman Islands Branch.

“judgment currency” has the meaning set forth in Section 1.14(b) hereof.

“Letter of Credit” has the meaning specified in the Letter of Credit Agreement.

“Letter of Credit Agreement” means the letter of credit agreement, dated as of June 24, 2005, among VPAR, the Issuing Bank, the Coordinating Bank, the Process Agent, the Local Bank and the Calculation Agent.

“Letter of Credit Business Day” means any day except (i) a Saturday, Sunday or (ii) any other day on which banks in New York City or São Paulo, Brazil are authorized or required by law to close.

“Lien” means, with respect to any property, assets, revenues or income, any mortgage or deed of trust, pledge, hypothecation, assignment, Receivables Sale, deposit arrangement, security interest, lien, charge, easement (other than any easement not materially impairing usefulness or marketability), Sale Leaseback Transaction, encumbrance, preference, priority or other security agreement or preferential arrangement of any kind or nature whatsoever on or with respect to such property, assets, revenues or income (including, without limitation, any conditional sale or other title retention agreement having substantially the same economic effect as any of the foregoing).

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“Local Bank” means Banco de Investimentos Credit Suisse First Boston S.A., and its successors and assigns.

“Local Currency” has the meaning specified in the Letter of Credit Agreement.

“Maturity Date”, when used with respect to any Security, means the date on which the principal of such Security becomes due and payable as therein or herein provided, whether at the Stated Maturity or by declaration of acceleration, call for redemption or otherwise.

“Maximum L/C Amount” has the meaning specified in the Letter of Credit Agreement.

“Minimum Stated Amount” has the meaning specified in the Letter of Credit Agreement.

“Net Obligation” at any date of determination means the net amount, exclusive of any commissions or administrative fees that a Person would be obligated to pay upon the termination of an Interest Rate and Currency Protection Agreement as of such date.

“Notice of Default” has the meaning set forth in Section 6.2.

“Notice of Non-Payment” means a notice in the form of Exhibit G hereto.

“Officers’ Certificate” means (a) with respect to the Company, a certificate signed by any two Directors of the Company and (b) with respect to any Guarantor, a certificate signed by (i) the Chief Executive Officer, President, Chief Financial Officer or a Vice President and (ii) the Treasurer, Assistant Treasurer, Secretary or an Assistant Secretary of such Guarantor, as applicable, and delivered to the Trustee and containing the statements provided for in Section 4.1 hereof.  One of the officers signing an Officers’ Certificate for any such Guarantor given pursuant to Section 4.1 hereof shall be the principal executive, financial or accounting officer of such entity.

“Opinion of Counsel” means a written opinion of legal counsel, who may be counsel for the Company or any of the Guarantors, and containing the statements provided for in Section 1.2.

“Outstanding”, when used with respect to the Securities, means, as of the date of determination, all the Securities theretofore authenticated and delivered under this Indenture (including, as of such date, all the Securities represented by Global Securities authenticated and delivered under this Indenture), except the reduced portion or portions of any Global Security, as such reduction or reductions shall have been endorsed on such Global Security by the Trustee as provided herein and, except:

(i)

The Securities theretofore cancelled by the Trustee or delivered to the Trustee for cancellation;

(ii)

The Securities for whose payment or redemption money in the necessary amount has been theretofore deposited with the Trustee or any Paying Agent (other than the Company) in trust or set aside and segregated in trust by the Company (if the Company shall act as their own Paying Agents) for the Holders of such Securities; provided that, if such Securities are to be repurchased, notice of such repurchase has been duly given pursuant to this Indenture; and

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(iii) Securities which have been issued pursuant to Section 3.6 or in exchange for or in lieu of which other Securities have been authenticated and delivered pursuant to this Indenture, other than any such Securities in respect of which there shall have been presented to the Trustee proof satisfactory to it that such Securities are held by a protected purchaser in whose hands such Securities are valid obligations of the Company;

provided, however, that in determining whether the Holders of the requisite principal amount of the Outstanding Securities have given any request, demand, authorization, direction, notice, consent or waiver hereunder, Securities owned by the Company or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor shall be disregarded and deemed not to be Outstanding, except that, in determining whether the Trustee shall be protected in relying upon any such request, demand, authorization, direction, notice, consent or waiver, only Securities which a Responsible Officer of the Trustee knows to be so owned shall be so disregarded.  Securities so owned which have been pledged in good faith may be regarded as Outstanding if the pledgee establishes to the satisfaction of the Trustee the pledgee’s right so to act with respect to such Securities and that the pledgee is not the Company, any Guarantor or any other obligor upon the Securities or any Affiliate of the Company or of such other obligor.

“Owner Securities Certification” has the meaning set forth in Section 2.1.

“Paying Agent” means any Person authorized by the Company to pay the principal of (and premium, if any) or interest on any Securities on behalf of the Company.  The Company has initially appointed JPMorgan Chase Bank, N.A., J.P. Morgan Bank Luxembourg S.A. and the Principal Paying Agent to act as Paying Agents.

“Payment Date” has the meaning set forth in Section 3.11.

“Person” means any individual, corporation, limited liability company, partnership, joint venture, association, trust, unincorporated organization, government or agency or political subdivision thereof or any other entity.

“Predecessor Security” of any particular Security means every previous Security evidencing all or a portion of the same debt as that evidenced by such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.5 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

“Principal Paying Agent” means J.P. Morgan Trust Bank Ltd. or any successor in its capacity as Principal Paying Agent.

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“Process Agent” means Credit Suisse First Boston, and its successors and assigns.

“Purchase Agreement” means the Purchase Agreement, dated as of June 21, 2005 between the Company, the Guarantors and the initial purchaser as set forth therein, as such agreement may be amended from time to time.

“rates of exchange” has the meaning set forth in Section 1.14.

“Receivables” means receivables, chattel paper, instruments, documents or intangibles evidencing or relating to the right to payment of money in respect of the sale of goods or services.

“Receivables Sale” of any Person means any sale of Receivables of such Person (pursuant to a purchase facility or otherwise), other than in connection with a disposition of the business operations of such Person relating thereto or a disposition of defaulted Receivables for purpose of collection and not as a financing arrangement.

“Redemption Date” when used with respect to any Security to be redeemed, means the date fixed for such redemption by or pursuant to Section 11 of this Indenture.

“Redemption Price” when used with respect to any Security to be redeemed, means the price at which it is to be redeemed pursuant to Section 11 of this Indenture.

“Reference Rate of Exchange” has the meaning specified in the Letter of Credit Agreement.

“Reference Treasury Dealer” means Credit Suisse First Boston LLC or its affiliates which are primary United States government securities dealers and three other leading primary United States government securities dealers in New York City reasonably designated by the Company; provided, however, that if any of the foregoing shall cease to be a primary United States government securities dealer in New York City (a “Primary Treasury Dealer”), the Company will substitute therefor another Primary Treasury Dealer.

“Reference Treasury Dealer Quotation” means, with respect to each Reference Treasury Dealer and any redemption date, the average, as determined by the Trustee, of the bid and asked prices for the Comparable Treasury Issue (expressed in each case as a percentage of its principal amount) quoted in writing to the Trustee by such Reference Treasury Dealer at 3:30 pm New York time on the third business day preceding such redemption date.  On and after the redemption date, interest will cease to accrue on the Securities or any portion of the Securities called for redemption (unless the Company defaults in the payment of the redemption price and accrued interest).  On the Business Day prior to the redemption date, the Company will deposit with the Trustee money sufficient to pay the redemption price of and (unless the redemption date shall be an interest payment date) accrued interest to the redemption date on the Securities to be redeemed on such date.  If less than all of the Securities are to be redeemed, the Securities to be redeemed shall be selected by the Trustee by such method as the Trustee shall deem fair and appropriate.

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“refinancing” has the meaning set forth in Section 10.12.

“Regular Record Date” for the interest payable on any Interest Payment Date means the 15th day (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.

“Regulation S” means Regulation S under the Securities Act (or any successor provision), as it may be amended from time to time.

“Regulation S Global Security” has the meaning set forth in Section 2.1.

“Related Party” means any Affiliate of the Ermírio de Moraes Family.

“Responsible Officer” means any officer of the Trustee with direct responsibility for the administration of this Indenture and also means, with respect to a particular corporate trust matter, any other officer to whom such matter is referred because of his knowledge of and familiarity with the particular subject.

“Restricted Global Security” has the meaning set forth in Section 2.1.

“Restricted Securities” means the Restricted Global Security and any Successor Security, other than (i) any Security issued upon a transfer or exchange for which a certificate substantially in the form set forth in (a) Exhibit A is required to be provided and is provided pursuant to Section 3.4(c)(2) or (b) Exhibit C-2 is required to be provided and is provided pursuant to Section 3.4(c)(5), (ii) any Security issued in exchange for or in lieu of any Security specified in Clause (i) of this definition or any Security issued in exchange therefore or in lieu thereof, or (iii) any Security as to which the Company has removed and has not replaced the legend described in Section 3.4(b).

“Reuters” means Reuters Group plc, a U.K. corporation, and its successors and assigns.

“Rule 144” means Rule 144 under the Securities Act (or any successor provision), as it may be amended from time to time.

“Rule 144A” means Rule 144A under the Securities Act (or any successor provision), as it may be amended from time to time.

“S&P” means Standard & Poor’s Ratings Services, a division of the McGraw-Hill Companies, Inc.

“Sale Leaseback Transaction” means any arrangement, direct or indirect, with any Person whereby a Person shall sell or transfer any property, real or personal, used or useful in its business, whether now owned or hereafter acquired, and thereafter rent or lease such property or other property that it intends to use for substantially the same purpose or purposes as the property being sold or transferred.

“Scheduled Payment” has the meaning specified in the Letter of Credit Agreement.

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“Securities” means the securities issued pursuant to this Indenture.

“Securities Act” means the United Slates Securities Act of 1933 and any statute successor thereto, in each case as amended from time to time.

“Securitization Transaction” means a transaction in which a Guarantor or a Subsidiary thereof sells or transfers an interest in Receivables (and/or any rights arising under the documentation governing or relating to such Receivables covered by such transaction, any proceeds of Receivables and any lockboxes or accounts in which such proceeds are deposited and any related assets) to a special purpose entity that issues securities payable from collections of such Receivables or other assets.

“Security Register” and “Security Registrar” have the respective meanings specified in Section 3.4(b).

“Senior Officer” means the chief executive officer, president or chief financial officer of the relevant entity.

“special quorum” has the meaning set forth in Section 15.4.

“Special Record Date” for the payment of any Defaulted Interest means a date fixed by the Trustee pursuant to Section 3.7.

“Stated Amount” has the meaning specified in the Letter of Credit.

“Stated Maturity”, when used with respect to any Security or any installment of interest thereon, means the date specified in such Security as the fixed date on which the principal of such Security or such installment of interest, as the case may be, is due and payable.

“Subsidiary” of any Person means (i) a corporation more than 50% of the combined voting power of the outstanding Voting Stock of which is owned, directly or indirectly, by such Person or by one or more other Subsidiaries of such Person or by such Person and one or more Subsidiaries thereof or (ii) any other Person (other than a corporation) in which such Person, or one or more other Subsidiaries of such Person or such Person and one or more other Subsidiaries thereof, directly or indirectly, has at least a majority ownership and power to direct the policies, management and affairs thereof.

“Successor Security” of any particular Security means every Security issued after, and evidencing all or a portion of the same debt as that evidenced by, such particular Security; and, for the purposes of this definition, any Security authenticated and delivered under Section 3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen Security.

“Taxes” has the meaning set forth in Section 10.10.

“Transaction Documents” means the Indenture, the Securities, the Guarantees, the Letter of Credit Agreement, the application for listing of the Securities on the Luxembourg Stock Exchange and the Blanket DTC Letter of Representations completed by the Company in connection with the Securities.

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“Transfer Agent” means the agents designated by the Company (not including the Security Registrar) for the registration of transfer of securities as provided in Section 10.10.

“Treasury Rate” means, with respect to any redemption date, the rate per annum equal to the semiannual equivalent yield to maturity or interpolated maturity (on a day count basis) of the Comparable Treasury Issue, assuming a price for the Comparable Treasury Issue (expressed as a percentage of its principal amount) equal to the Comparable Treasury Price for such redemption date.

“Trustee” means the Person named as the “Trustee” in the first paragraph of this instrument until a successor Trustee shall have become such pursuant to the applicable provisions of this Indenture, and thereafter “Trustee” shall mean such successor Trustee.

“Uniform Commercial Code” means the Uniform Commercial Code as in effect from time to time in the state of New York.

“U.S. Dollar Equivalent” means, with respect to any monetary amount in a currency other than the U.S. Dollar, at any time for the determination thereof, the amount of U.S. Dollars obtained by converting such foreign currency involved in such computation into U.S. Dollars at the spot rate for the purchase of U.S. Dollars with the applicable foreign currency as quoted by Reuters at approximately 11:00 a.m. (New York time) on the date not more than two business days prior to such determination.

“U.S. GAAP” means generally accepted accounting principles in the United States of America as in effect as of the date of this indenture, including those set forth in the opinions and pronouncements of the Accounting Principles Board of the American Institute of Certified Public Accountants and statements and pronouncements of the Financial Accounting Standards Board or in such other statements by such other entity as approved by a significant segment of the accounting profession.

“Vice President”, when used with respect to the Guarantors, means any vice president, whether or not designated by a number or a word or words added before or after the title “vice president”.

“Voting Stock” of any Person means Capital Stock of such Person which ordinarily has voting power for the election of directors (or persons performing similar functions) of such Person, whether at all times or only so long as no senior class of securities has such voting power by reason of any contingency.

“Votorantim Group” means the group of related companies commonly known as the “Votorantim Group” comprised of the subsidiaries of Hejoassu as of the date hereof.

“Wholly Owned Designated Subsidiary” of any Person means a Designated Subsidiary of such Person of which at least 99% or more of the outstanding Capital Stock or other ownership interests (other than directors’ qualifying shares) shall at the time be owned by such Person or by one or more Wholly Owned Designated Subsidiaries of such Person.

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SECTION 1.2.     Compliance Certificates and Opinions

Upon any application or request by the Company or any of the Guarantors to the Trustee to take any action under any provision of this Indenture, the Company or any of the Guarantors shall furnish to the Trustee such certificates and opinions as may be required under this Indenture.  Each such certificate or opinion, and any certificate evidencing a determination required to be made by the Company or any of the Guarantors under this Indenture, shall be given in the form of an Officers’ Certificate, if to be given by an officer of the Company or any of the Guarantors, or an Opinion of Counsel, if to be given by counsel, and shall comply with the requirements set forth in this Indenture.

Every certificate or opinion with respect to compliance by or on behalf of the Company or any of the Guarantors with a condition or covenant provided for in this Indenture shall include:

(1)	a statement that each individual signing such certificate or opinion has read such covenant or condition and the definitions herein relating thereto;
(2)	a brief statement as to the nature and scope of the examination or investigation upon which the statements or opinions contained in such certificate or opinion are based;
(3)	a statement that, in the opinion of each such individual, he has made such examination or investigation as is necessary to enable him or her to express an informed opinion as to whether or not such covenant or condition has been complied with; and
(4)	a statement as to whether, in the opinion of each such individual, such condition or covenant has been complied with.

SECTION 1.3.     Form of Documents Delivered to Trustee

In any case where several matters are required to be certified by, or covered by an opinion of, any specified Person, it is not necessary that all such matters be certified by, or covered by the opinion of, only one such Person, or that they be so certified or covered by only one document, but one such Person may certify or give an opinion with respect to some matters and one or more other such Persons as to other matters, and any such Person may certify or give an opinion as to such matters in one or several documents.

Any certificate of an officer of the Company or any of the Guarantors may be based, insofar as it relates to legal matters, upon an Opinion of Counsel submitted therewith, unless such officer knows, or in the exercise of reasonable care should know, that the opinion with respect to the matters upon which his certificate is based is erroneous.  Any Opinion of Counsel may be based, insofar as it relates to factual matters, upon a certificate of an officer or officers of the Company or any of the Guarantors submitted therewith stating the information on which counsel is relying, unless such counsel knows, or in the exercise of reasonable care should know, that the certificate with respect to such matters is erroneous.

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Where any Person is required to make, give or execute two or more applications, requests, consents, certificates, statements, opinions or other instruments under this Indenture, they may, but need not, be consolidated and form one instrument.

SECTION 1.4.     Acts of Holders; Record Dates

Any request, demand, authorization, direction, notice, consent, waiver or other action provided by this Indenture to be given or taken by Holders may be embodied in and evidenced by one or more instruments of substantially similar tenor signed by such Holders in person or by an agent duly appointed in writing; and, except as herein otherwise expressly provided, such action shall become effective when such instrument or instruments are delivered to the Trustee and, where it is hereby expressly required, to the Company.  Such instrument or instruments (and the action embodied therein and evidenced thereby) are herein sometimes referred to as the “Act” of the Holders signing such instrument or instruments.  Proof of execution of any such instrument or of a writing appointing any such agent shall be sufficient for any purpose of this Indenture and (subject to Section 6.1) conclusive in favor of the Trustee and the Company, if made in the manner provided in this Section.

The fact and date of the execution by any Person of any such instrument or writing pursuant to this Section 1.4 may be proved by the affidavit of a witness of such execution or by a certificate of a notary public or other officer authorized by law to take acknowledgments of deeds, certifying that the individual signing such instrument or writing acknowledged to him or her the execution thereof.  Where such execution is by a signer acting in a capacity other than his individual capacity, such certificate or affidavit shall also constitute sufficient proof of his authority.  The fact and date of the execution of any such instrument or writing, or the authority of the Person executing the same, may also be proved in any other manner which the Trustee deems sufficient.

The ownership of Securities shall be proved by the Security Register.

Any request, demand, authorization, direction, notice, consent, waiver or other Act of the Holder of any Security shall bind every future Holder of the same Security and the Holder of every Security issued upon the registration of transfer thereof or in exchange therefore or in lieu thereof in respect of anything done, omitted or suffered to be done by the Trustee or the Company in reliance thereon, whether or not notation of such action is made upon such Security.

The Company may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to give, make or take any request, demand, authorization, direction, notice, consent, waiver or other action provided or permitted by this Indenture to be given, made or taken by Holders of Securities, provided that the Company may not set a record date for, and the provisions of this paragraph shall not apply with respect to, the giving or making of any notice, declaration, request or direction referred to in the next paragraph.  If not set by the Company prior to the first solicitation of a Holder made by any Person in respect of any such matter referred to in the foregoing sentence, the record date for any such matter shall be the 30th day (or, if later, the date of the most recent list of Holders required to be provided pursuant to Section 7.1) prior to such first solicitation.  If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to take the relevant action, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date. 

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Nothing in this paragraph shall be construed to prevent the Company from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities on the date such action is taken.  Promptly after any record date is set pursuant to this paragraph, the Company, at its own expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Trustee in writing and to each Holder of Securities in the manner set forth in Section 1.6.

The Trustee may set any day as a record date for the purpose of determining the Holders of Outstanding Securities entitled to join in the giving or making of (i) any Notice of Default, (ii) any declaration of acceleration referred to in Section 5.1, (iii) any request to institute proceedings referred to in Section 5.6(2) or (iv) any direction referred to in Section 5.11.  If any record date is set pursuant to this paragraph, the Holders of Outstanding Securities on such record date, and no other Holders, shall be entitled to join in such notice, declaration, request or direction, whether or not such Holders remain Holders after such record date; provided that no such action shall be effective hereunder unless taken on or prior to the applicable Expiration Date by Holders of the requisite principal amount of Outstanding Securities on such record date.  Nothing in this paragraph shall be construed to prevent the Trustee from setting a new record date for any action for which a record date has previously been set pursuant to this paragraph (whereupon the record date previously set shall automatically and with no action by any Person be cancelled and of no effect), and nothing in this paragraph shall be construed to render ineffective any action taken by Holders of the requisite principal amount of Outstanding Securities on the date such action is taken.  Promptly after any record date is set pursuant to this paragraph, the Trustee, at the Company’s expense, shall cause notice of such record date, the proposed action by Holders and the applicable Expiration Date to be given to the Company in writing and to each Holder of Securities in the manner set forth in Section 1.6.

With respect to any record date set pursuant to this Section, the party hereto which sets such record dates may designate any day as the “Expiration Date”, and from time to time may change the Expiration Date to any earlier or later day; provided that no such change shall be effective unless notice of the proposed new Expiration Date is given to the other party hereto in writing, and to each Holder of Securities in the manner set forth in Section 1.6, on or prior to the existing Expiration Date.  If an Expiration Date is not designated with respect to any record date set pursuant to this Section, the party hereto which set such record date shall be deemed to have initially designated the 180th day after such record date as the Expiration Date with respect thereto, subject to its right to change the Expiration Date as provided in this paragraph.  Notwithstanding the foregoing, no Expiration Date shall be later than the 180th day after the applicable record date.

Without limiting the foregoing, a Holder entitled hereunder to take any action hereunder with regard to any particular Security may do so with regard to all or any part of the principal amount of such Security or by one or more duly appointed agents each of which may do so pursuant to such appointment with regard to all or any part of such principal amount.

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SECTION 1.5.     Notices, Etc. to Trustee, Company and Subsidiary Guarantors

Any request, demand, authorization, direction, notice, consent, waiver or Act of Holders or other document provided or permitted by this Indenture to be made upon, given or furnished to, or filed with:

(1)	the Trustee by any Holder or by the Company or any of the Guarantors shall be sufficient for every purpose hereunder if made, given, furnished or filed, in writing, to or with the Trustee at 4 New York Plaza, 15th Floor, New York, New York 10004.  Attention: Corporate Trust Administration, telephone number 1 212 623-5175, telefax number 1 212 623-6207, and such other offices as the Trustee may designate from time to time or at any other address previously furnished in writing to the Holders, the Company and any of the Guarantors by the Trustee;
(2)	the Principal Paying Agent by the Trustee or by any Holder shall be sufficient for every purpose hereunder (except as otherwise expressly provided herein) if in writing and mailed, first class postage prepaid, to the Principal Paying Agent addressed to it at J.P. Morgan Trust Ltd.  Attention Loans and Securities Administration, telephone number: 1 212 623-5175 telefax number: 1 212 623-6207 or at any other address previously furnished in writing to the Trustee by the Principal Paying Agent;
(3)	the Company by the Trustee or by any Holder shall be sufficient for every purpose hereunder (except as otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to the Company addressed to it at Voto-Votorantim Overseas Trading Operations IV Limited c/o Votorantim Participações S.A. Rua Amauri, 255, 10 andar, 01448-000 São Paulo, SP Tel 55-11-3704-3345/Fax  55-11-3167-352, Attention:  Financial Director or at any other address previously furnished in writing to the Trustee by the Company;
(4)	any of VPAR or CRB by the Trustee or by any Holder shall be sufficient for every purpose hereunder (except as otherwise expressly provided herein) if in writing and mailed, first-class postage prepaid, to any of such Guarantors addressed to VPAR or CRB, as the case may be, in care of Votorantim Participações S.A., Rua Amauri, 255, 10 andar, 01448-000 São Paulo, SP Tel 55-11-3704-3345/Fax 55-11-3167-352, Attention:  Financial Director, or to any other address previously furnished in writing to the Trustee by such Guarantor;
(5)	VCP by the Trustee or by any Holder shall be sufficient for every purpose hereunder (except as otherwise expressly provided herein) if in writing and mailed, first class postage prepaid, to VCP at Alameda Santos, 1357, 6° andar, 01470-900 Sáo Paulo, Brazil, Attention:  Financial Director, telephone number: 55-11-3269-4165, telefax number 55-11-3269-4066, or to any other address previously furnished in writing to the Trustee by VCP, with a copy to Votorantim Participações S.A. Rua Amauri, 255, 10 andar, 01448-000 São Paulo, SP Tel 55-11-3704-3345/Fax 55-11-3167-352, Attention:  Financial Director;

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(6)	the Banks by the Trustee, the Company or any Guarantor shall be sufficient for every purpose hereunder (except as otherwise expressly provided herein) if in writing and mailed, first class postage prepaid, to Credit Suisse First Boston Bahamas Limited, at The Bahamas Financial Centre, 4th floor, Shirley & Charlotte Street, PO Box N3721 Nassau, Bahamas, Attention: Operations/Legal and Compliance Department, telephone number: (242) 356-0022, telefax number (242) 302-4049, or to any other address previously furnished in writing to the Trustee, the Company and the Guarantors;
(7)	Fitch by the Trustee, the Company or any Guarantor shall be sufficient for every purpose hereunder (except as otherwise expressly provided herein) if in writing and mailed, first class postage prepaid, to Fitch Ratings Inc. at 55 East Monroe Street Suite 3500, Chicago Illinois 60603, Attention: Latin American Structured Finance, telephone number: (312) 368-2052, telefax number (312) 263-1032, or to any other address previously furnished in writing to the Trustee, the Company and the Guarantors; or
(8)	S&P by the Trustee, the Company or any Guarantor shall be sufficient for every purpose hereunder (except as otherwise expressly provided herein) if in writing and mailed, first class postage prepaid, to Standard and Poor’s at 55 Water St. 40th Floor, New York, New York 10041-0003, Attention: Latin America/Emerging Markets Structured Finance Group, telephone number: (212) 438-3080, telefax number (212) 438-2652, or to any other address previously furnished in writing to the Trustee, the Company and the Guarantors.

SECTION 1.6.     Notice to Holders; Waiver

Where this Indenture provides for notice to Holders of any event, such notice shall be sufficiently given (unless otherwise herein expressly provided) if (i) in the case of a Global Security, in writing by electronic mail, facsimile and/or by first-class mall to the Depositary, and (ii) in the case of securities other than Global Securities, in writing and mailed, first-class postage prepaid, to each Holder affected by such event, at his address as it appears in the Security Register, not later than the latest date (if any), and not earlier than the earliest date (if any), prescribed for the giving of such notice.  In any case where notice to Holders is given by mail, neither the failure to mail such notice, nor any defect in any notice so mailed, to any particular Holder shall affect the sufficiency of such notice with respect to other Holders.  Where this Indenture provides for notice in any manner, such notice may be waived in writing by the Person entitled to receive such notice, either before or after the event, and such waiver shall be the equivalent of such notice.  Waivers of notice by Holders shall be filed with the Trustee, but such filing shall not be a condition precedent to the validity of any action taken in reliance upon such waiver.

In case by reason of the suspension of regular mail service or by reason of any other cause it shall be impracticable to give such notice by mail, then such notification as shall be made with the approval of the Trustee shall constitute a sufficient notification for every purpose hereunder.

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In addition, so long as the Securities are listed on the Luxembourg Stock Exchange and the rules of the Luxembourg Stock Exchange so require, notices to Holders will be published in a leading newspaper having general circulation in Luxembourg (which is expected to be the Luxemburger Wort)or, if such publication is not practicable, in an English language newspaper having general circulation in Europe.  Such notices shall be deemed to be given on the date of such publication or, if published more than once, on the date of the first such publication.  If a notice is published at the discretion of the Trustee, the notice will conform to the rules of the Luxembourg Stock Exchange, If publication is not practicable in any newspaper in accordance with this paragraph, notice will be given in such other manner, and shall be deemed to have been given on such date, as the Trustee may, in its sole discretion, determine.

SECTION 1.7.     Effect of Headings and Table of Contents

The Article and Section headings herein and the Table of Contents are for convenience only and shall not affect the construction hereof.

SECTION 1.8.     Successors and Assigns

All covenants and agreements in this Indenture by the Company or each of the Guarantors shall bind their successors and assigns, whether so expressed or not.

SECTION 1.9.     Separability Clause

In case any provision in this Indenture or in the Securities or in the Guarantees shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions of each of the Securities or the Guarantees shall not in any way be affected or impaired thereby.

SECTION 1.10.     Benefits of Indenture

Except as provided below with regard to the Issuing Bank, nothing in this Indenture, in the Securities or in the Guarantees, express or implied, shall give to any Person, other than the parties hereto and their successors hereunder and the Holders of Securities, any benefit or any legal or equitable right, remedy or claim under this Indenture, the Securities or the Guarantees.

Solely for the purposes of enforcing its subrogation rights under Section 14(f) of this Agreement, the Issuing Bank shall be a third party beneficiary of this Indenture and shall be entitled to rely upon and to enforce the provisions of this Indenture, the Securities and the Guarantees.

SECTION 1.11.     Governing Law

THIS INDENTURE, THE SECURITIES AND THE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  For the purposes of paragraph 2 or article 9 of the Brazilian Decree-Law 4.567 of September 4, 1942, the Company is the “proponent” of the transactions contemplated by this Indenture.

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SECTION 1.12.     Legal Holidays

In any case where any Interest Payment Date, Redemption Date or Stated Maturity of any Security shall not be a Business Day, then (notwithstanding any other provision of this Indenture, the Securities or the Guarantees) payment of interest or principal (and premium, if any) need not be made on such date, but may be made on the next succeeding Business Day with the same force and effect as if made on the Interest Payment Date, Redemption Date or at the Stated Maturity, provided that no interest shall accrue on account of such delay for the period from and after such Interest Payment Date, Redemption Date or Stated Maturity, as the case may be.

SECTION 1.13.     Submission to Jurisdiction; Agent for Service; Waiver of Immunities

(a)

The Company and each of the Guarantors agree that any suit, action or proceeding against any of them brought by any Holder or the Trustee arising out of or based upon this Indenture, the Securities or the Guarantees may be instituted in any state or Federal court in the Borough of Manhattan in The City of New York, New York, and waive any objection which each of them may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submit to the non-exclusive jurisdiction of such courts in any suit, action or proceeding.

(b)

By the execution and delivery of this Indenture or any amendment or supplement hereto, each of the Company and each of the Guarantors (i) acknowledges that it has, by separate written instrument, designated and appointed National Corporate Research currently located at 225 West 34th Street, Suite 910, New York, NY 10122, as its authorized agent upon which process may be served in any suit, action or proceeding with respect to, arising out of, or relating to, the Securities, this Indenture or the Guarantees, that may be instituted in any Federal or state court in the State of New York, The City of New York, the Borough of Manhattan, or brought under Federal or state securities laws or brought by the Trustee (whether in its individual capacity or in its capacity as Trustee  hereunder),  and  acknowledges that National Corporate Research has  accepted  such designation, (ii) submits to the jurisdiction of any such court in any such suit, action or proceeding, and (iii) agrees that service of process upon National Corporate Research shall be deemed in every respect effective service of process upon the Company or such Guarantor, as the case may be, in any such suit, action or proceeding.  The Company and each of the Guarantors further agree to take any and all action, including the execution and filing of any and all such documents and instruments as may be necessary to continue such designation and appointment of National Corporate Research in full force and effect so long as this Indenture shall be in full force and effect; provided that the Company and each of the Guarantors may and shall (to the extent National Corporate Research ceases to be able to be served on the basis contemplated herein), by written notice to the Trustee, designate such additional or alternative agents for service of process under this Section 1.14 that (i) maintains an office located in the Borough of Manhattan, The City of New York in the State of New York, (ii) are either (x) counsel for the Company and the Guarantor or (y) a corporate service company which acts as agent for service of process for other persons in the ordinary course of its business and (iii) agrees to act as agent for service of process in accordance with this Section 1.13.  Such notice shall identify the name of such agent for process and the address of such agent for process in the Borough of Manhattan, The City of New York, State of New York. Upon the request of any Holder, the Trustee shall deliver such information to such Holder.  Notwithstanding the foregoing, there shall, at all times, be at least one agent for service of process for the Company and each of the Guarantors appointed and acting in accordance with this Section 1.13.

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(c) To the extent that the Company or any of the Guarantors has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Company and each of the Guarantors hereby irrevocably waives such immunity in respect of their obligations under this Indenture, the Securities and the Guarantees, to the extent permitted by law.

SECTION 1.14.     Currency of Account; Conversion of Currency:  Foreign Exchange Restrictions

(a) U.S. Dollars are the sole currency of account and payment for all sums payable by the Company and the Guarantors under or in connection with the Securities, the Guarantees or this Indenture, including damages. Any amount received or recovered in a currency other than U.S. dollars (whether as a result of, or of the enforcement of, a judgment or order of a court of any jurisdiction, in the winding-up or dissolution of the Company or the Guarantors or otherwise) by any Holder of the Securities in respect of any sum expressed to be due to it from the Company and the Guarantors shall only constitute a discharge to the Company and the Guarantors to the extent of the U.S. dollar amount which the recipient is able to purchase with the amount so received or recovered in that other currency on the date of that receipt or recovery (or, if it is not practicable to make that purchase on that date, on the first date on which it is practicable to do so). If that U.S. dollar amount is less than the U.S. dollar amount expressed to be due to the recipient under the Securities, the Company and the Guarantors shall, jointly and severally, indemnify it against any loss sustained by it as a result as set forth in Section 1.14(b).  In any event, the Company and each of the Guarantors shall, jointly and severally, indemnify the recipient against the cost of making any such purchase provided that the liability of each of VCP and CRB will be limited to 50% of the total amount of such indemnity.  For the purposes of this Section 1.14, it will be sufficient for the Holder of a Security to certify in a satisfactory manner (indicating sources of information used) that it would have suffered a loss had an actual purchase of dollars been made with the amount so received in that other currency on the date of receipt or recovery (or, if a purchase of dollars on such date had not been practicable, on the first date on which it would have been practicable, it being required that the need for a change of date be certified in the manner mentioned above).  The indemnities set forth in this Section 1.14 constitute separate and independent obligations from other obligations of the Company and the Guarantors, shall give rise to a separate and independent cause of action, shall apply irrespective of any indulgence granted by any Holder of the Securities and shall continue in full force and effect despite any other judgment, order, claim or proof for a liquidated amount in respect of any sum due under the Securities.

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(b)	The Company and each of the Guarantors covenant and agree that the following provisions shall apply to conversion of currency in the case of the Securities, the Guarantees and this Indenture:
	(i)	(A)	If for the purpose of obtaining judgment in, or enforcing the judgment of, any court in any country, it becomes necessary to convert into a currency (the “judgment currency”) an amount due in any other currency (the “Base Currency”), then the conversion shall be made at the rate of exchange prevailing on the Business Day before the day on which the judgment is given or the order of enforcement is made, as the case may be (unless a court shall otherwise determine).
		(B)	If there is change in the rate of exchange prevailing between the Business Day before the day on which the judgment is given or an order of enforcement is made, as the case may be (or such other date as a court shall determine), and the date of receipt of the amount due, the Company or the relevant Guarantor, as the case may be, will pay such additional (or, as the case may be such lesser) amount, if any, as may be necessary so that the amount paid in the judgment currency when converted at the rate of exchange prevailing on the date of receipt will produce the amount in the Base Currency originally due.
	(ii)	In the event of the winding-up of the Company or any of the Guarantors at any time while any amount or damages owing under the Securities, the Guarantees and this Indenture, or any judgment or order rendered in respect thereof, shall remain outstanding, the Company or the relevant Guarantor, as the case may be, shall indemnify provided that the liability of each of VCP and CRB will be limited to 50% of the total amount of such indemnity and hold the Holders and the Trustee harmless against any deficiency arising or resulting from any variation in rates of exchange between (1) the date as of which the U.S. Dollar Equivalent of the amount due or contingently due under the Securities, the Guarantees and this Indenture (other than under this Subsection (b)(ii)) is calculated for the purposes of such winding-up and (2) the final date for the filing of proofs of claim in such winding-up.  For the purpose of this Subsection (b)(ii), the final date for the filing of proofs of claim in the winding-up of the Company or the relevant Guarantor, as the case may be, shall be the date fixed by the liquidator or otherwise in accordance with the relevant provisions of applicable law as being the latest practicable date as at which liabilities of the Company or the relevant Guarantor, as the case may be, may be ascertained for such winding-up prior to payment by the liquidator or otherwise in respect thereto.
	(iii)	The obligations contained in Subsections (a), (b)(i)(B) and (b)(ii) of this Section 1.14 shall constitute separate and independent obligations from the other obligations of the Company and the Guarantors under the terms of this Indenture, shall give rise to separate and independent causes of action against the Company and the Guarantors, shall apply irrespective of any waiver or extension granted by any Holder or the Trustee or either of them from time to time and shall continue

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		in full force and effect notwithstanding any judgment or order or the filing of any proof of claim in the winding-up of the Company or any of the Guarantors for a liquidated sum in respect of amounts due hereunder (other than under Subsection (b)(ii) above) or under any such judgment or order.  Any such deficiency as aforesaid shall be deemed to constitute a loss suffered by the Holders or the Trustee, as the case may be, and no proof or evidence of any actual loss shall be required by the Company or the relevant Guarantor or the liquidator or otherwise or any of them.  In the case of Subsection (b)(ii) above, the amount of such deficiency shall not be deemed to be reduced by any variation in rates of exchange occurring between the said final date and the date of any liquidating distribution.
	(iv)	The term “rate(s) of exchange” shall mean the rate of exchange quoted by Reuters at 10:00 a.m. (New York time) for spot purchases of the Base Currency with the judgment currency other than the Base Currency referred to in Subsections (b)(i) and (b)(ii) above and includes any premiums and costs of exchange payable.
(c)	In the event that on any Interest Payment Date, the Maturity Date or Redemption Date, as the case may be, in respect of the Securities or the Guarantees, any restrictions or prohibition of access to the Brazilian foreign exchange market exists, the Guarantors agree to pay all amounts payable under the Securities and the Guarantees in the currency of the Securities by means of any legal procedure existing in Brazil (except commencing legal proceedings against the Central Bank of Brazil), on any due date for payment under the Securities, for the purchase of the currency of such Securities.  All costs and taxes payable in connection with the procedures referred to in this Section 1.14 shall be borne by the Company and the Guarantors provided that the obligation of each of VCP and CRB will be limited to 50% of the total amount of such costs and taxes.

SECTION 1.15.     Counterparts

This Indenture may be executed in any number of counterparts (including facsimile), each of which shall be an original; but such counterparts shall together constitute but one and the same instrument.  Delivery of an executed counterpart of a signature page by telecopier shall be as effective as delivers’ of a manually executed counterpart thereof.

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ARTICLE 2

SECURITY FORMS

SECTION 2.1.     Forms Generally

The Securities, the Trustee’s certificates of authentication thereof and the Guarantees endorsed thereon shall be substantially in the forms set forth in this Article, with such appropriate legends, insertions, omissions, substitutions and other variations as are required or permitted by this Indenture, and may have such letters, numbers or other marks of identification and such legends or endorsements placed thereon as may be required to comply with the rules of any securities exchange or as may, consistently herewith, be determined by the officers executing such Securities or Guarantees, as the case may be, as evidenced by their execution of the Securities.

The definitive Securities and the Guarantees to be endorsed thereon shall be printed, lithographed or engraved or produced by any combination of these methods on steel engraved borders or may be produced in any other manner all as determined by the officers executing such Securities, as evidenced by their execution of such Securities or Guarantees, as the case may be.

In certain cases described elsewhere herein, the legends set forth in the first three paragraphs of Section 2.2 may be omitted from Securities issued hereunder.

Securities offered and sold in their initial distribution in reliance on Regulation S will be initially issued in the form of one or more Global Securities in fully registered form without interest coupons, substantially in the form of Security set forth in Sections 2.2 and 2.3, (the “Regulation S Global Security”), which shall be registered in the name of the Depositary or its nominee and deposited with the Trustee, at its Corporate Trust Office, as custodian for the Depositary, duly executed by the Company and the Guarantors and authenticated by the Trustee as hereinafter provided, for credit by the Depositary to the respective accounts of the beneficial owners of the Securities represented thereby (or such other accounts as they may direct).

Securities offered and sold in their initial distribution in reliance on Rule 144A shall be issued in the form of one or more Global Securities (collectively, and, together with their Successor Securities, the “Restricted Global Security”) in fully registered form without interest coupons, substantially in the form of Security set forth in Sections 2.2 and 2.3, with such applicable legends as are provided for in Section 2.2, except as otherwise permitted herein.  Such Restricted Global Security shall be registered in the name of the Depositary or its nominee and deposited with the Trustee, at its Corporate Trust Office, as custodian for the Depositary, duly executed by the Company and the Guarantors and authenticated by the Trustee as hereinafter provided, for credit by the Depositary to the respective accounts of beneficial owners of the Securities represented thereby (or such other accounts as they may direct).  The aggregate principal amount of the Restricted Global Security may be increased or decreased from time to time by adjustments made on the records of the Trustee, as custodian for the Depositary, in connection with a corresponding decrease or increase in the aggregate principal amount of the Regulation S Global Security, as hereinafter provided.

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SECTION 2.2.     Form of Face of Security

[Include if Security is a Restricted Global Security — [THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION, NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, SUCH REGISTRATION.

THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE “RESALE REGISTRATION TERMINATION DATE”) WHICH IS TWO YEARS AFTER THE LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE ISSUER OR ANY AFFILIATE OF THE ISSUER WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE ISSUER OR THE GUARANTORS, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A “QUALIFIED INSTITUTIONAL BUYER” AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT, THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER, IN A PRINCIPAL AMOUNT OF NOT LESS THAN $100,000, FOR THE PURCHASER AND FOR EACH SUCH ACCOUNT, TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT.  THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.]

VOTO—VOTORANTIM OVERSEAS TRADING OPERATIONS IV LIMITED
(incorporated under the laws of the Cayman Islands)

[REGULATION S GLOBAL SECURITY/RESTRICTED GLOBAL SECURITY]*
representing up to
$400,000,000

7.75% NOTES DUE 2020
jointly, severally, and unconditionally and
irrevocably guaranteed by
VOTORANTIM PARTICIPAÇÕES S.A.,
VOTORANTIM CELULOSE E PAPEL S.A.,
and
CIMENTO RIO BRANCO S.A.,

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[ISIN Number] [CUSIP Number]^**:      __________

VOTO—Votorantim Overseas Trading Operations IV Limited, a limited liability company organized under the laws of the Cayman Islands (herein called the “Company”, which term includes any successor Person under the Indenture hereinafter referred to), for value received, hereby promises to pay to Cede & Co. or its registered assigns, the principal sum of  Dollars [include if Security is a Global Security — (or such other Principal Sum as is noted in the records of the Custodian for the Depositary as being the Principal Amount of this [Regulation S Global Security/Restricted Global Security] for the time being)] on June 24, 2020, and to pay interest thereon from June 24, 2005 or from the most recent Interest Payment Date to which interest has been paid or duly provided for, semi-annually on June 24, and December 24 in each year, commencing on December 24, 2005 at the rate of 7.75% per annum, until the principal hereof is paid or made available for payment.  The interest so payable, and punctually paid or duly provided for, on any Interest Payment Date will, as provided in such Indenture, be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest, which shall be 15 calendar days prior to payment (whether or not a Business Day), as the case may be, next preceding such Interest Payment Date.  Any such interest not so punctually paid or duly provided for will forthwith cease to be payable to the Holder on such Regular Record Date and may either be paid to the Person in whose name this Security (or one or more Predecessor Securities) is registered at the close of business on a Special Record Date for the payment of such Defaulted Interest to be fixed by the Trustee, notice whereof shall be given to Holders of Securities not less than 10 days prior to such Special Record Date, or be paid at any time in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, all as more fully provided in said Indenture.  In addition, the Company will pay to the Holder of this Security such Additional Amounts as may become payable under Section 10.10 of the Indenture.

In the case of a default in payment of principal and premium, if any, upon acceleration or repayment, interest shall be payable pursuant to the preceding paragraph on such overdue principal (and premium, if any), such interest shall be payable on demand and, if not so paid on demand, such interest shall itself bear interest at the rate per annum stated above plus 1% (to the extent that the payment of such interest shall be legally enforceable), and shall accrue from the date such principal and/or premium, as the case may be, was due and payable to the date payment of such interest has been made or duly provided for, and such interest on unpaid interest shall also be payable on demand.

Payment of the principal of (and premium, if any) and interest on this Security will be made at the corporate trust office of the Trustee, at the offices of a Paying Agent, at the office or agency of the Company maintained for that purpose in the City of New York, New York, and at any other office or agency maintained by the Company for such purpose, in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts; provided, however, that at the option of the Company payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.

^*           Delete as appropriate for cither Regulation S Global Security or Restricted Global Security.

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Reference is hereby made to the further provisions of this Security set forth on the reverse hereof, which further provisions shall for all purposes have the same effect as if set forth at this place.

Unless the certificate of authentication hereon has been executed by the Trustee referred to on the reverse hereof by manual signature, this Security shall not be entitled to any benefit under the Indenture or be valid or obligatory for any purpose.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed.

Dated:
	VOTO-VOTORANTIM OVERSEAS TRADING OPERATIONS IV LIMITED
	By:
	Name:
	Title:

SECTION 2.3.     Form of Reverse of Security

This Security is one of a duly authorized issue of Securities of the Company designated as its U.S.$400,000,000 7.75% Notes due 2020 (the “Securities”) issued under an Indenture, dated as of June 24, 2005 (herein called the “Indenture”), among the Company, the Guarantors named therein.  JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), and J.P. Morgan Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd., a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).  Reference is hereby made to the Indenture and all indentures supplemental thereto for a statement of the respective rights, limitations of rights, duties and immunities thereunder of the Company, the Guarantors, the Trustee the Transfer Agent, the Registrar, the Paying Agents and the Holders of the Securities and of the terms upon which the Securities are, and are to be, authenticated and delivered.  Terms used but not defined in this Security are defined in the Indenture.

As provided in the Indenture and subject to certain limitations therein set forth, the obligations of the Company under the Indenture and this Security are guaranteed pursuant to the Guarantees set forth in the Indenture.  Each Holder, by holding this Security, agrees to all of the terms and provisions of said Guarantees.  The Indenture provides that the Guarantors shall be released from the relevant Guarantee upon compliance with certain conditions.  Reference is hereby made to the Indenture for a statement of the respective rights, limitations of rights, duties and obligations thereunder of the Guarantors, the Trustee and the Holders.

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The Holders will receive the benefit of the Letter of Credit which will provide for certain payments to the Trustee, on behalf of the Holders, limited, at any one time outstanding, to the Stated Amount, upon the receipt by the Issuing Bank of evidence of the satisfaction of each of the conditions for drawing funds set forth in the Letter of Credit, including the occurrence and continuation of a Currency Inconvertibility/Non-Transfer Event.

The Securities shall mature on the Stated Maturity; provided, however, that if on or before the Stated Maturity, the Company and the Guarantors deliver a certificate, substantially in the form of Exhibit E to the Indenture, to the Trustee (with a copy of such certificate to S&P, Fitch and the Issuing Bank) stating that either the Company and/or the Guarantors have sufficient funds in Local Currency at the Reference Rate of Exchange, as defined in the Letter of Credit Agreement, to repay the principal amount of the Securities and any other Indebtedness payable on the Stated Maturity but that neither the Company nor any of the Guarantors can make such payment in respect of the Securities due to a Currency Inconvertibility/Non-Transfer Event which has occurred and is continuing on the date of the certificate, and that each of the Company and the Guarantors has used its best efforts to convert and transfer such funds, then if such certificate shall be received by the Trustee on or before the Stated Maturity, the obligation of the Company and the Guarantors to repay the principal amount of and accrued interest on the Securities then shall be extended to the earlier to occur of (i) December 24, 2021 and (ii) 30 days after the date on which the Currency Inconvertibility/Non-Transfer Event that prevented the Company and the Guarantors from satisfying their payment obligations under the Securities and the Guarantees has ended.

In the case of any extension of the Stated Maturity, the Stated Maturity shall be considered a Payment Date under the terms of this Indenture, and interest shall be due on the Securities at the rate set forth on the face of the Security on such Stated Maturity and on each Payment Date occurring thereafter until the Stated Maturity.

If the Stated Maturity shall have been extended, the Trustee shall, promptly after the related Currency Inconvertibility/Non-Transfer Event shall no longer exist and all funds due to the Banks have been paid in full in U.S. dollars, return the Letter of Credit to the Issuing Bank for cancellation.

If as a result of any Change of Law (as defined in the Indenture), (i) the Company is or would be required on the next succeeding Interest Payment Date to pay any Additional Amounts referred to in Section 10.10 of the Indenture or (ii) any of VPAR, VCP or CRB is or would be required on the next succeeding Interest Payment Date to pay additional amounts under the Intercompany Bonds in excess of the additional amounts that the Company or VPAR, VCP or CRB would be obliged to pay if Taxes (excluding interest and penalties) were payable with respect to such payments of interest at a rate of 15.0% (or 12.5% as provided for in the treaty to avoid double taxation between Brazil and Japan), and in either case the payment of such excess amounts cannot be avoided by the use of any reasonable measures available to the Company or the Guarantors, the Securities may be repurchased, by the Company at the option of the Company, in whole, but not in part, upon not less than 45 nor more than 75 days’ notice mailed to the Holders (which notice shall be deemed given upon delivery of such notice to the Trustee), at any time following such Change of Law at a repurchase price equal to the principal amount thereof, plus accrued and unpaid interest, if any, to the date fixed for repurchase.

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The Company or the Guarantors will also pay to Holders of the Securities on the Redemption Date any Additional Amounts which are payable.  Following such repurchase, the Securities will be cancelled.  Prior to the delivery of any notice of repurchase in accordance with the foregoing, the Company shall deliver to the Trustee an Officers’ Certificate stating that the Company is entitled to effect such redemption based on an Opinion of Counsel or written advice of a qualified tax expert, that the Company has or will, or that there is a substantial probability that the Company has or will, become obligated to pay such Additional Amounts as a result of such Change of Law.  Such notice, once delivered by the Company to the Trustee, will be irrevocable.  The Company shall provide the Trustee with official acknowledgment of the relevant taxing authority (if such acknowledgement is not available, a certified copy thereof) evidencing the payment of Taxes in respect of which the Company has paid any Additional Amounts to the extent such documentation is issued therefore.  Copies of such documentation shall be available to Holders of the Securities upon request thereof.

The Company has the right at its option to redeem any of the Securities in whole or in part, at any time or from time to time prior to their maturity, on at least 30 days’ but not more than 60 days’ notice, at a redemption price equal to the greater of (1) 100% of the principal amount of such Securities and (2) the sum of the present values of each remaining scheduled payment of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semiannual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points (the “Make-Whole Amount”), plus in each case accrued interest and Additional Amounts, if any, on the principal amount of the Securities to the date of redemption.

The Company may at any time repurchase the Securities at any price in the open market or otherwise.  The Company may hold or resell the Securities it purchases or may surrender them to the Trustee for cancellation.

[Include if Security is a Regulation S Global Security — If the holder of a beneficial interest in this Regulation S Global Security at any time wishes to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security, such transfer may be effected, subject to the rules and procedures of the Depositary, Euroclear and Clearstream, in each case to the extent applicable and as in effect from time to time, only in accordance with the terms of this paragraph.  Upon receipt by the Trustee, as Security Registrar of (A) written instructions given by or on behalf of the Depositary in accordance with the rules and procedures of the Depositary, Euroclear and Clearstream, in each case to the extent applicable and as in effect from time to time directing the Trustee to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Restricted Global Security in a specified principal amount and to cause to be debited from another specified Agent Member’s account a beneficial interest in this Regulation S Global Security in an equal principal amount; and (B) a certificate in substantially the form set forth in Exhibit B to the Indenture signed by or on behalf of the Agent Member holding such beneficial interest in this Regulation S Global Security, the Trustee, as Security Registrar, shall reduce the principal amount of this Regulation S Global Security and increase the principal amount of the Restricted Global Security by such specified principal amount.

31

[Include if Security is a Restricted Global Security — If the holder of a beneficial interest in this Restricted Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Regulation S Global Security, such transfer may be effected, subject to the rules and procedures of the Depositary, Euroclear and Clearstream, in each case to the extent applicable and as in effect from time to time, only in accordance with the terms of this paragraph.  Upon receipt by the Trustee, as Security Registrar of:

(A)

written instructions given by or on behalf of the Depositary in accordance with the rules and procedures of the Depositary, Euroclear and Clearstream, in each case to the extent applicable and as in effect from time to time directing the Trustee to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Regulation S Global Security in a specified principal amount and to cause to be debited from another specified Agent Member’s account a beneficial interest in the Restricted Global Security in an equal principal amount; and

(B)

a certificate in substantially the form set forth in Exhibit A of the Indenture signed by or on behalf of the Agent Member holding such beneficial interest in this Restricted Global Security,

the Trustee, as Security Registrar, shall reduce the principal amount of this Restricted Global Security, and increase the principal amount of the Regulation S Global Security by such specified principal amount.]

The Securities do not have the benefit of any sinking fund obligations.

In the event of redemption or purchase of this Security in part only, a new Security or Securities of like tenor for the unredeemed or unpurchased portion hereof will be issued in the name of the Holder hereof upon the cancellation hereof.

If an Event of Default shall occur and be continuing, the principal of all the Securities may be declared due and payable in the manner and with the effect provided in the Indenture.

The Indenture contains provisions for defeasance at any time of (i) the entire indebtedness of this Security, or (ii) certain restrictive covenants and Events of Default with respect to this Security, in each case upon compliance with certain conditions set forth therein.

Unless the context otherwise requires, the Securities shall constitute one series for all purposes under the Indenture, including without limitation, amendments, waivers or redemption.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Company and the Guarantors and the rights of the Holders of the Securities under the Indenture at any time by the Company, the Guarantors and the Trustee with the consent of the Holders of a majority in aggregate principal amount of the Securities at the time Outstanding.  The Indenture also contains provisions permitting the Holders of specified percentages in aggregate principal amount of the Securities at the time Outstanding, on behalf of the Holders of all the Securities, to waive compliance by the Company with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. 

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Any such consent or waiver by the Holder of this Security shall be conclusive and binding upon such Holder and upon all future Holders of this Security and of any Security issued upon the registration of transfer hereof or in exchange herefor or in lieu hereof, whether or not notation of such consent or waiver is made upon this Security.

No reference herein to the Indenture and no provision of this Security or of the Indenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of (and premium, if any) and interest on this Security at the times, place and rate, and in the coin or currency, herein prescribed.

As provided in the Indenture and subject to certain limitations therein set forth, the transfer of this Security is registrable in the Security Register, upon surrender of this Security for registration of transfer at the office or agency of the Company in the Borough of Manhattan, The City of New York, New York, or of any of the Transfer Agents duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Company duly executed by, the Holder hereof or his attorney duly authorized in writing, and thereupon one or more new Securities, of authorized denominations and like tenor and for the same aggregate principal amount, will be issued to the designated transferee or transferees.

The Securities are issuable only in registered form without coupons in minimum denominations of U.S.$100,000 and integral multiples of U.S.$1,000 in excess thereof.  As provided in the Indenture and subject to certain limitations therein set forth, Securities are exchangeable for a like tenor and aggregate principal amount of Securities of a different authorized denomination, as requested by the Holder surrendering the same.

No service charge shall be made for any such registration of transfer or exchange, but the Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge payable in connection therewith.

Prior to due presentment of this Security for registration of transfer, the Company, the Trustee, the Transfer Agents and any agent of the Company or the Trustee may treat the Person in whose name this Security is registered as the owner hereof for all purposes, whether or not this Security be overdue, and none of the Company, the Trustee or any such agent shall be affected by notice to the contrary.

Interest on this Security shall be computed on the basis of a 360-day year of twelve 30-day months each and, in the case of an incomplete month, on the number of days elapsed (pro rata basis) based on a 30-day month.

All terms used in this Security which are defined in the Indenture shall have the meanings assigned to them in the Indenture.

THE INDENTURE, THIS SECURITY AND THE GUARANTEES SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.  For the purposes of paragraph 2 or article 9 of the Brazilian Decree-Law 4.567 of September 4, 1942, the Company is the “proponent” of the transactions contemplated by the Indenture.

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The Company and each of the Guarantors agree that any suit, action or proceeding against any of them brought by any Holder or the Trustee arising out of or based upon this Indenture, the Securities or the Guarantees may be instituted in any state or Federal court in The City of New York, New York, and waive any objection which any of them may now or hereafter have to the laying of venue of any such proceeding, and irrevocably submits to the non-exclusive jurisdiction of such courts in any suit, action or proceeding.

The Company may change any Paying Agent, the Registrar or Transfer Agent; provided that, the Company will maintain an office or agency where the Securities may be presented or surrendered for payment and for registration of transfer in the Borough of Manhattan, The City of New York, a Japanese paying agent and, so long as the Securities are listed on The Luxembourg Stock Exchange, a Paying Agent and Transfer Agent in Luxembourg.  Upon any such change, the Company shall give written notice thereof to the Trustee and the Holders.

U.S. dollars are the sole currency of account and payment for all sums payable by the Company and the Guarantors under or in connection with the Securities, the Guarantees or the Indenture, including damages.  The Company and the Guarantors have agreed that the provisions of Section 1.14 of the Indenture shall apply to conversion of currency in the case of the Securities, the Guarantees and the Indenture.  Among other things, Section 1.14 specifies that if there is a change in the rate of exchange prevailing between the Business Day before the day on which a judgment is given or an order of enforcement is made, as the case may be (or such other date as a court shall determine), and the date of receipt of the amount due, the Company or the relevant Guarantor, as the case may be, will pay such additional (or, as the case may be, such lesser) amount, if any, as may be necessary so that the amount paid in the judgment currency when converted at the rate of exchange prevailing on the date of receipt will produce the amount in the Base Currency originally due. 

The Company and each of the Guarantors have appointed National Corporate Research, currently located at 225 West 34^th Street, Suite 910, New York, NY 10122 as its authorized agent upon which process may be served in any suit, or proceeding with respect to, arising out of, or relating to, this Security, the Indenture or the Guarantees, that may be instituted in any Federal or state court in the State of New York, The City of New York, the Borough of Manhattan, or brought under Federal or state securities laws and have agreed that there shall, at all times, be at least one agent for service of process for the Company and the Guarantors appointed and acting in accordance with the provisions of Section 1.13 of the Indenture relating to agent for service of process.  To the extent that the Company or any of the Guarantors has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether through service of notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its property, the Company and the Guarantors have irrevocably waived such immunity in respect of its obligations under the Indenture, this Security and the Guarantees, to the extent permitted by law.

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SECTION 2.4.     Form of Trustee’s Certificate of Authentication

This is one of the Securities with the Guarantees referred to in the within-mentioned Indenture.

JPMORGAN CHASE BANK, N.A.,
as Trustee
By:
	Authorized Officer

The Guarantors jointly, severally, unconditionally and irrevocably guarantee the due and punctual payment of all sums from time to time payable in respect of the Securities as set forth in the Indenture.

VOTORANTIM PARTICIPAÇÕES S.A.

By:

Name:

Title:

VOTORANTIM CELULOSE E PAPEL S.A.

By:

Name:

Title:

CIMENTO RIO BRANCO S.A.

By:

Name:

Title:

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ARTICLE 3

THE SECURITIES

SECTION 3.1.     Title and Terms

The aggregate principal amount of Securities which may be authenticated and delivered under this Indenture will be U.S.$400,000,000.  No additional notes may be issued under this Indenture.

The Securities shall be known and designated as the “7.75% Notes due 2020” of the Company.  The Stated Maturity of the Securities shall be June 24, 2020.  The Securities shall bear interest at the rate of 7.75% per annum, from June 24, 2005 or from the most recent Interest Payment Date thereafter to which interest has been paid or duly provided for, as the case may be, payable semiannually in arrears on June 24 and December 24, commencing December 24, 2005, until the principal thereof is paid or made available for payment.

The Holders will receive the benefit of the Letter of Credit which will provide for certain payments to the Trustee, on behalf of the Holders, limited, at any one time outstanding to the Stated Amount, upon receipt by the Issuing Bank of evidence of satisfaction of each of the conditions set forth in the Letter of Credit for drawing funds thereunder, including the occurrence and continuation of a Currency Inconvertibility/Non-Transfer Event.

The Securities shall mature on the Stated Maturity; provided, however, that if on or before the Stated Maturity, the Company and the Guarantors deliver a certificate, substantially in the form of Exhibit E, to the Trustee (with a copy of such certificate to S&P, Fitch and the Issuing Bank) stating that either the Company and/or the Guarantors have sufficient funds in Local Currency at the Reference Rate of Exchange to repay the principal amount of the Securities on the Stated Maturity and any other Indebtedness payable on the Stated Maturity but that neither the Company nor any of the Guarantors can make such payment in respect of the Securities due to a Currency Inconvertibility/Non-Transfer Event which has occurred and is continuing on the date of the certificate, and that each of the Company and the Guarantors has used its best efforts to convert and transfer such funds, then, the obligation of the Company and the Guarantors to repay the principal amount of and accrued interest on the Securities shall be extended to the earlier to occur of (i) December 24, 2021 and (ii) 30 days after the date on which the Currency Inconvertibility/Non-Transfer Event that prevented the Company and the Guarantors from satisfying their payment obligations under the Securities and the Guarantees has ended.

In the case of any extension of the Stated Maturity, the Stated Maturity shall be considered a Payment Date under the terms of this Indenture, and interest shall be due on the Securities at the rate set forth on the face of the Security on such Stated Maturity and on each Payment Date occurring thereafter until the Stated Maturity.

Upon the occurrence of any extension of the Stated Maturity pursuant to this Section 3.1, the Company shall promptly, but in any event within two Business Days thereafter, deliver notice thereof to the Holders in accordance with the provisions of 1.6 hereof.  In the event of an extension of the Stated Maturity, the Company will notify the Luxembourg Stock Exchange at least ten Business Days in advance, file a supplement to the offering circular relating to the Securities with the Luxembourg Stock Exchange and publish a notice in a leading newspaper having general circulation in Luxembourg (which is expected to be d’Wort) or, if such publication is not practicable, in an English language newspaper having general circulation in Europe.

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In the case of a default in payment of principal and premium, if any, upon acceleration or redemption, interest (and Additional Amounts, if any) shall be payable pursuant to the second paragraph of this Section 3.1 on such overdue principal (and premium, if any), such interest shall be payable on demand and, if not so paid on demand, such interest shall itself bear interest at the rate per annum stated in the form of security contained herein plus 1% per annum (to the extent that the payment of such interest shall be legally enforceable), and shall accrue from the date such principal and/or premium, as the case may be, was due and payable to the date payment of such interest (and Additional Amounts, if any) has been made or duly provided for, and such interest on unpaid interest shall also be payable on demand.

The principal of and premium, if any, and interest on the Securities shall be payable at the Corporate Trust Office, the office of the Paying Agents and at any other office or agency maintained by the Company for such purpose; provided, however, that at the option of the Company upon five (5) Business Days notice to the applicable Paying Agent, payment of interest may be made by check mailed to the address of the Person entitled thereto as such address shall appear in the Security Register.

The Securities shall be redeemable or repurchasable as provided in Article 11. 

The Securities shall not have the benefit of any sinking fund obligations.

The Securities shall be subject to defeasance at the option of the Company as provided in Article 12.

Unless the context otherwise requires, the Securities shall constitute one series for all purposes under this Indenture, including, without limitation, amendments, waivers or redemptions.

SECTION 3.2.     Denominations

The Securities are issuable only in fully registered  form, without coupons, in a minimum denomination of U.S.$100,000 and integral multiples of U.S.$1,000 in excess thereof.

SECTION 3.3.     Execution, Authentication, Delivery and Dating

The Securities shall be executed on behalf of the Company by an authorized signatory or authorized signatories of the Company.  The signature of any signatory on the Securities may be manual or facsimile.

Securities bearing the manual or facsimile signatures of individuals who were at any time the proper officers of the Company shall bind the Company, notwithstanding that such individuals or any of them have ceased to hold such offices prior to the authentication and delivery of such Securities or did not hold such offices at the date of such Securities.

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At any time and from time to time after the execution and delivery of this Indenture, the Company may deliver Securities executed by the Company and having endorsed (by attachment or imprint) thereon the Guarantees executed as provided in Section 13.2 by the Guarantors, to the Trustee for authentication, together with a Company Order for the authentication and delivery of such Securities; and the Trustee in accordance with such Company Order shall authenticate and deliver such Securities as in this Indenture provided and not otherwise.

Each Security shall be dated the date of its authentication.

No Security or Guarantee shall be entitled to any benefit under this Indenture or be valid or obligatory for any purpose unless there appears on such Security a certificate of authentication substantially in the form provided for herein executed by the Trustee by manual signature, and such certificate upon any Security shall be conclusive evidence, and the only evidence, that such Security has been duly authenticated and delivered hereunder and that each Guarantee referred to therein has been duly executed and delivered hereunder.

SECTION 3.4.     Global Securities; Registration, Registration of Transfer and Exchange

(a)	Global Securities.  The provisions of Clauses (1) through (7) below shall apply only to Global Securities:
	(1)	Each Global Security authenticated under this Indenture shall be registered in the name of the Depositary or a nominee thereof and delivered to the Depositary or a nominee thereof or custodian therefore, and each such Global Security shall constitute a single Security for all purposes of this Indenture.
	(2)	Notwithstanding any other provision in this Indenture, no Global Security may be exchanged in whole or in part for Securities registered, and no transfer of a Global Security in whole or in part may be registered, in the name of any Person other than the Depositary or a nominee thereof unless (A) the Depositary (i) has notified the Company that it is unwilling or unable to continue as Depositary for such Global Security and the Company thereupon fails to appoint a successor Depositary or (ii) has ceased to be a clearing agency registered under the Exchange Act, (B) the Company, at its option, notifies the Trustee in writing that it elects to cause the issuance of the Securities in definitive registered certificated form, or (C) an Event of Default has occurred and is continuing and the Registrar has received a written request from a beneficial owner of the Securities through an Agent Member to issue its proportionate interest in the Global Security in certificated Form.
	(3)	If any Global Security is to be exchanged for other Securities or cancelled in whole, it shall be surrendered by or on behalf of the Depositary or its nominee to the Trustee, as Security Registrar, for exchange or cancellation as provided in this Article 3.  If any Global Security is to be exchanged for other Securities or cancelled in part, or if another Security is to be exchanged in whole or in part for a beneficial interest in any Global Security, such Global Security shall be so surrendered for exchange or cancellation as provided in this Article 3 or, if the

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		Trustee is acting as custodian for the Depositary or its nominee (or is party to a similar arrangement) with respect to such Global Security, the principal amount thereof shall be reduced or increased by an amount equal to the portion thereof to be so exchanged or cancelled, or the principal amount of such other Security to be so exchanged for a beneficial interest therein, as the case may be, in each case by means of an appropriate adjustment made on the records of the Trustee, whereupon the Trustee, in accordance with the Applicable Procedures, shall instruct the Depositary or its authorized representatives to make a corresponding adjustment to its records (including by crediting or debiting any Agent Member’s account as necessary to reflect any transfer or exchange of a beneficial interest pursuant to Section 3.4(c)).  Upon any such surrender or adjustment of a Global Security, the Trustee shall, subject to Section 3.4(a)(2) and as otherwise provided in this Article 3, authenticate and deliver any Securities issuable in exchange for such Global Security (or any portion thereof) to or upon the order of, and registered in such names as may be directed by, the Depositary or its authorized representative.  Upon the request of the Trustee in connection with the occurrence of any of the events specified in the preceding paragraph, the Company shall promptly make available to the Trustee a reasonable supply of Securities that are not in the form of Global Securities.  The Trustee shall be entitled to rely upon any order, direction or request of the Depositary or its authorized representative which is given or made pursuant to this Article 3 if such order, direction or request is given or made in accordance with the Applicable Procedures.
	(4)	Every Security authenticated and delivered upon registration of transfer of, or in exchange for or in lieu of, a Global Security or any portion thereof, whether pursuant to this Article 3 or Section 9.5 or otherwise, shall be authenticated and delivered in the form of, and shall be, a Global Security, unless such Security is registered in the name of a Person other than the Depositary or a nominee thereof.
	(5)	None of the Company, the Trustee, any agent of the Trustee, any Paying Agent or the Security Registrar will have any responsibility or liability for any aspect of the Depositary’s records (or the records of the participant of such Depositary) relating to or payments made on account of beneficial ownership interests of a Global Security or for maintaining, supervising or reviewing any records of the Depositary relating to such beneficial ownership interests.
	(6)	Subject to the provisions in the legends required by Section 2.2 above, the registered Holder may grant proxies and otherwise authorize any Person, including Agent Members and Persons who may hold interests in Agent Members, to take any action that such Holder is entitled to take under this Indenture.
	(7)	Except as provided in Section 3.4(a)(2) herein, neither Agent Members nor any other Person on whose behalf Agent Members may act shall have any rights under this Indenture with respect to any Global Security held on their behalf by the Depositary or under the Global Security, and the Depositary may be treated by the Company, the Trustee and any agent of the Company or the Trustee as the absolute owner of such Global Security for all purposes whatsoever.  Notwithstanding the foregoing, nothing herein shall prevent the Company, the Trustee or any agent of the Company or the Trustee from giving effect to any written certification, proxy or other authorization furnished by the Depositary or impair, as between the Depositary and its Agent Members, the operation of customary practices governing the exercise of the rights of a Holder of any Security.
(b)	Registration, Registration of Transfer and Exchange and Legends.  The Company shall cause to be kept at the Corporate Trust Office of the Trustee a register (the register maintained in such office and in any other office or agency designated pursuant to Section 10.2 being herein sometimes collectively referred to as the “Security Register”) in which, subject to such reasonable regulations as they may prescribe, the Company shall provide for the registration of Securities and of transfers and exchanges of Securities.  The Trustee is hereby appointed “Security Registrar” for the purpose of registering Securities and transfers and exchanges of Securities as herein provided.

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Upon surrender for registration of transfer of any Security at an office or agency of the Company designated pursuant to Section 10.2 for such purpose in accordance with the terms hereof, the Company shall, subject to the other provisions of this Section 3.4, execute, and the Trustee shall authenticate and deliver, in the name of the designated transferee or transferees, one or more new Securities of any authorized denominations and of a like tenor and aggregate principal amount and bearing the applicable legends set forth in Section 2.2.

Subject to Section 3.4(c), at the option of the Holder, Securities may be exchanged for other Securities of any authorized denominations and of a like tenor and aggregate principal amount and bearing the applicable legend set forth in Section 2.2, if any, each such new Security having the benefit of the Guarantees executed by the Guarantors, upon surrender of the Securities to be exchanged at such office or agency.  Whenever any Securities are so surrendered for exchange, the Company shall execute, and the Trustee shall authenticate and deliver, the Securities which the Holder making the exchange is entitled to receive.

All Securities and the Guarantees issued upon any registration of transfer or exchange of Securities shall be the valid obligations of the Company and the Guarantors, evidencing the same debt, and entitled to the same benefits under this Indenture, as the Securities and the Guarantees endorsed thereon, respectively, surrendered upon such registration of transfer or exchange.

Every Security presented or surrendered for registration of transfer or for exchange shall (if so required by the Company or the Trustee) be duly endorsed, or be accompanied by a written instrument of transfer in form satisfactory to the Company and the Security Registrar duly executed, by the Holder thereof or his attorney duly authorized in writing.

No service charge shall be made to the Holder for any registration of transfer or exchange of Securities, but the Company or the Trustee may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any registration of transfer or exchange of Securities, other than exchanges pursuant to Section 3.4, 3.5 or 9.5.

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The Company and the Security Registrar shall not be required (i) to issue, register the transfer of or exchange any Security during a period beginning at the opening of business 15 days before the due date for any payment of principal in respect of the Securities selected for redemption under Section 11.6 and ending at the close of business on the day of such mailing, or (ii) to register the transfer of or exchange any Security so selected for redemption in whole or in part, except the unredeemed portion of any Security being redeemed in part.

All Securities, initially issued hereunder shall, upon issuance, bear the relevant legends specified in Section 2.2, if any, to be applied to such a Security and, in the case of the legend specifically required for the Restricted Global Security, such required legend shall not be removed unless the Company shall have delivered to the Trustee (and the Securities Registrar, if other than the Trustee) a Company Order which states that such Security may be issued without such legend thereon.  If such legend has been removed from a Security as provided above, no other Security issued in exchange for all or any part of such Security shall bear such legend, unless the Company has reasonable cause to believe that such other Security is a “restricted security” within the meaning of Rule 144 of the Securities Act and instructs the Trustee to cause a legend to appear thereon.

(c)	Certain Transfers and Exchanges.  Upon presentation for transfer or exchange of any Security at the office of the Trustee, as Securities Registrar, located in The City of New York, accompanied by a written instrument of transfer or exchange in the form approved by the Company (it being understood that, until notice to the contrary is given to Holders of Securities, the Company shall be deemed to have approved the form of instrument of transfer or exchange, if any, printed on any Security), executed by the registered Holder, in person or by such Holder’s attorney thereunto duly authorized in writing, and upon compliance with this Section 3.4, such Security shall be transferred upon the Security Register, and a new Security shall be authenticated and issued in the name of the transferee.  Notwithstanding any provision to the contrary herein or in the Securities, transfers of a Global Security, in whole or in part, and transfers of interests therein of the kind described in this Section 3.4(c), shall only be made in accordance with this Section 3.4(c).  Transfers and exchanges subject to this Section 3.4(c) shall also be subject to the other provisions of this Indenture that are not inconsistent with this Section 3.4(c).
	(1)	General.  A Global Security may not be transferred, in whole or in part, to any Person other than the Depositary or a nominee thereof, and no such transfer to any such other Person may be registered; provided, however, that this Clause (1) shall not prohibit any transfer of a Security that is issued in exchange for a Global Security but is not itself a Global Security.  No transfer of a Security to any Person shall be effective under this Indenture or the Securities unless and until such Security has been registered in the name of such Person.  Nothing in this Clause (1) shall prohibit or render ineffective any transfer of a beneficial interest in a Global Security effected in accordance with the other provisions of this Section 3.4(c).

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(2)	Restricted Global Security to Regulation S Global Security.  If the holder of a beneficial interest in the Restricted Global Security wishes at any time to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Regulation S Global Security, such transfer may be effected, subject to the rules and procedures of the Depositary, Euroclear and Clearstream, in each case to the extent applicable and as in effect from time to time (the “Applicable Procedures”), only in accordance with this Clause (2).  Upon receipt by the Trustee, as Security Registrar, of (A) written instructions given by or on behalf of the Depositary in accordance with the Applicable Procedures directing the Trustee to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Regulation S Global Security in a specified principal amount and to cause to be debited from another specified Agent Member’s account a beneficial interest in the Restricted Global Security in an equal principal amount and (B) a certificate in substantially the form set forth in Exhibit A signed by or on behalf of the Agent Member holding such beneficial interest in the Restricted Global Security, the Trustee, as Security Registrar, shall reduce the principal amount of a Restricted Global Security, and increase the principal amount of the Regulation S Global Security by such specified principal amount as provided in Section 3.4(a)(3).
(3)	Regulation S Global Security to Restricted Global Security.  If the holder of a beneficial interest in the Regulation S Global Security at any time wishes to transfer such interest to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Clause (3).  Upon receipt by the Trustee, as Security Registrar, of (A) written instructions given by or on behalf of the Depositary in accordance with the Applicable Procedures directing the Trustee to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Restricted Global Security in a specified principal amount and to cause to be debited from another specified Agent Member’s account a beneficial interest in the Regulation S Global Security and (B) a certificate in substantially the form set forth in Exhibit B signed by or on behalf of the Agent Member holding such beneficial interest in the Regulation S Global Security, the Trustee, as Security Registrar, shall reduce the principal amount of such Regulation S Global Security and increase the principal amount of the Restricted Global Security by such specified principal amount as provided in Section 3.4(a)(3).
(4)	Non-Global Restricted Security to Global Security.  If the holder of a Restricted Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security or the Regulation S Global Security, such transfer may be effected, subject to the Applicable Procedures, only in accordance with this Clause (4).  Upon receipt by the Trustee, as Security Registrar, of (A) such Security and written  instructions given by or on  behalf of such  Holder as provided in Section 3.4(b) directing the Trustee to credit or cause to be credited to a specified Agent Member’s account a beneficial  interest  in  the  Restricted Global  Security or the Regulation S Global Security, as the case may be, in a specified principal amount equal to the principal amount of the Restricted Security (or portion thereof) to be so transferred, and

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(B) an appropriately completed certificate substantially in the form set forth in Exhibit C-1 hereto, if the specified account is to be credited with a beneficial interest in the Restricted Global Security, or Exhibit C-2 hereto, if the specified account is to be credited with a beneficial interest in the Regulation S Global Security, signed by or on behalf of such Holder, then the Trustee, as Security Registrar, shall cancel such Restricted Security (and issue a new Security in respect of any untransferred portion thereof) as provided in Section 3.4(b) and increase the principal amount of the Restricted Global Security or Regulation S Global Security, as the case may be, by the specified principal amount as provided in Section 3.4(a)(3).

(5)

Non-Global Regulation S Security to Restricted Global Security or Regulation S Global Security.  If the Holder of a Regulation S Security (other than a Global Security) wishes at any time to transfer all or any portion of such Security to a Person who wishes to take delivery thereof in the form of a beneficial interest in the Restricted Global Security or the Regulation S Global Security, as the case may be, such transfer may be effected only in accordance with this Clause (5) and subject to the Applicable Procedures.  Upon receipt by the Trustee, as Security Registrar, of (A) such Security and written instructions given by or on behalf of such Holder as provided in Section 3.4(b) directing the Trustee to credit or cause to be credited to a specified Agent Member’s account a beneficial interest in the Restricted Global Security or the Regulation S Global Security, as the case may be, in a principal amount equal to the principal amount of the Security (or portion thereof) to be so transferred, and (B)(i) with respect to a transfer which is to be delivered in the form of a beneficial interest in the Restricted Global Security, a certificate in substantially the form set forth in Exhibit D-l, signed by or on behalf of such Holder, and (ii) with respect to a transfer which is to be delivered in the form of a beneficial interest in the Regulation S Global Security, a certificate in substantially the form set forth in Exhibit D-2, signed by or on behalf of such Holder, then the Trustee, as Security Registrar, shall cancel such Security (and issue a new Security in respect of any untransferred portion thereof) as provided in Section 3.4(b) and increase the principal amount of the Restricted Global Security or the Regulation S Global Security, as the case may be, by the specified principal as provided in Section 3.4(a)(3).

SECTION 3.5.     Mutilated, Destroyed, Lost and Stolen Securities

If any mutilated or defaced Security is surrendered to the Trustee, the Company shall execute and the Trustee shall authenticate or cause to be authenticated and deliver in exchange therefore a new Security of like tenor and principal amount, having endorsed thereon the Guarantees executed by the Guarantors and bearing a number not contemporaneously outstanding.

If there shall be delivered to the Company and the Trustee (i) evidence to their satisfaction of the destruction, loss or theft of any Security and (ii) such security or indemnity as may be required by them to save each of them, the Guarantors and any agent of either of them harmless, then, in the absence of notice to the Company or the Trustee that such Security has been acquired by a bona fide purchaser, the Company shall execute and the Trustee shall authenticate and deliver, in lieu of any such destroyed, lost or stolen Security, a new Security of like tenor and principal amount, having endorsed thereon the Guarantees executed by the Guarantors and bearing a number not contemporaneously outstanding.

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In case any such mutilated, defaced, destroyed, lost or stolen Security has become or is about to become due and payable, the Company may in its discretion, instead of issuing a new Security, pay such Security.

Upon the issuance of any new Security under this Section, the Company may require the payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in relation thereto and any other expenses (including the fees and expenses of the Trustee and Paying Agents) connected therewith.

Every new Security issued pursuant to this Section in lieu of any destroyed, defaced, lost or stolen Security, and each Guarantee endorsed thereon, shall constitute an original additional contractual obligation of the Company and each of the Guarantors, respectively, whether or not the destroyed, lost or stolen Security shall be at any time enforceable by anyone, and shall be entitled to all the benefits of this Indenture equally and proportionately with any and all other Securities and Guarantees, respectively duly issued hereunder.

The provisions of this Section are exclusive and shall preclude (to the extent lawful) all other rights and remedies with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities.

SECTION 3.6.     Payment of Interest; Interest Rights Preserved

Interest on any Security which is payable, and is punctually paid or duly provided for, on any Interest Payment Date shall be paid to the Person in whose name that Security (or one or more Predecessor Securities) is registered at the close of business on the Regular Record Date for such interest.

Any interest on any Security which is payable, but is not punctually paid or duly provided for, on any Interest Payment Date (herein called “Defaulted Interest”) shall (a) bear interest at the rate per annum stated in the form of Security included herein, (to the extent that the payment of such interest shall be legally enforceable), and (b) forthwith cease to be payable to the Holder on the relevant Regular Record Date by virtue of having been such Holder, and such Defaulted Interest may be paid by the Company, at its election in each case, as provided in Clause (1) or (2) below:

(1) The Company may elect to make payment of any Defaulted Interest to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on a Special Record Date for the payment of such Defaulted Interest, which shall be fixed in the following manner.  The Company shall notify the Trustee in writing of the amount of Defaulted Interest proposed to be paid on each Security and the date of the proposed payment, and at the same time the Company shall deposit with the Trustee an amount of money equal to the aggregate amount proposed to be paid in respect of such Defaulted Interest or shall make arrangements satisfactory to the Trustee for such deposit prior to the date of the proposed payment, such money when deposited to be held in trust for the benefit of the Persons entitled to such Defaulted Interest as in this Clause provided. 

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	Thereupon the Trustee shall fix a Special Record Date for the payment of such Defaulted Interest which shall be not more than 15 days and not less than 10 days prior to the date of the proposed payment and not less than 10 days after the receipt by the Trustee of the notice of the proposed payment.  The Trustee shall promptly notify the Company of such Special Record Date and, in the name and at the expense of the Company, shall cause notice of the proposed payment of such Defaulted Interest and the Special Record Date therefore to be mailed, first-class postage prepaid, to each Holder at his address as it appears in the Security Register, not less than 10 days prior to such Special Record Date.  Notice of the proposed payment of such Defaulted Interest and the Special Record Date therefore having been so mailed, such Defaulted Interest shall be paid to the Persons in whose names the Securities (or their respective Predecessor Securities) are registered at the close of business on such Special Record Date and shall no longer be payable pursuant to the following Clause (2).
(2)	The Company may make payment of any Defaulted Interest in any other lawful manner not inconsistent with the requirements of any securities exchange on which the Securities may be listed, and upon such notice as may be required by such exchange, if, after notice given by the Company to the Trustee of the proposed payment pursuant to this Clause, such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Security delivered under this Indenture upon registration of transfer of or in exchange for or in lieu of any other Security shall carry the rights to interest accrued and unpaid, and to accrue, which were carried by such other Security.

SECTION 3.7.     Persons Deemed Owners

Prior to due presentment of a Security for registration of transfer and the effective registration of such transfer by the Security Registrar, the Company, the Guarantors, the Trustee and any agent of the Company, the Guarantors or the Trustee may treat the Person in whose name such Security is registered as the owner of such Security for the purpose of receiving payment of principal of and premium, if any, and (subject to Section 3.6) interest on such Security and for all other purposes whatsoever, whether or not such Security be overdue, and none of the Company, the Guarantors, the Trustee or any agent of the Company, the Guarantors or the Trustee shall be liable for so treating such holder.

SECTION 3.8.     Cancellation

Except as provided for in Sections 11.2 and 11.3, Securities surrendered for payment, redemption, registration of transfer or exchange shall, if surrendered to any Person other than the Trustee, be delivered to the Trustee and shall be promptly cancelled by it.  The Company may at any time deliver to the Trustee for cancellation any Securities previously authenticated and delivered hereunder which the Company may have acquired in any manner whatsoever, and all Securities so delivered shall be promptly cancelled by the Trustee.  No Securities shall be authenticated in lieu of or in exchange for any Securities cancelled as provided in this Section, except as expressly permitted by this Indenture.  All cancelled Securities held by the Trustee shall be disposed of in accordance with its standard procedures or as directed by a Company Order; provided, however, that the Trustee shall not be required to destroy such Securities.

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SECTION 3.9.     Computation of Interest

The amount of interest payable on the Securities for any Interest Period will be calculated by applying the rate of interest to the principal amount of such Security, dividing the product by two and rounding the resulting figure to the nearest cent (half a cent being rounded upwards).  If interest is required to be calculated for any other period, it will be calculated on the basis of a year of 360 days consisting of 12 months of 30 days each and, in the case of an incomplete month, on the number of days elapsed (pro rata basis) based on a 30 day month provided, however, that Defaulted Interest shall be computed on the basis of a 365 or 366-day year, as the case may be, and the number of days actually elapsed.

SECTION 3.10.     CUSIP numbers

The Company shall in issuing the Securities use CUSIP numbers, and the Trustee shall use the applicable CUSIP number in notices of redemption or exchange as a convenience to the Holders; provided, that any such notice may state that no representation is made as to the accuracy or correctness of the CUSIP number or numbers printed in the notice or on the certificates representing the Securities and that reliance may be placed only on the other identification numbers printed on the certificates representing the Securities.  The Company shall promptly notify the Trustee in writing of any change in CUSIP numbers.

SECTION 3.11.     Paying Agents; Discharge of Payment Obligations; Indemnity of Holders

(a)

The Company may from time to time appoint one or more paying agents under this Indenture and the Securities.  By its execution and delivery of this Indenture, the Company hereby initially designates and appoints J.P. Morgan Trust Bank Ltd., as principal paying agent and JPMorgan Chase Bank, N.A. and J.P. Morgan Bank Luxembourg S.A. as paying agents.  Subject to Section 10.3, the Company may act as paying agent.

(b)

Unless the Company shall be acting as paying agent as provided in Section 10.3, the Company shall, by 10:00 a.m. London time, no later than one Business Day prior to each interest payment date, Redemption Date or Maturity Date on any Securities (whether on maturity, redemption or otherwise) (each, a “Payment Date”), deposit with the Principal Paying Agent in immediately available funds a sum sufficient to pay such principal, any premium, and interest when so becoming due (including any Additional Amounts).  The Company shall request that the bank through which such payment is to be made agree to supply to the Principal Paying Agent in London by 10:00 a.m. (London time) two Business Days prior to the due date for any such payment an irrevocable confirmation (by tested telex or authenticated SWIFT MT 100 Message) of its intention to make such payment.  The Principal Paying Agent shall arrange with all other Paying Agents for the payment, from funds furnished by the Company or the Guarantors to the Principal Paying Agent pursuant to this Indenture, of the principal, and premium, if any, and interest (including Additional Amounts, if any) on the Securities and of the compensation of such Paying Agents for their services as such.

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	All Paying Agents will hold in trust, for the benefit of Holders or the Trustee, all money held by such Paying Agent for the payment of principal, or premium if any, of or interest on the Securities and shall notify the Trustee of any default by the Company in making any such payment.  The Company at any time may require a Paying Agent to pay all money held by it to the Trustee and to account for any funds disbursed by it.  Upon complying with this Section 3.11 and the applicable provisions of Section 10.3, the Paying Agents shall have no further liability for the money delivered to the Trustee.
(c)	Any payment to be made in respect of the Securities or the Guarantees by the Company or the Guarantors as the case may be to or to the order of the Principal Paying Agent shall be in satisfaction pro tanto of the obligations of the Company under the Securities.
(d)	Each payment in full of principal, redemption amount, additional amounts and/or interest payable under the Indenture in respect of any Note made by or on behalf of the Company to or to the order of the Principal Paying Agent in the manner specified in the Indenture on the date due shall be valid and effective to satisfy and discharge the obligation of the Company to make payment of principal, redemption amount, additional amounts and/or interest payable under the Indenture on such date, provided, however, that the liability of the Principal Paying Agent hereunder shall not exceed any amounts paid to it by the Company, or held by it, on behalf of the Holders under the Indenture; and provided further that, in the event that there is a default by the Paying Agent or the Principal Paying Agent in any payment of principal, redemption amount, additional amounts and/or interest in respect of any Note in accordance with the Indenture, the Company and the Guarantors shall pay on demand such further amounts as will result in receipt by the Holder of such amounts as would have been received by it had no such default; provided that, the liability of each of VCP and CRB will be limited to 50% of such amount.  This obligation constitutes a separate and independent obligation from the other obligations of the Company under the Securities and the Guarantors under the Guarantees, shall give rise to a separate and independent cause of action, will apply irrespective of any waiver granted by the Trustee and/or any holder of Securities and shall continue in full force and effect despite any judgment, order, claim, or proof for a liquidated amount in respect of any sum due under this Indenture, the Securities or any judgment or order.

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ARTICLE 4

SATISFACTION AND DISCHARGE

SECTION 4.1.     Satisfaction and Discharge of Indenture

This Indenture shall cease to be of further effect as to all Outstanding Securities, and the Trustee, on demand of and at the expense of the Company, shall execute proper instruments acknowledging satisfaction and discharge of this Indenture, when

(1)	either
	(A)	the Company or any of the Guarantors will have paid or caused to be paid the principal of and premium, if any, and interest (including Additional Amounts, if any) on the Securities as and when the same will have become due and payable; or
	(B)	all Outstanding Securities (except lost, stolen or destroyed Securities which have been replaced or paid) have been delivered to the Trustee for cancellation;
		and the Company, in the case of (A) above, has deposited or caused to be deposited with the Trustee as trust funds in trust for the purpose an amount sufficient to pay and discharge the entire indebtedness on such Securities not theretofore delivered to the Trustee for cancellation, for principal of and premium, if any, and interest, including Additional Amounts, if any, to the date of such deposit (in the case of Securities which have become due and payable) or to the Stated Maturity or Redemption Date, as the case may be;
(2)	the Company and/or any of the Guarantors have paid or caused to be paid (i) all other sums payable hereunder and (ii) if the Stated Amount of the Letter of Credit is less than the Maximum L/C Amount of the Letter of Credit, all other sums payable under the Letter of Credit Agreement by VPAR;
(3)	the Company has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent herein provided for relating to the satisfaction and discharge of this Indenture have been complied with; and
(4)	the Trustee shall have received such other documents and assurances as the Trustee shall have reasonably requested.

Notwithstanding the satisfaction and discharge of this Indenture, (i) the obligations of the Company to the Trustee under Section 6.7 hereof, (ii) substitution of apparently mutilated, defaced, destroyed, lost or stolen Securities, (iii) rights of holders of Securities to receive payment of principal of and premium, if any, and interest (including Additional Amounts, if any) on the Securities, (iv) rights, obligations and immunities of the Trustee under this Indenture (including, if money shall have been deposited with the Trustee pursuant to subclause (B) of Clause (I) of this Section, the obligations of the Trustee under Section 4.2 hereof and the last paragraph of Section 10.3 hereof), and (v) rights of holders of the Securities as beneficiaries of this Indenture with respect to any property deposited with the Trustee payable to all or any of them, shall survive.

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SECTION 4.2.     Application of Trust Money

Subject to the provisions of the last paragraph of Section 10.3, all money deposited with the Trustee pursuant to Section 4.1 hereof shall be held in trust and applied by it, in accordance with the provisions of the Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Trustee may determine, to the Persons entitled thereto, of the principal (and premium, if any) and interest for whose payment such money has been deposited with the Trustee.

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ARTICLE 5

REMEDIES

SECTION 5.1.     Events of Default

“Event of Default”, wherever used herein, means any one of the following events (whatever the reason for such Event of Default and whether it shall be voluntary or involuntary or be effected by operation of law or pursuant to any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body):

(a)	failure to pay any amount of principal of (or premium, if any) any Security when due;
(b)	failure to pay any interest (including Additional Amounts, if any), on any Security when due and such failure shall continue for a period of 30 days and the Trustee shall not have otherwise received such amounts (and any interest payable on such amounts, including interest on interest) by drawing on the Letter of Credit or otherwise, provided, however, that if any payments are due and payable by the Issuing Bank under the Letter of Credit after VPAR and the Trustee have taken all steps necessary to draw on the Letter of Credit in accordance with the Letter of Credit, the Company’s failure to make such payment of interest (and Additional Amounts, if any), and any interest payable on such amounts, including interest on interest, shall not be an Event of Default hereunder;
(c)	failure to perform any covenant or agreement of the Company or any of the Guarantors under this Indenture or the Securities and such failure is incapable of remedy, or, if such failure is capable of remedy, remains unremedied for 30 days after the Trustee has given written notice thereof to the Company or any of the Guarantors, as applicable;
(d)	failure to pay when due or, as the case may be, within any originally applicable grace period, any amount of principal and premium, if any, or interest (including Additional Amounts, if any), due under the terms of any instrument evidencing Indebtedness of the Company, any of the Guarantors or any of their Subsidiaries, or any such Indebtedness of the Company, any of the Guarantors or any of their Subsidiaries that becomes due and payable prior to its stated maturity otherwise than at the option of the issuer thereof by reason of the occurrence of an event of default howsoever described; provided that the aggregate amount of any such Indebtedness equals with respect to such Person, on a consolidated basis (except with respect to VPAR, which shall be on an unconsolidated basis) US$50 million or more (or its equivalent in other currency or currencies);
(e)	the rendering of a final judgment or judgments (not subject to appeal) for the payment of money against the Company, any of the Guarantors or any Subsidiary which remains undischarged, unbonded or unstayed for a period of 60 days after the date on which the right to appeal all such judgments has expired or, if later, the date therein specified for payment; provided that the aggregate amount of any such final judgment equals or exceeds with respect to such Person, on a consolidated basis (except with respect to VPAR, which shall be on an unconsolidated basis) US$50 million (or its equivalent in other currency or currencies);

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(f)	all or a substantial part of the property of the Company, any Guarantor or any of the Designated Subsidiaries, if the whole or part of such property is material to the Company, such Guarantor or such Designated Subsidiary considered as a whole, shall be condemned, seized or otherwise appropriated, or custody of such property shall be assumed by any governmental authority or court or other person purporting to act under the authority of the federal government of any jurisdiction, or the Company, any Guarantor or any Designated Subsidiary shall be prevented from exercising normal control over all or a substantial part of its respective property or revenues, if the whole or part of such property or revenues is material to the Company, such Guarantor and or such Designated Subsidiary considered as a whole;
(g)	(a) a secured party takes possession of any part of the assets or revenues of the Company, any of the Guarantors or any of the Subsidiaries, if such assets or revenues are material to the Company or such Guarantor and its Subsidiaries on a consolidated basis, or (b) a receiver or similar officer is appointed, of any part of the assets or revenues of the Company, any of the Guarantors or any of the Designated Subsidiaries;
(h)	the Company or any of the Guarantors pursuant to or under or within the meaning of any Bankruptcy Law (a) commences a voluntary case or proceeding; (b) consents to the making of a Bankruptcy Order in an involuntary case or proceeding or the commencement of any case against it; (c) consents to the appointment of a custodian of it or for substantially all of its property; (d) makes a general assignment for the benefit of its creditors; (e) files an answer or consent seeking reorganization or relief; (f) shall admit in writing its inability to pay its debts generally; or (g) consents to the filing of a petition in bankruptcy;
(i)	a court of competent jurisdiction in any involuntary case or proceeding enters a Bankruptcy Order against the Company or any Guarantor, and such Bankruptcy Order remains unstayed and in effect for 60 consecutive days;
(j)	the performance or compliance by the Company or the Guarantors with any of their respective obligations under or in respect of the Securities or this Indenture if any such performance or compliance would be unlawful;
(k)	any of the Guarantees is not (or is claimed by any of the Guarantors not to be) in full force and effect;
(l)	(i) The Letter of Credit Agreement or the Letter of Credit is terminated or otherwise rendered unenforceable prior to the Stated Maturity or (ii) the Letter of Credit expires and is not extended by the Issuing Bank prior to the Stated Maturity pursuant to Section 2.01 of the Letter of Credit Agreement unless Letter of Credit is replaced pursuant to Section 2.03 of the Letter of Credit Agreement; and
(m)	failure by VPAR to comply with its obligations under Section 2.04(i) of the Letter of Credit Agreement and such failure shall continue for a period of 30 days.

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If any Event of Default (other than an Event of Default described in clauses (h) and (i) above with respect to the Company or any of the Guarantors) shall occur and be continuing, either (i) the Trustee or (ii) the holders of at least 25% in aggregate principal amount of the Outstanding Securities may accelerate the maturity of all Securities.  If an Event of Default specified in clauses (h) and (i) above occurs with respect to the Company or any of the Guarantors, the Outstanding Securities will ipso facto become immediately due and payable without any declaration or other act on the part of the Trustee or any Holder.

The Company and each of the Guarantors will be required to furnish to the Trustee (i) within ten days of demand by the Trustee therefore and (ii) (without the necessity of any such demand) together with the delivery of each of the annual financial statements and interim and in any event within 120 days after the end of each such fiscal period, an Officers’ Certificate or Officers’ Certificates, stating whether or not to the best knowledge of the signers thereof the Company or such Guarantor is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture and if the Company or such Guarantor is in default, specifying all such defaults and the nature and status thereof of which they may have knowledge.

SECTION 5.2.     Collection of Indebtedness and Suits for Enforcement by Trustee

The Company and the Guarantors covenant that if

(1)	default is made in the payment of any interest on any Security, (including Additional Amounts, if any), when such amounts become due and payable and such default continues for a period of 30 days, or
(2)	default is made in the payment of the principal of (or premium, if any, on) any Security at the Maturity thereof or, with respect to any Security to be redeemed, at the Redemption Date thereof,

the Company and the Guarantors (subject to the limitations provided in this Indenture) will, jointly and severally, upon demand of the Trustee, pay to it, for the benefit of the Holders of such Securities, the whole amount then due and payable on such Securities for principal (and premium, if any) and interest (including Additional Amounts, if any), and, to the extent that payment of interest on overdue amounts shall be legally enforceable, interest on any overdue principal (and premium, if any) and on any overdue interest, at the rate provided by the Securities, and, in addition thereto, such further amount as shall be sufficient to cover the costs and expenses incurred by the Trustee under this Indenture, including the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel.

If the Company and the Guarantors fail to pay such amounts forthwith upon such demand, the Trustee, in its own name and as trustee of an express trust, may institute a judicial proceeding for the collection of the sums so due and unpaid, may prosecute such proceeding to judgment or final decree, and may enforce the same against the Company, the Guarantors or any other obligor upon the Securities and collect the moneys adjudged or decreed to be payable in the manner provided by law out of the property of the Company, the Guarantors or any other obligor upon the Securities, wherever situated.

If an Event of Default occurs and is continuing, the Trustee may in its discretion proceed to protect and enforce its rights and the rights under this Indenture and the Guarantees of the Holders by such appropriate judicial proceedings as the Trustee shall deem most effective to protect and enforce any such rights, whether for the specific enforcement of any covenant or agreement in this Indenture or in aid of the exercise of any power granted herein including, without limitation, seeking recourse against the Guarantor or proceeding to enforce any other proper remedy.

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SECTION 5.3.     Trustee May File Proofs of Claim

The Trustee may file such proofs of claim and other papers or documents as may be necessary or advisable in order to have the claims of the Trustee and the Holders allowed in any judicial proceedings relative to the Company, the Guarantors, their respective creditors or its property and, unless prohibited by law or applicable regulations, may vote on behalf of the Holders at their direction in any election of a trustee in bankruptcy or other Person performing similar functions, and any custodian in any such judicial proceeding is hereby authorized by each Holder to make payments to the Trustee and, in the event that the Trustee shall consent to the making of such payments directly to the Holders, to pay to the Trustee any amount due it for the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and its counsel, and any other amounts due the Trustee under Section 6.7.

SECTION 5.4.     Trustee May Enforce Claims Without Possession of Securities

All rights of action and claims under this Indenture, the Securities or the Guarantees may be prosecuted and enforced by the Trustee without the possession of any of the Securities or the production thereof in any proceeding relating thereto, and any such proceeding instituted by the Trustee shall be brought in its own name as trustee of an express trust, and any recovery of judgment shall, after provision for the payment of the reasonable compensation, expenses, disbursements and advances of the Trustee, its agents and counsel, be for the ratable benefit of the Holders of the Securities in respect of which such judgment has been recovered.

SECTION 5.5.     Application of Money Collected

Any money collected by the Trustee pursuant to this Article shall be applied in the following order, at the date or dates fixed by the Trustee and, in case of the distribution of such money on account of principal (or premium, if any) or interest, upon presentation of the Securities and the notation thereon of the payment if only partially paid and upon surrender thereof if fully paid;

FIRST:	To the payment of all amounts due to the Trustee under Section 6.7; provided however, that in the event of a draw under the Letter of Credit, (other than a draw to pay Trustee’s fees covered by the Letter of Credit pursuant to the Letter of Credit Agreement), all amounts due to the Trustee under the second sentence of Section 6.7 will be paid as provided in paragraph THIRD below;
SECOND:	To the payment of the amounts then due and unpaid for principal of (and premium, if any) and interest on the Securities in respect of which or for the benefit of which such money has been collected, ratably, without preference or priority of any kind, according to the amounts due and payable on such Securities for principal (and premium, if any) and interest, respectively; and

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THIRD: To the payment of all amounts due to the Trustee under the indemnity contained in Section 6.7.

The Trustee, upon prior written notice to the Company, may fix a record date and payment date for any payment to the Holders pursuant to this Section 5.5.

SECTION 5.6.     Limitation on Suits

No Holder of any Security shall have any right to institute any proceeding, judicial or otherwise, with respect to this Indenture, or for the appointment of a receiver or trustee, or for any other remedy hereunder, unless:

(1)	such Holder has previously given written notice to the Trustee of a continuing Event of Default;
(2)	the Holders of at least 25% in aggregate principal amount of the Outstanding Securities shall have made written request to the Trustee to institute proceedings in respect of such Event of Default in its own name as Trustee hereunder;
(3)	the Trustee for 60 days after its receipt of such notice, request and offer and, if requested, provision of indemnity has failed to institute any such proceeding; and
(4)	no direction inconsistent with such written request has been given to the Trustee during such 60-day period by the Holders of a majority in principal amount of the Outstanding Securities;

it being understood and intended that no one or more Holders shall have any right in any manner whatever by virtue of, or by availing of, any provision of this Indenture, any Security or the Guarantees to affect, disturb or prejudice the rights of any other Holders, or to obtain or to seek to obtain priority or preference over any other Holders or to enforce any right under this Indenture, any Security or any Guarantee, except in the manner herein provided and for the equal and ratable benefit of all the Holders.

SECTION 5.7.     Unconditional Right of Holders to Receive Principal, Premium and Interest

Notwithstanding any other provision in this Indenture, the Securities or the Guarantees, the Holder of any Security shall have the right, which is absolute and unconditional, to receive payment of the principal of (and premium, if any) and (subject to Section 3.6) interest on such Security on the respective Stated Maturities expressed in such Security (or earlier Redemption  Date) and to institute suit for the enforcement of any such payment, and such rights shall not be impaired without the consent of such Holder.

SECTION 5.8.     Restoration of Rights and Remedies

If the Trustee or any Holder has instituted any proceeding to enforce any right or remedy under this Indenture, any Security or any Guarantee, and such proceeding has been discontinued or abandoned for any reason, or has been determined adversely to the Trustee or to such Holder, then and in every such case, subject to any determination in such proceeding, the Company, the Guarantors, the Trustee and the Holders shall be restored severally and respectively to their former positions hereunder and thereafter all rights and remedies of the Trustee and the Holders shall continue as though no such proceeding had been instituted.

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SECTION 5.9.     Rights and Remedies Cumulative

Except as otherwise provided with respect to the replacement or payment of mutilated, destroyed, lost or stolen Securities in the last paragraph of Section 3.5 hereof, no right or remedy herein conferred upon or reserved to the Trustee or to the Holders is intended to be exclusive of any other right or remedy, and every right and remedy shall, to the extent permitted by law, be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in equity or otherwise.  The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of any other appropriate right or remedy.

SECTION 5.10.     Delay or Omission Not Waiver

No delay or omission of the Trustee or of any Holder of any Security to exercise any right or remedy accruing upon any Event of Default shall impair any such right or remedy or constitute a waiver of any such Event of Default or an acquiescence therein.  Every right and remedy given by this Article or by law to the Trustee or to the Holders may be exercised from time to time, and as often as may be deemed expedient, by the Trustee or by the Holders, as the case may be.

SECTION 5.11.     Control by Holders

The Holders of a majority of the aggregate principal amount of the Outstanding Securities shall have the right to direct the time, method and place of conducting any proceeding for any remedy available to the Trustee or exercising any trust or power conferred on the Trustee, provided that

(1)	such direction shall not be in conflict with any rule of law or with this Indenture or expose the Trustee to personal liability (as determined in the sole discretion of the Trustee), and
(2)	the Trustee may take any other action deemed proper by the Trustee which is not inconsistent with such direction.

The Trustee may refuse, however, to follow any direction that the Trustee, in its sole discretion, determines may be unduly prejudicial to the rights of the Holders or that may subject the Trustee to any liability or expense if the Trustee determines, in its sole discretion, that it lacks indemnification satisfactory to it against such loss or expense.

SECTION 5.12.     Waiver of Past Defaults

The Holders of not less than a majority in aggregate principal amount of the Outstanding Securities may by written notice to the Company and the Trustee waive any past default hereunder and rescind and annul any declaration of acceleration and its consequences, except a default

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(1)	in the payment of the principal of (or premium, if any) or interest on any Security, or
(2)	in respect of a covenant or provision hereof which under Article 9 cannot be modified or amended without the consent of the Holder of each Outstanding Security affected.

Upon any such waiver, such default shall cease to exist, and any Event of Default arising therefrom shall be deemed to have been cured, for every purpose of this Indenture; but no such waiver shall extend to any subsequent or other default or impair any right consequent thereon.

ARTICLE 6

THE TRUSTEE

SECTION 6.1.     Certain Duties and Responsibilities

(a)	Except during the continuance of an Event of Default,
	(1)	the Trustee undertakes to perform such duties and only such duties as are specifically set forth in this Indenture, and no implied covenants or obligations shall be read into this Indenture against the Trustee; and
	(2)	in the absence of bad faith on its part, the Trustee may conclusively rely, as to the truth of the statements and the correctness of the opinions expressed therein, upon certificates or opinions furnished to the Trustee and conforming to the requirements of this Indenture; but in the case of any such certificates or opinions which by any provision hereof are specifically required to be furnished to the Trustee, the Trustee shall be under a duty to examine the same to determine whether or not they conform to the requirements of this Indenture.
(b)	In case an Event of Default has occurred and is continuing, the Trustee shall exercise such of the rights and powers vested in it by this Indenture, and use the same degree of care and skill in their exercise, as a prudent man would exercise or use under the circumstances in the conduct of his own affairs.
(c)	No provision of this Indenture shall be construed to relieve the Trustee from liability for its own negligent action, its own negligent failure to act, or its own wilful misconduct, except that
	(1)	this Subsection shall not be construed to limit the effect of Subsection (a) of this Section;
	(2)	the Trustee shall not be liable for any error of judgment made in good faith by a Responsible Officer, unless it shall be proved that the Trustee was negligent  in ascertaining the pertinent facts;
	(3)	the Trustee shall not be liable with respect to any action taken or omitted to be taken by it in good faith in accordance with the direction of the Holders of a majority in principal amount of the Outstanding Security of any series, determined as provided in Section 5.1, relating to the time, method and place of conducting any proceeding for any remedy available to the Trustee, or exercising any trust or power conferred upon the Trustee, under this Indenture with respect to the Security; and

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	(4)	no provision of this Indenture shall require the Trustee to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its duties hereunder, or in the exercise of any of its rights or powers, if it shall have reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured to it.
	(5)	The Trustee shall not be obligated to take any action with respect to an Event of Default under Sections 5.1(f) and (g) unless it shall have received written notification from Holders representing at least 25% of the aggregate principal amount of outstanding Securities that an Event of Default described in such Sections has occurred.
(d)	Whether or not therein expressly so provided, every provision of this Indenture relating to the conduct or affecting the liability of or affording protection to the Trustee shall be subject to the provisions of this Section.

SECTION 6.2.     Notice of Defaults

The Trustee shall give the Holders notice of any Default that has occurred and is continuing and of which the Trustee has actual knowledge, within 90 days after the occurrence of such Default.  The Trustee may withhold from Holders notice of any continuing Default or Event of Default (except a Default or Event of Default relating to the payment of principal, premium, if any, or interest on, the Securities) if it determines that withholding such notice is in their interest.

SECTION 6.3.     Certain Rights of Trustee

Subject to the provisions of Section 6.1:

(a)	the Trustee may rely and shall be protected in acting or refraining from acting upon any resolution, certificate, statement, instrument, opinion, report, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document believed by it to be genuine and to have been signed or presented by the proper party or parties;
(b)	any request or direction of the Company mentioned herein shall be sufficiently evidenced by a Company Request or a Company Order and any resolution of the Board of Directors of the Company may be sufficiently evidenced by a Board Resolution;
(c)	whenever in the administration of this Indenture the Trustee shall deem it desirable that a matter be proved or established prior to taking, suffering or omitting any action hereunder, the Trustee (unless other evidence be herein specifically prescribed) may, in the absence of bad faith on its pan, rely upon an Officers’ Certificate or an Opinion of Counsel;

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(d)	the Trustee may consult with counsel and the written advice of such counsel or any Opinion of Counsel shall be full and complete authorization and protection in respect of any action taken, suffered or omitted by it hereunder in good faith and in reliance thereon;
(e)	the Trustee shall be under no obligation to exercise any of the rights or powers vested in it by this Indenture at the request or direction of any of the Holders pursuant to this Indenture, unless such Holders shall have offered to the Trustee reasonable security or indemnity against the costs, expenses and liabilities which might be incurred by it in compliance with such request or direction satisfactory to the Trustee;
(f)	the Trustee shall not be bound to make any investigation into the facts or matters stated in any resolution, certificate, statement, instrument, report, opinion, notice, request, direction, consent, order, bond, debenture, note, other evidence of indebtedness or other paper or document, but the Trustee, in its discretion, may make such further inquiry or investigation into such facts or matters as it may see fit, and, if the Trustee shall determine to make such further inquiry or investigation, it shall be entitled to examine the books, records and premises of the Company, personally or by agent or attorney;
(g)	the Trustee may execute any of the trusts or powers hereunder or perform any duties hereunder either directly or by or through agents or attorneys and the Trustee shall not be responsible for any misconduct or negligence on the part, or for the supervision of, any agent or attorney appointed with due care by it hereunder;
(h)	the Trustee shall not be liable for any action taken, suffered or omitted by it in good faith which the Trustee believed to have been authorized or within its rights or powers; and
(i)	the Trustee shall not be charged with knowledge of any default or Event of Default with respect to the Notes, unless either (1) a Responsible Officer shall have actual knowledge of such default or Event of Default or (2) written notice of such default or Event of Default shall have been given to the Trustee by the Company or by any Holder of the Notes.

SECTION 6.4.     Not Responsible for Recitals or Issuance of Securities

The recitals contained herein, in the Securities and in the Guarantees endorsed thereon, except the Trustee’s certificates of authentication, shall be taken as the statements of the Company or the Guarantors, as the case may be, and the Trustee assumes no responsibility for their correctness.  The Trustee makes no representations as to the validity or sufficiency of this Indenture or the Securities.  The Trustee shall not be accountable for the use or application by the Company of Securities or the proceeds thereof.

SECTION 6.5.     May Hold Securities

The Trustee, any Paying Agent or Transfer Agent, any Security Registrar (if other than the Trustee) or any other agent of the Company or the Guarantors, in its individual or any other capacity, may become the owner or pledgee of Securities and, subject to Sections 6.8 and 6.13, may otherwise deal with the Company with the same rights it would have if it were not Trustee, Paying Agent, Transfer Agents Security Registrar or such other agent.

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SECTION 6.6.     Money Held in Trust

All moneys received by the Trustee or any Paying Agent shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, and shall be segregated from other funds of the Trustee or Paying Agent.  Neither the Trustee nor any Paying Agent shall be under any liability for interest on any moneys received by it hereunder except such as it may agree in writing with the Company to pay thereon.

SECTION 6.7.     Compensation and Reimbursement

The Company and the Guarantors agree:

(1)	to pay to the Trustee, the Principal Paying Agent and the Paying Agents from time to time upon demand such compensation for all services rendered by it hereunder as shall be agreed upon in writing (which compensation shall not be limited by any provision of law in regard to the compensation of a trustee of an express trust);
(2)	except as otherwise expressly provided herein, to reimburse each of the Trustee, the Principal Paying Agent and each other Paying Agent upon its request for all reasonable expenses, disbursements and advances incurred or made by it in accordance with any provision of this Indenture (including the reasonable compensation and the expenses and disbursements of their agents and counsel), except any such expense, disbursement or advance as may be attributable to its gross negligence or wilful misconduct; and
(3)	to indemnify each of the Trustee, the Principal Paying Agent and each other Paying Agent for, and to hold each harmless against, any loss, liability, cost, damage, claim or expense (including the reasonable compensation, expenses and disbursements of its agents, accountants, experts and counsel) incurred without gross negligence or willful misconduct on its part, arising out of or in connection with the acceptance or administration of this trust or the performance by it of its duties and obligations or the exercise of its rights hereunder, including the costs and expenses of enforcing this Indenture against the Company or the Guarantors, as the case may be (including, without limitation, this Section 6.7) and of defending against any claim (whether asserted by any Holder or the Company or the Guarantors, as the case may be) or liability in connection with the exercise or performance of any of its powers or duties hereunder.  The provisions of this Section 6.7 shall survive any termination of this Indenture and the resignation or removal of the Trustee, the Principal Paying Agent or other Paying Agent.

As security for the performance of the obligations of the Company or the Guarantors, as the case may be, under this Section 6.7, the Trustee shall have a lien prior to the Securities upon all property and funds held or collected by the Trustee, except funds held in trust for the payment of principal of (and premium, if any) or interest on particular Securities.  The Trustee’s right to receive payment of any amounts due under this Section 6.7 shall not be subordinate to any other liability or indebtedness of the Company or the Guarantors, as the case may be (even though the Securities may be so subordinated).

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When the Trustee incurs expenses or renders services after an Event of Default specified in Section 5.1 occurs, the expenses and the compensation for such services are intended to constitute expenses of administration under Title II, U.S. Code, or any similar Federal, State or analogous foreign law for the relief of debtors.

SECTION 6.8.     Disqualification; Conflicting Interests

If the Trustee has or shall acquire a conflicting interest within the meaning of the Trust Indenture Act, the Trustee shall either eliminate such interest or resign, to the extent and in the manner provided by, and subject to the provisions of, the Trust Indenture Act and this Indenture.

SECTION 6.9.     Corporate Trustee Required; Eligibility

There shall at all times be a Trustee hereunder which shall be a Person that is eligible pursuant to the Trust Indenture Act to act as such and has a combined capital and surplus of at least $50,000,000 and its Corporate Trust Office in The City of New York, New York.  If such Person publishes reports of condition at least annually, pursuant to law or to the requirements of a Federal, State, Territorial or District of Columbia supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Person shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time the Trustee shall cease to be eligible in accordance with the provisions of this Section, it shall resign immediately in the manner and with the effect hereinafter specified in this Article.

SECTION 6.10.     Resignation and Removal; Appointment of Successor

(a)	No resignation or removal of the Trustee and no appointment of a successor Trustee pursuant to this Article shall become effective until the acceptance of appointment by the successor Trustee under Section 6.11, at which time the retiring Trustee shall be fully discharged from its obligations hereunder.
(b)	The Trustee may resign at any time by giving written notice thereof to the Company.  If an instrument of acceptance by a successor Trustee shall not have been delivered to the Trustee within 30 days after the giving of such notice of resignation, the resigning Trustee may petition any court of competent jurisdiction for the appointment of a successor Trustee.
(c)	The Trustee may be removed at any time by Act of the Holders of a majority in principal amount of the Outstanding Securities, delivered to the Trustee and to the Company.
(d)	If at any time:
	(1)	the Trustee shall fail to comply with Section 6.8 after written request therefore by the Company or by any Holder who has been a bona fide Holder of a Security for at least six months, or
	(2)	the Trustee shall cease to be eligible under Section 6.9 and shall fail to resign after written request therefore by the Company or by any such Holder, or

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	(3)	the Trustee shall become incapable of acting or shall be adjudged a bankrupt or insolvent or a receiver of the Trustee or of its property shall be appointed or any public officer shall take charge or control of the Trustee or of its property or affairs for the purpose of rehabilitation, conservation or liquidation, then, in any such case, (i) the Company by a Board Resolution may remove the Trustee, or (ii) subject to Section 5.14, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself or herself and all others similarly situated, petition any court of competent jurisdiction for the removal of the Trustee and the appointment of a successor Trustee.
(e)	If the Trustee shall resign, be removed or become incapable of acting, or if a vacancy shall occur in the office of Trustee for any cause, the Company, by a Board Resolution, shall promptly appoint a successor Trustee.  If, within one year after such resignation, removal or incapability, or the occurrence of such vacancy, a successor Trustee shall be appointed by Act of the Holders of a majority in principal amount of the Outstanding Securities delivered to the Company and the retiring Trustee, the successor Trustee so appointed shall, forthwith upon its acceptance of such appointment, become the successor Trustee and supersede the successor Trustee appointed by the Company.  If no successor Trustee shall have been so appointed by the Company or the Holders and accepted appointment in the manner hereinafter provided, any Holder who has been a bona fide Holder of a Security for at least six months may, on behalf of himself or herself and all others similarly situated, petition any court of competent jurisdiction for the appointment of a successor Trustee.
(f)	The Company shall give notice of each resignation and each removal of the Trustee and each appointment of a successor Trustee to all Holders in the manner provided in Section 1.6.  Each notice shall include the name of the successor Trustee and the address of its Corporate Trust Office.

SECTION 6.11.     Acceptance of Appointment by Successor

Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Company, the Guarantors and to the retiring Trustee an instrument accepting such appointment, and thereupon the resignation or removal of the retiring Trustee shall become effective and such successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the retiring Trustee; but, on request of the Company or the successor Trustee, such retiring Trustee shall, upon payment of its charges, execute and deliver an instrument transferring to such successor Trustee all the rights, powers and trusts of the retiring Trustee and shall duly assign, transfer and deliver to such successor Trustee all property and money held by such retiring Trustee hereunder, subject nevertheless to its Lien, if any, provided for in Section 6.7.  Upon request of any such successor Trustee, the Company and the Guarantors shall execute any and all instruments for more fully and certainty vesting in and confirming to such successor Trustee all such rights, powers and trusts.  No successor Trustee shall accept its appointment unless at the time of such acceptance such successor Trustee shall be qualified and eligible under this Article.

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SECTION 6.12.     Merger, Conversion, Consolidation or Succession to Business

Any corporation or other entity into which the Trustee may be merged or convened or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which the Trustee shall be a party, or any corporation or other entity succeeding to all or substantially all the corporate trust business of the Trustee, shall be the successor of the Trustee hereunder, provided that such corporation or other entity shall be otherwise qualified and eligible under this Article, without the execution or filing of any paper or any further act on the part of any of the parties hereto.  In case any Securities shall have been authenticated, but not delivered, by the Trustee then in office, any successor by merger, conversion or consolidation to such authenticating Trustee may adopt such authentication and deliver the Securities so authenticated with the same effect as if such successor Trustee had itself authenticated such Securities.

SECTION 6.13.     Preferential Collection of Claims Against the Company

The Trustee shall comply with Sections 311(a) and 311(b) of the Trust Indenture Act.  A Trustee who has resigned or been removed shall be subject to Section 311(a) of the Trust Indenture Act to the extent indicated.

SECTION 6.14.     Appointment of Authenticating Agent

The Trustee may appoint an Authenticating Agent or Agents with respect to the Securities which shall be authorized to act on behalf of the Trustee to authenticate Securities issued upon original issue and upon exchange, registration of transfer or partial redemption thereof or pursuant to Section 3.6, and Securities so authenticated shall be entitled to the benefits of this Indenture and shall be valid and obligatory for all purposes as if authenticated by the Trustee hereunder.  Wherever reference is made in this Indenture to the authentication and delivery of Securities by the Trustee or the Trustee’s certificate of authentication, such reference shall be deemed to include authentication and delivery on behalf of the Trustee by an Authenticating Agent and a certificate of authentication executed on behalf of the Trustee by an Authenticating Agent.  Each Authenticating Agent shall be acceptable to the Company and shall at all times be a corporation organized and doing business under the laws of the United States of America, any State thereof or the District of Columbia, authorized under such laws to act as Authenticating Agent, having a combined capital and surplus of not less than $50,000,000 and subject to supervision or examination by Federal or State authority.  If such Authenticating Agent publishes reports of condition at least annually, pursuant to law or to the requirements of said supervising or examining authority, then for the purposes of this Section, the combined capital and surplus of such Authenticating Agent shall be deemed to be its combined capital and surplus as set forth in its most recent report of condition so published.  If at any time an Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, such Authenticating Agent shall resign immediately in the manner and with the effect specified in this Section.

Any corporation or other entity into which an Authenticating Agent may be merged or converted or with which it may be consolidated, or any corporation or other entity resulting from any merger, conversion or consolidation to which such Authenticating Agent shall be a party, or any corporation or other entity succeeding to the corporate agency or corporate trust business of an Authenticating Agent, shall continue to be an Authenticating Agent, provided such corporation or other entity shall be otherwise eligible under this Section, without the execution or filing of any paper or any further act on the part of the Trustee or the Authenticating Agent.

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An Authenticating Agent may resign at any time by giving written notice thereof to the Trustee and to the Company.  The Trustee may at any lime terminate the agency of an Authenticating Agent by giving written notice thereof to such Authenticating Agent and to the Company.  Upon receiving such a notice of resignation or upon such a termination, or in case at any lime such Authenticating Agent shall cease to be eligible in accordance with the provisions of this Section, the Trustee may appoint a successor Authenticating Agent which shall be acceptable to the Company and shall give notice of such appointment in the manner provided in Section 1.6 to all Holders of Securities.  Any successor Authenticating Agent upon acceptance of its appointment hereunder shall become vested with all the rights, powers and duties of its predecessor hereunder, with tike effect as if originally named as an Authenticating Agent.  No successor Authenticating Agent shall be appointed unless eligible under the provisions of this Section.

The Company agrees to pay to each Authenticating Agent from time to time reasonable compensation for its services under this Section.

If an appointment is made pursuant to this Section, the Securities may have endorsed thereon, in lieu of the Trustee’s certificate of authentication, an alternative certificate of authentication in the following form:

          This is one of the Securities referred to in the within-mentioned Indenture.

JPMORGAN CHASE BANK, N.A.,
As Trustee
By:
	As Authenticating Agent

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ARTICLE 7

HOLDERS, LISTS AND REPORTS BY TRUSTEE AND THE COMPANY

SECTION 7.1.     Company to Furnish Trustee; Names and Addresses of Holders

The Company will furnish or cause to be furnished to the Trustee

(a)	semi-annually, not more than 15 days after each Regular Record Date, a list, in such form as the Trustee may reasonably require, of the names and addresses of the Holders as of such Regular Record Date, and
(b)	at such other times as the Trustee may request in writing, within 30 days after the receipt by the Company of any such request, a list of similar form and content as of a date not more than 15 days prior to the time such list is furnished;

excluding from any such list names and addresses received by the Trustee in its capacity as Security Registrar.

SECTION 7.2.     Preservation of Information; Communications to Holders

(a)	The Trustee shall preserve, in as current a form as is reasonably practicable, the names and addresses of Holders contained in the most recent list furnished to the Trustee as provided in Section 7.1 and the names and addresses of Holders received by the Trustee in its capacity as Security Registrar.  The Trustee may destroy any list furnished to it as provided in Section 7.1 upon receipt of a new list so furnished.
(b)	If a Holder (herein referred to as an “applicant”) applies in writing to the Trustee, and furnishes to the Trustee reasonable proof that each such applicant has owned a Security for a period of at least six months preceding the date of such application, and such application states that the applicants desire to communicate with other Holders with respect to their rights under this Indenture or under the Securities and is accompanied by a copy of the form of proxy or other communication which such applicant proposes to transmit, then the Trustee shall, within five Business Days after the receipt of such application, at its election, either
	(i)	afford such applicant access to the information preserved at the time by the Trustee in accordance with Section 7.2(a), or
	(ii)	inform such applications as to the approximate number of Holders whose names and addresses appear in the information preserved at the time by the Trustee in accordance with Section 7.2(a), as to the approximate cost of mailing to such Holders the form of proxy or other communication, if any, specified in such application.
(c)	Every Holder of Securities, by receiving and holding the same, agrees with the Company and the Trustee that neither the Company nor the Trustee nor any agent of either of them shall be held accountable by reason of the disclosure of any such information as to the names and addresses of the Holders in accordance with Section 7.2(b), regardless of the source from which such information was derived, and that the Trustee shall not be held accountable by reason of mailing any material pursuant to a request made under Section 7.2(b).

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SECTION 7.3.     Reports by Trustee

Within 60 days after May 15 of each year commencing with the year 2006, the Trustee shall mail to each Holder, as their name and address appears in the Security Registrar, a brief report dated as of such date covering the matters set forth in Trust Indenture Act 313(a).  The Trustee shall also comply with Trust Indenture Act 313(b) and (c).

A copy of each report at the time of its mailing to Holders shall be filed by the Trustee with each stock exchange (if any) on which the Securities are listed and with the Company.  The Company agrees to notify promptly the Trustee whenever the Securities become listed on any stock exchange and of any delisting thereof.

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ARTICLE 8

MERGER, CONSOLIDATION, ETC.

SECTION 8.1.     Mergers, Consolidations and Certain Sales of Assets

So long as any of the Securities are Outstanding, none of the Guarantors may, in a single transaction or a series of related transactions:

(i)	consolidate with or merge into any other Person or permit any other Person to consolidate with or merge into any such Guarantor (other than a consolidation or merger of a Wholly Owned Designated Subsidiary organized under the laws of Brazil or the United States into any such Guarantor), or
(ii)	directly or indirectly, transfer, sell, lease or otherwise dispose of all or substantially all of its assets (provided that the creation of a Lien on or in any of its assets shall not in and of itself constitute the transfer, sale, lease or disposition of the assets subject to the Lien)
unless the following conditions, to the extent applicable, are met:
(A)	in the case of a transaction in which any such Guarantor does not survive or in which such Guarantor sells, leases or otherwise disposes of all or substantially at of its assets to any other Person, the successor entity to such Guarantor (1) shall expressly assume, by a supplemental indenture executed and delivered to the Trustee, all of such Guarantor’s obligations under this Indenture and (2) shall be organized under the laws of (x) Brazil or any state or political subdivision thereof, or (y) the United States of America or any state thereof or the District of Columbia or (z) any other country if such successor entity undertakes, in such supplemental indenture, to pay such additional amounts in respect of principal (and premium, if any) and interest as may be necessary in order that the net amounts paid pursuant to the Securities after deduction or withholding of any present or future withholding taxes, levies, imposts or charges whatsoever imposed by or for the account of such country or any political subdivision or taxing authority thereof or therein shall equal the respective amounts of principal (and premium, if any) and interest specified in the Securities unless such tax, levy, impost or charge is payable because the Holder is a domiciliary, national or resident of, or engages in business or maintains a permanent establishment or is physically present in such jurisdiction of organization;
(B)	if, as a result of any such transaction, property or assets of such Guarantor would become subject to a Lien prohibited by Section 10.12 such Guarantor or the successor entity to such Guarantor shall have secured the Securities as described thereunder;
(C)	such Guarantor has delivered to the Trustee an Opinion of Counsel to the effect that the Holders will not recognize gain or loss for United States federal income tax purposes as a result of such transaction; and
(D)	such Guarantor has delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that such consolidation, merger, conveyance, transfer, lease or acquisition and, if a supplemental indenture is required in connection with such transaction, such supplemental indenture complies with this covenant and that all conditions precedent herein provided for relating to such transaction have been complied with.

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SECTION 8.2.     Successor Substituted

In the event of any transaction (other than a lease) described in and complying with the immediately preceding paragraph in which any Guarantor is not the surviving Person and the surviving Person assumes all the obligations of such Guarantor under the Securities and this Indenture pursuant to a supplemental indenture, such surviving Person shall succeed to, and be substituted for, and may exercise every right and power of, such Guarantor, and such Guarantor will be discharged from its obligations under this Indenture and the Securities.  In such case a supplement to the Offering Circular shall be prepared and notices published with respect to such transaction in accordance with the requirements of the Luxembourg Stock Exchange.

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ARTICLE 9

SUPPLEMENTAL INDENTURES

SECTION 9.1.     Supplemental Indentures Without Consent of Holders

Without the consent of any Holders, the Company, when authorized by a Board Resolution of the Company, each Guarantor, when authorized by Board Resolutions of such Guarantor, and the Trustee, at any time and from time to time, may enter into one or more indentures supplemental hereto, in form satisfactory to the Trustee, for any of the following purposes:

(1)	to evidence the succession of another Person to the Company and the assumption by any such successor of the covenants of the Company herein and in the Securities; or
(2)	to add to the covenants of the Company for the benefit of the Holders, or to surrender any right or power herein conferred upon the Company; or
(3)	to secure the Securities pursuant to the requirements of Section 10.11 or otherwise; or
(4)	to cure any ambiguity, to correct or supplement any provision herein which may be inconsistent with any other provision herein, or to make any other provisions with respect to matters or questions arising under this Indenture which shall not be inconsistent with the provisions of this Indenture, provided that such action pursuant to this Clause (4)shall not adversely affect the legal rights of the Holders; or
(5)	to provide for uncertificated Securities in addition to or in place of certificated Securities.

The Trustee will not be required to obtain the consent of any of the Holders to cure any ambiguity in the Letter of Credit, or to correct or supplement any provision in the Letter of Credit which may be inconsistent with any other provision in the Letter of Credit, or to make any other provisions with respect to matters or questions arising under the Letter of Credit which shall not be inconsistent with the provisions of the Letter of Credit in effect at such time, provided that such action shall not adversely affect the legal rights of the Holders.

SECTION 9.2.     Supplemental Indentures with Consent of Holders

With the consent of the Holders of not less than a majority in aggregate principal amount of the Outstanding Securities, by Act of said Holders delivered to the Company and the Trustee, and consistent with Section 5.13, the Company, when authorized by the respective Board Resolutions of the Company, each Guarantor, when authorized by the Board Resolutions of such Guarantor, and the Trustee may enter into an indenture or indentures supplemental hereto for the purpose of adding any provisions to or changing in any manner or eliminating any of the provisions of this Indenture or of modifying in any manner the rights of the Holders under this Indenture; provided, however, that no such supplemental indenture shall, without the consent of the Holder of each outstanding Security affected thereby and the Coordinating Bank (which consent in the case of the Coordinating Bank shall not be unreasonably with held):

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(1)	change the Stated Maturity of the principal of, or any installment of interest on, any Security, or reduce the principal amount thereof or the rate of interest thereon or any premium payable thereon, or change the place of payment where, or the coin or currency in which, any Security or Guarantee or any premium or interest thereon is payable, or impair the right to institute suit for the enforcement of any such payment on or with respect to any Security or Guarantee on or after the Stated Maturity thereof (or, in the case of redemption, on or after the Redemption Date),
(2)	reduce the percentage in principal amount of the Outstanding Securities, the consent of whose Holders is required for any such supplemental indenture, or the consent of whose Holders is required for any waiver (of compliance with certain provisions of this Indenture or certain defaults hereunder and their consequences) provided for in this Indenture, or
(3)	modify any of the provisions of this Section 9.2 or Section 5.12, Section 10.9, 10.10, Section 11.1 or Section 12.4(5) or (6) (with respect to the obligation of the Company to deliver an Opinion of Counsel in the United States as to certain matters relating to United States federal income tax law), except to increase any such percentage described in Clause (2) above or to provide that certain other provisions of this Indenture cannot be modified or waived without the consent of the Holder of each Outstanding Security affected thereby.
(4)	release any Guarantor from any of its obligations under its Guarantee or this Indenture, except in compliance with the terms of this Indenture,

In the event of any modification or amendment to this Indenture of the nature described in items (1) through (4) of this Section 9.2, the Company will publish a notice and prepare a supplemental offering circular to reflect such modification or amendment.

It shall not be necessary for any Act of Holders under this Section to approve the particular form of any proposed supplemental indenture, but it shall be sufficient if such Act shall approve the substance thereof.

SECTION 9.3.     Execution of Supplemental Indentures

In executing, or accepting the additional trusts created by, any supplemental indenture permitted by this Article or the modifications thereby of the trusts created by this Indenture, the Trustee shall be entitled to receive, and (subject to Section 6.1) shall be fully protected in relying upon, in addition to the documents required by Section 1.2, an Opinion of Counsel stating that the execution of such supplemental indenture is authorized or permitted by this Indenture. The Trustee may, but shall not be obligated to, enter into any such supplemental indenture which affects the trustee’s own rights, duties or immunities under this Indenture.  The Trustee may, but shall not be obligated to, accept any amended Letter of Credit which affects the Trustee’s own rights, duties or immunities regarding timing under the third and fourth complete paragraphs on page 2 of the Letter of Credit.

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SECTION 9.4.     Effect of Supplemental Indentures

Upon the execution of any supplemental indenture under this Article, this Indenture shall be modified in accordance therewith, and such supplemental indenture shall form a part of this Indenture for all purposes; and every Holder of Securities theretofore or thereafter authenticated and delivered hereunder shall be bound thereby.

SECTION 9.5.     Reference in Securities to Supplemental Indentures

Securities authenticated and delivered after the execution of any supplemental indenture pursuant to this Article may, and shall if required by the Trustee, bear a notation in form approved by the Trustee as to any matter provided for in such supplemental indenture.  If the Company shall so determine, new Securities so modified as to conform, in the opinion of the Company, to any such supplemental indenture may be prepared and executed by the Company and authenticated and delivered by the Trustee in exchange for Outstanding Securities.

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ARTICLE 10

COVENANTS

SECTION 10.1.     Payment Under the Securities and the Guarantees

The Company and the Guarantors shall duly and punctually pay all amounts owed by them, and comply with all their other obligations, under the terms of the Securities, the Guarantees and this Indenture.

SECTION 10.2.     Maintenance of Office or Agency

The Company and the Guarantors will maintain in the Borough of Manhattan, The City of New York, New York, an office or agency where Securities may be presented or surrendered for payment, where Securities may be surrendered for registration of transfer or exchange and where notices and demands to or upon the Company or the Guarantors in respect of the Securities, the Guarantees and this Indenture may be served.  Initially, this office will be at the offices of National Corporate Research, Ltd. located at 225 West 34^th Street, Suite 910, New York, NY 10122, and the Company and the Guarantors shall agree not to change the designation of such office without prior notice to the Trustee and designation of a replacement office in the same general location.  In addition, for as long as the Securities are listed on the Luxembourg Stock Exchange, the Company will maintain in Luxembourg an office or agency where securities may be presented or surrendered for payment and where securities may be surrendered for registration of transfer or exchange.  The Company will give prompt written notice to the Trustee of the location, and any change in the location, of such offices or agencies.  If at any time the Company or any of the Guarantors shall fail to maintain any such required offices or agencies or shall fail to furnish the Trustee with the address thereof, such presentations, surrenders, notices and demands may be made or served at the Corporate Trust Office of the Trustee, the Company and each of the Guarantors hereby appoint the Trustee as their agent to receive all such presentations, surrenders, notices and demands.

The Company may also from time to time designate one or more other offices or agencies (in or outside the Borough of Manhattan, The City of New York, New York) where the Securities may be presented or surrendered for any or all such purposes and may from time to time rescind such designations (each, a “Transfer Agent”); provided, however, that no such designation or rescission shall in any manner relieve the Company of its obligation to maintain an office or agency in the Borough of Manhattan, The City of New York, New York or, for so long as the Securities are listed on the Luxembourg Stock Exchange, in Luxembourg for such purposes.  The Company has initially designated the offices of JPMorgan Chase Bank, N.A. and J.P. Morgan Bank Luxembourg S.A. to act as Transfer Agents.  The Company will give prompt written notice to the Trustee of any such designation or rescission and of any change in the location of any such other office or agency.

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SECTION 10.3.     Money for Security Payments to Be Held in Trust

If the Company shall at any time act as its own Paying Agent, it will, on or before each due date of the principal of (and premium, if any) or interest on any of the Securities, segregate and hold in trust for the benefit of the Persons entitled thereto a sum sufficient to pay the principal (and premium, if any) or interest so becoming due until such sums shall be paid to such Persons or otherwise disposed of as herein provided and will promptly notify the Trustee in writing of its action or failure so to act.  As provided in Section 5.4, upon any bankruptcy or reorganization proceeding relative to the Company, the Trustee shall serve as the Co-Paying Agent for the Securities.

Whenever the Company shall have one or more Paying Agents, it will, prior to each due date of the principal of (and premium, if any) or interest on any Securities, deposit with the Principal Paying Agent a sum sufficient to pay the principal (and premium, if any) or interest (including Additional Amounts, if any) so becoming due, such sum to be held in trust for the benefit of the Persons entitled to such principal, premium or interest, and (unless such Paying Agent is the Trustee) the Company will promptly notify the Trustee in writing of its action or failure so to act.  As provided in Section 5.4, upon any bankruptcy or reorganization proceeding relative to the Company the Trustee shall serve as the Paying Agent for the Securities.

The Company will cause each Paying Agent other than the Trustee to execute and deliver to the Trustee an instrument in which such Paying Agent shall agree with the Trustee, subject to the provisions of this Section, that such Paying Agent will:

(1)	hold all sums held by it for the payment of the principal of (and premium, if any) or interest on Securities in trust for the benefit of the Persons entitled thereto until such sums shall be paid to such Persons or otherwise disclosed of as herein provided;
(2)	give the Trustee notice of any default by the Company (or any other obligor upon the Securities) in the making of any payment of principal (and premium, if any) or interest;
(3)	at any time during the continuance of any such default, upon the written request of the Trustee, forthwith pay to the Trustee all sums so held in trust by such Paying Agent; and
(4)	acknowledge, accept and agree to comply in all respects with the provisions of this Indenture relating to the duties, rights and obligations of such Paying Agent.

The Company may at any time, for the purpose of obtaining the satisfaction and discharge of this Indenture or for any other purpose, pay, or by Company Order direct any Paying Agent to pay, to the Trustee all sums held in trust by the Company or such Paying Agent, such sums to be held by the Trustee upon the same trusts as those upon which such sums were held by the Company or such Paying Agent; and, upon such payment by any Paying Agent to the Trustee, such Paying Agent shall be released from all further liability with respect to such money.

Any money deposited with the Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of (and premium, if any) or interest on any Security and remaining unclaimed for two years after such principal (and premium, if any) or interest has become due and payable shall be paid to the Company on the Company’s Request, or (if then held by the Company) shall be discharged from such trust; and the Holder of such Security shall thereafter, as an unsecured general creditor, look only to the Company for payment thereof, and all liability of the Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in a newspaper published in the English language, customarily published on each Business Day and of general circulation in the Borough of Manhattan, The City of New York, New York, notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such publication, any unclaimed balance of such money then remaining will be repaid to the Company.

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SECTION 10.4.     Maintenance of corporate existence

The Company and the Guarantors shall, and shall cause each of their Subsidiaries to, maintain in effect their corporate existence and all registrations necessary therefore and take all actions to maintain all rights, privileges, titles to property, franchises and the like necessary or desirable in the normal conduct of their business, activities or operations provided that this covenant shall not require the Company, the Guarantors or any of their Subsidiaries to maintain any such registration, right, privilege, title to property, franchise or the like or require the Company or any Guarantor to preserve the corporate existence of any of their Subsidiaries, if the failure to do so would not have a material adverse effect on the Company or such Guarantor and its Subsidiaries taken as a whole or have a material adverse effect on the rights of the Holders.

SECTION 10.5.     Maintenance of Properties

The Company and each Guarantor shall, and shall cause each of their Subsidiaries to, keep all their property used or useful in the conduct of their businesses in good working order and condition, ordinary wear and tear excepted, provided that this covenant shall not require the Company, any Guarantor or any of their Subsidiaries to maintain any such property, if the failure to do so would not have a material adverse effect on the Company or such Guarantor and its Subsidiaries taken as a whole or have a material adverse effect on the rights of the Holders.

SECTION 10.6.     Payment of Taxes and Other Claims

The Company and the Guarantors shall, and shall cause each of their Subsidiaries to, pay or discharge or cause to be paid or discharged before the same shall become delinquent, (i) all taxes, assessments and governmental charges levied or imposed upon the Company, such Guarantor or such Subsidiary, as the case may be, and (ii) all lawful claims for labor, materials and supplies which, if unpaid, might by law become a lien upon the property of the Company, such Guarantor or such Subsidiary, as the case may be; provided, however, that neither the Company, the Guarantors nor any Subsidiary shall be required to pay or discharge or cause to be paid or discharged any such tax, assessment, charge or claim whose amount, applicability or validity is being contested in good faith and, if appropriate, by appropriate legal proceedings, or where the failure to do so would not have a material adverse effect on the Company or such Guarantor and its Subsidiaries taken as a whole or have a material adverse effect on the rights of the Holdings.

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SECTION 10.7.     Provision of Financial Information

The Company and each of the Guarantors have agreed that, for so long as any Securities are Outstanding and during any period in which the Company and each of the Guarantors are not both subject to and in compliance with the reporting requirements of Section 13 or 15(d) of the Exchange Act or exempt from reporting pursuant to Rule 12g3-2(b) under the Exchange Act, they will each furnish to the Trustee and the Holders (with a copy to the Issuing Bank) under the restricted global note or of a restricted physical note and to any prospective purchasers of such Securities, to the extent permitted by applicable law or contractual restrictions, upon their request, the information required to be delivered pursuant to Rule 144A(d)(4) under the Securities Act.

Additionally, the Company and each Guarantor shall provide the Trustee and the Holders (with a copy to the Issuing Bank), within 150 days of the end of each fiscal year and 90 days within the end of each of the first three fiscal quarters, annual or quarterly financial statements, as applicable, in accordance with Brazilian GAAP in the case of the Guarantors and U.S. GAAP in the case of the Company, and audited in the case of annual financial statements.  The financial statements of the Guarantors will be available at the specified offices of each of the Agents, including the Luxembourg Paying Agent.

Delivery of such reports, information and documents to the Trustee is for informational purposes only and the Trustee’s receipt of such reports shall not constitute constructive notice of any information contained therein or determinable from information contained therein, including the Company’s or a Guarantor’s compliance with any of its covenants hereunder (as to which the Trustee is entitled to rely exclusively on Officers’ Certificates or notices from the Holders).

SECTION 10.8.     Statement by Officers as to Default

(a)

Each of the Company and the Guarantors will deliver to the Trustee, within 90 days after the end of each quarter of each of its fiscal years ending after the date hereof, an Officers’ Certificate, stating whether or not to the best knowledge of the signers thereof the Company or such Guarantor, as the case may be, is in default in the performance and observance of any of the terms, provisions and conditions of this Indenture and if the Company or any Guarantor, as the case may be, is in default, specifying all such defaults and the nature and status thereof of which it may have knowledge.

(b)

Each of the Company and the Guarantors shall deliver to the Trustee, as soon as possible and in any event within 10 days after the Company or any Guarantor, as the case may be, becomes aware of the occurrence of a Default or an Event of Default, an Officers’ Certificate setting forth the details of such Default or Event of Default and the action which the Company or such Guarantor, as the case may be, proposes to take with respect thereto.

SECTION 10.9.     Waiver of Certain Covenants

The Company or the Guarantors, as the case may be, may omit in any particular instance to comply with any covenant or condition set forth in Sections 10.4 to 10.8, inclusive, if before or after the time for such compliance the Holders of at least a majority in aggregate principal amount of the Outstanding Securities shall, by Act of such Holders, either waive such compliance in such instance or generally waive compliance with such covenant or condition, but no such waiver shall extend to or affect such covenant or condition except to the extent so expressly waived, and, until such waiver shall become effective, the obligations of the Company or the Guarantor, as the case may be, and the duties of the Trustee in respect of any such covenant or condition shall remain in full force and effect.

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SECTION 10.10.     Payment of Additional Amounts

Any and all payments to a Holder of principal (and premium, if any) and interest in respect of the Securities will be made free and clear of, and without withholding or deduction for, any and all present and future withholding taxes, duties, assessments, levies, imposts or charges (“Taxes”) whatsoever imposed by or on behalf of, the Cayman Islands, Brazil or Japan or any political subdivision or taxing authority thereof or therein, unless such withholding or deduction is required by law.  In that event, the Company or the Guarantors, as the case may be, shall pay such additional amounts (the “Additional Amounts”) as will result in the receipt by the Holders of such amounts as would have been received by them if no such withholding or deduction had been required, except that no such Additional Amounts shall be payable in respect of any Security:

(i)	held by, or by a third party on behalf of, a holder which is liable for such taxes, duties, assessments, levies, imposts or governmental charges in respect of such Security by reason of its (or a fiduciary, settlor, member or shareholder, beneficiary of, or possessor of a power over, such holder, if such holder is an estate, trust, partnership or corporation) having some present or former connection with the Cayman Islands, Brazil or Japan (including being or having been a citizen or resident of the Cayman Islands, Brazil or Japan or being or having been engaged in trade or business therein) other than the mere holding of such Security; or
(ii)	where (in the case of a payment of principal, premium, if any, or interest on the Maturity Date or date of earlier redemption) the relevant Security is surrendered for payment more than 30 days after the Relevant Date except to the extent that the relevant Holder would have been entitled to such Additional Amounts if it had surrendered the relevant Security on the last day of such period of 30 days; or
(iii)	if such tax is an estate, inheritance, gift, sales, transfer or personal property tax or any similar tax, assessment, levy, impost or governmental charge; or
(iv)	if such amount is (a) payable other than by withholding from a payment on such Security, or (b) required to be withheld by a paying agent and such payment can be made without such withholding by any other paying agent; or
(v)	if such tax, duty, assessment, levy, impost or governmental charge would not have been imposed but for the failure of such holder to comply with applicable certification, information, documentation or other reporting requirements concerning the nationality, residence, identity or connection with the Cayman Islands, Brazil or Japan of the Holder or beneficial owner of such Security if such compliance is required as a precondition to relief or exemption from withholding or deduction of all or part of such tax, duty, assessment, levy, impost or governmental charge; or

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(vi)

where such withholding or deduction is imposed on a payment to an individual and is required to be made pursuant to Council Directive 200348/EC of 3 June 2003 on taxation of savings income in the form of interest payments or any European Union Directive otherwise implementing the conclusions of the ECOFIN Council meeting of 26 and 27 November 2000 or any law implementing or complying with, or introduced in order to conform to, any such Directive; or

(vii)

in the case of any combination of items (i) through (vi).

“Relevant Date” means whichever is the later of (a) the date on which the payment in question first becomes due and (b) if the full amount payable has not been received by the Principal Paying Agent on or prior to such due date, the date on which (the full amount having been so received) notice to that effect has been given to the Holders.

The Company shall pay any present or future stamp, court or documentary taxes, or any other excise or property taxes, charges or similar levies which arise in any jurisdiction from the execution, delivery or registration of the Securities or any other document or instrument referred to therein, excluding any such taxes, charges or similar levies imposed by any jurisdiction outside of Brazil, except those resulting from, or required to be paid in connection with, the enforcement of the Securities or any other such document or instrument following the occurrence of any Event of Default with respect to the Securities.

References to principal or interest shall be deemed to include any Additional Amounts in respect of principal, premium, if any, or interest (as the case may be) which may be payable under the Securities.

If the Company or any Guarantor becomes subject at any time to any taxing jurisdiction other than the Cayman Islands, Brazil, or Japan as the case may be, references herein to the Cayman Islands, Brazil and Japan, respectively, shall be construed to include such other jurisdiction.

SECTION 10.11.     Negative Covenants of the Company

The Company shall not, so long as any of the Securities are Outstanding:

(i)	Incur or permit to exist any Indebtedness, except (a) Indebtedness evidenced by the Securities, (b) Indebtedness representing fees, expenses and indemnities payable pursuant to and in accordance with the Purchase Agreement, the Transaction Documents or the Letter of Credit, or (c) as permitted in (iv) below;
(ii)	Incur or permit to exist any Lien on any property or assets (including stock or other securities) now owned or hereafter acquired by it or on any of its current or future income or revenues, except with respect to Indebtedness permitted by clauses (i) and (iv);
(iii)	Incur or permit to exist any guarantees;
(iv)	create or permit to exist any creditors, other than (a) as permitted in (i) above, (b) as required by applicable law, or (c) any other creditors provided that the total Outstanding aggregate amount owed to all such other creditors is less than US$30,000;

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(v)	engage at any time in any business or business activity, other than: (a) the performance of its obligations pursuant to the Purchase Agreement or the Transaction Documents, (b) as required by law, or (c) any other incidental or related activities in connection with the Transaction Documents;
(vi)	enter into any Sale Leaseback Transaction;
(vii)	purchase, hold or acquire any Capital Stock, evidences of indebtedness or other securities of, make or permit to exist any loans or advances to, or make or permit to exist any Investment or any other interest in, any other Person or engage in any transactions involving commodity options or futures contracts or similar transactions, except for the Intercompany Bonds, short-term investments in U.S. treasury securities and any other indebtedness to an Affiliate limited to the amount of funds the Company may have left over after paying interest on each Interest Payment Date;
(viii)	merge into or consolidate with any other Person, or permit any other Person to merge into or consolidate with it, or sell, transfer, lease or otherwise dispose of (in one or a series of transactions) any of its assets (whether now owned or hereafter acquired), or purchase, lease or otherwise acquire (in one or a series of transactions) any of the assets of any other Person, other than (a) the repurchase of the Securities pursuant to, and in accordance with the terms of, this Indenture or (b) as permitted by clause (vii) above;
(ix)	Incur, create, assume or permit to exist any lease obligations, except for the leasing of office space and equipment necessary to carry on its business activities;
(x)	declare or pay, directly or indirectly, any dividend or make any other distribution (by reduction of capital or otherwise), whether in cash, property, securities or a combination thereof, with respect to any shares of its Capital Stock or directly or indirectly redeem, purchase, retire or otherwise acquire for value any shares of any class of its Capital Stock or set aside any amount for any such purpose;
(xi)	engage in any transactions with, any of its Affiliates, except as set forth in this Indenture or in connection with the acquisition, amendment, modification, sale or other disposition of Intercompany Bonds;
(xii)	make any change (a) in accounting treatment and reporting practices, except as required by law or applicable accounting standards or (b) in tax reporting treatment, except as required by law;
(xiii)	issue any Capital Stock to any entity or Person (other than the Capital Stock held by VPAR), permit any of its Capital Stock to be transferred to any Person or otherwise change its equity structure in any manner, except for Issuances or transfers to Affiliates upon provision of an Opinion of Counsel acceptable to the Trustee to the effect that such transfer would not have a material adverse effect on the rights of the Holders;
(xiv)	amend its certificate of incorporation, memorandum or articles of association without the consent of a majority of the Holders;

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(xv)	enter into or be a party to any agreement, instrument or transaction, other than (a) the Transaction Documents, the Purchase Agreement or the Intercompany Bond Documents or any agreement, instrument or transaction incidental to or in connection therewith, (b) as may be required by applicable law or (c) in order to maintain its existence as a Cayman Islands corporation; or
(xvi)	grant any powers of attorney to any Person for any purposes, except for the purpose of permitting any Person to perform any ministerial functions on behalf of the Company that are not prohibited by or inconsistent with the terms of this Indenture, the Purchase Agreement, or any agreement, instrument or transaction incidental to or in connection therewith.

Notwithstanding the foregoing, the Company may enter into Currency Protection Agreements in connection with the Intercompany Bonds.

SECTION 10.12.     Limitation on Liens of the Guarantors

So long as any of the Securities are Outstanding, none of the Guarantors may, or may permit any of their respective Designated Subsidiaries to, Incur or suffer to exist any Lien on or with respect to any property, assets or Capital Stock now owned or hereafter acquired to secure any Indebtedness without making, or causing such Designated Subsidiary to make, effective provision for securing the Securities (x) equally and ratably with (or prior to) such Indebtedness as to such property, assets or Capital Stock for so long as such Indebtedness will be so secured or (y) in the event such Indebtedness is Indebtedness of such Guarantor or Designated Subsidiary which is subordinate in right of payment to the Securities, prior to such Indebtedness as to any such property, assets or Capital Stock for so long as such Indebtedness will be so secured.

The foregoing restrictions shall not apply to:

(i)	Liens arising by operation of law and in the ordinary course of business of any of the Guarantors, or any of the Designated Subsidiaries, which Liens, when enforced on the assets to which they are attached, would not (either alone or together with any other such Liens) materially impair the operation of such business;
(ii)	any Lien on the inventory or receivables (other than those described in clause (ix) below) of any of the Guarantors or any Designated Subsidiary securing obligations:
	(A)	under any short term lines of credit, entered into in the normal course of business, or
	(B)	under any working capital facility;
(iii)	Liens in respect of legal proceedings which have been submitted to a competent court and are being contested in good faith;
(iv)	Liens created solely for the purpose of securing the payment of all or a part of the purchase price of assets or property (including Capital Stock of any Person) acquired or constructed after the Closing Date; provided that (a) the aggregate principal amount of Indebtedness secured by such Liens shall not exceed the purchase price of the assets or property so acquired or constructed, and (b) such Liens shall not encumber any assets or property other than the assets or property so acquired and shall attach to such assets or property within 90 days of the construction or acquisition of such assets or property;

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(v)	pledges or deposits made in the ordinary course of business in connection with workers’ compensation, unemployment insurance or other similar social security legislation;
(vi)	Liens securing taxes, assessments and other governmental charges or levies, in each case the payment of which is not yet due or is being contested in good faith by appropriate proceedings and for which such reserve or other appropriate provisions, if any, as shall be required by Brazilian GAAP shall have been made;
(vii)	encumbrances, security deposits or reserves maintained in the ordinary course of business and required by law or regulation or by any Government Agency;
(viii)	Liens which arise pursuant to a final judgment or judgments that do not constitute an Event of Default under Section 5.1(f);
(ix)	Liens on accounts receivable and related assets in connection with export, import or other trade transactions or in connection with any Securitization Transaction provided that the aggregate amount of any Receivables sold or transferred in such Securitization Transaction securing Indebtedness shall not exceed (a) with respect to transactions related to revenues from exports, 80% of such Person’s consolidated net sales from exports; or (b) with respect to transactions related to revenues from domestic sales, 50% of such Person’s consolidated net safes within Brazil;
(x)	Liens granted to secure borrowings from (i) Banco Nacional de Desenvolvimento Econômico e Social-BNDES, or any other Brazilian governmental development bank, or (ii) any international development bank or Government Agency;
(xi)	any Lien extending, renewing or replacing, in whole or in part, any Lien outstanding at the Closing Date;
(xii)	any Lien that does not fall within clauses (i) through (xi) above and that secures Indebtedness which, exclusive of Indebtedness secured by other Liens permitted under this covenant, does not exceed an aggregate principal equal to the greater of (i) US$200 million (or its equivalent in any other currency) and (ii) 10% of Consolidated Net Tangible Assets;
(xiii)	survey exceptions, encumbrances, easements or reservations of, or rights of others for, licenses, rights of way, sewers, electric lines, telegraph and telephone lines and other similar purposes, or zoning or other restrictions as to the use of real property or Liens incidental to the conduct of such Person or to the ownership of its properties which were not Incurred in connection with indebtedness and which do not in the aggregate materially adversely affect the value of said properties or materially impair their use in the operation of the business of such Person;

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(xiv)	Liens existing on the Issue Date;
(xv)	Liens on property or shares of Capital Stock of another Person at the time such other Person becomes a Subsidiary; provided, however, that the Liens may not extend to any other property owned by such Person;
(xvi)	Liens on properly at the time such Person or any of its Subsidiaries acquires the property, including any acquisition by means of a merger or consolidation with or into such Person or a Subsidiary of such Person; provided, however, that the Liens may not extend to any other property owned by such Person;
(xvii)	Liens securing Indebtedness or other obligations of a Subsidiary of such Person owing to such Person or a wholly-owned Subsidiary of such Person; and
(xviii)	Liens in favor of surety bonds or letters of credit issued pursuant to the request of, and for the account of, such Person in the ordinary course of its business.

SECTION 10.13.     Transactions with Affiliates and Related Persons

None of the Guarantors may, or may permit any of their Subsidiaries to, enter into any transaction (or series of related transactions) with any Related Party, including any Investment, either directly or indirectly, unless such transaction is on terms no less favorable to such Guarantor or such Subsidiary, as the case may be, than those that could have been obtained in a comparable arm’s-length transaction with an unrelated third party; provided, that for any such transaction (or series of related transactions) involving a Related Party other than a Guarantor or a Subsidiary and an amount in interest in excess of US$10 million, a Senior Officer of such Guarantor shall, or shall cause a Senior Officer of such Subsidiary to, determine that such transaction is on terms no less favorable to such Guarantor or such Subsidiary, as the case may be, than those that could have been obtained in a comparable arm’s-length transaction with an unrelated third party.  Notwithstanding the foregoing, this covenant does not apply to (a) any loan or similar financial transaction (or series of related transactions) entered into for the purpose of performing cash management or other financial management functions by any Guarantor or Subsidiary with any of the other Guarantors, Subsidiaries or Related Parties; provided that such transaction (or series of related transactions) would not be materially adverse to the results of operations or financial condition of any such Guarantor or Subsidiary, and (b) any tax allocation agreements entered into from time to time by any Guarantor or any Subsidiary with any Related Party; provided that such transaction (or series of related transactions) would not be materially adverse to the results of operations or financial condition of any such Guarantor or Subsidiary.

SECTION 10.14.     Performance Obligations Under Other Documents

The Company and the Guarantors shall duly and punctually perform, comply with and observe all obligations and agreements to be performed by them set forth in the Transaction Documents, as applicable.

Upon the occurrence of a Currency Inconvertibility/Non-Transfer Event, the Company and the Guarantors shall deliver a Notice of Non-Payment in the form of Exhibit G hereto and in accordance with Section 2.04(a)(i) of the Letter of Credit Agreement.  Any Notice of Non-Payment shall be delivered by the Company and the Guarantors to the Banks and the Trustee.  Upon receipt of a Notice of Non-Payment, the Trustee shall deliver promptly a copy thereof to the Holders.  If a Notice of Non-Payment is delivered, VPAR shall promptly comply with all of its obligations under Section 2.04 of the Letter of Credit Agreement.

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SECTION 10.15.     Compliance with Laws

The Company and the Guarantors shall comply, and shall cause their Subsidiaries to comply, at all times with all applicable laws, rules, regulations, orders and directives of any government or government agency or authority having jurisdiction over the Company, the Guarantor, the Subsidiaries or the business of any of them or any of the transactions contemplated herein, except where the failure by the Company or the Guarantors so to comply would not have a material adverse effect on the Company or such Guarantor and its Subsidiaries taken as a whole or have a material adverse effect on the rights of the Holders.

SECTION 10.16.     Maintenance of Government Approvals

The Company and the Guarantors shall, and shall cause their Subsidiaries to, duly obtain and maintain in full force and effect all governmental approvals, consents or licenses of any government or governmental agency or authority under the laws of Brazil, the Cayman Islands or any other government or government agency having jurisdiction over the Company or the Guarantors or necessary in all cases for the Company and the Guarantors to perform their obligations under the Transaction Documents (including, without limitation, any authorization required to obtain and transfer U.S. dollars or any other currency which at that time is legal tender in the United States out of Brazil in connection with the Securities, this Indenture and the Guarantees) or for the validity or enforceability thereof, except where the failure to do so would not have a material adverse effect on the Company or such Guarantor and its Subsidiaries taken as a whole or have a material adverse effect on the rights of the Holders.

SECTION 10.17.     Maintenance of Insurance

Each Guarantor shall, and shall cause each of their Subsidiaries to, maintain insurance with insurance companies that such Guarantor reasonably believes to be financially sound in such amounts and covering such risks as is usually carried by companies engaged in similar businesses and owning and/or operating properties or facilities similar to those owned and/or operated, such Guarantor or its respective Subsidiaries, as the case may be, in the same general locations in which the Guarantor and their Subsidiaries own and/or operate their properties or facilities except where the failure to maintain such insurance for such risks, either individually or in the aggregate, would not have a material adverse effect on the Company or such Guarantor and its Subsidiaries taken as a whole or have a material adverse effect on the rights of the Holders.

SECTION 10.18.     Maintenance of Books and Records

The Company and the Guarantors shall, and shall cause each of their Subsidiaries to, maintain books, accounts and records in all material respects in accordance with US GAAP, Cayman Islands GAAP or Brazilian GAAP, as applicable, or the applicable GAAP of their place of incorporation, and in any case in the manner necessary to facilitate consolidation into VPAR’s financial statements.

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SECTION 10.19.     Ranking

The Company and each Guarantor shall ensure that the Securities and its Guarantee, respectively, will constitute general senior unconditional and unsubordinated obligations of the Company or the Guarantors, respectively, and will rank at least equally to all other present and future senior unsecured obligations of the Company and the Guarantors respectively (other than obligations preferred by statute or by operation of law).

SECTION 10.20.     Notice of Certain Events

The Company shall give and the Guarantors shall ensure that the Company shall give, notice to the Trustee (with a copy of such notice to S&P, Fitch and the Banks), as soon as is practicable and in any event within ten calendar days after the Company or any Guarantor becomes aware or should reasonably become aware, of the occurrence of any Event of Default or Default, accompanied by a certificate of a director of the Company setting forth the details of such Event of Default or Default and stating what action the Company proposes to take with respect thereto.

The Company and the Guarantors shall give written notice to the Trustee (substantially in the form of Exhibit F hereto) (with a copy of such notice to S&P, Fitch and the Banks), immediately after the Company or any of the Guarantors becomes aware (i) of any action taken by the Government of Brazil that could, in the reasonable judgment of VPAR, the Company and the other Guarantors, give rise to a Currency Inconvertibility/Non-Transfer Event, (ii) that any Currency Inconvertibility/Non-Transfer Event has occurred or (iii) that any Currency Inconvertibility/Non-Transfer Event has ceased; provided, that, if the Company and the Guarantors are unable to make a Scheduled Payment as the same becomes due because of a Currency Inconvertibility/Non-Transfer Event, then the Company and the Guarantors shall submit a Notice of Non-Payment to the Trustee and the Banks, in the form of Exhibit G, in accordance with Section 2.04 of the Letter of Credit Agreement.

SECTION 10.21.     Further Actions

The Company and the Guarantors shall, at their own cost and expense, satisfy any condition or take any action (including the obtaining or effecting of any necessary consent, approval, authorization, exemption, filing, license, order, recording or registration) at any time required, as necessary or as reasonably requested by the Trustee in accordance with applicable laws to be taken, fulfilled or done in order to (a) enable the Company and the Guarantors to lawfully enter into, exercise their rights and perform and comply with their obligations under the Transaction Documents, as applicable, (b) ensure that the Company’s and the Guarantors’ obligations under the Transaction Documents are legally binding and enforceable, (c) make the Indenture, the Guarantees and the Letter of Credit Agreement Documents admissible in evidence in the courts of the State of New York, Brazil or the Cayman Islands and (d) enable the Trustee to exercise and enforce its rights under and carry out the terms, provisions and purposes of the Indenture, the Guarantees and the Letter of Credit Agreement, (e) take any and all actions necessary to preserve the enforceability of, and maintain the Trustee’s rights hereunder and under the Guarantees and the Letter of Credit Agreement, including, without limitation, refraining from taking any action that reasonably can be expected to have an adverse effect on the enforceability of, or any of the Trustee’s rights under the Indenture, the Guarantees and the Letter of Credit Agreement, and (f) assist, to the extent reasonably practicable, the Trustee in the Trustee’s performance of its obligations under the Indenture, the Guarantees and the Letter of Credit Agreement.

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SECTION 10.22.     Additional Information for Rating Agencies

So long as any Securities remain outstanding, the Company and the Guarantors shall:

(a)	so far as permitted by law, at all times give S&P and Fitch, for so long as S&P and Fitch are rating the Securities, such information as they shall reasonably request in order that they may perform their functions as a rating agency in respect of the Securities;
(b)	inform S&P and Fitch, for so long as S&P and Fitch are rating the Securities, as soon as reasonably practicable of any amendments or modifications that have been or are proposed to be made to the Indenture, the Guarantees and the Letter of Credit Agreement; and
(c)	in addition to copies of notices specifically referred to herein, send a copy to S&P and Fitch, for so long as S&P and Fitch are rating the Securities, of all notices sent by them to the Trustee under the terms of this Indenture, other than routine notices.

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ARTICLE 11

REDEMPTION OF SECURITIES

SECTION 11.1.     Redemption For Tax Reasons

If as a result of any Change of Law (as defined below):

(i)

the Company is or would be required on the next succeeding interest payment date to pay any Additional Amounts; or

(ii)

the issuers of the Intercompany Bonds are or would be required on the next succeeding interest payment date to pay Taxes in excess of a general rate of 15% (or 12.5% as provided for in the treaty to avoid double taxation between Brazil and Japan); provided that, such requirement to pay such taxes in excess of a general rate of 15% was not caused by, or otherwise the result of, whether directly or indirectly, wholly or in part, any amendment to the Intercompany Bonds;

and in either case the payment of such excess amounts cannot be avoided by the use of any reasonable measures available to such issuer, the Securities may be repurchased, by the Company at the option of the Company, in whole but not in part, upon not less than 45 nor more than 75 days’ notice to the Holders (which notice shall be deemed given upon delivery of such notice to the Trustee), which notice will be published, at any time following such Change of Law at a repurchase price equal to the principal amount thereof, plus accrued and unpaid interest, if any, to the date fixed for repurchase.  The Company or its Affiliates will also pay to the Holders on the repurchase date any Additional Amounts which are payable.  Following such repurchase, the Securities will be cancelled.

“Change of Law” means any change in or amendment to the laws or regulations of the Cayman Islands, Brazil or Japan (or of any political subdivision thereof or therein) or the adoption, amendment or modification of any resolution of the Central Bank of Brazil or such other countries (or any successor authority thereto) which becomes effective on or after the date of this Indenture resulting in VPAR on a consolidated basis being required to pay amounts with respect to Taxes above in a total aggregate amount in excess of that payable prior to such change or amendment.

Prior to the delivery of any notice of repurchase in accordance with the foregoing, the Company shall deliver to the Trustee an Officers’ Certificate stating that the Company is entitled to effect such repurchase based on an Opinion of Counsel or written advice of a qualified tax expert, that the Company has or will, or that there is a substantial probability that the Company has or will, become obligated to pay such excess amounts with respect to Taxes as a result of such Change of Law.  Such notice, once delivered by the Company to the Trustee, will be irrevocable.

The Company shall provide the Trustee with official acknowledgment of the relevant taxing authority (or if such acknowledgment is not available, a certified copy thereof) evidencing the payment of Taxes in respect of which the Company has paid such excess amounts with respect to Taxes to the extent such documentation is issued therefore.  Copies of such documentation shall be available to Holders upon request thereof.

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SECTION 11.2.     Optional Redemption

The Company has the right at its option to redeem any of the Securities in whole or in part, at any time or from time to time prior to their maturity, on at least 30 days’ but not more than 60 days’ notice, at a redemption price equal to the greater of (1) 100% of the principal amount of such Securities and (2) the sum of the present values of each remaining scheduled payment of principal and interest thereon (exclusive of interest accrued to the date of redemption) discounted to the redemption date on a semi-annual basis (assuming a 360-day year consisting of twelve 30-day months) at the Treasury Rate plus 50 basis points (the “Make-Whole Amount”), plus in each case accrued interest on the principal amount of the Securities to the date of redemption.  In the case of a partial redemption of Securities that are represented by a Global Security, the relevant Securities will be redeemed on a proportionate basis and in accordance with the rules of DTC.  The Company shall inform the Luxembourg Stock Exchange in the event of a partial redemption.   The Company may at any time repurchase the Securities at any price in the open market or otherwise.  The Company may hold or resell the Securities it purchases or may surrender them to the Trustee for cancellation.

SECTION 11.3.     Applicability of Article

Redemption of Securities at the election of the Company, as permitted or required by any provision of this Indenture, shall be made in accordance with such provision and this Article.

SECTION 11.4.     Election to Redeem; Notice to Trustee

The election of the Company to redeem any Securities by the Company or its Affiliates pursuant to Section 11.1 and 11.2 hereof shall be evidenced by a Resolution of the Shareholders of the Company.  In the case of any redemption of Securities prior to the expiration of any restriction on such redemption provided in the terms of such Securities or elsewhere in this Indenture, the Company shall furnish the Trustee with an Officers’ Certificate evidencing compliance with such restriction.

SECTION 11.5.     Notice of Redemption

Notice of redemption pursuant to Section 11.1 and 11.2 hereof shall be given in the manner provided for in Section 1.5 hereof (with a copy of any such notices delivered to S&P, Fitch and the Issuing Bank).  The Trustee will notify the Holders at such Holder’s address appearing in the Security Register at least 15 days prior to the Redemption Date.

All notices of redemption shall state:

(1)	the Redemption Date,
(2)	the Redemption Price,
(3)	that on the Redemption Date the Redemption Price will become due and payable upon each such Security to be redeemed and that interest thereon will cease to accrue on and after said date,

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(4)	the place or places where such Securities are to be surrendered for payment of the Redemption Price,
(5)	the aggregate principal amount of Securities being redeemed,
(6)	the CUSIP number or numbers of the Securities being redeemed,
(7)	if fewer than all the outstanding Securities are to be redeemed, or if a Security is to be redeemed in part only, the identification and principal amounts at maturity of the particular Securities (or portion thereof) to be redeemed, and
(8)	that no representation is made as to the correctness or accuracy of the CUSIP number, if any, listed in such notice or printed on the Securities.

SECTION 11.6.     Deposit of Redemption Price

On the Business Day prior to any Redemption Date, the Company shall deposit with the Trustee or with a Paying Agent (or, if the Company is acting as its own Paying Agent, segregate and hold in trust as provided in Section 10.3) an amount of money sufficient to pay the Redemption Price of, and (except if the Redemption Date shall be an Interest Payment Date) accrued and unpaid interest on, all the Securities which are to be repurchased on that date.

SECTION 11.7.     Securities Payable on Redemption Date

Notice of redemption having been given as aforesaid, the Securities so to be redeemed shall, on the Redemption Date, become due and payable at the Redemption Price therein specified, and from and after such date (unless the Company shall default in the payment of the Redemption Price and accrued and unpaid interest) such Securities shall cease to bear interest.  Upon surrender of any such Security for redemption in accordance with said notice, such Security shall be paid by the Company at the Redemption Price, together with accrued and unpaid interest to the Redemption Date; provided, however, that installments of interest whose Maturity Date is on or prior to the Redemption Date shall be payable to the Holders of such Securities, or one or more Predecessor Securities, registered as such at the close of business on the relevant Record Dates according to their terms and the provisions of Section 3.7.

If any Security called for redemption shall not be so paid upon surrender thereof for redemption, the principal (and premium, if any) shall, until paid, bear interest from the Redemption Date at the rate provided by the Security.

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ARTICLE 12

DEFEASANCE AND COVENANT DEFEASANCE

SECTION 12.1.     Option to Effect Defeasance or Covenant Defeasance

The Company or the Guarantors may at their option by Board Resolution, at any time (subject to 10-day prior written notification to the Trustee), elect to have either Section 12.2 or Section 12.3 applied to the Outstanding Securities upon compliance with the conditions set forth below in this Article 12.

SECTION 12.2.     Defeasance and Discharge

Upon the Company’s or the Guarantors’, as the case may be, exercise of the option provided in Section 12.1 applicable to this Section, the Company or the Guarantors, as the case may be, shall be deemed to have been discharged from their obligations with respect to the Outstanding Securities on the date the conditions set forth below are satisfied (hereinafter, “defeasance”).  For this purpose, such defeasance means that the Company or the Guarantors, as the case may be, shall be deemed to have paid and discharged the entire indebtedness represented by the Outstanding Securities and to have satisfied all their other obligations under such Securities and this Indenture insofar as such Securities are concerned (and the Trustee, at the expense of the Company or the Guarantors, as the case may be, shall execute proper instruments acknowledging the same), except for the following which shall survive until otherwise terminated or discharged hereunder: (A) the rights of Holders of Outstanding Securities to receive, solely from the trust fund described in Section 12.4 and as more fully set forth in such Section, payments in respect of the principal of (and premium, if any) and interest (and Additional Amounts, if any) on such Securities when such payments are due, (B) the Company’s obligations with respect to such Securities under Sections 3.3, 3.4, 3.5, 10.2 and 10.3, (C) the rights, powers, trusts, duties and immunities of the Trustee hereunder and (D) this Article 12.  Subject to compliance with this Article 12, the Company, or the Guarantors, as the case may be, may exercise their option under this Section 12.2 notwithstanding the prior exercise of their option under Section 12.3.

SECTION 12.3.     Covenant Defeasance

Upon the Company’s or the Guarantors’, as the case may be, exercise of the option provided in Section 12.1 applicable to this Section (i) the Company or the Guarantors, as the case may be, shall be released from their obligations under Sections 8.1, 10.5 through 10.20, inclusive and the Guarantors shall be released from all of their obligations under the Guarantees and under Article 13 of this Indenture, and (ii) the occurrence of an event specified in Sections 5.1(c)(with respect to Section 8.1 and Sections 10.5 through 10.20, inclusive), (k), (l) and (m) shall not be deemed to be or result in an Event of Default, on and after the date the conditions set forth below are satisfied (hereinafter, “covenant defeasance”).  For this purpose, such covenant defeasance means that the Company may omit to comply with and shall have no liability in respect of any term, condition or limitation set forth in any such Section or Article, whether directly or indirectly by reason of any reference elsewhere herein to any such Section or Article or by reason of any reference in any such Section or Article to any other provision herein or in any other document, but the remainder of this Indenture and such Securities shall be unaffected thereby.

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SECTION 12.4.     Conditions to Defeasance or Covenant Defeasance

The following shall be the conditions to application of either Section 12.2 or Section 12.3 to the Outstanding Securities:

(1)	The Company or the Guarantors, as the case may be, shall irrevocably have deposited or caused to be deposited with the Trustee, in trust, for the benefit of the Holders (A) money in an amount, or (B) U.S. Government Obligations which through the scheduled payment of principal and interest in respect thereof in accordance with their terms will provide, not later than one day before the due date of any payment, money in an amount, or (C) a combination thereof, sufficient, in the opinion of an internationally recognized firm of independent certified public accountants expressed in a written certification (which may be based upon agreed upon procedures) thereof delivered to the Trustee, to pay and discharge, and which shall be applied by the Trustee to pay and discharge, the principal of, premium, if any, and each installment of interest (including Additional Amounts, if any) on the Securities on the Stated Maturity of such principal or installment of interest on the day on which such payments are due and payable in accordance with the terms of this Indenture and of such Securities.  For this purpose, “U.S. Government Obligations” means securities that are (x) direct obligations of the United States of America for the payment of which its full faith and credit is pledged or (y) obligations of a Person controlled or supervised by and acting as an agency or instrumentality of the United States of America the payment of which is unconditionally guaranteed as a full faith and credit obligation by the United States of America, which, in either case, are not callable or redeemable at the option of the company thereof, and shall also include a depositary receipt issued by a bank (as defined in Section 3(a)(2) of the Securities Act) as custodian with respect to any such U.S. Government Obligation or a specific payment of principal of or interest on any such U.S. Government Obligation held by such custodian for the account of the holder of such depositary receipt, provided that (except as required by law) such custodian is not authorized to make any deduction from the amount payable to the holder of such depositary receipt from any amount received by the custodian in respect of the U.S. Government Obligation or the specific payment of principal of or interest on the U.S. Government Obligation evidenced by such depositary receipt.
(2)	No Default or Event of Default shall have occurred and be continuing on the date of such deposit or, insofar as subsections 5.1(f), (g), (h) and (i) are concerned, at any time during the period ending on the 91st day after the date of such deposit (it being understood that this condition shall not be deemed satisfied until the expiration of such period).
(3)	Such defeasance or covenant defeasance shall not result in a breach or violation of, or constitute a default under, this Indenture.
(4)	The Company shall have delivered to the Trustee an Officers’ Certificate and an Opinion of Counsel, each stating that all conditions precedent provided for relating to either the defeasance under Section 12.2 or the covenant defeasance under Section 12.3 (as the case may be) have been complied with.

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(5)	In the case of an election under Section 12.2, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States stating that (x) the Company has received from, or there has been published by, the Internal Revenue Service a ruling, or (y) since the date of this Indenture there has been a change in the applicable United States Federal income tax law, in either case to the effect that, and based thereon such Opinion of Counsel shall confirm that, the Holders of the Outstanding Securities will not recognize income, gain or loss for United States Federal income tax purposes as a result of such deposit, defeasance and discharge and will be subject to Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such deposit, defeasance and discharge had not occurred.
(6)	In the case of an election under Section 12.3, the Company shall have delivered to the Trustee an Opinion of Counsel in the United States to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for United States Federal income tax purposes as a result of such deposit and covenant defeasance and will be subject to United States Federal income tax on the same amounts, in the same manner and at the same times as would have been the case if such covenant defeasance had not occurred.
(7)	The Company shall have delivered to the Trustee an Opinion of Counsel to the effect that such deposit and defeasance or covenant defeasance shall not result in the trust arising from such deposit constituting an investment company as defined in the Investment Company Act of 1940, as amended, or such trust shall be qualified under such act or exempt from regulation thereunder.
(8)	The Company shall have delivered to the Trustee an Opinion of Counsel in Brazil to the effect that the Holders of the Outstanding Securities will not recognize income, gain or loss for Brazilian federal or state income tax or other tax purposes as a result of such defeasance or covenant defeasance, as applicable, and will be subject to Brazilian federal and state income tax and other tax on the same amounts, in the same manner and at the same times as would have been the case if such defeasance or covenant defeasance, as applicable, had not occurred.  Notwithstanding anything to the contrary in this Indenture, this condition may not be waived by any Holder or the Trustee.
(9)	The Company and/or the Guarantors shall have paid or caused to be paid (i) all sums payable hereunder and (ii) if the Stated Amount of the Letter of Credit is less than the Maximum L/C Amount of the Letter of Credit, all other sums payable under the Letter of Credit Agreement by VPAR.

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SECTION 12.5.     Deposited Money and U.S. Government Obligations to Be Held in Trust; Other Miscellaneous Provisions

Subject to the provisions of the last paragraph of Section 10.3, all money and U.S. Government Obligations (including the proceeds thereof) deposited with the Trustee (or other qualifying trustee—collectively, for purposes of this Section 12.5, the “Defeasance Trustee”) pursuant to Section 12.4 in respect of the Securities shall be held in trust and applied by the Defeasance Trustee, in accordance with the provisions of such Securities and this Indenture, to the payment, either directly or through any Paying Agent (including the Company acting as its own Paying Agent) as the Defeasance Trustee may determine, to the Holders of such Securities, of all sums due and to become due thereon in respect of principal (and premium, if any) and interest, but such money need not be segregated from other funds except to the extent required by law.

The Company or the Guarantors, as the case may be, shall pay and indemnify the Defeasance Trustee against any tax, fee or other charge imposed on or assessed against the U.S. Government Obligations deposited pursuant to Section 12.4 or the principal and interest received in respect thereof other than any such tax, fee or other charge which by law is for the account of the Holders of the Outstanding Securities.

Anything in this Article 12 to the contrary notwithstanding, the Defeasance Trustee shall deliver or pay to the Company from time to time upon Company Request any money or U.S. Government Obligations held by it as provided in Section 12.4 which, in the opinion of an internationally recognized accounting firm expressed in a written certification thereof delivered to the Defeasance Trustee, are in excess of the amount thereof which would then be required to be deposited to effect an equivalent defeasance or covenant defeasance.

SECTION 12.6.     Reinstatement

If the Defeasance Trustee or the Paying Agent is unable to apply any money in accordance with Section 12.2 or 12.3 by reason of any order or judgment of any court or governmental authority enjoining, restraining or otherwise prohibiting such application, then the obligations of the Company and the Guarantors under this Indenture, the Securities and the Guarantees, if any, shall be revived and reinstated as though no deposit had occurred pursuant to this Article 12 until such time as the Defeasance Trustee or Paying Agent is permitted to apply all such money in accordance with Sections 12.2 and 12.3; provided, however, that if the Company makes any payment of principal of (and premium, if any) any Security following the reinstatement of its obligations, the Company shall be subrogated to the rights of the Holders of such Securities to receive such payment from the money held by the Defeasance Trustee or the Paying Agent.

SECTION 12.7.     Repayment to Company

Any money deposited with the Defeasance Trustee or any Paying Agent, or then held by the Company, in trust for the payment of the principal of, premium, if any, or interest on any Security and remaining unclaimed for two years after such principal, and premium, if any, or interest has become due and payable shall be paid to the Company on its written request or (if then held by the Company) shall be discharged from such trust; and the Holder of such security shall thereafter, as a creditor, look only to the Company for payment thereof, and all liability of the Defeasance Trustee or such Paying Agent with respect to such trust money, and all liability of the Company as trustee thereof, shall thereupon cease; provided, however, that the Defeasance Trustee or such Paying Agent, before being required to make any such repayment, may at the expense of the Company cause to be published once, in The New York Times and The Wall Street Journal (national edition), notice that such money remains unclaimed and that, after a date specified therein, which shall not be less than 30 days from the date of such notification or publication, any unclaimed balance of such money then remaining will be repaid to the Company.

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ARTICLE 13

GUARANTEES

SECTION 13.1.     Guarantees

Each of VPAR, VCP and CRB hereby jointly, severally, fully, absolutely and unconditionally guarantee on a senior unsecured basis to each Holder of a Security authenticated and delivered by the Trustee, and to the Trustee on behalf of such Holder, the due and punctual payment of the principal of (and premium, if any) and interest (including any Additional Amounts) on such Security and all other obligations of the Company under this Indenture (which, for the avoidance of doubt, does not include obligations under the Letter of Credit Agreement, which are solely obligations of VPAR), when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, redemption, purchase or otherwise, in accordance with the terms of such Security and of this Indenture provided that the liability of each of VCP and CRB will be limited to 50% of the outstanding amount of the Securities.  In case of the failure of the Company punctually to make any such payment, each of the Guarantors hereby agrees to cause such payment to be made punctually when and as the same shall become due and payable, whether at the Stated Maturity or by acceleration, call for redemption, purchase or otherwise, and as if such payment were made by the Company.

The Guarantees constitute general senior unconditional and unsubordinated obligations of each of the Guarantors that will at all times rank at least equally with all other present and future unsecured senior obligations of each such Guarantor, except for any obligations that may be preferred by provisions of law that are both mandatory and of general application.

Each of the Guarantors hereby agrees that its obligations hereunder shall be unconditional, irrespective of the validity, regularity or enforceability of any Security or this Indenture, the absence of any action to enforce the same, any release or amendment or waiver of any term of any other guarantee of, or any consent to depart from any requirement of any other guarantee, of all or any of the Securities, any waiver or consent by the Holder of any Security or by the Trustee with respect to any provisions thereof or of this Indenture, the obtaining of any judgment against the Company or any action to enforce the same or any other circumstances which might otherwise constitute a legal or equitable discharge or defense of a guarantor.  Each of the Guarantors hereby waives notice of the acceptance of its Guarantee and of any of the obligations under this Indenture or the Securities (the “Obligations”) or of the accrual thereof, and further waives presentment, protest, notice or demand.  This is a continuing guarantee and is a guarantee of payment and not of collection, and each of the Guarantors waives any right to require the Holders to initiate collection proceeds or otherwise enforce payment of the Obligations or any security or other guarantee therefore before obtaining payment hereunder.

The Guarantees shall continue to be in effect or be reinstated, as the case may be, if at any time any payment in respect of any of the Obligations is rescinded or must otherwise be returned by the Holders, whether by reason of the insolvency, bankruptcy, receivership, reorganization or liquidation of the Company or any of the Guarantors or any other obligor or otherwise, all as though such payment had not been made.

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Each of the Guarantors hereby waives the benefits of diligence, presentment, demand of payment, any requirement that the Trustee or any of the Holders protect, secure, perfect or insure any security interest in or other Lien on any property subject thereto or exhaust any right or take any action against the Company or any other Person or any collateral, filing of claims with a court in the event of insolvency or bankruptcy of the Company, any right to require a proceeding first against the Company, protest or notice with respect to any Security or the indebtedness evidenced thereby and all demands whatsoever, and covenants, that these Guarantees will be discharged in respect of any Security except by complete performance of the obligations contained in such Security and in the Guarantees.  Each of the Guarantors hereby agrees that, in the event of a default in payment of principal (or premium, if any) or interest on any Security, whether at its Stated Maturity or by acceleration, redemption, purchase or otherwise, legal proceedings may be instituted by the Trustee on behalf of, or by, the Holder of such Security, subject to the terms and conditions set forth in this indenture, directly against any or ail of the Guarantors to enforce the Guarantees without first proceeding against the Company.  Each of the Guarantors agrees that if, after the occurrence and during the continuance of an Event of Default, the Trustee or any of the Holders are prevented by applicable law from exercising their respective rights to accelerate the maturity of the Securities, to collect interest on the Securities or to enforce or exercise any other right or remedy with respect to the Securities, or the Trustee or the Holders are prevented from taking any action to realize on any collateral, each of the Guarantors agrees to pay to the Trustee for the account of the Holders, upon demand therefore, the amount that would otherwise have been due and payable had such rights and remedies been permitted to be exercised by the Trustee or any of the Holders.

No provision of the Guarantees, Securities or of this Indenture shall alter or impair the Guarantees of the Guarantors, each of which is absolute and unconditional, of the due and punctual payment of the principal (and premium, if any) and interest (and Additional Amounts, if any) on the Security upon which each Guarantee is endorsed.

Each of the Guarantors shall be subrogated to all rights of the Holders of the Securities upon which its Guarantee is endorsed against the Company in respect of any amounts paid by each of the Guarantors on account of such Security pursuant to the provisions of the Guarantees or this Indenture; provided, however, that none of the Guarantors shall be entitled to enforce or to receive any payments arising out of, or based upon, such right of subrogation until the principal of (and premium, if any) and interest (and Additional Amounts, if any) on all Securities issued hereunder shall have been paid in full.

The Guarantees shall remain in full force and effect and continue to be effective should any petition be filed by or against the Company for liquidation or reorganization, should the Company become insolvent or make an assignment for the benefit of creditors or should a receiver or trustee be appointed for all or any significant part of the Company’s assets, and shall, to the fullest extent permitted by law, continue to be effective or be reinstated, as the case may be, if at any time payment and performance of the obligations under the Securities is, pursuant to applicable law, rescinded or reduced in amount, or must otherwise be restored or returned by any obligee on the Securities, whether as a “voidable preference”, “fraudulent transfer” or otherwise, all as though such payment or performance had not been made.  In the event that any payment, or any part thereof, is rescinded, reduced, restored or returned, the Securities shall, to the fullest extent permitted by law, be reinstated and deemed reduced only by such amount paid and not so rescinded, reduced, restored or returned.

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Each of the Guarantors hereby irrevocably waives all benefits set forth in the following provisions of the Brazilian law:  articles 827, 830 (with respect to VPAR only), 834, 835, 837 and 838 of the Brazilian Civil Code and article 595 of the Brazilian Civil Procedure Code.

No stockholder, officer, director, employer or incorporator, past, present or future, of any of the Guarantors, as such, shall have any personal liability under the Guarantees by reason of his, her or its status as such stockholder, officer, director, employer or incorporator.

SECTION 13.2.     Delivery of the Guarantees

The delivery of any Security by the Trustee, after the authentication thereof hereunder, shall constitute due delivery of the Guarantees set forth herein on behalf of the Guarantors.

SECTION 13.3.     Guarantors May Consolidate, Etc., on Certain Terms

Except as may be provided in Section 13.4 and in Articles 8 and 10, nothing contained in this Indenture or in any of the Securities shall prevent any consolidation or merger of any of the Guarantors with or into the Company or any other Guarantors or shall prevent any sale or conveyance of the property of any of the Guarantors as an entirety or substantially as an entirety to the Company or any other Guarantor.

SECTION 13.4.     Release of Guarantors

(a)

Concurrently with any consolidation or merger of any of the Guarantors or any sale or conveyance of the property of any of the Guarantors as an entirety or substantially as an entirety, in each case as permitted by Section 13.3 hereof, and upon delivery) by the Company to the Trustee of an Officers’ Certificate and an Opinion of Counsel to the effect that such consolidation, merger, sale or conveyance was made in accordance with Section 13.3 hereof, the Trustee shall execute any documents reasonably required in order to evidence the release of any such Guarantor from its obligations under its Guarantee endorsed on the Securities and under this Article 13.

(b)

Concurrently with the defeasance of the Securities under Section 12.2 hereof or the covenant defeasance of the Securities under Section 323 hereof, each of the Guarantors shall be released from all of its obligations under its Guarantee endorsed on the Securities and under this Article 33.

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ARTICLE 14

LETTER OF CREDIT

(a)	As set forth below, on the Closing Date, VPAR shall cause to be delivered to the Trustee a Letter of Credit in an amount equal to the Maximum L/C Amount.  The Trustee acknowledges that VPAR has provided for the issuance of a Letter of Credit for the benefit of the Holders as limited protection against a Currency Inconvertibility/Non-Transfer Event.
(b)	Upon the Trustee’s receipt from the Company and the Guarantors of a Notice of Non-Payment and (i) confirmation of the deposit by VPAR of an amount in Local Currency into a local bank account in accordance with Section 2.04(a)(iii) (A) of the Letter of Credit Agreement and/or (ii) a bank statement from the Local Bank reflecting amounts on deposit in an account at the Local Bank in accordance with Section 2.04(a)(iii) (B) of the Letter of Credit Agreement and/or (iii) a bank statement from the Issuing Bank reflecting amounts on deposit in an account at the Issuing Bank in accordance with Section 2.04(a)(iii) (C) of the Letter of Credit Agreement, the Trustee will, as soon as possible but in no event later than one Letter of Credit Business Day after such receipt from VPAR, file with the Issuing Bank a Drawing Certificate in accordance with Section 2.04(a)(iv) of the Letter of Credit Agreement certifying, among other things, the sufficiency of the deposits in Local Currency and/or U.S. dollars (as the case may be); provided, however, that VPAR may provide any combination of notices referred to in (i) through (iii) above to evidence the sufficiency of the deposit in Local Currency and/or U.S. dollars (as the case may be) in compliance with Section 2.04(a)(iii) (D) of the Letter of Credit Agreement.
(c)	The Trustee agrees to give written notice to the Issuing Bank (with a copy of such notice to S&P and Fitch), in each case promptly of, and in any event within two Letter of Credit Business Days after the occurrence of any event to its knowledge, of (i) any failure by the Company to make any payment on or in respect of the Securities or any failure by the Guarantors to make any payment on or in respect to the Guarantees required under this Indenture, (ii) any Default or Event of Default, (iii) any redemption or prepayment of the Securities before the Stated Maturity, and (iv) discovery by the Trustee of an event which it determines may give rise to a drawing of funds under the Letter of Credit.
(d)	The Issuing Bank has agreed to pay any amounts payable by it under the Letter of Credit directly to the Trustee to be held in trust for the benefit of the Holders.  The Trustee shall hold any such amounts in trust for use in making any Scheduled Payment.
(e)	In connection with VPAR’s satisfaction of its obligations under the Letter of Credit Agreement, VPAR shall provide all such information to the Trustee as is required to thereunder.

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(f)	Notwithstanding anything to the contrary set forth in this Indenture, the Issuing Bank shall, to the extent it makes any payment with respect to the Securities and/or the Guarantees under the Letter of Credit and to the extent it has not received in full amounts owed to it in U.S. dollars in respect of such payment, be subrogated to the rights of the recipients of such payments to the extent of such payments.  Subject to and conditioned upon any such payment with respect to the Securities and/or the Guarantees by the Issuing Bank, each Holder shall be deemed, by acceptance of its Security, without further action, to have directed the Trustee to assign to the Issuing Bank all rights to the payment of interest with respect to the Securities which are then due for payment to the extent of all payments made by the Issuing Bank under the Letter of Credit.
(g)	The Trustee and VPAR each agree that, if at any time the Letter of Credit is mutilated, defaced, destroyed, lost or stolen, the Letter of Credit will be replaced and affidavits executed in accordance with Section 8.16 of the Letter of Credit Agreement.
(h)	The Trustee shall return the Letter of Credit to the Issuing Bank for cancellation (and/or provide an affidavit of loss in accordance with Section 14(g) hereof if such Letter of Credit has been destroyed, lost or stolen) along with its consent to such cancellation when (i) all sums due under the Indenture, the Securities and the Guarantees payable by the Company and the Guarantors, including all principal, interest, premium and Additional Amounts, if any, have been paid in full and the Securities have been delivered to the Trustee for cancellation or (ii) the Trustee shall have received notice in writing from VPAR or the Issuing Bank that the Letter of Credit shall have expired pursuant to either Sections 2.01(b)(i) or 2.01(b)(iii) of the Letter of Credit Agreement.
(i)	If a Currency Inconvertibility/Non-Transfer Event occurs on or prior to June 24, 2020 and is continuing on such date, the Company and the Guarantors shall deliver to the Trustee and the Issuing Bank a Certificate of Extension of Maturity in the form of Exhibit E hereto, which states that the Company and/or the Guarantors have sufficient funds in Local Currency at the Reference Rate of Exchange to repay the principal amount of the Securities and any other Indebtedness payable on the Stated Maturity and the Company and the Guarantors cannot make such payments in respect of the Securities due to a Currency Inconvertibility/Non-Transfer Event which occurred on or prior to June 24, 2020 and which is continuing on the date thereof, and that each of the Company and the Guarantors has used its best efforts to convert and transfer such funds.
(j)	If the Stated Amount shall be less than or equal to the Minimum Stated Amount, VPAR shall at least 15 days prior to the then next scheduled date for payment of interest under the Indenture reimburse the Issuing Bank in full in U.S. Dollars in the United States, in an account designated at such time by the Issuing Bank, all amounts owing to the Issuing Bank under the Letter of Credit Agreement.
(k)	The Trustee shall promptly, without the consent or instruction of any of the Holders and upon receipt of a written notice from the Issuing Bank, acknowledge and accept an amended Letter of Credit pursuant to Section 2.04(j) of the Letter of Credit Agreement to increase the Stated Amount of the Letter of Credit as of the date of such amendment in an amount equal to all Draw Amounts (as defined in the Letter of Credit Agreement) reimbursed in full in U.S. Dollars to the Issuing Bank since the then immediately preceding Amendment Date (as defined in the Letter of Credit Agreement) (or the original issuance date, in the case of the first such amendment) up to the Maximum Stated Amount.

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ARTICLE 15

MEETINGS OF HOLDERS OF SECURITIES

SECTION 15.1.     Purposes for Which Meetings May Be Called

A meeting of Holders of Securities may be called at any time and from time to time pursuant to this Article to consider any matter affecting their interests, including, if proposed by the Company, the modification of the terms and conditions of the Securities; provided that any modification postponing the date for payment of any interest, reducing or canceling any amount of principal or the rate of interest payable or altering the currency of payment in respect of the Securities will only be binding if passed at a meeting of Holders at which a special quorum (as set forth in Section 15.4) is present.

SECTION 15.2.     Call, Notice and Place of Meetings

(1)

The Trustee may at any time call a meeting of Holders of Securities of any series for any purpose specified in Section 15.1, to be held at such time and at such place in the Borough of Manhattan, The City of New York as the Trustee shall determine.  Notice of every meeting of Holders of Securities, setting forth the time and the place of such meeting and in general terms the action proposed to be taken at such meeting, shall be given, in the manner provided in Section 1.6, not less than 21 nor more than 180 days prior to the date fixed for the meeting.

(2)

In case at any time the Company, pursuant to a Board Resolution, or the Holders of at least 10% in principal amount of the Outstanding Securities shall have requested the Trustee to call a meeting of the Holders of Securities for any purpose specified in Section 15.1, by written request setting forth to reasonable detail the action proposed to be taken at the meeting, and the Trustee shall not have made the first publication of the notice of such meeting within 21 days after receipt of such request or shall not thereafter proceed to cause the meeting to be held as provided herein, then the Company or the Holders of Securities in the amount specified above, as the case may be, may determine the time and the place in the Borough of Manhattan, The City of New York for such meeting and may call such meeting for such purposes by giving notice thereof as provided in subsection (1) of this Section.

SECTION 15.3.     Persons Entitled to Vote at Meetings

To be entitled to vote at any meeting of Holders of Securities, a Person shall be (i) a Holder on a record date established pursuant to Section 15.5 of one or more Outstanding Securities, or (ii) a Person appointed by an instrument in writing as proxy for a Holder or Holders of one or more Outstanding Securities by such Holder or Holders.  The only Persons who shall be permitted to be present or to speak at any meeting of Holders of Securities of any series shall be the Persons entitled to vote at such meeting and their counsel, any representatives of the Trustee and its counsel and any representatives of the Company and its counsel.

96

SECTION 15.4.     Quorum; Action

The Persons entitled to vote a majority in principal amount of the Outstanding Securities shall constitute a “quorum” for a meeting of Holders of Securities, however, any modification postponing the date for payment of any interest, reducing or canceling any amount of principal or the rate of interest payable or altering the currency of payment in respect of the Securities will only be binding if passed at a meeting of Holders of at least 66 2/3% of the Securities (a “special quorum”).  In the absence of a quorum or a special quorum, as the case may be, within 15 minutes (or such longer period not exceeding 30 minutes as the chairman may decide) of the time appointed for any such meeting, the meeting shall if convened upon the requisition of Holders be dissolved.  In any other case it shall stand adjourned to the same day in the next week (or if such day is not a Letter of Credit Business Day the next succeeding Letter of Credit Business Day) at the same time and place.  If within 15 minutes (or such longer period not exceeding 30 minutes as the chairman may decide) after the time appointed for any adjourned meeting a quorum or a special quorum, as the case may be, is not present for the transaction of any particular business, then, subject and without prejudice to the transaction of the business (if any) for which a quorum or a special quorum, as the case may be, is present, the chairman may either (with the approval of the Trustee) dissolve such meeting or adjourn the same for such period, being not less than ten calendar days (but without any maximum number of calendar days), and to such place as may be appointed by the chairman either at or subsequent to such adjourned meeting and approved by the Trustee, and the provisions of this sentence shall apply to all further adjourned such meetings.

Notice of the reconvening of any adjourned meeting shall be given as provided in Section 15.2(1), except that such notice need be given only once not less than five days prior to the date on which the meeting is scheduled to be reconvened.  Notice of a reconvening of an adjourned meeting shall state expressly the percentage, as provided above, of the principal amount of the Outstanding Securities of such series which shall constitute a quorum.

Any resolution passed or decision taken at any meeting of Holders of Securities of any series duly held in accordance with this Section shall be binding on all the Holders of Securities of such series, whether or not presented or represented at the meeting.  However, for the avoidance of doubt, no actions taken at such meeting shall be binding on all Holders of Securities unless such actions were approved by the minimum percentage in principal amount of the Outstanding Securities of the series as required elsewhere in this Indenture with respect to such actions.

SECTION 15.5.     Determination of Voting Rights; Conduct and Adjournment of Meetings

(a) Notwithstanding any other provisions of this Indenture, the Trustee may make such reasonable regulations as it may deem advisable for any meeting of Holders of Securities of a series in regard to proof of the holding of Securities of such series and the appointment of proxies and in regard to the appointment and duties of inspectors of votes, the submission and examination of proxies, certificates and other evidence of the right to vote, and such other matters concerning the conduct of the meeting as it shall deem appropriate.  Except as otherwise permitted or required by any such regulations, the holding of Securities shall be proved in the manner specified in Section 1.4 and the appointment of any proxy shall be proved in the manner specified in Section 1.4.  Such regulations may provide that written instruments appointing proxies, regular on their face, may be presumed valid and genuine without the proof specified in Section 1.4 or other proof.

97

(b)	The Trustee shall, by an instrument in writing, appoint a temporary chairman of the meeting, unless the meeting shall have been called by the Company or by Holders of Securities as provided in Section 15.2(2), in which case the Company or the Holders of Securities of the series calling the meeting, as the case may be, shall in like manner appoint a temporary chairman.  A permanent chairman and a permanent secretary of the meeting shall be elected by vote of the Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting.
(c)	At any meeting each Holder of a Security of such series or proxy shall be entitled to one vote for each $1,000 principal amount of the Outstanding Securities of such series held or represented by him or her; provided, however, that no vote shall be cast or counted at any meeting in respect of any Security challenged as not Outstanding and ruled by the chairman of the meeting to be not Outstanding.  The chairman of the meeting shall have no right to vote, except as a Holder of a Security of such series or proxy.
(d)	Any meeting of Holders of Securities of any series duly called pursuant to Section 15.2 at which a quorum is present may be adjourned from time to time by Persons entitled to vote a majority in principal amount of the Outstanding Securities of such series represented at the meeting, and the meeting may be held as so adjourned without further notice.

SECTION 15.6.     Counting Votes and Recording Action of Meetings

The vote upon any resolution submitted to any meeting of Holders of Securities of any series shall be by written ballots on which shall be subscribed the signatures of the Holders of Securities of such series or of their representatives by proxy and the principal amounts and serial numbers of the Outstanding Securities of such series held or represented by them.  The permanent chairman of the meeting shall appoint two inspectors of votes who shall count all votes cast at the meeting for or against any resolution and who shall make and file with the secretary of the meeting their verified written reports in duplicate of all votes cast at the meeting.  A record, at least in duplicate, of the proceedings of each meeting of Holders of Securities of any series shall be prepared by the secretary of the meeting and there shall be attached to said record the original reports of the inspectors of votes on any vote by ballot taken thereat and affidavits by one or more persons having knowledge of the facts setting forth a copy of the notice of the meeting and showing that said notice was given as provided in Section 13.2 and, if applicable, Section 15.5.  Each copy shall be signed and verified by the affidavits of the permanent chairman and secretary of the meeting and one such copy shall be delivered to the Company, and another to the Trustee to be preserved by the Trustee, the latter to have attached thereto the ballots voted at the meeting.  Any record so signed and verified shall be conclusive evidence of the matters therein stated.

98

          IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be duly executed and attested, and the Trustee has caused its seal to be hereunto affixed and attested, all as of the day and year first above written.

	VOTO-VOTORANTIM OVERSEAS
	TRADING OPERATIONS IV LIMITED
	By:
	Name:
	Title:
	VOTORANTIM PARTICIPAÇÕES S.A.
	By:
	Name:
	Title:
	VOTORANTIM CELULOSE E PAPEL S.A.
	By:
	Name:
	Title:
	CIMENTO RIO BRANCO S.A.
	By:
	Name:
	Title:
Witness:
By:
Driver’s License:
Witness:
By:
Driver’s License:

99

JPMORGAN CHASE BANK, N.A.

as Trustee,

By:

Name:

Title:

JPMORGAN CHASE BANK, N.A.

as Registrar

By:

Name:

Title:

JPMORGAN CHASE BANK, N.A.

as Paying Agent and Transfer Agent

By:

Name:

Title:

J.P. MORGAN BANK

LUXEMBOURG S.A.

as Luxembourg Paying Agent

By:

Name:

Title:

J.P. MORGAN TRUST BANK LTD.

as Principal Paying Agent

By:

Name:

Title:

County of New York

On the 24^th day of June in the year 2005 before me personally came to be known, who, being by me duly sworn, did depose and say that he is a of JPMorgan Chase, N.A., the corporation described in and which executed the above instrument.

100

EXHIBIT A

FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
RESTRICTED GLOBAL SECURITY TO
REGULATION S GLOBAL SECURITY
(Exchanges or transfers pursuant to
Section 3.4(c)(2) of the Indenture)

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Re:  Voto-Votorantim Overseas Trading Operations IV Limited
U.S.$400,000,000 7.75% Notes due 2020 (the “Securities”)

Reference is hereby made to the indenture, dated as of June 24, 2005 (the “Indenture”), among Voto-Votoramim Overseas Trading Operations IV Limited, as Company, the Guarantors JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), and J.P. Morgan Bank Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd., a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

This letter relates to U.S.$[ ],000,000 aggregate principal amount of Securities which are held in the form of the Restricted Global Security (CUSIP No. 92908K AA 3) with the Depositary in the name of [insert name of transferor] (the “Transferor”).  The Transferor has requested a transfer of such beneficial interest in the Securities to a Person who will take delivery thereof in the form of an equal aggregate principal amount of Securities evidenced by the Regulation S Global Security (ISIN No. US92908KAA34).

In connection with such request, and in respect of such Securities, the Transferor does hereby certify that such transfer has been effected in accordance with the transfer restrictions set forth in the Securities and that:

(A)	the offer of the Securities was not made to a person in the United States; and
(B)	either:

A-1

	(i)	at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States; or
	(ii)	the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on our behalf knows that the transaction was pre-arranged with a buyer in the United States;
(C)	no directed selling efforts have been made in contravention of the requirements of Rule 903(a)(2) or 904(a)(2) of Regulation S, as applicable; and
(D)	the transaction is not part of a plan or scheme to evade the registration requirements of the Securities Act.

We understand that this certificate is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate to any interested party in such proceeding.  This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Guarantors.

[INSERT NAME OF TRANSFEROR]

By:

Name:

Title:

Dated: _____________________

cc:  Voto-Votorantim Overseas Trading Operations IV Limited

A-2

EXHIBIT B

FORM OF CERTIFICATION FOR TRANSFER OR EXCHANGE OF
REGULATION S GLOBAL SECURITY TO
RESTRICTED GLOBAL SECURITY
(Exchanges or transfers pursuant to
Section 3,4(c)(3) of the Indenture)

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Re:  Voto-Votorantim Overseas Trading Operations IV Limited
U.S.$400,000,000 7.75% Notes due 2020 (the “Securities”)

Reference is hereby made to the Indenture, dated as of June 24, 2005 (the “Indenture”), among Voto-Votorantim Overseas Trading Operations IV Limited, as Company, the Guarantors JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the United States of America, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), and J.P. Morgan Bank Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd., a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

This letter relates to U.S.$[        ] principal amount of Securities which arc evidenced by an aggregate Regulation S Global Security (ISIN No. G93932 AA 2) and held with the Depositary through [Euroclear] [Clearstream] (Common Code 022341197) in the name of [insert name of transferor] (the “Transferor”).  The Transferor has requested a transfer of such beneficial interest in Securities to a person that will take delivery thereof in the form of an equal principal amount of Securities evidenced by a Restricted Global Security of the same series and of like tenor as the Securities (CUSIP No. USG93932AA24).

In connection with such request and in respect of such Securities, the Transferor does hereby certify that such transfer is being effected pursuant to and in accordance with Rule 144A under the Securities Act and, accordingly, the Transferor does hereby further certify that the Securities are being transferred to a Person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such person exercises sole investment discretion, and such person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States.

B-1

This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Guarantors.

[INSERT NAME OF TRANSFEROR]

By:

Name:

Title:

Dated: _____________________

cc:  Voto-Votorantim Overseas Trading Operations IV Limited

B-2

EXHIBIT C-I

FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
RESTRICTED GLOBAL SECURITY
(Transfers and exchanges pursuant to
Section 3.4(c)(4) of the Indenture)

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Re:  Voto-Votorantim Overseas Trading Operations IV Limited
U.S.$400,000,000 7.75% Notes due 2020 (the “Securities”)

Reference is hereby made to the Indenture, dated as of June 24, 2005 (the “Indenture”), among Voto-Votorantim Overseas Trading Operations IV Limited, as Company, the Guarantors JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the State of New York, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), and J.P. Morgan Bank Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd. a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

This letter relates to $[       ] principal amount of Restricted Securities held in definitive form (CUSIP No. 92908K AA 3) by [insert name of transferor] (the “Transferor”).  The Transferor has requested an exchange or transfer of such Securities.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that (i) such Securities are owned by the Transferor and are being exchanged without transfer or (ii) such transfer has been effected pursuant to and in accordance with Rule I44A or Rule 144 under the United States Securities Act of 1933, as amended (the “Securities Act”) and accordingly the Transferor does hereby further certify that:

(A) the Securities are being transferred to a person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion;

C-I-1

(B)	such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A; and
(C)	the Securities have been transferred in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States.

We understand that this certificate is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate to any interested party in such proceeding.  This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Guarantors.

Dated: [          ], [ ]

[INSERT NAME OF TRANSFEROR]

By:

Name:

Title:

Dated: _____________________

cc:  Voto-Votorantim Overseas Trading Operations IV Limited

C-I-2

EXHIBIT C-II

FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL RESTRICTED SECURITY TO
REGULATION S GLOBAL SECURITY
(Transfers and exchanges pursuant to
Section 3.4(c)(4) of the Indenture)

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Re:  Voto-Votorantim Overseas Trading Operations IV Limited
U.S.$400,000,000 7.75% Notes due 2020 (the “Securities”)

Reference is hereby made to the Indenture, dated as of June 24, 2005 (the “Indenture”), among Voto-Votorantim Overseas Trading Operations IV Limited, as Company, the Guarantor JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the State of New York, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), and J.P. Morgan Bank Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd., a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

This Letter relates to $[        ] principal amount of Restricted Securities held in definitive form (CUSIP No. 92908K AA 3) by [insert name of transferor] (the “Transferor”).  The Transferor has requested an exchange or transfer of such Securities.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that (i) such Securities are owned by the Transferor and are being exchanged without transfer or (ii) such transfer has been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under the Securities Act of 1933, as amended (the “Act”), or (b) Rule 144 under the Act, and accordingly the Transferor does hereby further certify that:

(A)	the offer of the Securities was not made to a person in the United States;
(B)	either:

C-II-1

	(i)	at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States, or
	(ii)	the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;
(C)	no directed selling efforts have been made in contravention of the requirements of Rule 903(a)(2) or 904(b)(2)) of Regulation S, as applicable; and
(D)	the transaction is not part of a plan or scheme to evade the registration requirements of the Act.

We understand that this certificate is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate to any interested party in such proceeding.  This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Guarantors.

Dated:  [          ]

[INSERT NAME OF TRANSFEROR]

By:

Name:

Title:

Dated: _____________________

cc:  Voto-Votorantim Overseas Trading Operations IV Limited

C-II-2

EXHIBIT D-l

FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL REGULATION S
SECURITY TO RESTRICTED GLOBAL SECURITY
(Transfers and exchanges pursuant to
Section 3,4(c)(5) of the Indenture)

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Re:  Voto-Votorantim Overseas Trading Operations IV Limited
U.S.$400,000,000 7.75% Notes due 2020 (the “Securities”)

Reference is hereby made to the Indenture, dated as of June 24, 2005 (the “Indenture”), among Voto-Votorantim Overseas Trading Operations IV Limited, as Company, the Guarantor JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the State of New York, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), and J.P. Morgan Bank Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd., a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

This letter relates to $[      ] principal amount of Regulation S Global Securities held in definitive form (ISIN No. USG93932AA24) by [insert name of transferor] (the “Transferor”).  The Transferor has requested an exchange or transfer of such Securities.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that (i) such Securities are owned by the Transferor and are being exchanged without transfer or (ii) such transfer has been effected pursuant to and in accordance with Rule 144A under the United States Securities Act of 1933, as amended, and accordingly the Transferor does hereby further certify that the Securities are being transferred to a person that the Transferor reasonably believes is purchasing the Securities for its own account, or for one or more accounts with respect to which such Person exercises sole investment discretion, and such Person and each such account is a “qualified institutional buyer” within the meaning of Rule 144A, in each case in a transaction meeting the requirements of Rule 144A and in accordance with any applicable securities laws of any state of the United States.

D-1-1

We understand that this certificate is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate to any interested party in such proceeding.  This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Guarantors.

[INSERT NAME OF TRANSFEROR]

By:

Name:

Title:

Dated: _____________________

cc:  Voto-Votorantim Overseas Trading Operations IV Limited

D-1-2

EXHIBIT D-2

FORM OF CERTIFICATION FOR TRANSFER
OR EXCHANGE OF NON-GLOBAL REGULATION S
SECURITY TO REGULATION S GLOBAL SECURITY
(Transfers and exchanges pursuant to
Section 3.4(c)(5) of the Indenture)

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Re:  Voto-Votorantim Overseas Trading Operations IV Limited
U.S.$400,000,000 7.75% Notes due 2020 (the “Securities”)

Reference is hereby made to the Indenture, dated as of June 24, 2005 (the “Indenture”), among Voto-Votorantim Overseas Trading Operations IV Limited, as Company, the Guarantor JPMorgan Chase Bank, N.A., a national banking association duly organized and existing under the laws of the State of New York, as trustee (the “Trustee”), as New York paying agent (the “New York Paying Agent”), as transfer agent (the “Transfer Agent”) and registrar (the “Registrar”), and J.P. Morgan Bank Luxembourg S.A., a corporation duly organized and existing under the laws of Luxembourg, as Luxembourg paying agent (the “Luxembourg Paying Agent”) and J.P. Morgan Trust Bank Ltd., a corporation duly organized and existing under the laws of Japan, as principal paying agent (the “Principal Paying Agent” and together with the Luxembourg Paying Agent and the New York Paying Agent, the “Paying Agents”).  Capitalized terms used but not defined herein shall have the meanings given to them in the Indenture.

This letter relates to $[       ] principal amount of Regulation S Global Securities held in definitive form (ISIN No. USG93932AA24) by [insert name of transferor] (the “Transferor”).  The Transferor has requested an exchange or transfer of such Securities.

In connection with such request and in respect of such Securities, the Transferor does hereby certify that (i) such Securities are owned by the Transferor and are being exchanged without transfer or (ii) such transfer has been effected pursuant to and in accordance with (a) Rule 903 or Rule 904 under the Securities Act of 1933, as amended (the “Act”), or (b) Rule 144 under the Act, and accordingly the Transferor does hereby further certify that:

(A)	the offer of the Securities was not made to a person in the United States;
(B)	either:
	(i)	at the time the buy order was originated, the transferee was outside the United States or the Transferor and any person acting on its behalf reasonably believed that the transferee was outside the United States, or

D-2-1

	(ii)	the transaction was executed in, on or through the facilities of a designated offshore securities market and neither the Transferor nor any person acting on its behalf knows that the transaction was pre-arranged with a buyer in the United States;
(C)	no directed selling efforts have been made in contravention of the requirements of Rule 903(a)(2) or 904(b)(2) of Regulation S, as applicable; and
(D)	the transaction is not pan of a plan or scheme to evade the registration requirements of the Act.

We understand that this certificate is required in connection with certain securities laws of the United States.  In connection therewith, if administrative or legal proceedings are commenced or threatened in connection with which this certificate is or would be relevant, we irrevocably authorize you to produce this certificate to any interested party in such proceeding.  This certificate and the statements contained herein are made for your benefit and the benefit of the Company and the Guarantors.

[INSERT NAME OF TRANSFEROR]

By:

Name:

Title:

Dated: _____________________

cc:  Voto-Votorantim Overseas Trading Operations IV Limited

D-2-2

EXHIBIT E

CERTIFICATE OF EXTENSION OF MATURITY

[DATE]

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Credit Suisse, acting through its Cayman Islands branch
Eleven Madison Avenue
New York, New York  10010
Attention:  Trade Finance/Services Department

Dear Sirs:

Reference is made to that certain Indenture (the “Indenture”) dated as of June 24, 2005 among VOTO-Votorantim Overseas Trading Operations IV Limited, Votorantim Participações S.A. (“VPAR”), Votorantim Celulose e Papel S.A., Cimento Rio Branco S.A., JPMorgan Chase Bank, N.A., as trustee, as New York paying agent, as transfer agent and as registrar, J.P. Morgan Bank Luxembourg S.A., as Luxembourg paying agent, and J.P. Morgan Trust Bank Ltd. as principal paying agent.  Capitalized terms not defined herein shall have the meanings set forth in the Indenture.

Pursuant to Section 3.1 of the Indenture, the Company and the Guarantors  hereby certify to you, the Trustee, acting on behalf of the holders of the Company’s 7.75% Notes due 2020, as follows:

The Company and/or the Guarantors have sufficient funds in Local Currency at the Reference Rate of Exchange to repay the principal amount of the Securities and any other Indebtedness payable on this date and the Company and the Guarantors cannot make such payment in respect of the Securities due to a Currency Inconvertibility/Non-Transfer Event which occurred on [insert date] and which is continuing on the date hereof, and that each of the Company and the Guarantors has used its best efforts to convert and transfer such funds.

Voto-Votorantim Overseas Trading Operations IV Limited

By:

Name:

Title:

E-1

Votorantim Participações S.A.

By:

Name:

Title:

Votorantim Celulose e Papel S.A.

By:

Name:

Title:

Cimento Rio Branco S.A.

By:

Name:

Title:

E-2

EXHIBIT F

FORM OF CURRENCY INCONVERTIBILITY/NON-TRANSFER EVENT NOTICE

[DATE]

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Credit Suisse, acting through its Cayman Islands branch
c/o Credit Suisse First Boston, New York branch
One Madison Avenue, 2^nd Floor
New York, New York  10010
Attention:  Trade Financial Services Department

Dear Sirs:

Reference is made to that certain Indenture (the “Indenture”) dated as of June 24, 2005 among VOTO-Votorantim Overseas Trading Operations IV Limited, Votorantim Participações S.A. (“VPAR”), Votorantim Celulose e Papel S.A., Cimento Rio Branco S.A., JPMorgan Chase Bank, N.A., as trustee, as New York paying agent, as transfer agent and as registrar, J.P. Morgan Bank Luxembourg S.A., as Luxembourg paying agent, and J.P. Morgan Trust Bank Ltd., as principal paying agent.  Capitalized terms not defined herein shall have the meanings set forth in the Indenture.

Pursuant to Section 10.20 of the Indenture, the Company and the Gurantors, hereby certify to you, the Trustee, acting on behalf of the Holders of the Company’s 7.75% Notes due 2020, that, as of [Date], a Currency Inconvertibility/Non-Transfer Event [came into existence][has terminated].  As evidence of the [existence][termination] of the such Currency Inconvertibility/Non-Transfer Event, we attach hereto copies of [law, regulation, resolution, official release, bona fide newspaper reports or any other material which demonstrates the [existence][termination]] of the Currency Inconvertibility/Non-Transfer Event or an alteration as to its existence].

Voto-Votorantim Overseas Trading Operations IV Limited

By:

Name:

Title:

F-1

Votorantim Participações S.A.

By:

Name:

Title:

Votorantim Celulose e Papel S.A.

By:

Name:

Title:

Cimento Rio Branco S.A.

By:

Name:

Title:

F-2

EXHIBIT G

FORM OF NOTICE OF NON-PAYMENT

[DATE]

JPMorgan Chase, N.A.,
as Trustee
4 New York Plaza, 15^th Floor
New York, New York  10004
Attention:  Corporate Trust Administration

Credit Suisse, acting through its Cayman Islands branch
Eleven Madison Avenue
New York, New York  10010
Attention:  Trade Finance/Services Department

Credit Suisse First Boston (Bahamas) Limited
The Bahamas Financial Centre, 4^th Floor
Shirley and Charlotte Streets
PO Box N-3721
Nassau, Bahamas
Attention:  Operations/Legal and Compliance Department

Banco de Investimentos Credit Suisse First Boston S.A.
Av. Brigadeiro Faria Lima, 3064
13º andar, 01451-000
São Paulo, SP, Brazil
Attention:  Operations/Legal and Compliance Department

Dear Sirs:

Reference is made to that certain Indenture (the “Indenture”) dated as of June 24, 2005 among VOTO-Votorantim Overseas Trading Operations IV Limited, Votorantim Participações S.A. (“VPAR”), Votorantim Celulose e Papel S.A., Cimento Rio Branco S.A., JPMorgan Chase Bank, N.A., as trustee, as New York paying agent, as transfer agent and as registrar, J.P. Morgan Bank Luxembourg S.A., as Luxembourg paying agent, and J.P. Morgan Trust Bank Ltd., as principal paying agent.  Capitalized terms not defined herein shall have the meanings set forth in the Indenture.

Prior to or contemporaneously with this notice, we have notified you of the occurrence of a Currency Inconvertibility/Non-Transfer Event and have not notified you of the termination of the Currency Inconvertibility/Non-Transfer Event.  In connection with the payment of interest and/or Additional Amounts due (and any interest payable on such amounts, including interest on interest) due on the Notes on [insert date] (the “Payment”), we represent to you as follows:

G-1

1.	The Company and/or the Guarantors have sufficient funds in Local Currency at the Reference Rate of Exchange to make the Payment.
2.	Solely on account of the Currency Inconvertibility/Non-Transfer Event, the Company or the Guarantors are unable to convert Local Currency funds into U.S. dollars or to transfer U.S. dollars outside Brazil to make the Payment and have used their best efforts to do so.

Voto-Votorantim Overseas Trading Operations IV Limited

By:

Name:

Title:

Votorantim Participações S.A.

By:

Name:

Title:

Votorantim Celulose e Papel S.A.

By:

Name:

Title:

Cimento Rio Branco S.A.

By:

Name:

Title:

G-2

EX-4.1

Exhibit 4.1

EXECUTION COPY

US$ 102,000,000
EXPORT PREPAYMENT AGREEMENT

dated as of May 12, 2004

among

VCP EXPORTADORA E PARTICIPAÇÕES LTDA.
as Exporter;

VOTORANTIM CELULOSE E PAPEL S.A. – VCP
as Guarantor;

VCP TRADING N.V.,
 as Paying Agent

The LENDERS from time to time hereunder,

ABN AMRO BANK N.V.

and

BANCO SANTANDER CENTRAL HISPANO, LONDON BRANCH,

as Lead Arrangers,

ABN AMRO BANK N.V.,

as Administrative Agent and Lender,

and

BANCO SANTANDER CENTRAL HISPANO, S.A., LONDON BRANCH

as Collateral Agent

EXPORT PREPAYMENT AGREEMENT

          This EXPORT PREPAYMENT AGREEMENT (the “Prepayment Agreement”) is made as of May 12, 2004 by and among:

          VCP EXPORTADORA E PARTICIPAÇÕES LTDA. , a company duly  organized and existing under the laws of the Federative Republic of Brazil, with its head office located at 1357 Alameda Santos, Sao Paulo, Brazil, (the “Exporter”);

          VOTORANTIM CELULOSE E PAPEL S.A. – VCP, a corporation organized and existing under the laws of the Federative Republic of Brazil, with its head office located at 1357 Alameda Santos, Sao Paulo Brazil, (“VCP” or the “Guarantor”);

          VCP TRADING N.V., a corporation organized and existing under the laws of The Netherlands Antilles, with its principal offices located at Netherlands Antilles (the “Paying Agent”);

          The LENDERS from time to time hereunder;

          ABN AMRO BANK N.V., a bank duly organized and existing under the laws of The Netherlands, and BANCO SANTANDER CENTRAL HISPANO, S.A., a bank duly organized and existing under the laws of Spain, acting through its London Branch, (together with its successors and permitted assigns, the “Lead Arrangers”), ABN AMRO BANK N.V., in its capacity as the Administrative Agent for the Lenders (in such capacity and, together with its successors and permitted assigns, the “Administrative Agent”), and BANCO SANTANDER CENTRAL HISPANO, S.A., acting through its London branch, as collateral agent for the Lenders (in such capacity and, together with its successors and permitted assigns, the “Collateral Agent”).

WITNESSETH

          WHEREAS, the Exporter and/or the Paying Agent, as the case may be, has entered or will enter into one or more Export Agreements with the Importers, pursuant to which the Exporter will export Goods from Brazil to the Importers (all capitalised terms used herein have the meanings assigned to them below);

          WHEREAS, the Exporter’s and/or Paying Agent’s, as the case may be, sales of Goods under the Export Agreements will be made through several shipments (the “Covered Shipments”) with the aggregate Purchase Price for such Covered Shipments being at least US$ 127,500,000 (One hundred and twenty seven million and five hundred thousand United States Dollars);

          WHEREAS, the Exporter and/or the Paying Agent, as the case may be, shall instruct each of the Importers to make payment due in respect of the Covered Shipments made to such Importer by forwarding the Purchase Price for the Goods so shipped to the Collection Account which shall be an account held in the name of the Collateral Agent;

2

          WHEREAS, the Paying Agent, or any substitute or replacement thereof, will act as paying agent for the Exporter and/or Guarantor as the case may be, and shall act at all time on their behalf;

          WHEREAS, the Exporter has requested that the Lead Arrangers act as lead arrangers for an export prepayment financing facility pursuant to which certain Lenders listed on Schedule 2. hereto shall make advances in an aggregate principal amount of up to US$ 102,000,000.00 (collectively referred to as the “Advance”) for the prepayment of future exports by the Exporter of Goods to Importers  (x) in accordance with the prepayment mechanisms established under applicable Brazilian laws and regulations for financing export receivables, in particular with Central Bank regulations including without limitation Resolution No. 1834 dated June 26, 1991 of the National Monetary Council and Circular No. 3027 dated February 2, 2001 of the Central Bank, with respect to the payments to be due from the Importer to the Exporter as provided above; and (y) subject to each of the terms and conditions of this Prepayment Agreement and (z) to be secured by a pledge by the Exporter of (i) accounts receivables from export sales of the Goods to the Importers (the “Export Agreements”);

          WHEREAS, the Lenders have agreed to make the Advance to the Exporter, subject to the terms and conditions set forth herein and provided that the Exporter grants to the Collateral Agent for the benefit of the Administrative Agent and the Lenders a first priority security interest in the Export Agreements;

          WHEREAS, the Exporter agrees to repay any and all principal and interest on the Advance provided hereunder and to pay all fees, expenses and other amounts due hereunder in accordance with the terms and conditions set forth herein;

          WHEREAS, the Exporter, shall irrevocably instruct the Collateral Agent to transfer sufficient funds held in the Collection Account to the Administrative Agent and instruct the Administrative Agent to apply funds received from the Collateral Agent to make payments due hereunder to the Lenders;

          WHEREAS, the Guarantor shall issue a guarantee in the form contained in Section 22 hereof as security for the liabilities and obligations of the Exporter; and

          WHEREAS, the Exporter has agreed to assign to the Collateral Agent, for the benefit of the Lenders thirty (30) days prior to each Installment, export receivables with a value in aggregate not less than the amount of such Installment and any Interest due thereon, it being understood that provisions under Section 12 (t) shall apply.

          NOW, THEREFORE, In consideration of the undertakings contained herein, the parties agree as follows:

3

Section 1.     Definitions

The following terms shall have the meanings ascribed hereunder (all the terms defined in the singular to have the same meaning when used in the plural and vice versa):

“Administrative Agent” has the meaning ascribed to such term in the preamble hereto.

“Administrative Fee” shall have the meaning ascribed in Section 16 below.

“Advance” shall mean the anticipated payment of certain future exports, made by the Lenders to the Exporter pursuant to this Prepayment Agreement.

“Advance Amount” shall mean any amount disbursed under this Prepayment Agreement as designated in each Promissory Note for the Advance, provided the aggregate amount of the disbursements shall not exceed US$ 102,000,00.00 (One hundred and two Million United States Dollars).

“Advance Document” shall mean any of this Prepayment Agreement, the Promissory Note, and the Disbursement Request.

“Affiliate” shall mean any Person directly or indirectly controlling, controlled by, or under common control with, any other Person. For this purpose, “control” of any Person means ownership of 10% or more of the Voting Stock of the Person or the ability, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise; provided that Aracruz Celulose S.A. shall not be considered an Affiliate of the Obligors unless the Votorantim Group (in the aggregate) possesses, directly or indirectly, the power to vote 30% or more of the Voting Stock of Aracruz Celulose S.A. or to direct or cause the direction of the management and policies of Aracruz Celulose S.A., whether through ownership of the Voting Stock, by contract or otherwise.

“Arrangement Fee” shall have the meaning set forth in Section 16 below.

“Assignment” shall mean the assignment made by the Exporter in Section 23 of this Prepayment Agreement.

“Assignment Agreement” shall have the meaning set forth in Section 19 below.

“Availability Period” shall mean the period commencing on the date hereof and ending on the 30th day following the date of execution of this Prepayment Agreement, during which the Lenders agree to make an Advance in accordance with Section 2 of this Prepayment Agreement.

“Banking Day” shall mean any day on which commercial banks are open for business in New York City, United States of America, London, England and São Paulo, Brazil.

“Brazil” shall mean the Federative Republic of Brazil.

“Brazilian GAAP” shall mean the accounting principles prescribed by Brazilian corporate law (Lei de Sociedades Anônimas).

4

“Breakage Costs” shall mean the costs referred to in Section 17 (a) of this Prepayment Agreement.

“Business” shall mean (i) the business of producing pulp and paper and/or other related products and (ii) other lines of business that are related or incidental to the business described under clause (i) of this definition.

“Capital Lease Obligations” means, as to a Surviving Entity, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP and, for purposes of this Prepayment Agreement, the amount of such obligations shall be the capitalized  amount thereof determined in accordance with GAAP.

“Capital Stock” means any and all shares, interests, participations, quotas or other equivalents (however designated) of capital stock of a corporation, any and all ownership interests in a Person other than a corporation and any and all warrants or options to purchase any of the foregoing.

“Cash Equivalents” means any of the following: (a) readily marketable direct obligations of the government of the United States of America or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States, (b) insured certificates of deposit of or time deposits with the Lenders  or a member of the Federal Reserve System, which issues (or the parent of which issues) commercial paper rated as described in clause (c), is organised under the laws of the United States of America or any State (or the District of Columbia) thereof and has combined capital and surplus of at least US$1,000,000,000, (c) commercial paper in an aggregate amount of no more than US$10,000,000 per issuer outstanding at any time, issued by any corporation organised under the laws of any State (or the District of Columbia) of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s and “A-1” (or the then equivalent grade) by S&P, or (d) other investments considered as cash equivalents under Brazilian GAAP.

“Central Bank” shall mean Banco Central do Brasil.

“Change of Control” shall mean the Guarantor shall cease to (i) own beneficially and control (either directly or indirectly) more than 50 (fifty percent) of the Exporter’s or the Paying Agent’s issued and outstanding voting capital stock and other equity interests in the Exporter or the Paying Agent as of the date hereof, or (ii) have the power (by ownership of capital stock or otherwise) to control the management or policies of the Exporter or the Paying Agent.

“Collateral Agent” shall mean Banco Santander Central Hispano, S.A., London Branch.

“Collection Account” shall mean that account held by the Collateral Agent and informed in writing to the Exporter, Guarantor and Paying Agent from time to time.

“Coverage Ratio” shall mean, for each Interest Period, the ratio of 1.25  in the Collection account paid by Importers, to the next payment of Interest plus the applicable Instalment as stated in Section 5 hereof.

5

“Debt” means, with respect to any Person (determined without duplication): (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than trade payables (whether payable to Affiliates or other Persons) incurred in the ordinary course of such Person’s business, but only if and for so long as such trade payables remain payable on customary trade terms, and accrued expenses incurred in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar documents, (d) all obligations, contingent or otherwise, of such Person in connection with any securitization of any products, receivables or other Property, (e) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or the lender under such agreement in the event of default are limited to repossession or sale of such Property), (f) all Capital Lease Obligations and similar obligations under “synthetic leases” of such Person, (g) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit, financial guaranty insurance policies or similar extensions of credit (excluding trade payables to the extent excluded from clause (b)), (h) all obligations of such Person to redeem, retire, defease or otherwise make any payment in respect of any Capital Stock of such Person, (i) all net obligations of such Person in respect of any interest rate protection agreement or any currency swap, cap or collar agreement or similar arrangement entered into by such Person providing for the transfer or mitigation of interest rate or currency risks either generally or under specific contingencies (but without regard to any notional principal amount relating thereto), (j) all Debt of other Persons referred to in clauses (a) through (i) or clause (k) that is Guaranteed by such Person and (k) all Debt referred to in clauses (a) through (j) secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on Property of such Person even though such Person has not assumed or become liable for the payment of such Debt.

“Debt Service Coverage Ratio” means, as of the last day of any fiscal quarter of VCP, the ratio (expressed as a decimal) of: (a) the sum of: (i) EBITDA for the four consecutive fiscal quarters ending on such day plus (ii) the amount of cash on VCP’s consolidated balance sheet as of such day plus (iii) the sum of, for each marketable security (including Cash Equivalents) on VCP’s consolidated balance sheet as of such day, the lower of: (A) the face value and (B) the market value of such marketable security as of such day, to (b) the amount of Total Debt that is scheduled to mature during the four consecutive fiscal quarters after such day plus the actual Interest Expense incurred during the four consecutive fiscal quarters ending on such day. For the purpose of clarification, the calculation of Debt Service Coverage Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Disbursement Date” shall mean each date of disbursement of the Advance in accordance with the applicable Disbursement Request.

“Disbursement Request” shall mean each Disbursement Request by the Exporter to the Administrative Agent, substantially in the form of Exhibit B hereto, for a disbursement of the proceeds of the Advance.

“EBITDA” means, during any period, the total earnings of a Surviving Entity (on a consolidated basis) before income taxes, Interest Expense, depreciation and amortization during such period, eliminating from the calculation of such earnings: (a) any net income or gain (or net loss), net of any tax effect, during such period from any extraordinary items,

6

(b) any interest income during such period, (c) gains or losses during such period on the sale of Property (other than the sale of inventory in the ordinary course of business), (d) any other extraordinary non-cash items deducted from or included in the calculation of pre-tax net income for such period (other than items that will require cash payments and for which an accrual or reserve has been, or is required by GAAP to be, made), (e) the EBITDA for such period of any Subsidiaries or other Property disposed of or discontinued during such period and (f) any net income or gain (or net loss) on any foreign exchange transactions or net monetary positions.

“Export Agreements” shall mean the agreements, made from time to time, with the Importers pursuant to which the Exporter, the Paying Agent and/or the Guarantor, as the case may be, will export Goods from Brazil to the Importers.

“Export Receivables” shall mean all account receivables arising out of any Export Agreement.

“Event of Default” shall have the meaning set forth in Section 12 hereof.

“Final Maturity Date” shall mean, subject to Section 5(e), in relation to each disbursement, the day which is 84 (eighty-four) months after the Disbursement Date.

“First Instalment Date” shall have the meaning set forth in Section 5(a).

“Fiscal Semester” means each period from and including January 1 through and including June 30 of each year and from and including July 1 through and including December 31 of each year.

“GAAP” means, with respect to any Person, the generally accepted accounting principles (as in effect from time to time) applicable to it in its home jurisdiction.

“Goods” shall mean pulp and paper and/or other related products.

“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) and any entity exercising executive, legislative, judicial, regulatory or administrative authority of or pertaining to government (whether such authority is recognized as a de jure government or is a de facto government).

“Guarantee” shall mean the guarantee given by the Guarantor in Section 22 of this Prepayment Agreement.

“Importers” shall mean,  jointly or severally :

(i)	certain OECD-based commercial counterparties acceptable to the Lead Arrangers, the Administrative Agent and the Lenders to be determined prior to the date hereof, (collectively the “Initial Importers”) as evidenced in Schedule I hereto,
(ii)	at any time after the date hereof, certain other importers approved by the the Lead Arrangers, the Administrative Agent and the Lenders,
(iii)	commercial counterparties whose obligations to the Exporter, the Paying Agent or the Guarantor, as the case may be,  are insured by certain policies or guaranteed by letters of credit issued by financial institutions acceptable to the Lenders and rated at least A by Standard & Poors’ or A2 by Moody’s, with exceptions to be agreed (the “Eligible Financial Institutions”),
(iv)	commercial counterparties located in any country and whose dealings with which are not generally prohibited by United States law or by the United Nations who enter into sales agreements with the Exporter, the Paying Agent or the Guarantor, as the case may be,  which call for payment in full on a pre-shipment basis,

7

hereinafter, (i-iv) individually or jointly referred to as “Importers”.

“Installments” shall have the meaning set forth in Section 5(a).

“Interest” shall have the meaning ascribed in Section 4 below.

“Interest Expense” means, for any period, interest (or similar) expense on the Debt of a Surviving Entity (on a consolidated basis), including (without duplication): (a) fees (including commitment fees and insurance premiums), (b) net payments under any interest rate protection agreement or other hedging agreement, (c) the interest portion of any deferred payment obligations, (d) all fees and charges owed with respect to letters of credit or performance or other bonds, (e) all accrued or capitalized interest, (f) any amortization of debt discount and (g) all but the principal component of payments relating to Capital Lease Obligations.

“Interest Payment Date” shall mean the day when interest is due and payable according to Schedule 3..

“Interest Period” shall mean in relation to each Advance, (a) the time period commencing on and including the Disbursement Date corresponding to such Advance and ending on but excluding the first Interest Payment Date; and (b) each subsequent time periods between two consecutive Interest Payment Dates thereafter, provided that the final date of the last of such Interest Period shall be the Final Maturity Date.

“Interest Rate” for an Interest Period shall mean LIBOR plus the Margin.

“Initial Trading Company” means: (a) initially, VCP Overseas Holding KFT, a corporation organized under the laws of Hungary and a wholly-owned Subsidiary of VCP Exportadora, and (b) thereafter, such other Person as may be identified from time to time by the Exporter, provided the latter shall: (i) be organized in an OECD Country, (ii) be a wholly-owned, direct or indirect subsidiary of VCP.

“Lead Arrangers” shall mean ABN AMRO Bank N.V. and Banco Santander Central Hispano S.A., London Branch.

“Lenders” shall mean any of the institutions identified in Schedule 2. attached hereto, together with its successors and permitted assigns pursuant to the Section 19 below.

“LIBOR” shall mean, for any Interest Period, an interest rate per annum determined on the basis of the London interbank offered rate for deposits in Dollars for a period of time comparable to the relevant Interest Period, shown on the display page designated British Bankers Association Interest Settlement Rates, “LIBOR 01” Page, on the Reuters screen or such other page as may replace that page in that service, at approximately 11:00 a.m., London time, 2 (two) Banking Days prior to the first day of such Interest Period.

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In the event that such rate does not appear on such LIBOR 01 Reuters screen page, or such other page as may replace that page in that service, then LIBOR shall be the arithmetic mean (expressed as an annual rate and rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates quoted at approximately 11:00 a.m. London time by 3 (three) leading banks, chosen by the Administrative Agent and agreed by the parties hereto as the rate at which deposits in Dollars are offered to such banks by prime banks, in the London interbank market for a period of time comparable to the relevant Interest Period, at approximately 11:00 a.m. 2 (two) Banking Days prior to the first day of such Interest Period. If the Exporter does not agree with the LIBOR quoted by the Administrative Agent, the Lenders shall have no obligation to make the disbursement related to the Advance or if the Advance has already been made, the rate will be reasonably determined by the Administrative Agent.

“Lien” means any mortgage, lien, pledge, usufruct, fiduciary transfer (alienação fiduciária), charge, encumbrance or other security interest or any preferential arrangement (including a securitisation) that has the practical effect of creating a security interest.

“Majority Lenders” shall mean the Lenders holding 66% (sixty-six percent) of the Advances.

“Margin” shall mean 2% p.a. (two percent per annum).

“Material Adverse Effect” shall mean a material adverse effect on the business, operations, property, or financial condition of the Guarantor and its direct or indirect subsidiaries (taken as a whole) which will, in the opinion of the Lenders, as justified in writing, impair the ability of the Exporter or the Guarantor to perform its obligations under any of the Advance Document; provided that there should be no Material Adverse Effect in the event the Lenders receive a remedy, that it considers satisfactory, from the Exporter, the Paying Agent and/or the Guarantor upon demand.

“Measurement Period” shall mean the period beginning and including the day that is 15 days (each a “Measurement Date”) before the next Interest Payment Date including such Interest Payment Date.

“Net Debt” means, as of the date of the consummation of any merger, consolidation, sale, transfer, lease or other disposition pursuant to Section 11(a), a Surviving Entity’s Total Debt as of such day minus the sum of: (a) the aggregate amount of cash on its consolidated balance sheet as of such day plus (b) the sum of, for each marketable security (including Cash Equivalents) on such Surviving Entity’s consolidated balance sheet as of such day, the lower of: (i) the face value and (ii) the market value of such marketable security as of such day. For the purpose of clarification, the calculation of Net Debt (and all components thereof) shall be made using Brazilian GAAP.

“Net Debt to EBITDA Ratio” means, the ratio (expressed as a decimal) of (a) Net Debt as of such date to (b) EBITDA for the two most recent Fiscal Semesters preceding such date. For the purpose of clarification, the calculation of Net Debt to EBITDA Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Obligors” shall mean either of the Exporter, the Paying Agent and the Importers.

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“OECD Country” means, at any time, any nation that is a member of the Organization of Economic Co-operation and Development at such time.

“Person” shall mean any individual, corporation, partnership, trust, unincorporated organization, joint stock company or other legal entity or organization and any government or agency or political subdivision thereof.

“Promissory Note” shall mean each promissory note substantially in the form of Exhibit A hereto duly executed and delivered by an authorized signatory of the Exporter and the Guarantor.

“Property” of any Person means any property, rights or revenues, or interest therein, of such Person.

“Purchase Price” shall mean in relation to each Covered Shipment the purchase price to be paid therefore by the relevant Importer.

“Receivable” means each account or payment intangible or similar obligation arising under any Export Agreement.

“Relevant Person” shall mean any Affiliate, Subsidiary or group company of the Guarantor.

“Responsible Officer” of a Person shall mean any Executive Officer of that Person.

“Shipping Documents” shall mean in relation to each Covered Shipment, originals or copies of (a) the “despacho aduaneiro” (customs receipt) related thereto, (b) the bill of lading or other shipping document evidencing such shipment, and (c) any draft or other payment document presented to the relevant Importer.

“Subsidiary” means with respect to any Person, any corporation or other entity more than 50% of the Voting Stock of which is owned or controlled directly or indirectly, by such Person and/or by any Subsidiary of such Person.

“Surviving Entity” means any surviving Person as described in Section 11(a)(i)(A)(1) or Person to whom substantially all of the assets of the Exporter or the Guarantor, as the case may be, shall have been transferred as described in Section 11(a)(i)(A)(2), in each case, that is not VCP, the Exporter or a Subsidiary thereof.

“Total Capitalization” means, as of the last day of any fiscal quarter of the Guarantor, the sum of: (a) the Total Debt as of such day plus (b) the net worth of the Guarantor (on a consolidated basis) as of such day plus (c) without duplication of clause (b), the sum of minority interests in other Persons held by the Guarantor (on a consolidated basis) as of such day.

“Total Debt” means, as of the last day of any fiscal quarter of the Guarantor, the aggregate outstanding principal amount of Debt of the Guarantor (on a consolidated basis) as of such day and as it refers to 11(a) as as of the date of the consummation of any merger, consolidation, sale, transfer, lease or other disposition, the aggregate outstanding principal amount of Debt of a Surviving Entity (on a consolidated basis) as of such day.

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“Total Debt to Total Capitalization Ratio” means, as of the last day of any Fiscal Semester of the Guarantor, the ratio (expressed as a decimal) of: (a) the Total Debt as of such day to (b) the Total Capitalization as of such day. For the purpose of clarification, the calculation of the Total Debt to Total Capitalization Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Undertaking” means all of the Exporter’s present and future, rights and remedies under the Export Agreement together with all present and future rights under any security, guarantee or other form of credit support created in its favor in respect of an Importer’s obligations under the Export Agreements (collectively, the “Undertakings”).

“Up-front-Participation Fee” shall have the meaning ascribed in Section 16 below.

“US Dollars”, “Dollars” or “US$” shall mean the lawful currency of the United States of America.

“Votorantim Group” means the group of related companies commonly known as the “Votorantim Group” comprised of Hejoassu Administração Ltda. and its Subsidiaries.

“Voting Stock” of a Person means Capital Stock in such Person having power to vote for the election of directors or similar officials of such Person or otherwise voting with respect to actions of such Person (other than such Capital Stock having such power only by reason of the happening of a contingency).

Section 2.     The Commitment

          (a)       Subject to the terms and conditions set forth in this Prepayment Agreement, the Lenders hereby agrees to make the Advance during the Availability Period as an anticipated payment of certain future exports in accordance with Central Bank regulations.

          (b)       Each Advance shall be evidenced by a single Promissory Note dated the applicable Disbursement Date and duly completed and executed by the Exporter and the Guarantor.

Section 3.     Making of the Advance; Use of Proceeds

          (a)       Subject to the satisfaction of the conditions set forth in Section 8 herein, the Lenders shall make any Advance provided that (i) the Administrative Agent shall have received from the Exporter a Disbursement Request at least three (3) Banking Days, and not later than 11:00 a.m. (São Paulo time), prior to the applicable Disbursement Date of the Advance and (ii) the Administrative Agent, on behalf of the Lenders, shall send to the Exporter its acknowledgement and agreement to the Disbursement Request on the same date.

          (b)        The Exporter shall treat the proceeds of the Advance as a pre-payment of future exports of the Goods to the Importers, all in accordance with and pursuant to the terms and conditions of Brazilian laws and regulations applicable to export prepayment operations, in particular Circulares 2231, 2259, 2567 and 3027 issued by the Central Bank, and the Exporter shall export the Goods solely to the Importers.

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Section 4.     Interest

          (a)        The Exporter shall pay interest (the “Interest”) on the unpaid Advance Amount on each Interest Payment Date during the relevant Interest Periods at the Interest Rate for the Advance, from the Disbursement Date until the Applicable Maturity Date. Such payment shall be made, at Exporter’s option, except as provided in paragraph (d) below, either (i) directly by the Exporter to the Administrative Agent ‘s account as listed herein in Section 5(b) or (ii) if so determined by the Exporter as notified in writing to the Administrative Agent, through the Paying Agent.  The Paying Agent hereby agrees to make such payment of Interest then due in accordance with the terms hereof if so instructed by the Exporter. 

          (b)        The Advance Amount, any Interest thereon (to the extent permitted by law), and any other amount due and payable under this Prepayment Agreement that is past due (whether at the Applicable Maturity Date, by acceleration or otherwise) shall bear interest from the date such amount is due until such amount is paid in full at the per annum rate that is the then applicable Interest Rate plus 1% p.a. (one percent per annum).

          (c)        Interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed (including the first day, but excluding the last day). Accrued Interest shall be due and payable in arrears upon any payment of the Advance and on each applicable Interest Payment Date. However, interest accruing according to paragraph (b) shall be due and payable from time to time on demand of the Lenders.

          (d)        In the event that the Exporter (or the Paying Agent, as provided in paragraph  (a) above) is unable for any reason, including without limitation, because of an action or inaction by any Governmental Authority of Brazil, to pay Interest as provided hereunder, the Exporter shall make additional Covered Shipments to Importers at such times and in such amounts as permitted by the relevant Governmental Authority so that the aggregate Purchase Prices paid for such Covered Shipments by the Importers and/or paid in connection of any Undertakings and deposited in the Collection Account are sufficient to pay to the Administrative Agent (for the benefit of the Lenders) the amount of Interest due hereunder as and when due. In such case, the Paying Agent, on behalf of the Exporter, shall make such payments of Interest to the Administrative Agent (for the benefit of the Lenders) using funds available in the Collection Account.

Section 5.     Repayments; Prepayments

          (a)        Each Advance shall be due and payable in 9 quarterly installments (each, an “Installment”) beginning on the Banking Day that is 1814 days after the  Disbursement Date (the “First Installment Date”), and as shown in Schedule 3, in the following manner:

Days from Disbursement Date	Installment amount
1814	25% of Advance
1904	9.375% of Advance
1994	9.375% of Advance
2084	9.375% of Advance
2172	9.375% of Advance
2263	9.375% of Advance
2354	9.375% of Advance
2444	9.375% of Advance
2520	9.375% of Advance.

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Notwithstanding the foregoing, any monies received by the Administrative Agent shall be applied in the following order: (a) Breakage Costs (if any); (b) Interest due and unpaid; (c) to reduce the amount of principal due and unpaid on the next Installment; and (d) to reduce the amount of principal due and unpaid on subsequent Installments.

          (b)        The Exporter shall itself, or shall cause the Paying Agent to (for the benefit and on behalf of the Exporter) instruct all Importers to make all payments due hereunder and/or shall cause to be paid the proceeds arising from the Undertakings in US Dollars, in same day funds, no later than 10:00 a.m. (New York time), on the dates such payments are due, without set-off, counterclaim or deduction, directly to the account informed by the Collateral Agent in writing from time to time.

          (c)        Repayment of the Advance shall be made by payment of funds to the Collection Account. To that end, the Exporter agrees to, or cause the Paying Agent to (i) act in accordance with sub-item (b) above, (ii) upon request, but in any case not before 10 (ten) days after the relevant repayment date, provide the Administrative Agent with originals or copies of all Shipping Documents related to such Covered Shipments. The Collateral  Agent shall transfer sufficient funds from the Collection Account to the Administrative Agent. The Administrative Agent shall apply the funds received from the Collateral Agent towards repayment of the Exporter’s indebtedness hereunder. It is hereby understood that funds not received by 10:00 a.m. (New York time) and, in the absence of any authenticated notification received in form and substance satisfactory to the Collateral Agent from the Importer’s bank(s) confirming that such payment has been made, then the Collateral Agent will make payment next day value after receipt of funds.

          (d)        The Exporter or the Paying Agent, on behalf of the Exporter, shall make available, when and as due, funds in the Collection Account sufficient to satisfy the payment obligations of the Exporter hereunder and under the Promissory Note on the due dates thereof, notwithstanding any other obligations which the Exporter or the Paying Agent may have to any other Person, repayment of which is intended to be made from funds in such Collection Account.

          (e)        If the due date of any payment under this Prepayment Agreement or under the Promissory Note would fall on a day which is not a Banking Day, such date shall be extended to the next Banking Day (and Interest shall be payable for the Advance Amount so extended for the period of such extension), unless such Banking Day falls in the next calendar month, in which case the payment shall be due on the immediately preceding Banking Day.

          (f)        If the Lenders holding at least 51% (fifty-one per cent) determine that a Material Adverse Effect has occurred, such Lenders shall promptly inform the Administrative Agent in writing who shall in turn, within a period of no more than three Banking Days, provide written notice thereof to the Guarantor and the Exporter and, in case each Lender does not receive satisfactory remedy from the Exporter, the Paying Agent and/or the Guarantor, the Administrative Agent (after consultation with the Lenders) shall provide to the Guarantor and the Exporter a written demand for prepayment of the then outstanding principal amount of the Advance and within 90 (ninety) Banking Days of receipt of such demand by the Exporter and the Guarantor, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon.

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          (g)        The Exporter may, on a Banking Day, prepay all or a portion of any Advance Amounts at any time or from time to time, which pre-payment shall in each case, be made together with accrued and unpaid Interest on the principal amount, so prepaid and all other amounts then payable under this Prepayment Agreement (including the costs and expenses described in Section 17, solely in the event such prepayment is made on a day other than the final day of an Interest Period), without premium but subject to the costs and expenses described in Section 17 (solely in the event that such prepayment is made on a day other than the final day of an Interest Period); provided that: (a) the Exporter shall give the Lenders  notice of each such pre-payment at least three (3) Banking Days prior to the date of such prepayment (and, upon the date specified in any such notice, the amount to be prepaid shall become due and payable hereunder), (b) each such notice of pre-payment shall specify the amount of the Advance Amount being prepaid and (c) each partial pre-payment shall be applied to the outstanding Advances in the inverse order of maturity.

Section 6.     Taxes

          (a)        The Exporter will pay to the Administrative Agent (for the benefit of the Lenders), all amounts due under this Prepayment Agreement and the Promissory Note free and clear of all deduction of any present or future taxes, levies, imposts, charges, withholdings, penalties, fines, additions to tax and interest, imposed or levied in Brazil or any other jurisdictions from which any payment hereunder or under the Promissory Note is remitted, or any political subdivision or taxing authority thereof (the “Taxes”), except taxes imposed on each of the Lenders’ income by the jurisdiction under which such Lender is incorporated.

          (b)        In the event the Exporter is required to deduct or withhold any Taxes, the Exporter hereby agrees to pay the required deductions contemplated in Section 6(a) herein, including deductions applicable to the additional amounts payable thereunder, so that the Administrative Agent shall receive an amount equal to the sum the Lenders would have received had no such deductions been made.

          (c)        Upon the Administrative Agent’s request, the Exporter shall, within thirty (30) days, furnish a copy of the official receipts evidencing payment of Taxes made according to this Section 6, if any.

          (d)        The Exporter shall indemnify the Administrative Agent and the Lenders for the full amount of Taxes or any penalties, interest and expenses arising therefrom paid by each Lender. This indemnification shall be made within 45 days from the date the Lenders  make written request therefor, subject to Central Bank authorization.

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Section 7.     Illegality

          (a)        If, after the date of this Prepayment Agreement, the introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any of the Lenders with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for any of the Lenders to make, maintain or fund the Advance, and after such Lender or Lenders have made reasonable efforts to make, maintain or fund the Advance using other alternatives such as lending offices in other jurisdictions, then such Lender or Lenders forthwith shall so notify the Exporter in writing, whereupon the obligation of such Lender or Lenders to make or maintain the Advance shall be terminated. Upon receipt of such notice, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the longer of either (a) the last day of Interest Period applicable thereto or  (b) within sixty-six (66) Banking Days.

          (b)        Brazil or any competent authority thereof shall declare a moratorium on the payment of or default on, all or a substantial part of the Indebtedness of Brazil or any governmental agency or authority thereof or persons or corporations therein, the effect of which does or will prevent or impede any payment in respect of the Advance and the validity of “pre-pagamento” agreements in Brazil, then the Exporter forthwith shall so notify the Administrative Agent in writing within ten (10) Banking Days. Whereupon, unless within 20 (twenty) Banking Days the Administrative Agent, after consultation with the Lenders certifies in writing that it is satisfied that the Exporter, the Paying Agent and/or the Guarantor, shall be able to meet their respective obligations hereunder, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the longer of either (a) the last day of Interest Period applicable thereto or (b) within ninety (90) Banking Days. Prepayment made pursuant to this Section 7 shall be made without payment of Costs and Expenses as defined in Section 17.

          (c)        If, after the date of this Prepayment Agreement, the introduction of, or any change in the law in the Exporter’s country shall occur which renders this Prepayment Agreement invalid, illegal or unenforceable, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the longer of either (a) the last day of Interest Period applicable thereto or (b) within sixty-six (66) Banking Days.

          (d)        Prepayment pursuant to this Section 7 shall be made without premium.

Section 8.     Conditions Precedent

          (a)        The obligation of the Lenders to make the Advance is subject to the condition precedent that the Administrative Agent shall have received the following documents and instruments, duly executed, created or issued, as the case may be:

(i)	This Prepayment Agreement, and the Promissory Note;
(ii)	A copy of the Financial Transaction Registration (“Registro de Operações Financeiras – ROF”) issued by Central Bank of Brazil;
(iii)	Evidence of the payment of the fees due hereunder;

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(iv)	A Disbursement Request;
(v)	The Exporter’s and the Guarantor’s balance sheet and statement of income,  stockholders’ equity and cash flows as of and for the fiscal year ended 2003, certified by its independent public accountants;
(vi)	Legal opinion from Brazilian counsel to the Exporter and the Guarantor addressed to the Administrative Agent and regarding matters requested by the Administrative Agent, substantially in the form of Exhibit C hereto;
(vii)	Copies of (A) the by-laws of the Exporter, the Paying Agent and Guarantor and Articles  of  Incorporation, if applicable, and (B)  relevant corporate  authorizations of the Exporter, the Paying Agent and the Guarantor necessary  to authorize the execution, delivery and performance  of the Advance  Document;
(viii)	A certificate from a duly authorized Responsible Officer of each of the  Exporter, the Paying Agent and the Guarantor as to the incumbency and  signatures of its duly authorized officers that are authorized to execute and  deliver the Advance Document substantially in the form of Exhibit D hereto;
(ix)	such other approvals, opinions, or documents as the Administrative Agent may  reasonably request and which are duly justified in writing;

            (b)      The obligation of the Lenders to make the Advance is also subject to the satisfaction of the following conditions precedent, and the disbursement by the Lenders of the Advance shall constitute a representation by the Exporter that items (i), (ii) and (iii) below shall have been satisfied on and as of the Disbursement Date:

(i)	the representations and warranties made by the Exporter, the Guarantor and the Paying Agent herein shall be true and correct on and as of the Disbursement Date;
(ii)	both immediately prior to the making of the Advance and after giving effect thereto and to the intended use of the proceeds thereof, no Event of Default shall have occurred and be continuing; and
(iii)	there has been no material adverse change, since the last audited financial statements of the Exporter, the Paying Agent and the Guarantor received by the Administrative Agent, in the economic and/or financial condition of the Exporter and the Guarantor.

            (c)      Upon the receipt by the Exporter of the Disbursement Request duly acknowledged and agreed by the Administrative Agent, the Lenders shall make the Advance, notwithstanding the provisions of item b (iii) above.

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Section 9.     Representations and Warranties

(a)	Each of the Exporter, the Paying Agent and the Guarantor hereby represent and warrant that:
(i)	It is duly organised and validly existing under the laws of the jurisdiction of its  organisation, registered with the “Departamento do Comércio Exterior –  Decex”, and has full power, authority and legal right to borrow the Advance  and to execute, deliver and perform this Prepayment Agreement and any  Promissory Note in the form set forth in Exhibit A.
(ii)	The  Advance contemplated  herein  and  the  execution,  delivery  and  performance of this Prepayment Agreement and of the Promissory Note are  within its powers, and have been duly authorised by all necessary actions, and  do not violate any provision of applicable law, regulation or order of any court  or regulatory body. Furthermore,  the Advance  contemplated under this  Prepayment Agreement and evidenced by the Promissory Note will not result  in the breach of, constitute a default, or require any consent under any  agreement, instrument or document to which it is a party or by which it or any  of its property may be bound or affected.
(iii)	This Prepayment Agreement and the Advance Document constitute its legal,  valid and binding obligation, enforceable against it in accordance with its  terms.
(iv)	There are no  actions, suits or proceedings pending or, to its knowledge,  threatened against or affecting it before any court, governmental agency or  arbitrator, which may, in any one case or in the aggregate, have a Material  Adverse Effect and which as of the Disbursement Date have not been remedied  in full or otherwise are not being remedied in a manner satisfactory to the  Administrative Agent and the Lenders.
(v)	It has good title to, or valid leasehold interests in, all its real and personal  property material to its business, except for defects in title that do not interfere  with its ability to conduct its business as currently conducted or to utilise such  property for its intended purposes. It owns or is licensed or otherwise has the  right to use all of the patents, contractual franchises, licenses, authorisations  and other rights that are reasonably necessary for the operation of its business,  without conflict with the rights of any other Person.

(b)	The Exporter hereby represents and warrants further that:
(i)	It has furnished to the Administrative Agent its balance sheet and statement of  income, stockholders’ equity and cash flows as of and for the fiscal year ended  2003, certified by its independent public accountants. Such financial  statements are complete and correct, and fairly present the Exporter’s financial  condition and the results of its operations and cash flows as of such dates and  for such periods in accordance with Brazilian GAAP. Since December 31,  2003 there has been no development or event that has had or could reasonably  be expected to have a Material Adverse Effect.
(ii)	Other than the approval of the Central Bank, which will be obtained as per  Section 8(a)(ii), no authorisation or approval or other action by, and no notice  to or filing with, any Governmental Authority or regulatory body is required  for the due execution, delivery and performance of this Prepayment Agreement  (except that the Exporter shall have to enter into an exchange contract with a  bank authorised to operate in the exchange market in Brazil whenever it shall  pay interest hereunder) or any of the other Advance Document.

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(iii)	Its obligations evidenced by this Prepayment Agreement and the Advance  Document to which it is a party are its direct and unconditional obligations,  and rank in priority of payment and in all other respects at least pari passu with  all its other similar secured and unsubordinated indebtedness, subject  to statutorily preferred exceptions, it being understood that all debt provided by  BNDES shall be excluded from this clause.
(iv)	It is not in default under or with respect to any agreement, instrument or  undertaking to which it is a party or by which it or any of its property or assets  are bound which default would have or cause a Material Adverse Effect.
(v)	Neither it nor any of its property or assets has any immunity (sovereign or  otherwise) from jurisdiction of any court or from any legal process (whether  through service or notice, attachment prior to judgement, attachment in aid of  execution, execution or otherwise) under the laws of the jurisdiction of its  organisation, except for public concessions.
(vi)	Under the laws of Brazil in force at the date hereof, it is not necessary that this  Prepayment Agreement or the Promissory Note be filed, recorded or enrolled  with any court or any other authority in Brazil or that any stamp, registration or  similar tax be paid on or in relation to this Prepayment Agreement or the  Promissory Note; except that a certified translation into Portuguese of this  Agreement and the Promissory Note is required to be filed with a competent  Registry of Deeds in Brazil in order to ensure the legality, validity and binding  effect of this Prepayment Agreement and the Promissory Note;

Section 10.     Affirmative Covenants      Each of the Exporter and the Guarantor covenant and agree that, so long as any part of the Advance is outstanding it will:

            (a)      Furnish to the Administrative Agent (i) upon demand, but not earlier than 120 days after the end of each fiscal year, its consolidated and, if available, consolidating balance sheet, as of the end of its fiscal year, and the related statement of earnings, shareholders’ equity and changes in financial condition prepared in accordance with Brazilian GAAP, in each case setting forth in comparative form the figures for the previous fiscal year, and certified by independent public accountants of recognized international standing; (ii) promptly after it knows that any Event of Default has occurred, however not later than 20 days after such occurrence, a certificate from a duly authorized officer notifying the Lenders  as to the occurrence of such Event of Default, describing the same in reasonable detail and describing the actions that it proposes to take with respect thereto; (iii) immediately after the commencement thereof, notice in writing of all actions, suits and proceedings before any court or governmental agency or instrumentality of any jurisdiction which, if determined adversely to it, will have a Material Adverse Effect; and (iv) such other publicly available  information with respect to its business, properties or its condition or operations, financial or otherwise, as the Lenders  may from time to time reasonably request.

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          (b)        Keep proper books of record and account in which full, true and correct entries in conformity with Brazilian GAAP and the requirements of applicable law shall be made of all dealings and transactions in relation to its business.

          (c)        obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals, licenses and consents required in or by the laws and regulations of Brazil to enable it lawfully to enter into and perform its obligations under this Prepayment Agreement, the Promissory Note and the Export Agreements or to ensure the legality, validity, enforceability or admissibility thereof in evidence in Brazil;

          (d)        promptly upon receipt of the Advance, enter into and perform its obligations under the currency exchange agreement, on terms and subject to conditions approved by the Administrative Agent, preferably with Banco ABN AMRO REAL S.A. pursuant to which the Exporter sells the dollars represented by the Advance to, and receives Brazilian currency in respect thereof from, the bank responsible for the currency exchange agreement (Banco ABN AMRO REAL S.A. or otherwise a third financial institutions authorized by the Central Bank) and procure that such currency exchange agreement is promptly registered as a “Pagamento Antecipado de Exportação” with the Central Bank;

          (e)        Comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities; and take all necessary actions in order to obtain and maintain in full force and effect all such governmental authorizations, approvals and consents as may be required for it to comply with its obligations under this Prepayment Agreement and the other Advance Document;

          (f)        Continue to engage in its existing Business and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, and comply with all contractual obligations binding on it and its property.

          (g)        Take any and all actions necessary so that its obligations under the Advance Document to which it is a party shall at all times rank at least pari passu in priority of payment and in all other respects with all present and future secured and subordinated indebtedness, subject to statutorily preferred exceptions.

          (h)        Within 90 days after the first Disbursement Date, deliver to the Administrative Agent, the following documents, all of which shall be in form and substance satisfactory to the Administrative Agent: (a) an opinion of Clifford Chance LLP, special Hungarian counsel to the Initial Trading Company, (b) a certified copy of the Trading Company Collateral Documents, duly executed and delivered by the parties thereto, including registration of the Agreement Constituting Floating Charge dated in or around May 2004 between the Initial Trading Company and VCP Exportadora with the Registry of Charges maintained by the Hungarian Chamber of Notaries Public, (c) certified copies of the Organizational Documents of the Initial Trading Company

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Section 11.     Negative Covenants     Each of the Exporter and the Guarantor covenant and agree with the Administrative Agent and the Lenders that, so long as any part of the Advance is outstanding it will not:

          (a)        enter into any transaction of merger, amalgamation or consolidation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets; provided that:

(i)	it may merge or consolidate with or into, or sell or transfer all or substantially  all of its assets to, any other Person that is organized in an OECD Country (or,  if not an OECD Country,  its  current  jurisdiction of organization) if,  immediately after giving effect thereto:
	(A)	(1) with respect to any merger or consolidation, it is the surviving Person  or, if not, the surviving Person has validly assumed its obligations under  the Advance Document to which it is a party, or (2) with respect to a  sale, transfer, lease or other disposition of all or substantially all of its  assets, the Person to whom the assets have been sold, transferred, leased  or otherwise disposed has validly assumed all obligations under the  Advance Document to which the transferor is a party (which assumption  may constitute a novation of such obligations under applicable law);
	(B)	no Event of Default or event that (with notice, lapse of time or both)  would become an Event of Default (including under Section 12(m) or  resulting  from a  breach  of  Section 10(d))  exists  or  would  exist  immediately after such merger, consolidation, sale, transfer, lease or  other disposition;
	(C)	the  Administrative  Agent shall have  received  any other opinions,  evidence of security interest filings and other documents or evidence as  it may reasonably request in connection therewith;
	(D)	to the extent reasonably requested by the Administrative Agents, the  Advance Document shall have been amended (or amended and restated)  to reflect such merger, consolidation, sale, transfer, lease or other  disposition.
	Notwithstanding the foregoing clauses (A)-(D), the Net Debt to EBITDA Ratio  of any Surviving Entity shall not exceed 3.00 as of the date of consummation  of such merger, consolidation, sale, transfer, lease or other disposition.
(ii)	the Exporter may be merged into Guarantor,
(iii)	it may sell, lease, transfer  or  otherwise dispose of obsolete or worn-out  property or  equipment no longer used or useful in its business and any  inventory or other assets sold or disposed of in the ordinary course of its  business, and
(iv)	it may sell or otherwise transfer Goods and other assets to the Exporter or the  Guarantor, as the case may be, in the manner contemplated in the Advance  Document.

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          (b)        Enter into any transaction or series of related transactions with any Affiliate thereof (other than its wholly-owned Subsidiaries), other than in the ordinary course of their respective businesses and on terms and conditions substantially as favorable to it as would reasonably be obtained at that time in a comparable arm’s -length transaction with a Person other than such Affiliate. Notwithstanding the foregoing, this provision shall not apply to: (a) any loan or similar financial transaction (or series of related financial transactions) entered into for the sole purpose of performing cash management or other financial management functions of an Affiliate or Subsidiary as the case may be and/or (b) tax allocation agreements entered into from time to time between an Affiliate or a Subsidiary as the case may be provided always none of the foregoing shall materially impair the ability of the Exporter and/or Guarantor to comply with their respective obligations under this Prepayment Agreement.

Section 12.     Events of Default If one, or more, of the following events (each an “Event of Default”) shall occur and be continuing:

          (a)        The Exporter shall fail to make payment of any amount of principal due hereunder;

          (b)        The Exporter shall fail to make payment, due to administrative reasons, of any  Interest, fees or other amounts due hereunder (whether at stated maturity, at acceleration or otherwise), after the expiry of three (3) Banking Days after the date the same becomes due; or

          (c)        Any representation, warranty or certification made herein (or any modification or supplement hereto) by the Exporter or the Guarantor shall prove to have been false or misleading in any material respect as of the time made or furnished;

          (d)        The Exporter ceases to be involved in (i) the business of producing pulp and paper and/or other related products and (ii) other lines of business that are related or incidental to the business described under this Prepayment Agreement;

          (e)        The Exporter, the Paying Agent or the Guarantor shall default in the performance of any other obligation under this Prepayment Agreement (other than payment obligations or any of the events described in (a), (b), (c) and (d), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o), (p), (q), (r), (s) and (t) of this Section 12) and/or the Export or the Guarantor under the Promissory Note, including failure related to the export of the Goods; and such default continue un-remedied for a period of 10 Banking Days after notice thereof to the Exporter by the Administrative Agent, provided always that the Guarantee shall always be legally binding and effective on the Guarantor;

          (f)        The Exporter shall admit in writing its inability to be generally able to pay its debts;

          (g)        The Guarantor shall admit in writing its inability to be generally able to pay its debts;

          (h)        The Paying Agent shall admit in writing its inability to be generally able to pay its debts;

          (i)        The Exporter shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all, or substantially all, its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition  or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing;

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          (j)        The Paying Agent shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or substantially all its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing and the Exporter shall not have designated a substitute for replacement thereof reasonably acceptable to the Lenders within 10 Banking Days after notice thereof to the Exporter by the Administrative Agent;

          (k)        The Guarantor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or substantially all its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing;

          (l)        A proceeding or case shall be commenced, without the application or consent of the Exporter , in any court of competent jurisdiction, seeking (i) its liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its respective debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of the Exporter, the Paying Agent or the Guarantor of all or substantially all of its respective property or assets, or (iii) similar relief in respect of the Exporter, the Paying Agent or the Guarantor under any law relating to bankruptcy, insolvency, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or any order, judgement or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 44 (forty-four) Banking Days;

          (m)        Any default or event of default shall occur or be continuing under any agreement, instrument or other document of the Exporter or the Guarantor evidencing External Indebtedness (as defined below) in excess of Fifty Million Dollars (US$ 50,000,000.00) (or its equivalent in other currencies) and such default or event of default causes the acceleration of such External Indebtedness and shall not have been waived.  For purposes of this paragraph (h), “External Indebtedness” shall mean indebtedness for borrowed money which is payable or may be paid (i) in a currency other than the lawful currency of Brazil an (ii) to a Person resident or having its principal place of business outside of Brazil;

          (n)        Any judgement or order from which no further appeal is permissible under applicable law for the payment of money aggregating in excess of Fifty Million Dollars (US$ 50,000,000.00) (or its equivalent in another currency) shall be rendered against the Exporter or the Guarantor and such judgement or order shall continue unsatisfied and in effect for a period of 30 (thirty) calendar days;

          (o)        A Change of Control shall occur;

          (p)        An event shall occur which results in a Material Adverse Effect;

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          (q)        The Debt Service Coverage Ratio as of the end of any fiscal quarter of the Guarantor shall be less than 1.30 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant fiscal quarter);

          (r)        The Net Debt to EBITDA Ratio as of the end of any fiscal semester of the Guarantor shall exceed 3.00 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant Fiscal Semester);

          (s)        The Debt to Total Capitalization Ratio as of the end of any fiscal semester of VCP shall exceed 0.70 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant Fiscal Semester);

          (t)        For any two consecutive Measurement Periods  (or four during the life of the Advances), failure to achieve the Coverage Ratio;

          then, in such event, the Administrative Agent may by notice to the Exporter and the Guarantor, declare the Advance Amount then outstanding, the accrued Interest on the Advance and all other amounts payable by the Exporter hereunder to be, whereupon the same shall become, forthwith due and payable, without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Exporter. Notwithstanding the foregoing, any event referred to in clause (a) or (b) above existing for a period of up to 5 (five) Banking Days after the applicable grace period will not constitute an Event of Default if such delay or failure could not have been prevented by the exercise of reasonable diligence by the Exporter or the Guarantor, and such delay or failure was caused by an act of God, riot, an act of war, terrorism, epidemic, flood, weather, landslide, fire, earthquake, electrical outage or similar causes.

Section 13.     The Administrative Agent

Each of the Lenders hereby irrevocably confirms the appointment of the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf, and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

                    (a)        The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank may accept deposits from, lend money to and generally engage in any kind of business with the Exporter or any Subsidiary or Affiliate thereof as if it were not the Administrative Agent hereunder.

                    (b)        The Administrative Agent shall not have any duties or obligations except those expressly set forth herein or in any other loan documents to which it is a party. Without limiting the generality of the foregoing:  (i) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing;

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(ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Majority Lenders; and (iii) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Exporter, the Guarantor or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Administrative Agent by the Exporter, the Guarantor or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with this Prepayment Agreement and any other Advance Document, (B) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (D) the validity, enforceability, effectiveness or genuineness of this Prepayment Agreement or any Advance Document or any other agreement, instrument or document, or (E) the satisfaction of any condition set forth hereunder or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

                    (c)        The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing reasonably believed by it to be genuine and to have been signed or sent by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and reasonably believed by it to be made by the proper Person, and shall not incur any liability for relying thereon.  The Administrative Agent may consult with legal counsel (who may be counsel for the Exporter or the Guarantor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts other than through willful misconduct and/or gross negligence.

                    (d)        The Administrative Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent.  The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent of the Administrative Agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

                    (e)        Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by giving sixty (60) days written notice to the Lenders and the Exporter.  Upon any such resignation, the Majority Lenders shall have the right, in consultation with the Exporter, to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within sixty (60) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent.  Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the Administrative Agent’s resignation hereunder, the provisions of this Article hereof shall continue in effect for the benefit of such retiring Administrative Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

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                    (f)        Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Advance established pursuant to this Prepayment Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Prepayment Agreement and any other Advance Document, any related agreement or any document furnished hereunder or thereunder.

Section 14. The Collateral Agent

                    Each of the Lenders hereby irrevocably confirms the appointment of the Collateral Agent as its agent and authorizes the Collateral Agent to take such actions on its behalf, and to exercise such powers as are delegated to the Collateral Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

                    (a)        The bank serving as the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Collateral Agent, and such bank may accept deposits from, lend money to and generally engage in any kind of business with the Exporter or the Guarantor or any of its respective Subsidiary or Affiliate thereof as if it were not the Collateral Agent hereunder.

                    (b)        The Collateral Agent shall not have any duties or obligations except those expressly set forth herein or in any other loan document to which it is a party.  Without limiting the generality of the foregoing: (i) the Collateral Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing; (ii) the Collateral Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Collateral Agent is required to exercise in writing by the Majority Lenders; and (iii) except as expressly set forth herein, the Collateral Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Exporter or the Guarantor or any of its respective subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent. The Collateral Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or willful misconduct. The Collateral Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Collateral Agent by the Exporter, the Guarantor or a Lender, and the Collateral Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with this Prepayment Agreement and any other Advance Document, (B) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (D) the validity, enforceability, effectiveness or genuineness of this Prepayment Agreement and any other Advance Document or any other agreement, instrument or document, or (E) the satisfaction of any condition set forth or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Collateral Agent.

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                    (c)        The Collateral Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing reasonably believed by it to be genuine and to have been signed or sent by the proper Person.  The Collateral Agent also may rely upon any statement made to it orally or by telephone and reasonably believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Collateral Agent may consult with legal counsel (who may be counsel for the Exporter or the Guarantor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts other than through willful misconduct and/or gross negligence.

                    (d)        The Collateral Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Collateral Agent.  The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent of the Collateral Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Collateral Agent.

                    (e)        Subject to the appointment and acceptance of a successor Collateral Agent as provided in this paragraph, the Collateral Agent may resign at any time by giving sixty (60) days written notice to the Lenders and the Exporter.  Upon any such resignation, the Majority Lenders shall have the right, in consultation with the Exporter and the Guarantor, to appoint a successor.  If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within sixty (60) days after the retiring Collateral Agent gives notice of its resignation, then the retiring Collateral Agent may, on behalf of the Lenders, appoint a successor Collateral Agent or an Affiliate of any such bank.  Upon the acceptance of its appointment as Collateral Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After the Collateral Agent’s resignation hereunder, the provisions of this Article hereof shall continue in effect for the benefit of such retiring Collateral Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while it was acting as Collateral Agent.

                    (f)        Each Lender acknowledges that it has, independently and without reliance upon the Collateral Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Advance established pursuant to this Prepayment Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Collateral Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Prepayment Agreement and any other loan document, any related agreement or any document furnished hereunder or thereunder.

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Section 15. Relationship between the Lenders

                    (a)        The participation in the Advance hereunder shall be for each of the Lenders’ own account and risk. Each Lender shall bear the risks associated with its portion of the Advance under this Prepayment Agreement, including, without limitation, that the Exporter may fail to make payments as required pursuant to the terms of this Prepayment Agreement and any other Advance Document.

                    (b)        Any action to be taken by the Lenders hereunder shall be taken by the Administrative Agent, upon written request of the Majority Lenders.

                    (c)        Each Lender has reviewed the text of each document evidencing the Advance, including this Prepayment Agreement and any other Advance Document. Each Lender acknowledges and agrees that no exercise of the rights and benefits provided to the parties in any other loan document shall impose any rights or obligations upon any other Lenders thereof other than are expressly set forth herein or therein.

                    (d)        Each Lender will contribute to its pro rata participation of any and all costs, expenses and disbursements incurred or made by the Administrative Agent, the Collateral Agent and any other Lender in protection of rights granted pursuant to this Prepayment Agreement or any other Advance Document and enforcing any remedies hereunder or thereunder. Any costs, expenses or disbursements incurred by a Lender pursuant to the immediately preceding sentence must be approved by the Majority Lenders prior to any incurrence by any Lender in order to be subject to contribution pursuant thereto.

                    (e)        Each Lender agrees to indemnify and hold the Administrative Agent and the Collateral Agent harmless, to the extent of each Lender’s pro rata participation, from any and all claims (including, without limitation, any tax claims), losses, liabilities, costs and expenses (including legal fees and disbursements) suffered or incurred by the Administrative Agent or the Collateral Agent in connection with the Advance or the transactions contemplated by this Prepayment Agreement and any other Advance Document (other than those arising out of Administrative Agent’s or Collateral Agent’s own gross negligence or willful misconduct).

                    (f)        In the event the Administrative Agent makes any payment to a Lender and either does not receive such payment promptly from the Exporter thereafter or for any reason amounts received by the Administrative Agent are rescinded or must otherwise be returned by the Administrative Agent, each Lender will immediately repay to the Administrative Agent, upon request, such Lender’s pro rata participation of such amount not received or so returned or paid.

                    (g)        Anything in this Prepayment Agreement to the contrary notwithstanding, in no event shall the Administrative Agent or any Lender be liable under or in connection with this Prepayment Agreement or any other loan document for indirect, special, incidental, punitive or consequential losses or damages of any kind whatsoever, including but not limited to lost profits, whether or not foreseeable, even if the Administrative Agent or any Lender has been advised of the possibility thereof and regardless of the form of action in which such damages are sought.

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Section 16. Fees

16.1 Up-front-Participation-Fee. The Exporter shall pay to the Administrative Agent (for the benefit of the Lenders) the Up-front-Participation Fee in United States Dollars, in the amount and at the times agreed in the Offer Letter dated April 13, 2004.

16.2. Arrangement Fee. The Exporter shall pay to the Lead Arrangers an arrangement fee in the amount and at the times agreed in the Offer Letter dated April 13, 2004.

16.3. Administrative Agent Fee: The Exporter shall pay to the Administrative Agent a fee of US$ 25,000.00 per annum as long as any amounts due hereunder remain outstanding.

Section 17.     Costs and Expenses

          (a)         If the Exporter makes any payment of principal of the Advance (excluding as a result of the provision set forth in Section 7 hereof) on any day, other than the last day of the Interest Period applicable thereto, or fails to borrow the Advance on the date specified therefore in the notice to the Administrative Agent pursuant to Section 3 hereof, the Exporter shall reimburse the Lenders, on demand, for any financial loss, excluding loss of anticipated profits, incurred by it as a result of the timing of such payment or such failure, or as a result of liquidating or employing deposits from third parties, provided that the Administrative Agent shall have delivered to the Exporter a certificate as to the amount of such loss incurred by the Lenders , which certificate shall be conclusive in the absence of manifest error.

          (b)         The Exporter agrees to reimburse the Lenders on demand for all reasonable and documented costs and expenses (including without limitation legal fees and registration costs) incurred by the Lenders in connection with the preparation and execution of the Advance Document, subject to a maximum amount of US$10,000.00 (ten thousand US Dollars).

Section 18.     Governing Law and Jurisdiction

          This Prepayment Agreement shall be governed by and construed in accordance with the laws of the state of New York.

          (a)         The Exporter, the Paying Agent and the Guarantor irrevocably agree for the exclusive benefit of the Collateral Agent, the Administrative Agent and the Lenders that the courts of the state of New York shall have jurisdiction to hear and determine any suit action or proceeding, and to settle any disputes, which may arise out of in connection with this Prepayment Agreement and for such purposes you hereby irrevocably submit to the jurisdiction of such courts.

          (b)         Nothing contained in this Section shall limit the right of the Collateral Agent, Administrative Agent and the Lenders to take proceedings against the Exporter or the Guarantor, in any other court of competent jurisdiction, nor shall the taking of any such proceedings in one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not (unless precluded by applicable law).

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          (c)         The Exporter, the Guarantor and the Paying Agent waive any objection which it may have now or in the future to the courts of the state of New York being nominated for the purpose of Section 18 (b) above and agree not to claim that any such court is not a convenient or appropriate forum.

          (d)         Each of the Exporter, Guarantor and Paying Agent hereby authorizes and appoints CT Corporation CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011, United States of America to accept service of all legal process arising out of or connected with this Prepayment Agreement.  Service on such person(s) (or substitute) shall be deemed to be service on the Exporter, Guarantor or the Paying Agent whether or not process is forwarded to or received by it. Except upon such a substitution, the Exporter and the Guarantor undertakes not to revoke any such authority or appointment, at all times to maintain an agent for service of process in New York, New York – United States of America and, if any such agent ceases for any reason to be an agent for this purpose, forthwith to appoint another agent and advise the Administrative Agent accordingly. Failing such appointment, the Administrative Agent shall be entitled by notice to the Exporter to appoint such a replacement agent to act on behalf of the Exporter, Guarantor and the Paying Agent (as the case may be).

Section 19.     Successors and Participations

          (a)         This Prepayment Agreement and the Promissory Note shall be binding on the Exporter, the Guarantor, the Paying Agent, and its respective successors and assigns and shall inure to the benefit of the Lenders and its successors and assigns.

          (b)         Except as provided herein, neither the Exporter, nor the Paying Agent nor the Guarantor may assign or otherwise transfer all or any part of its respective rights or obligations under this Prepayment Agreement and the Promissory Note without the prior written consent of the Administrative Agent (after written consent of the Lenders).

          (c)         The Lenders (including Administrative Agent, and Collateral Agent) may: (i) assign in whole and in part its rights and obligations under this Prepayment Agreement and the Promissory Note, provided, however, that such assignment (A) does not increase the overall cost hereunder to the Exporter, in any way whatsoever, and (B) is consented by the Exporter in writing (such consent not to be unreasonably withheld); provided, however that no such consent is required in the event  (x) the Lender assigns its rights and obligations to another branch of the Lender or any entity directly or indirectly controlled by, controlling or under common control with, the Lender, or (y) at any time that an Event of Default of payment as described in Section 12 (a) has occurred and is continuing; (ii) sell participations in, all or any part of this Prepayment Agreement and the Promissory Note to another bank or other entity without the prior written consent of the Exporter, provided that the Administrative Agent shall advise the Exporter of each such sale of participations within five Banking Days from such sale.

For the purposes hereof, (a) “Assignment Agreement” shall mean any agreement entered into by the buyer (the “Assignee”) of specified rights and obligations of the seller (the “Assignor”) in respect of this Prepayment Agreement and the Promissory Note, and whereby the Assignee will substitute the Assignor as a Lender and (b) a “Participation” shall mean any agreement entered into by the Lender whereby the Lender sells to any third party (a “Participant”) its interest in all or any part of this Prepayment Agreement and the Promissory Note; provided, however, that in any such case the contractual relation between the parties hereto shall not be affected, and the Participant itself shall have no right to directly enforce this Prepayment Agreement and the Promissory Note against the Exporter or the Guarantor.

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Section 20.     Indemnification

          The Exporter, the Guarantor and the Paying Agent agree to indemnify and hold harmless the Administrative Agent, Collateral Agent the Lenders and its officers, directors, employees, agents and representatives (together, the “Indemnified Parties”) from and against any and all liabilities, losses, damages, penalties, actions, judgements, suits, costs, expenses (including the reasonable documented fees and expenses of external counsels) or disbursements of any kind whatsoever (together, “Liabilities”) which may at any time (including following the repayment of the Advance) be imposed upon, incurred by or asserted against the Indemnified Parties as a result of, relating to, or arising out of any of the Advance Document or any document contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Indemnified Parties under or in connection with any of the foregoing and that are duly evidenced by the Lenders, provided, however, that the Liabilities do not result directly from the gross negligence or willful misconduct of the relevant Indemnified Party.

Section 21.     Miscellaneous

          (a)         Any amendment or waiver of any provision of this Prepayment Agreement, or consent to any departure by the parties herefrom must be in writing and signed by the Exporter, the Paying Agent, the Guarantor, the Administrative Agent, the Lenders and the Collateral Agent. Such waiver or consent shall be effective only in the specific instance for which it is stipulated. Any failure or delay by the parties in exercising their rights hereunder shall not be deemed a waiver and shall not preclude the parties from the exercise of their rights.

          (b)         All notices, designations, consents, offers, acceptances, or any other communications provided pursuant to this Prepayment Agreement shall be given in writing and sent, to the Administrative Agent, the Paying Agent, the Guarantor and the Exporter at the following addresses or to such other addresses as may be designated in writing from time to time by the parties:

If to the Lead Arrangers:

ABN AMRO BANK N.V.
C/o of Banco ABN AMRO REAL S.A.
Attn: GT&A – Renato Faria/Andrea Moor
Avenida Paulista, 15^th floor
CEP 01310-916 – São Paulo – Brazil
Fax: +55+1103174-9378
e-mail: inbal.salzstein@br.abnamro.com

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BANCO SANTANDER CENTRAL HISPANO, S.A.
Attn: Olga Valverde
Address: 100 Ludgate Hill
London EC4M 7NJ England
Tel: 00-44-207-332-7747
Fax: 00-44-207-332-7839
e-mail: ovalverde.londres@sinvest.es

If to each of the Lenders:

To such Lender’s address as set forth in such Lender’s administrative details specified on Schedule 2 attached hereto together with its successors and permitted assigns pursuant to the Section 19 above.

If to the Administrative Agent:
ABN AMRO Bank N.V.
C/o of Banco ABN AMRO REAL S.A.
Attn: GT&A – Inbal SalzsteinAvenida Paulista, 15^th floor
CEP 01310-916 – São Paulo – Brazil
Fax: +55+1103174-9378
e-mail: inbal.salzstein@br.abnamro.com
If to the Collateral Agent:

BANCO SANTANDER CENTRAL HISPANO S.A.
Attn: Jim Inches
Address: 100 Ludgate Hill
London EC4M 7NJ England
Tel: 00-44-207-3327781
Fax:00444-207-3327421
e-mail: jinches.londres@sinvest.es

If to the Exporter:
Attn: Mr. J. J. Trigo
Address: 1357 Alameda Santos
Sao Paulo, Brazil
Tel.: +55-11-3269-4165
Fax: +55-11-3269-4068
e-mail: trigojj@vcp.com.br

If to the Guarantor:
Attn: Mr. J. J. Trigo
Address: 1357 Alameda Santos
Sao Paulo, Brazil
Tel.: +55-11-3269-4165
Fax: +55-11-3269-4068
e-mail: trigojj@vcp.com.br

31

If to the Paying Agent:
Attn: Mr. J. J. Trigo
Address: Kaya W.F.G. (Jambi)
Mensing, 14, Curaçao
 Tel.: +55-11-3269-4165
Fax: +55-11-3269-4068
e-mail: trigojj@vcp.com.br

All such notices and communications shall be deemed given: (i) upon delivery if delivered by hand to the addresses provided in this Section 21(b); (ii) upon receipt if delivered by facsimile transmission to the number provided herein; or (iii) five (5) Banking Days after the date of deposit in the courier agency if delivered by reputable courier, return receipt requested if available, postage prepaid.

          (c)         This Prepayment Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect thereto.

          (d)         The various provisions of this Prepayment Agreement are severable from each other. In the event that any provision in this Prepayment Agreement shall be held invalid or unenforceable by a court of competent jurisdiction, the remainder of this Prepayment Agreement shall be fully effective, operative and enforceable.

          (e)         No party hereto shall be liable for any delay in performance of any obligation hereunder by reason of any act or circumstance beyond the control of such Party due to the occurrence of a force majeure.

          (f)         The obligations of the Exporter, Paying Agent and the Guarantor under Sections 7, 20, and 22 hereof shall survive the repayment in full of the Advance.

          (g)         This Prepayment Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

Section 22.     Guarantee

          (a)         In consideration of the Lenders entering into the Prepayment Agreement with the Exporter (or for other valuable consideration receipt of which is hereby acknowledged), the Guarantor, as primary obligor unconditionally and irrevocably, jointly and severally, (i) guarantees the Lenders, on first written demand, by way of continuing security, the payment when due of all amounts payable by the Exporter or the Paying Agent under the Prepayment Agreement and other Advance Document and (ii) agrees that if and each time that the Exporter or the Paying Agent shall fail to make any payments as and when the same become due under the Advance Document, the Guarantor will on first written demand (without requiring the Lenders first to take steps against the Exporter or the Paying Agent or any other person) pay to the Lenders such amounts (as to which the certificate of the Lenders shall in the absence of manifest error be conclusive) in the currency in which such amounts are payable by the Exporter or the Paying Agent, free of all tax, charges or deductions whatsoever together with Interest thereon from the date of demand until the date of payment at the rate specified in the Prepayment Agreement. If deductions must be made by law then the Guarantor will pay such additional amounts as may be necessary to ensure that the Lenders receive the full amount provided for.

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          (b)         The obligations of the Guarantor herein contained shall be in addition to and independent of every other security, if any, that the Lenders may at any time hold in respect of any obligation of the Obligors under the Prepayment Agreement.

          (c)         The obligations of the Guarantor hereunder constitute continuing obligations notwithstanding any intermediate payment or satisfaction of any part of any sum or sums of money owed by the Obligors under the Advance Document and shall not be affected by any matter that might operate to affect such obligations including without limitation (i) any time or indulgence granted to or composition with the Obligors or any other person, (ii) the taking, variation, renewal or release of, or neglect to perfect or enforce, any rights, remedies or securities against the Obligors or any other person or (iii) any unenforceability or invalidity of the Advance Document or any enforceability or invalidity of any obligations of the Obligors so that this Guarantee shall be construed as if there were no such unenforceability or invalidity.

          (d)         The Guarantor agrees as a primary obligation to indemnify the Lenders from time to time on demand from and against any loss incurred by the Lenders as a result of any of the obligations of the Obligors under the Advance Document being or becoming void, voidable, unenforceable or ineffective for any reason whatsoever, whether or not known to the Lenders, the amount of such loss being the amount which the Lenders would otherwise had been entitled to recover from the Obligors. The Guarantor will reimburse the Lenders all costs incurred by the Lenders in connection with the enforcement of this Guarantee.

          (e)         The Guarantor warrants that this Guarantee is its legally binding obligation enforceable in accordance with its terms and that all necessary governmental consents, authorizations and all other legal requirements for the giving and implementation of this Guarantee have been obtained.

          (f)         Until all amounts which may be or become payable under the Advance Document have been irrevocably paid in full, the Guarantor shall not by virtue of this Guarantee be subrogated to any rights of the Lenders or claim in competition with the Lenders against the Obligors or any other person.

          (g)         This Guarantee will remain in full force and effect until full discharge of the obligations of the Exporter to the Lenders.

33

          (h)         The rights of the Administrative Agent (for the benefit of each creditor hereunder or the Promissory Note) shall not be affected, nor shall the Guarantor be exonerated or discharged from its liabilities assumed hereunder by time being given to the Exporter or by any other indulgence or concession to the Exporter granted by the Administrative Agent (for the benefit of each creditor hereunder or the Promissory Note), by the taking, holding, varying, non-enforcement or release by the Administrative Agent (for the benefit of each creditor hereunder or under the Promissory Note) of any rights or remedies against the Exporter or other person or other guaranty or security for any of the sums payment of which is guaranteed hereunder or under the Promissory Note) or by any other indulgence or concession to the Exporter.

          (i)         Without conflict of applicable law, the Guarantor waives any and all rights (i) of preference as provided in Article 366, 827 and 838 of the Brazilian Civil Code and (ii) to object to be exonerated or discharged from its liabilities assumed hereunder.

          (j)         If the Lenders receive an amount in respect of the Guarantor’s liability under this Guarantee or if that liability is converted into a claim, proof, judgement or order in a currency other than the currency (the “Contractual Currency”) in which the amount is expressed to be payable under Section 5 above:

(i)	The Guarantor shall indemnify the Lenders as an independent obligation against any loss or liability arising as a result of the conversion;
(ii)	If the amount received by the Lenders, when converted into the Contractual Currency at a market rate in the usual course of its business, is less than the amount owed in the Contractual Currency, the Guarantor shall forthwith on demand pay to the Lenders an amount in the Contractual Currency equal to the deficient amount; and
(iii)	The Guarantor shall pay to the Lenders on demand any exchange costs and taxes payable and reasonably incurred in connection with any such conversion.

The Guarantor irrevocably authorizes the Lenders to apply any credit balance to which the Guarantor is entitled on any account of the Guarantor with the Lenders in satisfaction of any sum due and payable from the Guarantor to the Lenders hereunder but unpaid; for this purpose, the Lenders are authorized to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application.

Section 23.     Assignment of Export Agreement

In consideration of the Lenders entering into this Prepayment Agreement:

          (a)         The Exporter hereby assigns, as of each date that is 30 (thirty) days prior to each date on which an Installment, Interest and all amounts due herein, are due and payable pursuant to the terms and conditions of this Prepayment Agreement, with full title guarantee and as a continuing security for the payment of its obligations hereunder (the “Secured Obligation”), an absolute security interest (“Security Interest”) in a portion of the Exporter’s rights, interest and remedies with respect to any and all of the Undertakings (including, but not limited to all of the Exporter’s rights to receive payment from Importers, including (but  not limited to) all of the Exporter’s future acquired rights to payment under the Export Agreements whether in the form of a letter of credit or right to title to the Goods or otherwise) which portion shall have a value not less than the value of such Installment, Interest and all amounts due herein.

34

          (b)         The Exporter will fully perform all of its material obligations under the Export Agreements, and will enforce all of its rights and remedies thereunder as it deems appropriate in its reasonable business judgement; provided, however, that the Exporter will not take any action or fail to take any action which would result in a waiver or other loss of any material rights or remedy of the Exporter thereunder.

          (c)         The Exporter will not, without the Administrative Agent ‘ prior written consent (which consent shall not be unreasonable withheld), modify, amend, supplement, compromise, satisfy, release or discharge the Export Agreements, any person liable directly or indirectly with respect thereto, or any agreement relating to the Export Agreements.

          (d)         The Exporter will at all times remain liable to observe and perform all of its duties and obligations under the Export Agreements, and the Lenders’ exercise of any of its rights with respect to this Prepayment Agreement will not release the Exporter from any of such duties or obligations. The Lenders are not obligated to (I) perform or fulfil any of the Exporter’s duties or obligations under the Export Agreements (II) make any payment under the Export Agreements, (III) make any inquiry as to the sufficiency of any payment of property received by it under the Export Agreements or the sufficiency of performance by any party under the Export Agreements, or (IV) present or file any claim, or take any action to collect or enforce any performance or payment of any amounts, or delivery of any property.

          (e)         Effective from and after the occurrence of any Event of Default and during the continuation thereof, the Exporter hereby irrevocably authorizes and empowers the Administrative Agent, on behalf of the Lenders, at the Administrative Agent’s sole discretion, to assert, either directly or on behalf of the Exporter any claims the Exporter may then or thereafter have against Importer with respect to the Undertakings that are subject to this Prepayment Agreement, in such a manner, as the Administrative Agent or the Collateral Agent may deem proper, to receive and collect any and all damages, awards and other monies resulting therefrom and to apply the proceeds therefrom on account of the Secured Obligations, whether or not then due, in accordance with the terms of the Prepayment Agreement. The Exporter hereby authorizes the Administrative Agent and the Collateral Agent, on behalf of the Lenders to collect all amounts due to the Exporter under and by virtue of the Export Agreements including any future acquired rights to payment thereunder.

          (f)         Power-of-Attorney: To facilitate the foregoing, the Exporter hereby irrevocably authorizes and empowers each of the Administrative Agent and the Collateral Agent as its attorneys at any time after the occurrence and during the continuance of an Event of Default to (a) either directly or on behalf of the Exporter, assert any claims and demands and enforce any rights and remedies as the Exporter may have, from time to time, with respect to the Undertakings that shall have been assigned to the Lenders pursuant to Section 23(a), as the Administrative Agent, Collateral Agent  and the Lenders may deem proper and (b) receive and collect any and all proceeds, awards or amounts due to the Exporter in respect of any indemnification claims under the Secured Obligations in such manner as the Exporter’s true and lawful attorney to assert, at any time after the occurrence and during the continuance of an Event of Default, any claims and demands or enforce any rights and remedies and collect  such proceeds, awards and amounts and to apply such monies to the Secured Obligations in such manner as the Administrative Agent, Collateral Agent  and the Majority Lenders shall elect. This power of attorney is coupled with an interest and is irrevocable by the Exporter.

35

          (g)         This Prepayment Agreement creates a continuing security interest in the Undertakings and all representations, warranties, and agreements in each case, as specified in Section 23(a), and such security interest shall terminate only upon the full and irrevocable payment of all amounts owing to the Lenders under this Prepayment Agreement; provided that the Lenders have no other commitment to extend credit or make advance to or for the account of the Exporter.  At such time, the Lenders and the Administrative Agent will, at the request of the Exporter, reassign and redeliver to the Exporter all of its rights hereunder which have not been sold, which reassignment and redelivery will be without warranty by or recourse to the Lenders, except as to the absence of any prior assignments by the Lenders of its interest in the Undertakings, and will be at the expense of the Exporter.

IN WITNESS WHEREOF, each of the Exporter, the Paying Agent, the Guarantor, the Administrative Agent, the Collateral Agent and the Lenders have executed this Prepayment Agreement in seven  (7) originals in English as of the date first above written herein.

ABN AMRO BANK N.V.
As Lead Arranger
By:	By:
Name:	Name:
Title:	Title:
BANCO SANTANDER CENTRAL HISPANO, S.A., London Branch
As Lead Arranger
By:	By:
Name:	Name:
Title:	Title:
ABN AMRO BANK N.V. as Administrative Agent
By:	By:
Name:	Name:
Title:	Title:
BANCO SANTANDER CENTRAL HISPANO, S.A., London Branch, as Collateral Agent
By:	By:
Name:	Name:
Title:	Title:

36

VCP EXPORTADORA E PARTICIPAÇÕES LTDA., as Exporter
By:	By:
Name:	Name:
Title:	Title:
VOTORANTIM CELULOSE E PAPEL S.A., as Guarantor
By:	By:
Name:	Name:
Title:	Title:
VCP TRADING N.V., as Paying Agent
By:	By:
Name:	Name:
Title:	Title:
ABN AMRO Bank N.V.
As Lender
By:	By:
Name:	Name:
Title:	Title:
BANCO SANTANDER CENTRAL HISPANO, S.A., LONDON BRANCH
As Lender
By:	By:
Name:	Name:
Title:	Title:
Witnesses:
1.	2.
Name:	Name:

37

SCHEDULE 1

INITIAL IMPORTERS

NAME	COUNTRY
M-Real Sittingbourne Ltd.(Former UK Paper)	United Kingdom
Papierfabrik Scheufelen GmbH	Germany
Ahlstrom Sibille	France
Ahlstrom Dalle	France
Fedrigoni Cartiere S.p.A.	Italy
Koehler Kehl Gmbh	Germany
Kimberly Clark Corp.	USA
Marubeni Corporation	Japan
Itochu Corporation	Japan
Amicell Inc	USA
Cellmark AB	Sweden
Lindenmeyer Munroe-Maine	USA
TST Impresso INC	USA
Elof Hansson Paper & Board Inc.	USA
Diamond Paper Corporation	USA
J. McNaughton Paper Group Ltd	England
Antalis S.N.C.	France
Allcart S.R.L.	Italy
IMPECO, S.L.	Spain
Trent Paper	England
Roxcel Handelsges M.B.H.	Austria
Norse Paper A.S.	Norway
Premier Paper Group LTD	England
MoDoVan Gelder	Netherlands

38

SCHEDULE 2

LENDERS’COMMITMENTS

Lender	Commitment
ABN AMRO BANK N.V.	US$	77,000,000.00
BANCO SANTANDER CENTRAL HISPANO, acting  through its London branch	US$	25,000,000.00
TOTAL	US$	102,000,000.00

39

SCHEDULE 3

PAYMENT DATES

Date	Principal Amount (US$)	Description
05/12/2004	(102,000,000)	Disbursement Date
06/11/2004		Interest Payment Date
11/22/2004		Interest Payment Date
05/20/2005		Interest Payment Date
11/17/2005		Interest Payment Date
05/16/2006		Interest Payment Date
11/12/2006		Interest Payment Date
05/11/2007		Interest Payment Date
11/07/2007		Interest Payment Date
05/06/2008		Interest Payment Date
10/31/2008		Interest Payment Date
04/30/2009	25,500,000.00	Principal and Interest Payment Date
07/29/2009	9,562,500.00	Principal and Interest Payment Date
10/27/2009	9,562,500.00	Principal and Interest Payment Date
01/25/2010	9,562,500.00	Principal and Interest Payment Date
04/23/2010	9,562,500.00	Principal and Interest Payment Date
07/23/2010	9,562,500.00	Principal and Interest Payment Date
10/22/2010	9,562,500.00	Principal and Interest Payment Date
01/20/2011	9,562,500.00	Principal and Interest Payment Date
04/06/2011	9,562,500.00	Principal and Interest Payment Date. Final Maturity Date.

40

Exhibit A

PROMISSORY NOTE

Amount in US$ 102,000,000.00
Place: São Paulo, Brazil.
Date: May 12, 2004

FOR VALUE RECEIVED, VCP EXPORTADORA E PARTICIPAÇÕES LTDA., a company duly organised and existing under the laws of the Federative Republic of Brazil, with its head office located at 1357 Alameda Santos, São Paulo, Brazil, (the “Exporter”) hereby promises to pay to ABN AMRO Bank, as Administrative Agent, on behalf of the Lenders , the principal sum of US$ 102,000,000.00  (One hundred and two million  UNITED STATES DOLLARS) (the “Advance”), on the dates as specified in the Export Prepayment Agreement (as defined below) until (the “Final Maturity Date”) or on such earlier date as may be required by the Lender  in accordance with the terms of the Export Prepayment Agreement (as defined below). The Exporter also promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Export Prepayment Agreement

Both principal and interest hereunder are payable in lawful money of the United States of America, in same day funds, to the Administrative Agent, at its account at ABN AMRO BANK N.V. – New York Branch, informed from time to time, free and clear of all deduction of any present or future taxes, levies, imposts, charges, withholdings, penalties, fines, additions to tax and interest, imposed or levied in Brazil or any other jurisdictions from which any payment hereunder is remitted, or any political subdivision or taxing authority thereof, except taxes imposed on the Lenders’ income by the jurisdiction under which the Lenders are incorporated.

The Exporter hereby waives, to the fullest extent permitted by applicable law, presentment, demand, protest and all notices of any kind in connection with this Promissory Note. The failure of the Lenders to exercise any of their rights hereunder in any particular instance shall not constitute a waiver thereof in that instance or any subsequent instance.

This promissory note is the Promissory Note referred to in that Export Prepayment Agreement, dated as of May 12, 2004 (the “Export Prepayment Agreement”), among the Exporter, the Guarantor, the Paying Agent, the Administrative Agent, Collateral Agent and the Lenders, which among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events therein specified.

This Promissory Note shall be governed by, and construed in accordance with New York law, without giving effect to its conflict of law principles.

41

VCP EXPORTADORA E PARTICIPAÇÕES LTDA.
By:	By:
Name:	Name:
Title:	Title:
Per Aval:
VOTORANTIM CELULOSE E PAPEL S.A.
By:	By:
Name:	Name:
Title:	Title:

42

Exhibit B

DISBURSEMENT REQUEST

To:	ABN AMRO Bank, as Administrative Agent
Attn:	[Contact Person]

Sao Paulo, Brazil, [date]

BANK X
[Address]

Ladies and Gentlemen:

We refer to the Export Prepayment Agreement dated as of [date] (the “Prepayment Agreement”) among VCP Exportadora e Participações Ltda., Votorantim Celulose e Papel S.A., VCP Trading N.V., the Administrative Agent, the Collateral Agent and the Lenders. Terms defined in the Prepayment Agreement shall have the same meaning in this Disbursement Request.

Pursuant to Section 3 of the Prepayment Agreement, we hereby request the Lenders to make an advance to us in the amount of US$ xx,000,000.oo (the “Advance Amount”) on [date] (the “Disbursement Date”) for the purpose of financing future exports to be made by the Exporter to the Importers in accordance with the Prepayment Agreement.

Not later than 2 (two) Banking Days prior to the Disbursement Date, we shall give you in writing the credit instructions for the Advance Amount.

We confirm that, on the date hereof, the representations set out in Section 9 of the Prepayment Agreement are true and correct and that no Event of Default has occurred and is continuing.

Enclosed are the documents required pursuant to Section 8 of the Prepayment Agreement.

Sincerely yours,

By:
Name:	Jose Joao Trigo
Title:	Treasurer

43

Exhibit C

Offer Letter dated April 13, 2004

44

EX-4.2

Exhibit 4.2

EXECUTION COPY

US$ 123,000,000
OFFSHORE FACILITY AGREEMENT

dated as of July 5, 2004

among

VCP TRADING N.V.,
as Borrower

VOTORANTIM CELULOSE E PAPEL S.A. – VCP
as Guarantor

The Lenders from time to time hereunder,

and

ABN AMRO BANK N.V.

and

BANCO BRADESCO S.A.

as Lead Arrangers

ABN AMRO BANK N.V., CHICAGO BRANCH

as Administrative Agent

ABN AMRO TRUST COMPANY (CURAÇAO) N.V.

as Collateral Agent

1

OFFSHORE FACILITY AGREEMENT

          This OFFSHORE FACILITY AGREEMENT (the “Offshore Facility Agreement”) is made as of July 5, , 2004 by and among:

          VCP TRADING N.V., a company duly organized and existing under the laws of the Netherlands Antilles with its head office located at Kaya W. F. G. (Jombi) Mensing 14, Curaçao (the “Borrower”);

          VOTORANTIM CELULOSE E PAPEL S.A. – VCP, a corporation organized and existing under the laws of the Federative Republic of Brazil, with its head office located at 1357 Alameda Santos, Sao Paulo Brazil, (“VCP” or the “Guarantor”);

          The LENDERS from time to time hereunder;

          ABN AMRO BANK N.V., a bank duly organized and existing under the laws of The Netherlands, and BANCO BRADESCO S.A., a bank duly organized and existing under the laws of Federative Republic of Brazil, acting through its branch located in Grand Cayman , (together with its successors and permitted assigns, the “Lead Arrangers”), ABN AMRO BANK N.V., in its capacity as the Administrative Agent and Collateral Agent for the Lenders (in such capacity and, together with its successors and permitted assigns, the “Administrative Agent” and “Collateral Agent”).,

WITNESSETH

          WHEREAS, the Borrower has entered or will enter into one or more Purchase Agreements with the Final Buyers, pursuant to which the Borrower will sell or cause to sell Goods from Brazil to the Final Buyers (all capitalised terms used herein have the meanings assigned to them below);

          WHEREAS, the Borrower’s sales of Goods under the Purchase Agreements will be made through several shipments (the “Covered Shipments”) with the aggregate Purchase Price for such Covered Shipments being at least US$ 153,750,000 (One hundred and fifty three million and seven hundred and fifty thousand United States Dollars);

          WHEREAS, the Borrower shall instruct each of the Final Buyers to make payment due in respect of the Covered Shipments made to such Importer by forwarding the Purchase Price for the Goods so shipped to the Collection Account which shall be an account held in the name of the Collateral Agent;

          WHEREAS, the Borrower has requested that the Lead Arrangers act as lead arrangers for this Offshore Facility Agreement pursuant to which certain Lenders listed on Schedule 2. hereto shall make advances in an aggregate principal amount of up to US$ 123,000,000.00 (One hundred and twenty three million United States Dollars) (collectively referred to as the “Advance”) for the prepayment of future sales by the Borrower of Goods to Final Buyers, with respect to the payments to be due from the Importer to the Borrower as provided above; and (y) subject to each of the terms and conditions of this Offshore Facility Agreement and (z) to be secured by a pledge by the Borrower of (i) accounts receivables from sales of the Goods to the Final Buyers (the “Purchase Agreements”);

2

          WHEREAS, the Lenders have agreed to make the Advance to the Borrower, subject to the terms and conditions set forth herein and provided that the Borrower grants to the Collateral Agent for the benefit of the Administrative Agent and the Lenders a first priority security interest in the Purchase Agreements;

          WHEREAS, the Borrower agrees to repay any and all principal and interest on the Advance provided hereunder and to pay all fees, expenses and other amounts due hereunder in accordance with the terms and conditions set forth herein;

          WHEREAS, the Borrower, shall irrevocably instruct the Collateral Agent to transfer sufficient funds held in the Collection Account to the Administrative Agent and instruct the Administrative Agent to apply funds received from the Collateral Agent to make payments due hereunder to the Lenders;

          WHEREAS, the Guarantor shall issue a guarantee in the form contained in Section 22 hereof as security for the liabilities and obligations of the Borrower; and

          WHEREAS, the Borrower has agreed to assign to the Collateral Agent, for the benefit of the Lenders thirty (30) days prior to each Installment, sales receivables with a value in aggregate not less than the amount of such Installment and any Interest due thereon, it being understood that provisions under Section 12 (t) shall apply.

          NOW, THEREFORE, In consideration of the undertakings contained herein, the parties agree as follows:

Section 1. Definitions

The following terms shall have the meanings ascribed hereunder (all the terms defined in the singular to have the same meaning when used in the plural and vice versa):

“Administrative Agent” has the meaning ascribed to such term in the preamble hereto.

“Advance” shall mean the anticipated payment of certain future sales, made by the Lenders to the Borrower pursuant to this Offshore Facility Agreement.

“Advance Amount” shall mean any amount disbursed under this Offshore Facility Agreement as designated in each Promissory Note for the Advance, provided the aggregate amount of the disbursements shall not exceed US$ 123,000,00.00 (One hundred and twenty three million United States Dollars).

“Advance Document” shall mean any of this Offshore Facility Agreement, the Promissory Note, and the Disbursement Request.

“Affiliate” shall mean any Person directly or indirectly controlling, controlled by, or under common control with, any other Person. For this purpose, “control” of any Person means ownership of 10% or more of the Voting Stock of the Person or the ability, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise; provided that Aracruz Celulose S.A. shall not be considered an Affiliate of the Obligors unless the Votorantim Group (in the aggregate) possesses, directly or indirectly, the power to vote 30% or more of the Voting Stock of Aracruz Celulose S.A. or to direct or cause the direction of the management and policies of Aracruz Celulose S.A., whether through ownership of the Voting Stock, by contract or otherwise.

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“Arrangement Fee” shall have the meaning set forth in Section 16 below.

“Assignment” shall mean the assignment made by the Borrower in Section 23 of this Offshore Facility Agreement.

“Assignment Agreement” shall have the meaning set forth in Section 19 below.

“Availability Period” shall mean the period commencing on the date hereof and ending on the 30th day following the date of execution of this Offshore Facility Agreement, during which the Lenders agree to make an Advance in accordance with Section 2 of this Offshore Facility Agreement.

“Banking Day” shall mean any day on which commercial banks are open for business in New York City, United States of America, London, England and São Paulo, Brazil.

“Brazil” shall mean the Federative Republic of Brazil.

“Brazilian GAAP” shall mean the accounting principles prescribed by Brazilian corporate law (Lei de Sociedades Anônimas).

“Breakage Costs” shall mean the costs referred to in Section 17 (a) of this Offshore Facility Agreement.

“Business” shall mean (i) the business of producing pulp and paper and/or other related products and (ii) other lines of business that are related or incidental to the business described under clause (i) of this definition.

“Capital Lease Obligations” means, as to a Surviving Entity, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP and, for purposes of this Offshore Facility Agreement, the amount of such obligations shall be the capitalized  amount thereof determined in accordance with GAAP.

“Capital Stock” means any and all shares, interests, participations, quotas or other equivalents (however designated) of capital stock of a corporation, any and all ownership interests in a Person other than a corporation and any and all warrants or options to purchase any of the foregoing.

“Cash Equivalents” means any of the following: (a) readily marketable direct obligations of the government of the United States of America or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States, (b) insured certificates of deposit of or time deposits with the Lenders  or a member of the Federal Reserve System, which issues (or the parent of which issues) commercial paper rated as described in clause (c), is organised under the laws of the United States of America or any State (or the District of Columbia) thereof and has combined capital and surplus of at least US$1,000,000,000, (c) commercial paper in an aggregate amount of no more than US$10,000,000 per issuer outstanding at any time, issued by any corporation organised under the laws of any State (or the District of Columbia) of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s and “A-1” (or the then equivalent grade) by S&P, or (d) other investments considered as cash equivalents under Brazilian GAAP.

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“Central Bank” or “Central Bank of Brazil” shall mean Banco Central do Brasil.

“Change of Control” shall mean the Guarantor shall cease to (i) own beneficially and control (either directly or indirectly) more than 50 (fifty percent) of the Borrower’s issued and outstanding voting capital stock and other equity interests in the Borrower as of the date hereof, or (ii) have the power (by ownership of capital stock or otherwise) to control the management or policies of the Borrower.

“Collateral Agent” shall mean ABN AMRO Bank N.V.

“Collection Account” shall mean that account held by the Collateral Agent and informed in writing to the Borrower and, or the Guarantor from time to time.

“Coverage Ratio” shall mean, for each Interest Period, the ratio of 1.25  in the Collection Account paid by Final Buyers, to the next payment of Interest plus the applicable Installment as stated in Section 5 hereof.

“Debt” means, with respect to any Person (determined without duplication): (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than trade payables (whether payable to Affiliates or other Persons) incurred in the ordinary course of such Person’s business, but only if and for so long as such trade payables remain payable on customary trade terms, and accrued expenses incurred in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar documents, (d) all obligations, contingent or otherwise, of such Person in connection with any securitization of any products, receivables or other Property, (e) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or the lender under such agreement in the event of default are limited to repossession or sale of such Property), (f) all Capital Lease Obligations and similar obligations under “synthetic leases” of such Person, (g) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit, financial guaranty insurance policies or similar extensions of credit (excluding trade payables to the extent excluded from clause (b)), (h) all obligations of such Person to redeem, retire, defease or otherwise make any payment in respect of any Capital Stock of such Person, (i) all net obligations of such Person in respect of any interest rate protection agreement or any currency swap, cap or collar agreement or similar arrangement entered into by such Person providing for the transfer or mitigation of interest rate or currency risks either generally or under specific contingencies (but without regard to any notional principal amount relating thereto), (j) all Debt of other Persons referred to in clauses (a) through (i) or clause (k) that is Guaranteed by such Person and (k) all Debt referred to in clauses (a) through (j) secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on Property of such Person even though such Person has not assumed or become liable for the payment of such Debt.

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“Debt Service Coverage Ratio” means, as of the last day of any fiscal quarter of VCP, the ratio (expressed as a decimal) of: (a) the sum of: (i) EBITDA for the four consecutive fiscal quarters ending on such day plus (ii) the amount of cash on VCP’s consolidated balance sheet as of such day plus (iii) the sum of, for each marketable security (including Cash Equivalents) on VCP’s consolidated balance sheet as of such day, the lower of: (A) the face value and (B) the market value of such marketable security as of such day, to (b) the amount of Total Debt that is scheduled to mature during the four consecutive fiscal quarters after such day plus the actual Interest Expense incurred during the four consecutive fiscal quarters ending on such day. For the purpose of clarification, the calculation of Debt Service Coverage Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Disbursement Date” shall mean each date of disbursement of the Advance in accordance with the applicable Disbursement Request.

“Disbursement Request” shall mean each Disbursement Request by the Borrower to the Administrative Agent, substantially in the form of Exhibit B hereto, for a disbursement of the proceeds of the Advance.

“EBITDA” means, during any period, the total earnings of a Surviving Entity (on a consolidated basis) before income taxes, Interest Expense, depreciation and amortization during such period, eliminating from the calculation of such earnings: (a) any net income or gain (or net loss), net of any tax effect, during such period from any extraordinary items, (b) any interest income during such period, (c) gains or losses during such period on the sale of Property (other than the sale of inventory in the ordinary course of business), (d) any other extraordinary non-cash items deducted from or included in the calculation of pre-tax net income for such period (other than items that will require cash payments and for which an accrual or reserve has been, or is required by GAAP to be, made), (e) the EBITDA for such period of any Subsidiaries or other Property disposed of or discontinued during such period and (f) any net income or gain (or net loss) on any foreign exchange transactions or net monetary positions.

“Purchase Agreements” shall mean the agreements, made from time to time, with the Final Buyers pursuant to which the Borrower and/or the Guarantor, as the case may be, will sell or cause to sell Goods to the Final Buyers.

“Sales Receivables” shall mean all account receivables arising out of any Purchase Agreement.

“Event of Default” shall have the meaning set forth in Section 12 hereof.

“Final Maturity Date” shall mean, subject to Section 5(e), in relation to each disbursement, the day which is 84 (eighty-four) months after the Disbursement Date.

“First Installment Date” shall have the meaning set forth in Section 5(a).

“Fiscal Semester” means each period from and including January 1 through and including June 30 of each year and from and including July 1 through and including December 31 of each year.

“GAAP” means, with respect to any Person, the generally accepted accounting principles (as in effect from time to time) applicable to it in its home jurisdiction.

“Goods” shall mean pulp and paper and/or other related products.

“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) and any entity exercising executive, legislative, judicial, regulatory or administrative authority of or pertaining to government (whether such authority is recognized as a de jure government or is a de facto government).

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“Guarantee” shall mean the guarantee given by the Guarantor in Section 22 of this Offshore Facility Agreement.

“Final Buyers” shall mean, jointly or severally :

(i)	certain OECD-based commercial counterparties acceptable to the Lead Arrangers, the Administrative Agent and the Lenders to be determined prior to the date hereof, (collectively the “Initial Final Buyers”) as evidenced in Schedule 1 hereto,
(ii)	at any time after the date hereof, certain other buyers approved by the Lead Arrangers, the Administrative Agent and the Lenders,
(iii)	commercial counterparties whose obligations to the Borrower or the Guarantor, as the case may be, are insured by certain policies or guaranteed by letters of credit issued by financial institutions acceptable to the Lenders and rated at least A by Standard & Poors’ or A2 by Moody’s, with exceptions to be agreed (the “Eligible Financial Institutions”),
(iv)	commercial counterparties located in any country and whose dealings with which are not generally prohibited by United States law or by the United Nations who enter into sales agreements with the Borrower or the Guarantor, as the case may be, which call for payment in full on a pre-shipment basis,

hereinafter, (i-iv) individually or jointly referred to as “Final Buyers”.

“Installments” shall have the meaning set forth in Section 5(a).

“Interest” shall have the meaning ascribed in Section 4 below.

“Interest Expense” means, for any period, interest (or similar) expense on the Debt of a Surviving Entity (on a consolidated basis), including (without duplication): (a) fees (including commitment fees and insurance premiums), (b) net payments under any interest rate protection agreement or other hedging agreement, (c) the interest portion of any deferred payment obligations, (d) all fees and charges owed with respect to letters of credit or performance or other bonds, (e) all accrued or capitalized interest, (f) any amortization of debt discount and (g) all but the principal component of payments relating to Capital Lease Obligations.

“Interest Payment Date” shall mean the last day of each Interest Period.

“Interest Period” shall mean in relation to each Advance, (I) prior to the First Installment Date, (a) the time period commencing on and including the Disbursement Date corresponding to such Advance and ending on but excluding the date that is six months after such Disbursement Date, and (b) each subsequent six month period thereafter until the First Installment Date; (II) After the First Installment Date (a) the time period commencing on the First Installment Date and ending but excluding the date that is three months after such date and (b) each subsequent three months period thereafter, provided that the final date of any such Interest Period shall be the Final Maturity Date.

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“Interest Rate” for an Interest Period shall mean LIBOR plus the Margin.

“Initial Trading Company” means: (a) initially, VCP Overseas Holding KFT, a corporation organized under the laws of Hungary and a [wholly-owned Subsidiary of VCP Exportadora, and (b) thereafter, such other Person as may be identified from time to time by the Borrower, provided the latter shall: (i) be organized in an OECD Country, (ii) be a wholly-owned, direct or indirect subsidiary of VCP.

“Lead Arrangers” shall mean ABN AMRO Bank N.V. and Banco Bradesco S.A.

“Lenders” shall mean any of the institutions identified in Schedule 2. attached hereto, together with its successors and permitted assigns pursuant to the Section 19 below.

“LIBOR” shall mean, for any Interest Period, an interest rate per annum determined on the basis of the London interbank offered rate for deposits in Dollars for a period of time comparable to the relevant Interest Period, shown on the display page designated British Bankers Association Interest Settlement Rates, “LIBOR 01” Page, on the Reuters screen or such other page as may replace that page in that service, at approximately 11:00 a.m., London time, 2 (two) Banking Days prior to the first day of such Interest Period. In the event that such rate does not appear on such LIBOR 01 Reuters screen page, or such other page as may replace that page in that service, then LIBOR shall be the arithmetic mean (expressed as an annual rate and rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates quoted at approximately 11:00 a.m. London time by 3 (three) leading banks, chosen by the Administrative Agent and agreed by the parties hereto as the rate at which deposits in Dollars are offered to such banks by prime banks, in the London interbank market for a period of time comparable to the relevant Interest Period, at approximately 11:00 a.m. 2 (two) Banking Days prior to the first day of such Interest Period. If the Borrower does not agree with the LIBOR quoted by the Administrative Agent, the Lenders shall have no obligation to make the disbursement related to the Advance or if the Advance has already been made, the rate will be reasonably determined by the Administrative Agent.

“Lien” means any mortgage, lien, pledge, usufruct, fiduciary transfer (alienação fiduciária), charge, encumbrance or other security interest or any preferential arrangement (including a securitisation) that has the practical effect of creating a security interest.

“Majority Lenders” shall mean the Lenders holding 66% (sixty-six percent) of the Advances.

“Margin” shall mean 2% p.a. (two percent per annum).

“Material Adverse Effect” shall mean a material adverse effect on the business, operations, property, or financial condition of the Guarantor and its direct or indirect subsidiaries (taken as a whole) which will, in the opinion of the Lenders, as justified in writing, impair the ability of the Borrower or the Guarantor to perform its obligations under any of the Advance Document; provided that there should be no Material Adverse Effect in the event the Lenders receive a remedy, that it considers satisfactory, from the Borrower and/or the Guarantor upon demand.

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“Measurement Period” shall mean the period beginning and including the day that is 15 days (each a “Measurement Date”) before the next Interest Payment Date including such Interest Payment Date.

“Net Debt” means, as of the date of the consummation of any merger, consolidation, sale, transfer, lease or other disposition pursuant to Section 11(a), a Surviving Entity’s Total Debt as of such day minus the sum of: (a) the aggregate amount of cash on its consolidated balance sheet as of such day plus (b) the sum of, for each marketable security (including Cash Equivalents) on such Surviving Entity’s consolidated balance sheet as of such day, the lower of: (i) the face value and (ii) the market value of such marketable security as of such day. For the purpose of clarification, the calculation of Net Debt (and all components thereof) shall be made using Brazilian GAAP.

“Net Debt to EBITDA Ratio” means, the ratio (expressed as a decimal) of (a) Net Debt as of such date to (b) EBITDA for the two most recent Fiscal Semesters preceding such date. For the purpose of clarification, the calculation of Net Debt to EBITDA Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Obligors” shall mean either of the Borrower and/or  the Final Buyers.

“OECD Country” means, at any time, any nation that is a member of the Organization of Economic Co-operation and Development at such time.

“Person” shall mean any individual, corporation, partnership, trust, unincorporated organization, joint stock company or other legal entity or organization and any government or agency or political subdivision thereof.

“Promissory Note” shall mean each promissory note substantially in the form of Exhibit A hereto duly executed and delivered by an authorized signatory of the Borrower and the Guarantor.

“Property” of any Person means any property, rights or revenues, or interest therein, of such Person.

“Purchase Price” shall mean in relation to each Covered Shipment the purchase price to be paid therefore by the relevant Importer.

“Reais” shall mean the lawful currency of the Federative Republic of Brazil.

“Receivable” means each account or payment intangible or similar obligation arising under any Purchase Agreement.

“Relevant Person” shall mean any Affiliate, Subsidiary or group company of the Guarantor.

“Responsible Officer” of a Person shall mean any Executive Officer of that Person.

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“Sales Receivables” shall mean all account receivables arising out of any Purchase Agreement.

“Shipping Documents” shall mean in relation to each Covered Shipment, originals or copies of (a) the “despacho aduaneiro” (customs receipt) related thereto, (b) the bill of lading or other shipping document evidencing such shipment, and (c) any draft or other payment document presented to the relevant Importer.

“Subsidiary” means with respect to any Person, any corporation or other entity more than 50% of the Voting Stock of which is owned or controlled directly or indirectly, by such Person and/or by any Subsidiary of such Person.

“Surviving Entity” means any surviving Person as described in Section 11(a)(i)(A)(1) or Person to whom substantially all of the assets of the Borrower or the Guarantor, as the case may be, shall have been transferred as described in Section 11(a)(i)(A)(2), in each case, that is not VCP, the Borrower or a Subsidiary thereof.

“Total Capitalization” means, as of the last day of any fiscal quarter of the Guarantor, the sum of: (a) the Total Debt as of such day plus (b) the net worth of the Guarantor (on a consolidated basis) as of such day plus (c) without duplication of clause (b), the sum of minority interests in other Persons held by the Guarantor (on a consolidated basis) as of such day.

“Total Debt” means, as of the last day of any fiscal quarter of the Guarantor, the aggregate outstanding principal amount of Debt of the Guarantor (on a consolidated basis) as of such day and as it refers to 11(a) as of the date of the consummation of any merger, consolidation, sale, transfer, lease or other disposition, the aggregate outstanding principal amount of Debt of a Surviving Entity (on a consolidated basis) as of such day.

“Total Debt to Total Capitalization Ratio” means, as of the last day of any Fiscal Semester of the Guarantor, the ratio (expressed as a decimal) of: (a) the Total Debt as of such day to (b) the Total Capitalization as of such day. For the purpose of clarification, the calculation of the Total Debt to Total Capitalization Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Undertaking” means all of the Borrower’s present and future, rights and remedies under the Purchase Agreement together with all present and future rights under any security, guarantee or other form of credit support created in its favor in respect of an Importer’s obligations under the Purchase Agreements (collectively, the “Undertakings”).

“Up-front-Participation Fee” shall have the meaning ascribed in Section 16 below.

“US Dollars”, “Dollars” or “US$” shall mean the lawful currency of the United States of America.

“Votorantim Group” means the group of related companies commonly known as the “Votorantim Group” comprised of Hejoassu Administração Ltda. and its Subsidiaries.

“Voting Stock” of a Person means Capital Stock in such Person having power to vote for the election of directors or similar officials of such Person or otherwise voting with respect to actions of such Person (other than such Capital Stock having such power only by reason of the happening of a contingency).

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Section 2. The Commitment

          (a)       Subject to the terms and conditions set forth in this Offshore Facility Agreement, the Lenders hereby agree to make the Advance during the Availability Period as an anticipated payment of certain future sales.

          (b)       Each Advance shall be evidenced by a single Promissory Note dated the applicable Disbursement Date and duly completed and executed by the Borrower and the Guarantor.

Section 3. Making of the Advance; Use of Proceeds

          (a)       Subject to the satisfaction of the conditions set forth in Section 8 herein, the Lenders shall make any Advance provided that (i) the Administrative Agent shall have received from the Borrower a Disbursement Request at least three (3) Banking Days, and not later than 11:00 a.m. (São Paulo time), prior to the applicable Disbursement Date of the Advance and (ii) the Administrative Agent, on behalf of the Lenders, shall send to the Borrower its acknowledgement and agreement to the Disbursement Request on the same date.

Section 4. Interest

          a)        The Borrower shall pay interest (the “Interest”) on the unpaid Advance Amount on each Interest Payment Date during the relevant Interest Periods at the Interest Rate for the Advance, from the Disbursement Date until the Applicable Maturity Date. Such payment shall be made, at the Borrower’s option, except as provided in paragraph (d) below, directly by the Borrower to the Administrative Agent ‘s account as listed herein in Section 5(b).

          b)        The Advance Amount, any Interest thereon (to the extent permitted by law), and any other amount due and payable under this Offshore Facility Agreement that is past due (whether at the Applicable Maturity Date, by acceleration or otherwise) shall bear interest from the date such amount is due until such amount is paid in full at the per annum rate that is the then applicable Interest Rate plus 1% p.a. (one percent per annum).

          c)        Interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed (including the first day, but excluding the last day). Accrued Interest shall be due and payable in arrears upon any payment of the Advance and on each applicable Interest Payment Date. However, interest accruing according to paragraph (b) shall be due and payable from time to time on demand of the Lenders.

          d)        In the event that the Borrower  is unable for any reason, including without limitation, because of an action or inaction by any Governmental Authority of Brazil, to pay Interest as provided hereunder, the Borrower shall make additional Covered Shipments to Final Buyers at such times and in such amounts as permitted by the relevant Governmental Authority so that the aggregate Purchase Prices paid for such Covered Shipments by the Final Buyers and/or paid in connection of any Undertakings and deposited in the Collection Account are sufficient to pay to the Administrative Agent (for the benefit of the Lenders) the amount of Interest due hereunder as and when due.

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Section 5. Repayments; Prepayments

          (a)       Each Advance shall be due and payable in 9 quarterly installments (each, an “Installment”) beginning on the Banking Day that is sixty months after the Disbursement Date (the “First Installment Date”), and as shown in Schedule 3, in the following manner:

Months from Disbursement Date	Installment amount
60	25% of Advance
63	9.375% of Advance
66	9.375% of Advance
69	9.375% of Advance
72	9.375% of Advance
75	9.375% of Advance
78	9.375% of Advance
81	9.375% of Advance
84	9.375% of Advance

Notwithstanding the foregoing, any monies received by the Administrative Agent shall be applied in the following order: (a) Breakage Costs (if any); (b) Interest due and unpaid; (c) to reduce the amount of principal due and unpaid on the next Installment; and (d) to reduce the amount of principal due and unpaid on subsequent Installments.

          (b)       The Borrower shall instruct all Final Buyers to make all payments due hereunder and/or shall cause to be paid the proceeds arising from the Undertakings in US Dollars, in same day funds, no later than 10:00 a.m. (New York time), on the dates such payments are due, without set-off, counterclaim or deduction, directly to the account informed by the Collateral Agent in writing from time to time.

          (c)       Repayment of the Advance shall be made by payment of funds to the Collection Account. To that end, the Borrower agrees to, (i) act in accordance with sub-item (b) above, (ii) upon request, but in any case not before 10 (ten) days after the relevant repayment date, provide the Administrative Agent with originals or copies of all Shipping Documents related to such Covered Shipments. The Collateral  Agent shall transfer sufficient funds from the Collection Account to the Administrative Agent. The Administrative Agent shall apply the funds received from the Collateral Agent towards repayment of the Borrower’s indebtedness hereunder. It is hereby understood that funds not received by 10:00 a.m. (New York time) and, in the absence of any authenticated notification received in form and substance satisfactory to the Collateral Agent from the Importer’s bank(s) confirming that such payment has been made, then the Collateral Agent will make payment next day value after receipt of funds.

          (d)       The Borrower or the Guarantor on behalf of the Borrower, as the case may be, shall make available, when and as due, funds in the Collection Account sufficient to satisfy the payment obligations of the Borrower hereunder and under the Promissory Note on the due dates thereof, notwithstanding any other obligations which the Borrower may have to any other Person, repayment of which is intended to be made from funds in such Collection Account.

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          (e)       If the due date of any payment under this Offshore Facility Agreement or under the Promissory Note would fall on a day which is not a Banking Day, such date shall be extended to the next Banking Day (and Interest shall be payable for the Advance Amount so extended for the period of such extension), unless such Banking Day falls in the next calendar month, in which case the payment shall be due on the immediately preceding Banking Day.

          (f)       If the Lenders holding at least 51% (fifty-one per cent) determine that a Material Adverse Effect has occurred, such Lenders shall promptly inform the Administrative Agent in writing who shall in turn, within a period of no more than three Banking Days, provide written notice thereof to the Guarantor and the Borrower and, in case each Lender does not receive satisfactory remedy from the Borrower and/or the Guarantor, the Administrative Agent (after consultation with the Lenders) shall provide to the Guarantor and the Borrower a written demand for prepayment of the then outstanding principal amount of the Advance and within 90 (ninety) Banking Days of receipt of such demand by the Borrower and the Guarantor, the Borrower shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon.

          (g)       The Borrower may, on a Banking Day, prepay all or a portion of any Advance Amounts at any time or from time to time, which pre-payment shall in each case, be made together with accrued and unpaid Interest on the principal amount, so prepaid and all other amounts then payable under this Offshore Facility Agreement (including the costs and expenses described in Section 17, solely in the event such prepayment is made on a day other than the final day of an Interest Period), without premium but subject to the costs and expenses described in Section 17 (solely in the event that such prepayment is made on a day other than the final day of an Interest Period); provided that: (a) the Borrower shall give the Lenders notice of each such pre-payment at least three (3) Banking Days prior to the date of such prepayment (and, upon the date specified in any such notice, the amount to be prepaid shall become due and payable hereunder), (b) each such notice of pre-payment shall specify the amount of the Advance Amount being prepaid and (c) each partial pre-payment shall be applied to the outstanding Advances in the inverse order of maturity.

Section 6. Taxes

          (a)       The Borrower will pay to the Administrative Agent (for the benefit of the Lenders), all amounts due under this Offshore Facility Agreement and the Promissory Note free and clear of all deduction of any present or future taxes, levies, imposts, charges, withholdings, penalties, fines, additions to tax and interest, imposed or levied in Brazil or any other jurisdictions from which any payment hereunder or under the Promissory Note is remitted, or any political subdivision or taxing authority thereof (the “Taxes”), except taxes imposed on each of the Lenders’ income by the jurisdiction under which such Lender is incorporated.

          (b)       In the event the Borrower is required to deduct or withhold any Taxes, the Borrower hereby agrees to pay the required deductions contemplated in Section 6(a) herein, including deductions applicable to the additional amounts payable thereunder, so that the Administrative Agent shall receive an amount equal to the sum the Lenders would have received had no such deductions been made.

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          (c)       Upon the Administrative Agent’s request, the Borrower shall, within thirty (30) days, furnish a copy of the official receipts evidencing payment of Taxes made according to this Section 6, if any.

          (d)       The Borrower shall indemnify the Administrative Agent and the Lenders for the full amount of Taxes or any penalties, interest and expenses arising therefrom paid by each Lender. This indemnification shall be made within 45 days from the date the Lenders make written request therefor, subject to Central Bank authorization.

Section 7. Illegality

          (a)       If, after the date of this Offshore Facility Agreement, the introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any of the Lenders with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for any of the Lenders to make, maintain or fund the Advance, and after such Lender or Lenders have made reasonable efforts to make, maintain or fund the Advance using other alternatives such as lending offices in other jurisdictions, then such Lender or Lenders forthwith shall so notify the Borrower in writing, whereupon the obligation of such Lender or Lenders to make or maintain the Advance shall be terminated. Upon receipt of such notice, the Borrower shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the longer of either (a) the last day of Interest Period applicable thereto or (b) within sixty-six (66) Banking Days.

          (b)       Brazil or any competent authority thereof shall declare a moratorium on the payment of or default on, all or a substantial part of the Indebtedness of Brazil or any governmental agency or authority thereof or persons or corporations therein, the effect of which does or will prevent or impede any payment in respect of the Advance and the validity of “pre-pagamento” agreements in Brazil, then the Borrower forthwith shall so notify the Administrative Agent in writing within ten (10) Banking Days. Whereupon, unless within 20 (twenty) Banking Days the Administrative Agent, after consultation with the Lenders certifies in writing that it is satisfied that the Borrower and/or the Guarantor, shall be able to meet their respective obligations hereunder, the Borrower shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the longer of either (a) the last day of Interest Period applicable thereto or (b) within ninety (90) Banking Days. The prepayment of this Offshore Facility Agreement made pursuant to this Section 7 shall be made without payment of any Costs and Expenses, whatsoever, as defined in Section 17.

          (c)       If, after the date of this Offshore Facility Agreement, the introduction of, or any change in the law in the Borrower’s country shall occur which renders this Offshore Facility Agreement invalid, illegal or unenforceable, the Borrower shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the longer of either (a) the last day of Interest Period applicable thereto or (b) within sixty-six (66) Banking Days.

          (d)       Prepayment pursuant to this Section 7 shall be made without premium.

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Section 8. Conditions Precedent

          (a)       The obligation of the Lenders to make the Advance is subject to the condition precedent that the Administrative Agent shall have received the following documents and instruments, duly executed, created or issued, as the case may be:

(i)	This Offshore Facility Agreement and the Promissory Note;
(ii)	Evidence of the payment of the fees due hereunder;
(iii)	A Disbursement Request;
(iv)	The Borrower’s and the Guarantor’s balance sheet and statement of income, stockholders’ equity and cash flows as of and for the fiscal year ended 2003, certified by its independent public accountants;
(v)	Legal opinion from Brazilian counsel to the Borrower and the Guarantor addressed to the Administrative Agent and regarding matters requested by the Administrative Agent, substantially in the form of Exhibit C hereto;
(vi)	Copies of (A) the by-laws of the Borrower and the Guarantor and Articles of Incorporation, if applicable, and (B) relevant corporate authorizations of the Borrower and the Guarantor necessary to authorize the execution, delivery and performance of the Advance Document;
(vii)	A certificate from a duly authorized Responsible Officer of each of the Borrower and the Guarantor as to the incumbency and signatures of its duly authorized officers that are authorized to execute and deliver the Advance Document substantially in the form of Exhibit D hereto;
(viii)	such other approvals, opinions, or documents as the Administrative Agent may reasonably request and which are duly justified in writing;

          (b)       The obligation of the Lenders to make the Advance is also subject to the satisfaction of the following conditions precedent, and the disbursement by the Lenders of the Advance shall constitute a representation by the Borrower that items (i), (ii) and (iii) below shall have been satisfied on and as of the Disbursement Date:

(i)	the representations and warranties made by the Borrower and the Guarantor herein shall be true and correct on and as of the Disbursement Date;
(ii)	both immediately prior to the making of the Advance and after giving effect thereto and to the intended use of the proceeds thereof, no Event of Default shall have occurred and be continuing; and
(iii)	there has been no material adverse change, since the last audited financial statements of the Borrower and the Guarantor received by the Administrative Agent, in the economic and/or financial condition of the Borrower and the Guarantor.

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          (c)       Upon the receipt by the Borrower of the Disbursement Request duly acknowledged and agreed by the Administrative Agent, the Lenders shall make the Advance, notwithstanding the provisions of item b (iii) above.

Section 9.		Representations and Warranties
	(a)	Each of the Borrower and the Guarantor hereby represent and warrant that:
	(i)	The Borrower is duly organised and validly existing, and in good standing under the laws  of Netherlands Antilles and that the Guarantor is duly organised and validly  existing, and in good standing under the laws of the Federative Republic of  Brazil.
	(ii)	The Advance contemplated herein and the execution, delivery and performance  of this Offshore Facility Agreement and of the Promissory Note are within its  powers, and have been duly authorised by all necessary actions, and do not  violate any provision of applicable law, regulation or order of any court or  regulatory body. Furthermore, the Advance contemplated under this Offshore  Facility Agreement and evidenced by the Promissory Note will not result in the  breach of, constitute a default, or require any consent under any agreement,  instrument or document to which it is a party or by which it or any of its  property may be bound or affected. Notwithstanding the foregoing it is  understood that the prior approval of the Central Bank of Brazil of the  Guarantee provided by the Guarantor in accordance with Section 22 below is  not required for the legality, validity or enforceability thereof but that the  absence of such prior approval may affect the Guarantor’s ability to remit  funds abroad from Brazil to satisfy obligations thereunder (which approval is  subject to the sole discretion of the Central Bank of Brazil).
	(iii)	This Offshore Facility Agreement and the Advance Document constitute its  legal, valid and binding obligation, enforceable against it in accordance with its  terms.
	(iv)	There are no actions, suits or proceedings pending or, to its knowledge,  threatened against or affecting it before any court, governmental agency or  arbitrator, which may, in any one case or in the aggregate, have a Material  Adverse Effect and which as of the Disbursement Date have not been remedied  in full or otherwise are not being remedied in a manner satisfactory to the  Administrative Agent and the Lenders.
	(v)	It has good title to, or valid leasehold interests in, all its real and personal  property material to its business, except for defects in title that do not interfere  with its ability to conduct its business as currently conducted or to utilise such  property for its intended purposes. It owns or is licensed or otherwise has the  right to use all of the patents, contractual franchises, licenses, authorisations  and other rights that are reasonably necessary for the operation of its business,  without conflict with the rights of any other Person.
	(b)	The Borrower hereby represents and warrants further that:

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(i)	It has furnished to the Administrative Agent its balance sheet and statement of  income, stockholders’ equity and cash flows as of and for the fiscal year ended  2003, certified by its independent public accountants. Such financial  statements are complete and correct, and fairly present the Borrower’s  financial condition and the results of its operations and cash flows as of such  dates and for such periods in accordance with Brazilian GAAP. Since  December 31, 2003 there has been no development or event that has had or  could reasonably be expected to have a Material Adverse Effect.
(ii)	Its obligations evidenced by this Offshore Facility Agreement and the Advance  Document to which it is a party are its direct and unconditional obligations,  and rank in priority of payment and in all other respects at least pari passu with  all its other similar secured and unsubordinated indebtedness, subject to  statutorily preferred exceptions, it being understood that all debt provided by BNDES shall be excluded from this clause.
(iii)	It is not in default under or with respect to any agreement, instrument or  undertaking to which it is a party or by which it or any of its property or assets  are bound which default would have or cause a Material Adverse Effect.
(iv)	Neither it nor any of its property or assets has any immunity (sovereign or  otherwise) from jurisdiction of any court or from any legal process (whether  through service or notice, attachment prior to judgement, attachment in aid of  execution, execution or otherwise) under the laws of the jurisdiction of its  organisation, except for public concessions.
(v)	Under the laws of Brazil in force at the date hereof, it is not necessary that this  Offshore Facility Agreement or the Promissory Note be filed, recorded or  enrolled with any court or any other authority in Brazil or that any stamp,  registration or similar tax be paid on or in relation to this Offshore Facility  Agreement or the Promissory Note; except that a certified translation into  Portuguese of this Agreement and the Promissory Note is required to be filed  with a competent Registry of Deeds in Brazil in order to ensure the legality,  validity and binding effect of this Offshore Facility Agreement and the  Promissory Note;

Section 10.   Affirmative Covenants  Each of the Borrower and the Guarantor covenant and agree that, so long as any part of the Advance is outstanding it will:

          (a)       Furnish to the Administrative Agent (i) upon demand, but not earlier than 120 days after the end of each fiscal year, its consolidated and, if available, consolidating balance sheet, as of the end of its fiscal year, and the related statement of earnings, shareholders’ equity and changes in financial condition prepared in accordance with Brazilian GAAP, in each case setting forth in comparative form the figures for the previous fiscal year, and certified by independent public accountants of recognized international standing; (ii) promptly after it knows that any Event of Default has occurred, however not later than 20 days after such occurrence, a certificate from a duly authorized officer notifying the Lenders as to the occurrence of such Event of Default, describing the same in reasonable detail and describing the actions that it proposes to take with respect thereto; (iii) immediately after the commencement thereof, notice in writing of all actions, suits and proceedings before any court or governmental agency or instrumentality of any jurisdiction which, if determined adversely to it, will have a Material Adverse Effect; and (iv) such other publicly available information with respect to its business, properties or its condition or operations, financial or otherwise, as the Lenders may from time to time reasonably request.

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          (b)       Keep proper books of record and account in which full, true and correct entries in conformity with Brazilian GAAP and the requirements of applicable law shall be made of all dealings and transactions in relation to its business.

          (c)       Obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals, licenses and consents required in or by the laws and regulations of Brazil to enable it lawfully to enter into and perform its obligations under this Offshore Facility Agreement, the Promissory Note and the Purchase Agreements or to ensure the legality, validity, enforceability or admissibility thereof in evidence in Brazil;

          (d)       Comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities; and take all necessary actions in order to obtain and maintain in full force and effect all such governmental authorizations, approvals and consents as may be required for it to comply with its obligations under the Advance Document and considering the provision in Section 9. (a) (ii) herein.

          (e)       Continue to engage in its existing Business and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, and comply with all contractual obligations binding on it and its property.

          (f)       Take any and all actions necessary so that its obligations under the Advance Document to which it is a party shall at all times rank at least pari passu in priority of payment and in all other respects with all present and future secured and subordinated indebtedness, subject to statutorily preferred exceptions.

          (g)       Within 90 days after the first Disbursement Date, deliver to the Administrative Agent, the Hungarian Documents as per Section 8.17 in the Amended and Restated CreditAgreement, dated as of May 24, 2002 and Amended and Restated on April 26, 2004.

Section 11.   Negative Covenants     Each of the Borrower and the Guarantor covenant and agree with the Administrative Agent and the Lenders that, so long as any part of the Advance is outstanding it will not:

          (a)       enter into any transaction of merger, amalgamation or consolidation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets; provided that:

(i) it may merge or consolidate with or into, or sell or transfer all or substantially all of its assets to, any other Person that is organized in an OECD Country (or, if not an OECD Country, its current jurisdiction of organization) if, immediately after giving effect thereto:

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	(A)	(1) with respect to any merger or consolidation, it is the surviving Person or, if not, the surviving Person has validly assumed its obligations under the Advance Document to which it is a party, or (2) with respect to a sale, transfer, lease or other disposition of all or substantially all of its assets, the Person to whom the assets have been sold, transferred, leased or otherwise disposed has validly assumed all obligations under the Advance Document to which the transferor is a party (which assumption may constitute a novation of such obligations under applicable law);
	(B)	no Event of Default or event that (with notice, lapse of time or both) would become an Event of Default (including under Section 12(m) or resulting from a breach of Section 10(d)) exists or would exist immediately after such merger, consolidation, sale, transfer, lease or other disposition;
	(C)	the Administrative Agent shall have received any other opinions, evidence of security interest filings and other documents or evidence as it may reasonably request in connection therewith;
	(D)	to the extent reasonably requested by the Administrative Agents, the Advance Document shall have been amended (or amended and restated) to reflect such merger, consolidation, sale, transfer, lease or other disposition.
	Notwithstanding the foregoing clauses (A)-(D), the Net Debt to EBITDA Ratio of any Surviving Entity shall not exceed 3.00 as of the date of consummation of such merger, consolidation, sale, transfer, lease or other disposition.
(ii)	the Borrower may be merged into the Guarantor,
(iii)	it may sell, lease, transfer or otherwise dispose of obsolete or worn-out property or equipment no longer used or useful in its business and any inventory or other assets sold or disposed of in the ordinary course of its business, and
(iv)	it may sell or otherwise transfer Goods and other assets to the Borrower or the Guarantor, as the case may be, in the manner contemplated in the Advance Document.

          (b)      Enter into any transaction or series of related transactions with any Affiliate thereof (other than its wholly-owned Subsidiaries), other than in the ordinary course of their respective businesses and on terms and conditions substantially as favorable to it as would reasonably be obtained at that time in a comparable arm’s -length transaction with a Person other than such Affiliate. Notwithstanding the foregoing, this provision shall not apply to: (a) any loan or similar financial transaction (or series of related financial transactions) entered into for the sole purpose of performing cash management or other financial management functions of an Affiliate or Subsidiary as the case may be and/or (b) tax allocation agreements entered into from time to time between an Affiliate or a Subsidiary as the case may be provided always none of the foregoing shall materially impair the ability of the Borrower and/or Guarantor to comply with their respective obligations under this Offshore Facility Agreement.

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Section 12. Events of Default If one, or more, of the following events (each an “Event of Default”) shall occur and be continuing:

          (a)       The Borrower shall fail to make payment of any amount of principal due hereunder;

          (b)       The Borrower shall fail to make payment, due to administrative reasons, of any Interest, fees or other amounts due hereunder (whether at stated maturity, at acceleration or otherwise), after the expiry of three (3) Banking Days after the date the same becomes due; or

          (c)       Any representation, warranty or certification made herein (or any modification or supplement hereto) by the Borrower or the Guarantor shall prove to have been false or misleading in any material respect as of the time made or furnished;

          (d)       The Borrower ceases to be involved in (i) the business of producing pulp and paper and/or other related products and (ii) other lines of business that are related or incidental to the business described under this Offshore Facility Agreement;

          (e)       The Borrower or the Guarantor shall default in the performance of any other obligation under this Offshore Facility Agreement (other than payment obligations or any of the events described in (a), (b), (c) and (d), (f), (g), (h), (i), (j), (k), (l), (m), (n), (o), (p), (q) and (r) of this Section 12) and/or the Borrower or the Guarantor under the Promissory Note, including failure related to the sales of the Goods; and such default continue un-remedied for a period of 10 Banking Days after notice thereof to the Borrower by the Administrative Agent, provided always that the Guarantee shall always be legally binding and effective on the Guarantor;

          (f)       The Borrower shall admit in writing its inability to be generally able to pay its debts;

          (g)       The Guarantor shall admit in writing its inability to be generally able to pay its debts;

          (h)       The Borrower shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all, or substantially all, its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing;

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          (i)       The Guarantor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or substantially all its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing;

          (j)       A proceeding or case shall be commenced, without the application or consent of the Borrower, in any court of competent jurisdiction, seeking (i) its liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its respective debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of the Borrower or the Guarantor of all or substantially all of its respective property or assets, or (iii) similar relief in respect of the Borrower, or the Guarantor under any law relating to bankruptcy, insolvency, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or any order, judgement or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 44 (forty-four) Banking Days;

          (k)       Any default or event of default shall occur or be continuing under any agreement, instrument or other document of the Borrower or the Guarantor evidencing External Indebtedness (as defined below) in excess of Fifty Million Dollars (US$ 50,000,000.00) (or its equivalent in other currencies) and such default or event of default causes the acceleration of such External Indebtedness and shall not have been waived. For purposes of this paragraph (h), “External Indebtedness” shall mean indebtedness for borrowed money which is payable or may be paid (i) in a currency other than the lawful currency of Brazil an (ii) to a Person resident or having its principal place of business outside of Brazil;

          (l)        Any judgement or order from which no further appeal is permissible under applicable law for the payment of money aggregating in excess of Fifty Million Dollars (US$ 50,000,000.00) (or its equivalent in another currency) shall be rendered against the Borrower or the Guarantor and such judgement or order shall continue unsatisfied and in effect for a period of 30 (thirty) calendar days;

          (m)       A Change of Control shall occur;

          (n)       An event shall occur which results in a Material Adverse Effect;

          (o)       The Debt Service Coverage Ratio as of the end of any fiscal quarter of the Guarantor shall be less than 1.30 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant fiscal quarter);

          (p)       The Net Debt to EBITDA Ratio as of the end of any fiscal semester of the Guarantor shall exceed 3.00 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant Fiscal Semester);

          (q)       The Debt to Total Capitalization Ratio as of the end of any fiscal semester of VCP shall exceed 0.70 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant Fiscal Semester);

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          (r)       For any two consecutive Measurement Periods (or four during the life of the Advances), failure to achieve the Coverage Ratio;

          then, in such event, the Administrative Agent shall by notice to the Borrower and the Guarantor, declare the Advance Amount then outstanding, the accrued Interest on the Advance and all other amounts payable by the Borrower hereunder to be, whereupon the same shall become, forthwith due and payable, without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower. Notwithstanding the foregoing, any event referred to in clause (a) or (b) above existing for a period of up to 5 (five) Banking Days after the applicable grace period will not constitute an Event of Default if such delay or failure could not have been prevented by the exercise of reasonable diligence by the Borrower or the Guarantor, and such delay or failure was caused by an act of God, riot, an act of war, terrorism, epidemic, flood, weather, landslide, fire, earthquake, electrical outage or similar causes.

Section 13. The Administrative Agent

Each of the Lenders hereby irrevocably confirms the appointment of the Administrative Agent as its agent and authorizes the Administrative Agent to take such actions on its behalf, and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

          (a)       The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or any Subsidiary or Affiliate thereof as if it were not the Administrative Agent hereunder.

          (b)       The Administrative Agent shall not have any duties or obligations except those expressly set forth herein or in any other loan documents to which it is a party. Without limiting the generality of the foregoing: (i) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing; (ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Majority Lenders; and (iii) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower, the Guarantor or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent. The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or willful misconduct. The Administrative Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Administrative Agent by the Borrower, the Guarantor or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with this Offshore Facility Agreement and any other Advance Document, (B) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (D) the validity, enforceability, effectiveness or genuineness of this Offshore Facility Agreement or any Advance Document or any other agreement, instrument or document, or (E) the satisfaction of any condition set forth hereunder or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.

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          (c)     The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing reasonably believed by it to be genuine and to have been signed or sent by the proper Person. The Administrative Agent also may rely upon any statement made to it orally or by telephone and reasonably believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Administrative Agent may consult with legal counsel (who may be counsel for the Borrower or the Guarantor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts other than through willful misconduct and/or gross negligence.

          (d)       The Administrative Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent of the Administrative Agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.

          (e)       Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by giving sixty (60) days written notice to the Lenders and the Borrower. Upon any such resignation, the Majority Lenders shall have the right, in consultation with the Borrower, to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within sixty (60) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent. Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the Administrative Agent’s resignation hereunder, the provisions of this Article hereof shall continue in effect for the benefit of such retiring Administrative Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.

          (f)       Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Advance established pursuant to this Offshore Facility Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Offshore Facility Agreement and any other Advance Document, any related agreement or any document furnished hereunder or thereunder.

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Section 14. The Collateral Agent

          Each of the Lenders hereby irrevocably confirms the appointment of the Collateral Agent as its agent and authorizes the Collateral Agent to take such actions on its behalf, and to exercise such powers as are delegated to the Collateral Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

          (a)       The bank serving as the Collateral Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Collateral Agent, and such bank may accept deposits from, lend money to and generally engage in any kind of business with the Borrower or the Guarantor or any of its respective Subsidiary or Affiliate thereof as if it were not the Collateral Agent hereunder.

          (b)       The Collateral Agent shall not have any duties or obligations except those expressly set forth herein or in any other loan document to which it is a party. Without limiting the generality of the foregoing: (i) the Collateral Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing; (ii) the Collateral Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Collateral Agent is required to exercise in writing by the Majority Lenders; and (iii) except as expressly set forth herein, the Collateral Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Borrower or the Guarantor or any of its respective subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent. The Collateral Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or willful misconduct. The Collateral Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Collateral Agent by the Borrower, the Guarantor or a Lender, and the Collateral Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with this Offshore Facility Agreement and any other Advance Document, (B) the contents of any certificate, report or other document delivered hereunder or in connection herewith, (C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (D) the validity, enforceability, effectiveness or genuineness of this Offshore Facility Agreement and any other Advance Document or any other agreement, instrument or document, or (E) the satisfaction of any condition set forth or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Collateral Agent.

          (c)       The Collateral Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing reasonably believed by it to be genuine and to have been signed or sent by the proper Person. The Collateral Agent also may rely upon any statement made to it orally or by telephone and reasonably believed by it to be made by the proper Person, and shall not incur any liability for relying thereon. The Collateral Agent may consult with legal counsel (who may be counsel for the Borrower or the Guarantor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts other than through willful misconduct and/or gross negligence.

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          (d)       The Collateral Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Collateral Agent. The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent of the Collateral Agent and any such sub-agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Collateral Agent.

          (e)       Subject to the appointment and acceptance of a successor Collateral Agent as provided in this paragraph, the Collateral Agent may resign at any time by giving sixty (60) days written notice to the Lenders and the Borrower. Upon any such resignation, the Majority Lenders shall have the right, in consultation with the Borrower and the Guarantor, to appoint a successor. If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within sixty (60) days after the retiring Collateral Agent gives notice of its resignation, then the retiring Collateral Agent may, on behalf of the Lenders, appoint a successor Collateral Agent or an Affiliate of any such bank. Upon the acceptance of its appointment as Collateral Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Collateral Agent, and the retiring Collateral Agent shall be discharged from its duties and obligations hereunder. After the Collateral Agent’s resignation hereunder, the provisions of this Article hereof shall continue in effect for the benefit of such retiring Collateral Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while it was acting as Collateral Agent.

          (f)       Each Lender acknowledges that it has, independently and without reliance upon the Collateral Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Advance established pursuant to this Offshore Facility Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Collateral Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Offshore Facility Agreement and any other loan document, any related agreement or any document furnished hereunder or thereunder.

Section 15. Relationship between the Lenders

          (a)       The participation in the Advance hereunder shall be for each of the Lenders’ own account and risk. Each Lender shall bear the risks associated with its portion of the Advance under this Offshore Facility Agreement, including, without limitation, that the Borrower may fail to make payments as required pursuant to the terms of this Offshore Facility Agreement and any other Advance Document.

          (b)       Any action to be taken by the Lenders hereunder shall be taken by the Administrative Agent, upon written request of the Majority Lenders.

          (c)       Each Lender has reviewed the text of each document evidencing the Advance, including this Offshore Facility Agreement and any other Advance Document. Each Lender acknowledges and agrees that no exercise of the rights and benefits provided to the parties in any other loan document shall impose any rights or obligations upon any other Lenders thereof other than are expressly set forth herein or therein.

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          (d)       Each Lender will contribute to its pro rata participation of any and all costs, expenses and disbursements incurred or made by the Administrative Agent, the Collateral Agent and any other Lender in protection of rights granted pursuant to this Offshore Facility Agreement or any other Advance Document and enforcing any remedies hereunder or thereunder. Any costs, expenses or disbursements incurred by a Lender pursuant to the immediately preceding sentence must be approved by the Majority Lenders prior to any incurrence by any Lender in order to be subject to contribution pursuant thereto.

          (e)       Each Lender agrees to indemnify and hold the Administrative Agent and the Collateral Agent harmless, to the extent of each Lender’s pro rata participation, from any and all claims (including, without limitation, any tax claims), losses, liabilities, costs and expenses (including legal fees and disbursements) suffered or incurred by the Administrative Agent or the Collateral Agent in connection with the Advance or the transactions contemplated by this Offshore Facility Agreement and any other Advance Document (other than those arising out of Administrative Agent’s or Collateral Agent’s own gross negligence or willful misconduct).

          (f)       In the event the Administrative Agent makes any payment to a Lender and either does not receive such payment promptly from the Borrower thereafter or for any reason amounts received by the Administrative Agent are rescinded or must otherwise be returned by the Administrative Agent, each Lender will immediately repay to the Administrative Agent, upon request, such Lender’s pro rata participation of such amount not received or so returned or paid.

          (g)       Anything in this Offshore Facility Agreement to the contrary notwithstanding, in no event shall the Administrative Agent or any Lender be liable under or in connection with this Offshore Facility Agreement or any other loan document for indirect, special, incidental, punitive or consequential losses or damages of any kind whatsoever, including but not limited to lost profits, whether or not foreseeable, even if the Administrative Agent or any Lender has been advised of the possibility thereof and regardless of the form of action in which such damages are sought.

Section 16. Fees

          (a)       Up-front-Participation-Fee. The Borrower shall pay to the Administrative Agent (for the benefit of the Lenders) the Up-front-Participation Fee in United States Dollars, in the amount and at the times agreed in the Offer Letter dated April 13, 2004.

          (b)       Arrangement Fee. The Borrower shall pay to the Lead Arrangers an arrangement fee in the amount and at the times agreed in the Offer Letter dated April 13, 2004.

Section 17. Costs and Expenses

          (a)       If the Borrower makes any payment of principal of the Advance (excluding as a result of the provision set forth in Section 7 hereof) on any day, other than the last day of the Interest Period applicable thereto, or fails to borrow the Advance on the date specified therefore in the notice to the Administrative Agent pursuant to Section 3 hereof, the Borrower shall reimburse the Lenders, on demand, for any financial loss, excluding loss of anticipated profits, incurred by it as a result of the timing of such payment or such failure, or as a result of liquidating or employing deposits from third parties, provided that the Administrative Agent shall have delivered to the Borrower a certificate as to the amount of such loss incurred by the Lenders , which certificate shall be conclusive in the absence of manifest error.

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          (b)       The Borrower agrees to reimburse the Lenders on demand for all reasonable and documented costs and expenses (including without limitation legal fees and registration costs) incurred by the Lenders in connection with the preparation and execution of the Advance Document, subject to a maximum amount of US$10,000.00 (ten thousand US Dollars).

Section 18. Governing Law and Jurisdiction

          This Offshore Facility Agreement shall be governed by and construed in accordance with the laws of the state of New York.

          (a)       The Borrower and the Guarantor irrevocably agree for the exclusive benefit of the Collateral Agent, the Administrative Agent and the Lenders that the courts of the state of New York shall have jurisdiction to hear and determine any suit action or proceeding, and to settle any disputes, which may arise out of in connection with this Offshore Facility Agreement and for such purposes you hereby irrevocably submit to the jurisdiction of such courts.

          (b)       Nothing contained in this Section shall limit the right of the Collateral Agent, Administrative Agent and the Lenders to take proceedings against the Borrower or the Guarantor, in any other court of competent jurisdiction, nor shall the taking of any such proceedings in one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not (unless precluded by applicable law).

          (c)       The Borrower and the Guarantor waive any objection which it may have now or in the future to the courts of the state of New York being nominated for the purpose of Section 18 (b) above and agree not to claim that any such court is not a convenient or appropriate forum.

          (d)       Each of the Borrower and the Guarantor hereby authorizes and appoints CT Corporation CT Corporation System, located at 111 Eighth Avenue, New York, New York 10011, United States of America to accept service of all legal process arising out of or connected with this Offshore Facility Agreement. Service on such person(s) (or substitute) shall be deemed to be service on the Borrower or the  Guarantor whether or not process is forwarded to or received by it. Except upon such a substitution, the Borrower and the Guarantor undertakes not to revoke any such authority or appointment, at all times to maintain an agent for service of process in New York, New York – United States of America and, if any such agent ceases for any reason to be an agent for this purpose, forthwith to appoint another agent and advise the Administrative Agent accordingly. Failing such appointment, the Administrative Agent shall be entitled by notice to the Borrower to appoint such a replacement agent to act on behalf of the Borrower or the  Guarantor, as the case may be.

Section 19. Successors and Participations

          (a)       This Offshore Facility Agreement and the Promissory Note shall be binding on the Borrower, the Guarantor and its respective successors and assigns and shall inure to the benefit of the Lenders and its successors and assigns.

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          (b)       Except as provided herein, neither the Borrower nor the Guarantor may assign or otherwise transfer all or any part of its respective rights or obligations under this Offshore Facility Agreement and the Promissory Note without the prior written consent of the Administrative Agent (after written consent of the Lenders).

          (c)       The Lenders (including Administrative Agent, and Collateral Agent) may: (i) assign in whole and in part its rights and obligations under this Offshore Facility Agreement and the Promissory Note, provided, however, that such assignment (A) does not increase the overall cost hereunder to the Borrower, in any way whatsoever, and (B) is consented by the Borrower in writing (such consent not to be unreasonably withheld); provided, however that no such consent is required in the event (x) the Lender  assigns its rights and obligations to another branch of the Lender or any entity directly or indirectly controlled by, controlling or under common control with, the Lender, or (y) at any time that an Event of Default of payment as described in Section 12 (a) has occurred and is continuing; (ii) sell participations in, all or any part of this Offshore Facility Agreement and the Promissory Note to another bank or other entity without the prior written consent of the Borrower, provided that the Administrative Agent shall advise the Borrower of each such sale of participations within five Banking Days from such sale.

For the purposes hereof, (a) “Assignment Agreement” shall mean any agreement entered into by the buyer (the “Assignee”) of specified rights and obligations of the seller (the “Assignor”) in respect of this Offshore Facility Agreement and the Promissory Note, and whereby the Assignee will substitute the Assignor as a Lender and (b) a “Participation” shall mean any agreement entered into by the Lender whereby the Lender sells to any third party (a “Participant”) its interest in all or any part of this Offshore Facility Agreement and the Promissory Note; provided, however, that in any such case the contractual relation between the parties hereto shall not be affected, and the Participant itself shall have no right to directly enforce this Offshore Facility Agreement and the Promissory Note against the Borrower or the Guarantor.

Section 20. Indemnification

          The Borrower and the Guarantor agree to indemnify and hold harmless the Administrative Agent, Collateral Agent the Lenders and its officers, directors, employees, agents and representatives (together, the “Indemnified Parties”) from and against any and all liabilities, losses, damages, penalties, actions, judgements, suits, costs, expenses (including the reasonable documented fees and expenses of external counsels) or disbursements of any kind whatsoever (together, “Liabilities”) which may at any time (including following the repayment of the Advance) be imposed upon, incurred by or asserted against the Indemnified Parties as a result of, relating to, or arising out of any of the Advance Document or any document contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Indemnified Parties under or in connection with any of the foregoing and that are duly evidenced by the Lenders, provided, however, that the Liabilities do not result directly from the gross negligence or willful misconduct of the relevant Indemnified Party.

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Section 21. Miscellaneous

          (a)     The obligations of the Borrower and/or the Guarantor under this Agreement to make payment in Dollars shall not be discharged or satisfied by any payment made in Reais, if a Lender does not receive the amount in Reais equivalent to the amount in Dollars due and payable hereunder in accordance with Section 22; it being understood that all amounts paid in Reais or any other currency, at the applicable exchange rate shall be fully discharged as amounts due and payable in Dollars.

          (b)       Any amendment or waiver of any provision of this Offshore Facility Agreement, or consent to any departure by the parties herefrom must be in writing and signed by the Borrower, the Guarantor, the Administrative Agent, the Lenders and the Collateral Agent. Such waiver or consent shall be effective only in the specific instance for which it is stipulated. Any failure or delay by the parties in exercising their rights hereunder shall not be deemed a waiver and shall not preclude the parties from the exercise of their rights.

          (c)       All notices, designations, consents, offers, acceptances, or any other communications provided pursuant to this Offshore Facility Agreement shall be given in writing and sent, to the Administrative Agent, , the Borrower and the Guarantor at the following addresses or to such other addresses as may be designated in writing from time to time by the parties:

If to the Lead Arrangers:

ABN AMRO BANK N.V.
C/o of Banco ABN AMRO REAL S.A.
Attn: GT&A – Renato Faria/Andrea Moor
Avenida Paulista, 15^th floor
CEP 01310-916 – São Paulo – Brazil
Fax: +55+1103174-9378
e-mail: Renato.faria@br.abnamro.com
             andrea.moor@br.abnamro.com

BANCO Bradesco S.A.
Attn.:	Mr. Roberto Medeiros / Osvaldo Junior
Address:	Ansbacher House 3rd floor – 20 Genesis Close – P.O.Box 1818 GT – Grand Cayman, Cayman Islands
Facsimile	1-345-945-1430
e-mail:	[º]

If to each of the Lenders:

To such Lender’s address as set forth in such Lender’s administrative details specified on Schedule 2 attached hereto together with its successors and permitted assigns pursuant to the Section 19 above.

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If to the Administrative Agent:
ABN AMRO Bank N.V.
C/o of Banco ABN AMRO REAL S.A.
Attn: GT&A – Renato Faria/Andrea Moor
Avenida Paulista, 15^th floor
CEP 01310-916 – São Paulo – Brazil
Fax: +55+1103174-9378
e-mail: Renato.faria@br.abnamro.com
            andrea.moor@br.abnamro.com

If to the Collateral Agent:
ABN AMRO Bank N.V.
C/o of Banco ABN AMRO REAL S.A.
Attn: GT&A – Renato Faria/Andrea Moor
Avenida Paulista, 15^th floor
CEP 01310-916 – São Paulo – Brazil
Fax: +55+1103174-9378
e-mail: Renato.faria@br.abnamro.com
            andrea.moor@br.abnamro.com

If to the Borrower:
Attn: Mr. J. J. Trigo
Address: 1357 Alameda Santos
Sao Paulo, Brazil
Tel.: +55-11-3269-4165
Fax: +55-11-3269-4068
e-mail: trigojj@vcp.com.br

If to the Guarantor: Attn: Mr. J. J. Trigo
Address: 1357 Alameda Santos
Sao Paulo, Brazil
Tel.: +55-11-3269-4165
Fax: +55-11-3269-4068
e-mail: trigojj@vcp.com.br

All such notices and communications shall be deemed given: (i) upon delivery if delivered by hand to the addresses provided in this Section 21(c); (ii) upon receipt if delivered by facsimile transmission to the number provided herein; or (iii) five (5) Banking Days after the date of deposit in the courier agency if delivered by reputable courier, return receipt requested if available, postage prepaid.

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          (d)       This Offshore Facility Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect thereto.

          (e)       The various provisions of this Offshore Facility Agreement are severable from each other. In the event that any provision in this Offshore Facility Agreement shall be held invalid or unenforceable by a court of competent jurisdiction, the remainder of this Offshore Facility Agreement shall be fully effective, operative and enforceable.

          (f)       No party hereto shall be liable for any delay in performance of any obligation hereunder by reason of any act or circumstance beyond the control of such Party due to the occurrence of a force majeure.

          (g)       The obligations of the Borrower and the Guarantor under Sections 7, 20, and 22 hereof shall survive the repayment in full of the Advance.

          (h)       This Offshore Facility Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

Section 22. Guarantee

          (a)       In consideration of the Lenders entering into the Offshore Facility Agreement with the Borrower (or for other valuable consideration receipt of which is hereby acknowledged), the Guarantor, as primary obligor unconditionally and irrevocably, jointly and severally, (i) guarantees the Lenders, on first written demand, by way of continuing security, the payment when due of all amounts payable by the Borrower under the Offshore Facility Agreement and other Advance Document and (ii) agrees that if and each time that the Borrower shall fail to make any payments as and when the same become due under the Advance Document, the Guarantor will on first written demand (without requiring the Lenders first to take steps against the Borrower or any other person) pay to the Lenders such amounts (as to which the certificate of the Lenders shall in the absence of manifest error be conclusive) in the currency in which such amounts are payable by the Borrower, free of all tax, charges or deductions whatsoever together with Interest thereon from the date of demand until the date of payment at the rate specified in the Offshore Facility Agreement. If deductions must be made by law then the Guarantor will pay such additional amounts as may be necessary to ensure that the Lenders receive the full amount provided for.

          (b)       The obligations of the Guarantor herein contained shall be in addition to and independent of every other security, if any, that the Lenders may at any time hold in respect of any obligation of the Obligors under the Offshore Facility Agreement.

          (c)       The obligations of the Guarantor hereunder constitute continuing obligations notwithstanding any intermediate payment or satisfaction of any part of any sum or sums of money owed by the Obligors under the Advance Document and shall not be affected by any matter that might operate to affect such obligations including without limitation (i) any time or indulgence granted to or composition with the Obligors or any other person, (ii) the taking, variation, renewal or release of, or neglect to perfect or enforce, any rights, remedies or securities against the Obligors or any other person or (iii) any unenforceability or invalidity of the Advance Document or any enforceability or invalidity of any obligations of the Obligors so that this Guarantee shall be construed as if there were no such unenforceability or invalidity.

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          (d)       The Guarantor agrees as a primary obligation to indemnify the Lenders from time to time on demand from and against any loss incurred by the Lenders as a result of any of the obligations of the Obligors under the Advance Document being or becoming void, voidable, unenforceable or ineffective for any reason whatsoever, whether or not known to the Lenders, the amount of such loss being the amount which the Lenders would otherwise had been entitled to recover from the Obligors. The Guarantor will reimburse the Lenders all costs incurred by the Lenders in connection with the enforcement of this Guarantee.

          (e)       The Guarantor warrants that this Guarantee is its legally binding obligation enforceable in accordance with its terms and that all necessary governmental consents, authorizations and all other legal requirements for the giving and implementation of this Guarantee have been obtained, it being understood that the prior approval of the Central Bank of Brazil referred to in Section 9 (a) (ii) is not required for the legality, validity or enforceability thereof but that the absence of such prior approval may affect the Guarantor’s ability to remit funds abroad from Brazil to satisfy obligations thereunder (which approval is subject to the sole discretion of the Central Bank of Brazil).

          (f)       Until all amounts which may be or become payable under the Advance Document have been irrevocably paid in full, the Guarantor shall not by virtue of this Guarantee be subrogated to any rights of the Lenders or claim in competition with the Lenders against the Obligors or any other person.

          (g)       This Guarantee will remain in full force and effect until full discharge of the obligations of the Borrower to the Lenders.

          (h)       The rights of the Administrative Agent (for the benefit of each creditor hereunder or the Promissory Note) shall not be affected, nor shall the Guarantor be exonerated or discharged from its liabilities assumed hereunder by time being given to the Borrower or by any other indulgence or concession to the Borrower granted by the Administrative Agent (for the benefit of each creditor hereunder or the Promissory Note), by the taking, holding, varying, non-enforcement or release by the Administrative Agent (for the benefit of each creditor hereunder or under the Promissory Note) of any rights or remedies against the Borrower or other person or other guaranty or security for any of the sums payment of which is guaranteed hereunder or under the Promissory Note) or by any other indulgence or concession to the Borrower.

          (i)       Without conflict of applicable law, the Guarantor waives any and all rights (i) of preference as provided in Article 366, 827 and 838 of the Brazilian Civil Code and (ii) to object to be exonerated or discharged from its liabilities assumed hereunder.

          (j)       If the Lenders receive an amount in respect of the Guarantor’s liability under this Guarantee or if that liability is converted into a claim, proof, judgement or order in a currency other than the currency (the “Contractual Currency”) in which the amount is expressed to be payable under Section 5 above:

(i) The Guarantor shall indemnify the Lenders as an independent obligation against any loss or liability arising as a result of the conversion;

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(ii)	If the amount received by the Lenders, when converted into the Contractual  Currency at a market rate in the usual course of its business, is less than the  amount owed in the Contractual Currency, the Guarantor shall forthwith on  demand pay to the Lenders an amount in the Contractual Currency equal to the  deficient amount; and
(iii)	The Guarantor shall pay to the Lenders on demand any exchange costs and  taxes payable and reasonably incurred in connection with any such conversion.
The Guarantor irrevocably authorizes the Lenders to apply any credit balance to which the Guarantor is entitled on any account of the Guarantor with the Lenders in satisfaction of any sum due and payable from the Guarantor to the Lenders hereunder but unpaid; for this purpose, the Lenders are authorized to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application.

           Notwithstanding the provision stated in Section 9 (a) (ii) , it is expressly agreed by the Guarantor, that upon the occurrence of an event as described in Section 12, and after all applicable grace periods and non-payment by the Borrower and/or the Guarantor of all amounts due and payable under the Advances, the Administrative Agent on behalf of the Lenders may then Request approval from the Central Bank in order to remit payments in United States Dollars from Brazil to the Administrative Agent in favor of the Lenders. Should the Central Bank not grant said approval, it is expressly agreed among the parties that the Guarantor undertakes to satisfy its obligations under the Guarantee, by remitting an amount in Reais equivalent to the amount in United States Dollars due and payable hereunder to each Lender (said amount in Reais being calculated at the applicable exchange rate and informed by the Administrative Agent to the Guarantor and Borrower which shall be conclusive save manifest error).

          Notwithstanding the foregoing, upon receipt by the Administrative Agent, of written notice either from the Guarantor or from the Central Bank, that the Central Bank did not grant the approval referred to in Section 9 (a) (ii) (an Affected Payment”), the Administrative Agent shall notify the Lenders of its receipt of such notice. Each Lender may elect at its sole discretion to receive such Affected Payment in either:

(i)      Reais on the date such Affected Payment is due and payable(an “Affected Payment Date”).

          In order for the election of each Lender to receive Reais as a result of an Affected Payment to be effective, (i) each Lender shall have delivered, within ten (10) Banking Days after the date of receipt of the Guarantor’s written notice to the Administrative Agent, a written notice (a “Notice”) to the effect the Affect Payment in Reais, informing its election to receive Reais.

          Following an effective election of each Lender to receive Reais, payment of any Affected Payment will be made by the Guarantor on the applicable Affected Payment Date to respective Lender or Lenders having elected to receive Reais instead of Dollars, Guarantor undertakes to pay, at the Lender’s sole discretion, by Reais check or any other manner of transfer in compliance with the applicable rules of the Central Bank, to a Brazilian according to Lender’s instructions. The amount of any such payment shall be determined by the exchange rate of sale under PTAX 800 – Option 5 – 220, transaction Sisbacen Data System of the Central Bank, on the Affected Payment Date (or, if PTAX 800 – Option 5 – 220, ceases to exist, the replacement rate therefor, or, if there is no such rate replacing the PTAX 800 – Option 5 – 220, such rate as is determined by the Administrative Agent in good faith save manifest error).

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or

(ii)     Dollars at such time such Affected Payment may be made by either the Borrower or the Guarantor.

Section 23. Assignment of Purchase Agreement

In consideration of the Lenders entering into this Offshore Facility Agreement:

          (a)       The Borrower hereby assigns, as of each date that is 30 (thirty) days prior to each date on which an Installment, Interest and all amounts due herein, are due and payable pursuant to the terms and conditions of this Offshore Facility Agreement, with full title guarantee and as a continuing security for the payment of its obligations hereunder (the “Secured Obligation”), an absolute security interest (“Security Interest”) in a portion of the Borrower’s rights, interest and remedies with respect to any and all of the Undertakings (including, but not limited to all of the Borrower’s rights to receive payment from Final Buyers, including (but not limited to) all of the Borrower’s future acquired rights to payment under the Purchase Agreements whether in the form of a letter of credit or right to title to the Goods or otherwise) which portion shall have a value not less than the value of such Installment, Interest and all amounts due herein.

          (b)       The Borrower will fully perform all of its material obligations under the Purchase Agreements, and will enforce all of its rights and remedies thereunder as it deems appropriate in its reasonable business judgement; provided, however, that the Borrower will not take any action or fail to take any action which would result in a waiver or other loss of any material rights or remedy of the Borrower thereunder.

          (c)       The Borrower will not, without the Administrative Agent’ prior written consent (which consent shall not be unreasonable withheld), modify, amend, supplement, compromise, satisfy, release or discharge the Purchase Agreements, any person liable directly or indirectly with respect thereto, or any agreement relating to the Purchase Agreements.

          (d)       The Borrower will at all times remain liable to observe and perform all of its duties and obligations under the Purchase Agreements, and the Lenders’ exercise of any of its rights with respect to this Offshore Facility Agreement will not release the Borrower from any of such duties or obligations. The Lenders are not obligated to (I) perform or fulfil any of the Borrower’s duties or obligations under the Purchase Agreements (II) make any payment under the Purchase Agreements, (III) make any inquiry as to the sufficiency of any payment of property received by it under the Purchase Agreements or the efficiency of performance by any party under the Purchase Agreements, or (IV) present or file any claim, or take any action to collect or enforce any performance or payment of any amounts, or delivery of any property.

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          (e)       Effective from and after the occurrence of any Event of Default and during the continuation thereof, the Borrower hereby irrevocably authorizes and empowers the Administrative Agent, on behalf of the Lenders, at the Administrative Agent’s sole discretion, to assert, either directly or on behalf of the Borrower any claims the Borrower may then or thereafter have against Importer with respect to the Undertakings that are subject to this Offshore Facility Agreement, in such a manner, as the Administrative Agent or the Collateral Agent may deem proper, to receive and collect any and all damages, awards and other monies resulting therefrom and to apply the proceeds therefrom on account of the Secured Obligations, whether or not then due, in accordance with the terms of the Offshore Facility Agreement. The Borrower hereby authorizes the Administrative Agent and the Collateral Agent, on behalf of the Lenders to collect all amounts due to the Borrower under and by virtue of the Purchase Agreements including any future acquired rights to payment thereunder.

          (f)       Power-of-Attorney: To facilitate the foregoing, the Borrower hereby irrevocably authorizes and empowers each of the Administrative Agent and the Collateral Agent as its attorneys at any time after the occurrence and during the continuance of an Event of Default to (a) either directly or on behalf of the Borrower, assert any claims and demands and enforce any rights and remedies as the Borrower may have, from time to time, with respect to the Undertakings that shall have been assigned to the Lenders pursuant to Section 23(a), as the Administrative Agent, Collateral Agent  and the Lenders may deem proper and (b) receive and collect any and all proceeds, awards or amounts due to the Borrower in respect of any indemnification claims under the Secured Obligations in such manner as the Borrower’s true and lawful attorney to assert, at any time after the occurre nce and during the continuance of an Event of Default, any claims and demands or enforce any rights and remedies and collect such proceeds, awards and amounts and to apply such monies to the Secured Obligations in such manner as the Administrative Agent, Collateral Agent and the Majority Lenders shall elect. This power of attorney is coupled with an interest and is irrevocable by the Borrower.

          (g)       This Offshore Facility Agreement creates a continuing security interest in the Undertakings and all representations, warranties, and agreements in each case, as specified in Section 23(a), and such security interest shall terminate only upon the full and irrevocable payment of all amounts owing to the Lenders under this Offshore Facility Agreement; provided that the Lenders have no other commitment to extend credit or make advance to or for the account of the Borrower.  At such time, the Lenders and the Administrative Agent will, at the request of the Borrower, reassign and redeliver to the Borrower all of its rights hereunder which have not been sold, which reassignment and redelivery will be without warranty by or recourse to the Lenders, except as to the absence of any prior assignments by the Lenders of its interest in the Undertakings, and will be at the expense of the Borrower.

IN WITNESS WHEREOF, each of the Borrower, the Guarantor, the Administrative Agent, the Collateral Agent and the Lenders have executed this Offshore Facility Agreement in seven (???) originals in English as of the date first above written herein.

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ABN AMRO BANK  N.V. As Lead Arranger
By:	By:
Name:	Name:
Title:	Title:
BANCO Bradesco As Lead Arranger
By:	By:
Name:	Name:
Title:	Title:
ABN AMRO BANK N.V., as Administrative Agent
By:	By:
Name:	Name:
Title:	Title:
ABN AMRO BANK N.V., as Collateral Agent
By:	By:
Name:	Name:
Title:	Title:
VCP TRADING N.V., as Borrower
By:	By:
Name:	Name:
Title:	Title:
VOTORANTIM CELULOSE E PAPEL S.A., as Guarantor
By:	By:
Name:	Name:
Title:	Title:

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ABN AMRO Bank N.V. As Lender
By:	By:
Name:	Name:
Title:	Title:
BANCO BRADESCO S.A. acting through its branch located in Grand Cayman Branch As Lender
By:	By:
Name:	Name:
Title:	Title:
Witnesses:
1.	2.
Name:	Name:

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SCHEDULE 1

INITIAL FINAL BUYERS

NAME	COUNTRY
M-Real Sittingbourne Ltd.(Former UK Paper)	United Kingdom
Papierfabrik Scheufelen GmbH	Germany
Ahlstrom Sibille	France
Ahlstrom Dalle	France
Fedrigoni Cartiere S.p.A.	Italy
Koehler Kehl Gmbh	Germany
Kimberly Clark Corp.	USA
Marubeni Corporation	Japan
Itochu Corporation	Japan
Amicell Inc	USA
Cellmark AB	Sweden
Lindenmeyer Munroe-Maine	USA
TST Impresso INC	USA
Elof Hansson Paper & Board Inc.	USA
Diamond Paper Corporation	USA
J. McNaughton Paper Group Ltd	England
Antalis S.N.C.	France
Allcart S.R.L.	Italy
IMPECO, S.L.	Spain
Trent Paper	England
Roxcel Handelsges M.B.H.	Austria
Norse Paper A.S.	Norway
Premier Paper Group LTD	England
MoDoVan Gelder	Netherlands

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SCHEDULE 2

LENDERS’COMMITMENTS

Lender	Commitment
ABN AMRO BANK N.V.	US$	48,000,000.00
BANCO Bradesco S.A., acting through its Grand Cayman Branch	US$	75,000,000.00
TOTAL	US$	123,000,000.00

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SCHEDULE 3

PAYMENT DATES

Date	Principal Amount (US$)	Description
07/06/2004		Disbursement Date
01/03/2005		Interest Payment Date
07/01/2005		Interest Payment Date
12/28/2005		Interest Payment Date
06/26/2006		Interest Payment Date
12/22/2006		Interest Payment Date
06/20/2007		Interest Payment Date
12/17/2007		Interest Payment Date
06/13/2008		Interest Payment Date
12/10/2008		Interest Payment Date
06/08/2009	30,750,000.00	Payment Date and Interest Payment Date
09/08/2009	11,531,250.00	Payment Date and Interest Payment Date
12/07/2009	11,531,250.00	Payment Date and Interest Payment Date
03/08/2010	11,531,250.00	Payment Date and Interest Payment Date
06/07/2010	11,531,250.00	Payment Date and Interest Payment Date
09/07/2010	11,531,250.00	Payment Date and Interest Payment Date
12/07/2010	11,531,250.00	Payment Date and Interest Payment Date
03/07/2011	11,531,250.00	Payment Date and Interest Payment Date
06/06/2011	11,531,250.00	Payment Date and Interest Payment Date –Final Maturity Date.

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Exhibit A

PROMISSORY NOTE

[Amount in US$]
Place: New York, New York _ U.S.A.
Date: [º] , [º]

FOR VALUE RECEIVED, VCP Trading N.V., a company duly organised and existing under the laws of the Netherlands Antilles, with its head office located at 1357 Alameda Santos, São Paulo, Brazil, (the “Borrower”) hereby promises to pay to ABN AMRO Bank, as Administrative Agent, on behalf of the Lenders, the principal sum of US$ 123,000,000.00 (One hundred and twenty three United States Dollars) (the “Advance”), on the dates as specified in the Offshore Facility Agreement (as defined below) until (the “Final Maturity Date”) or on such earlier date as may be required by the Lender in accordance with the terms of the Offshore Facility Agreement (as defined below). The Borrower also promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Offshore Facility Agreement

Both principal and interest hereunder are payable in lawful money of the United States of America, in same day funds, to the Administrative Agent, at its account at ABN AMRO BANK N.V. – New York Branch, informed from time to time, free and clear of all deduction of any present or future taxes, levies, imposts, charges, withholdings, penalties, fines, additions to tax and interest, imposed or levied in Brazil or any other jurisdictions from which any payment hereunder is remitted, or any political subdivision or taxing authority thereof, except taxes imposed on the Lenders’ income by the jurisdiction under which the Lenders are incorporated.

The Borrower hereby waives, to the fullest extent permitted by applicable law, presentment, demand, protest and all notices of any kind in connection with this Promissory Note. The failure of the Lenders to exercise any of their rights hereunder in any particular instance shall not constitute a waiver thereof in that instance or any subsequent instance.

This promissory note is the Promissory Note referred to in that Offshore Facility Agreement, dated as of June   [ ], 2004 (the “Offshore Facility Agreement”), among the Borrower, the Guarantor, the Administrative Agent, Collateral Agent and the Lenders, which among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events therein specified.

This Promissory Note shall be governed by, and construed in accordance with New York law, without giving effect to its conflict of law principles.

VCP Trading N.V.
By:	By:
Name:	Name:
Title:	Title:

Per Aval:
VOTORANTIM CELULOSE E PAPEL S.A.
By:	By:
Name:	Name:
Title:	Title:

Exhibit B

DISBURSEMENT REQUEST

To:	ABN AMRO Bank, as Administrative Agent
Attn:	[Contact Person]
		[date]

BANK X
[Address]

Ladies and Gentlemen:

We refer to the Offshore Facility Agreement dated as of [June xx, 2004] (the “Offshore Facility Agreement”) among Votorantim Celulose e Papel S.A., VCP Trading N.V., the Administrative Agent, the Collateral Agent and the Lenders. Terms defined in the Offshore Facility Agreement shall have the same meaning in this Disbursement Request.

Pursuant to Section 3 of the Offshore Facility Agreement, we hereby request the Lenders to make an advance to us in the amount of US$ xx,000,000.oo (amount in words) (the “Advance Amount”) on [June, 2004] (the “Disbursement Date”) for the purpose of financing future sales to be made by the Borrower to the Final Buyers in accordance with the Offshore Facility Agreement.

Not later than 2 (two) Banking Days prior to the Disbursement Date, we shall give you in writing the credit instructions for the Advance Amount.

We confirm that, on the date hereof, the representations set out in Section 9 of the Offshore Facility Agreement are true and correct and that no Event of Default has occurred and is continuing.

Enclosed are the documents required pursuant to Section 8 of the Offshore Facility Agreement.

Sincerely yours,

By:
Name:	Jose Joao Trigo
Title:	Treasurer

Exhibit C Legal Opinion

Exhibit D

Officer’s Certificate

EX-4.3

Exhibit 4.3

EXPORT PREPAYMENT AGREEMENT Nº G-0852/05

THIS EXPORT PREPAYMENT AGREEMENT (the “Agreement”) is made as of March 29, 2005 by and between:

VOTORANTIM CELULOSE E PAPEL S.A. (“VCP”), a company duly organized and validly existing under the laws of the Federative Republic of Brazil, having its principal place of business located at Alameda Santos, 1357 – 7º, São Paulo - SP, enrolled with the CNPJ/MF under number 60.643.228/0001- 21 (the “Borrower”); and

ABN AMRO Bank N.V., a financial institution duly organized and existing under the laws of The Netherlands, with its place of business in the city of Amsterdam (the “Bank”);

W I T N E S S E T H:

WHEREAS, the Borrower has, or will, enter into one or more export agreements, the performance of which shall be subject to the terms and conditions of this Agreement (such agreements being defined herein individually, as an “Export Agreement” and collectively, the “Export Agreements”), with the companies set forth on the schedules attached hereto (individually, an “Importer” and collectively, the “Importers”) and made a part hereof, entitled “Exhibit I” from time to time provided by the Borrower to the Bank, pursuant to which the Borrower will export goods,

WHEREAS, the Borrower’s sales of goods under the Export Agreements will be made through one or more shipments with the aggregate purchase price for such Goods being at least the amount set forth in the Exhibit I (the purchase price to be paid for any shipment of Goods by each Importer concerned being referred to herein as the “Purchase Price” for that shipment, and the aggregate of those Purchase Prices being referred to herein as the “Aggregate Purchase Price”);

WHEREAS, in connection with these export transactions, the Borrower has requested the Bank to establish a facility in the aggregate principal amount of up to US$ 50,000,00.00 (fifty million United States Dollars) (the “Facility”) to be disbursed in one ore more advances, such advance or advances to constitute an “anticipated payment of future exports” in accordance with Circular 2231, dated September 25, 1992, as modified from that date and with the electronic registration of the relevant terms and conditions of this Agreement through Module Registry Financial Transaction(Módulo Registro de Operação Financeira – ROF) of the Data System of the Central Bank of Brazil – SISBACEN, under number TA331696 (such advance or advance being referred to herein as the “Advance”); and

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WHEREAS, in order to satisfy its obligations hereunder, the Borrower(s shall instruct the Importer(s) concerned, upon the negotiation of the shipping documents relating to a shipment of Goods under each Export Agreement, to make payment thereof by forwarding the Purchase Price for the shipment to the Bank in accordance with the terms of this Agreement;

NOW THEREFORE, in consideration of the premises set forth herein, the Bank and the Borrower (referred to collectively herein as the “Parties”) hereby agree as follows:

1.      THE ADVANCE

1.1.      The Bank, upon the terms and subject to the conditions hereof, agrees to make the Facility available to the Borrower, such Facility to be disbursed in one or more Advances within the period of 10 days from the date hereof. To effect each Advance, the Bank shall forward the amount thereof to that account at ABN AMRO Bank N.V., New York Branch, CHIPS 0958, account number 673.001.211.441 designated “Banco ABN AMRO Real S.A.- Brazil” for the account of the Borrower. The Borrower shall deliver to the Bank promissory notes substantially in the form of Exhibit II hereto (the “Notes”) executed by the Borrower on each date of disbursement of each Advance (the “Disbursement Date”) made under this Agreement.

1.2.      The purpose of the Advance or the Advances is to provide financing to the Borrower in accordance with the applicable regulations of the Central Bank of Brazil.

1.3      The Borrower shall advise the Bank of those Export Agreements which the Borrower intends to allocate and make subject to this Agreement in existence on the date hereof and shall thereafter advise the Bank following the date hereof of any further agreements it wishes to allocate to this Agreement. The Borrower may request the authorization of the Bank to enter into Export Agreements with importers other than the Importer(s). If the Bank shall approve such designation in writing each such substitute importer shall also be deemed to be an “Importer” hereunder.

2.      REPAYMENT.

2.1.      The Parties hereby agree that, without limiting the liability of the Borrower hereunder and under the Notes, the primary mechanism for the repayment of each Advance to the Bank shall be the delivery to the Bank of the Purchase Price for each shipment of Goods made by the Borrower pursuant to each Export Agreement. The Borrower hereby unconditionally and irrevocably transfers assigns and sets over to the Bank all of its right, title and interest to receive the payment of all amounts due from each Importer under each of the Export Agreements. For purposes of this Agreement, each shipment of Goods, which is made pursuant to an Export Agreement shall be referred to as a “Covered Shipment.”

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2.2.      As to each Covered Shipment, the Parties agree to proceed as follows:

(a)      In order for a shipment of Goods to become a Covered Shipment, such shipment must occur during the shipment period beginning on the day which is not later than 6 months after the first Disbursement Date and ending on the day which is not later than 1 month after the first Disbursement Date the “Eligible Shipment Period”). Upon making any shipment of Goods under each Export Agreement during the Eligible Shipment Period, the Borrower shall notify Banco ABN AMRO Real S.A. in São Paulo (the “Exchange Bank”) that such shipment shall constitute a Covered Shipment hereunder, and shall provide to the Exchange Bank the following information and documentation with respect to such shipment: (x) the number of the “despacho aduaneiro” and the number of the “registro de exportação”; (y) copies of the shipping documents; and (z) any draft or other payment document to be executed by the Importer concerned. All shipping documents shall be delivered to the Bank within 15 days after the Date of Shipment. For purpose of this Agreement, the term “Date of Shipment” shall be the date of shipment, which appears on the relevant shipping, documents for a Covered Shipment.

(b)      The Borrower shall irrevocably instruct each Importer receiving a Covered Shipment to direct payment to the Bank, by crediting the collection account No. 44.84.11.490 at ABN AMRO Bank N.V., Amsterdam, in United States Dollars, free and clear of set-off or counterclaim (the “Collection Account”), in the name of the Bank, that amount of United States Dollars corresponding to the Purchase Price for each Covered Shipment, according to Exhibit III. Any remaining amount of the Collection Account shall be released by the Bank to the Borrower.

(c)      Provided that such payment is received in the Collection Account not later than the relevant Repayment Date (as hereinafter defined), the Bank shall, on the Repayment Date, credit such payment against the Advance.

2.3.      The Borrower hereby promises to repay the Advance or Advances in 9 (nine) equal installments on the respective dates (each one a “Repayment Date”), as set forth below:

Installment No.	Repayment Date	Principal Amount
1	03/03/2010	US$5,555,555.55
2	06/01/2010	US$5,555,555.55
3	08/30/2010	US$5,555,555.55
4	11/29/2010	US$5,555,555.55
5	02/28/2011	US$5,555,555.55
6	05/27/2011	US$5,555,555.55
7	08/25/2011	US$5,555,555.55
8	11/23/2011	US$5,555,555.55
9	02/21/2012	US$5,555,555.55

2.4.      The Borrower may prepay all or a portion of any Advance at any time or from time to time, without penalty, costs or additional expenses, which prepayment shall in each case, be made together with accrued and unpaid interest on the principal amount, provided;

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(a)	the Borrower shall inform the Bank, in writing, three days prior to such prepayment, and such notice of prepayment shall specify the amount of the Advance being prepaid and each partial prepayment shall be applied to the outstanding Advances in the inverse order of maturity;
(b)	such prepayment is to be made on any Interest Payment Date;
(c)	the Borrower has obtained all necessary and advisable governmental consents (including approval from the Central Bank of Brazil) required for purposes of making such prepayment; and
d)	the Borrower shall be responsible for any and all other reasonable penalty or costs incurred by the Bank by virtue of such prepayment it being understood that if the Borrower is in compliance with (a-c) there shall be no additional penalty, costs or additional expenses.

2.5.      The Borrower hereby agrees that the payment mechanism herein described shall in no respect limit the liability of the Borrower for all principal of and interest on the Advances and all other amounts due and owing hereunder and under the Notes and such payment mechanism shall in no respect limit the ability of the Bank to demand payment under the Notes and this Agreement on the Repayment Date. If, as of any Repayment Date, any of the principal amount of the Advances and/or any interest thereon shall remain outstanding and payment therefore shall not have been received through the payment mechanism described herein, or if at any time any such payment of such principal or interest shall be rescinded or the Bank shall be required to refund or disgorge any such payment, the Bank in its sole discretion may require that the Borrower make payment of such amounts in United States Dollars directly to the Bank. Such payments shall be made to the Bank to the Collection Account.

3.      INTEREST.

3.1.      “Interest Period” shall mean in relation to each Advance, (a) up to the first Repayment Date, each time period of 6 (six) months commencing on and including the Disbursement Date corresponding to such Advance; and (b) thereafter, each time period of 3 (three) months commencing on and including the First Repayment Date and ending on but excluding the date which is the last Repayment Date.

3.2.      “Interest Rate” for each Interest Period shall mean LIBOR plus the applicable Margin.

3.3.      “Margin” shall mean 1.5000 p.a. (one point five percent per annum).

3.4.      “LIBOR” shall mean, for any Interest Period, an interest rate per annum determined on the basis of the London interbank offered rate for deposits in Dollars for a period of time comparable to the relevant Interest Period, shown on the display page designated British Bankers Association Interest Settlement Rates, “LIBOR 01” Page, on the Reuters screen or such other page as may replace that page in that service, at approximately 11:00 a.m., London time, 2 (two) Business Days prior to the first day of such Interest Period.

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In the event that such rate does not appear on such LIBOR 01 Reuters screen page, or such other page as may replace that page in that service, then LIBOR shall be the arithmetic mean (expressed as an annual rate and rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates quoted at approximately 11:00 a.m. London time by 3 (three) leading banks, chosen by the Bank and agreed by the parties hereto as the rate at which deposits in Dollars are offered to such Banks by prime banks, in the London interbank market for a period of time comparable to the relevant Interest Period, at approximately 11:00 a.m. 2 (two) Business Days prior to the first day of such Interest Period. If the Borrower does not agree with the LIBOR quoted by the Bank, the Bank shall have no obligation to make the disbursement related to the Advance or if the Advance has already been made, the rate will be reasonably determined by the Bank.

3.5.      Interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed (including the first day, but excluding the last day). Accrued interest shall be due and payable in arrears upon any payment of the Advance and on each applicable Interest Payment Date by crediting the Collection Account. For that purpose, the Borrower shall irrevocably instruct the Importers receiving a Covered Shipment to effect payments to the Collection Account to cover the interest amount due to the Lender. Such amounts shall be credited by the Importers in amount sufficient to pay the interest due at least 90 (ninety) days before each Interest Payment Date. Any remaining amount of the Collection Account shall be released by the Bank to the Borrower. “Interest Payment Date” shall mean the last day of each Interest Period.

3.6.      Interest on the principal amount of any Advance made hereunder or under the Notes not paid when due any other amount due and payable under this Prepayment Agreement that is past due (whether at any Repayment Date, by acceleration or otherwise) shall, to the extent permitted by law, bear interest from the date such amount is due until such amount is paid in full at the per annum rate that is the then applicable Interest Rate plus 1%(one percent).

4.      PAYMENTS AND COMPUTATIONS.

4.1.      The Borrower shall make, and shall instruct each Importer to make, each payment hereunder and under any instrument delivered hereunder not later than 12:00 noon (New York City time) on the day when due in lawful money of the United States (in freely transferable and in immediately available United States dollars) to the Bank, to the Collection Account. 4.2. All computations of interest shall be made by the Bank on the basis of a year of 360 days for the actual number of days occurring in the period for which such interest is payable.

4.3.      Whenever any payment to be made hereunder or under any instrument delivered hereunder shall be stated to be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day (subject to the definition of Interest Period as above provided), and such extension of time shall, in such case, be included in the computation of payment of interest; provided, however, that if such extension would cause such payment to be made in a new calendar month, such payment shall be made on the next preceding Business Day. For the purposes of this Agreement, Business Day means a day on which banks are open for business in the city of New York and London.

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5.      CONDITIONS PRECEDENT TO THE ADVANCE.

5.1.      The obligation of the Bank to make the Advance is subject to the conditions precedent that it shall have received on or before the first date of disbursement the following documents, each dated on or before such day, in form and substance satisfactory to the Bank:

(i)	certified copies of the resolutions of the board of directors or equivalent body of the Borrower approving this Agreement and the Notes, and of all documents evidencing other necessary corporate or other action;
(ii)	Certificates of the Secretary or an Assistant Secretary or other appropriate officer of the Borrower certifying the names and true signatures of the officers of the Borrower duly authorized to sign this Agreement and the other documents to be delivered by it hereunder;
(iii)	an evidence of the electronic registration (Registro de Operação Financeira – ROF) of the Data System of the Central Bank of Brazi– SISBACEN under number TA331696;
(iv)	a Note evidencing the principal amount of the Advance plus accrued interest thereon;
(v)	any all guarantees or security documents duly executed in manner satisfactory to the Bank;
(vi)	three Business Days’ prior written irrevocable notice of borrowing, substantially in the form of Exhibit IV hereto.
(vii)	such other approvals, opinions, or documents as the Bank may reasonably request.
(viii)	the representations and warranties contained in Section 9 of this Agreement are true and correct on and as of the date of such Advance as though made on such date, and
(ix)	no event has occurred and is continuing, or would result from the  Advance, which constitutes an Event of Default or would constitute an Event of Default but for the requirement that notice be given or time elapse or both.

5.2.      The obligation of the Bank to make further disbursements is subject to the conditions precedent that it shall have received on or before the date of disbursement the following documents, each dated on or before such day, in form and substance satisfactory to the Bank:

(i) a Note evidencing the principal amount of the Advance plus accrued interest thereon;

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(ii)	three Business Days’ prior written irrevocable notice of borrowing; and
(iii)	such other approvals, opinions, or documents as the Bank may reasonably request.,
(iv)	the representations and warranties contained in Section 9 of this Agreement are true and correct on and as of the date of such Advance as though made on such date, and

6.      TAXES

6.1.      All payments to be made by the Borrower to the Bank hereunder shall be made free and clear of, and without deduction for, or on account of, any present or future taxes, levies, duties, imposts, deductions, charges or withholdings and all liabilities with respect thereto, excluding taxes imposed on the overall net income of the Bank (all such non-excluded taxes, levies, etc. to be referred to generally as “Taxes”) tax unless the Borrower is required to make such a payment subject to the deduction or withholding of Taxes, in which case the sum payable by the Borrower in respect of which such deduction or withholding is required to be made shall be increased to the extent necessary to ensure that, after the making of the required deduction or withholding, the Bank receives and retains (free from any liability in respect of any such deduction or withholding) a net sum equal to the sum which it would have received and so retained had no such deduction or withholding of taxes been made or required to be made. The Borrower shall deliver to the Bank within thirty (30) days after payment, an original receipt evidencing payment of any Taxes required to be withheld or paid.

6.2.      Without prejudice to the provisions of Section 6.1, if the Bank is required to make any payment on account of any Taxes, the Borrower shall, upon demand of the Bank, promptly indemnify the Bank against such payment or liability, together with any interest, penalties and expenses payable or incurred in connection therewith.

7.       INCREASED COSTS. If by reason of (i) any change in law, decree, rule or regulation or in the interpretation or administration thereof and/or (ii) compliance with any request from or requirement of any central bank or other fiscal, monetary or other authority (including, without limitation, a request or requirement which affects the manner in which the Bank is required to or does maintain capital resources having regard to the Bank’s obligations hereunder and to amounts owing to it hereunder) and/or (iii) no disbursements under this Agreement be made by any reason whatsoever:

(a)	the Bank incurs a cost as a result of the Bank’s having entered into and/or performing its obligations under this Agreement and/or assuming or maintaining a commitment under this Agreement;
(b)	the Bank becomes liable to make any payment on account of any Taxes calculated by reference to the amount of the Advance and/or to any sum received or receivable by it hereunder;

7

(c) then the Borrower shall, from time to time on demand of the Bank, promptly pay to the Bank amounts sufficient to indemnify it against, as the case may be, but in any event without duplication, such cost or such liability.

8.       ILLEGALITY. If, after the date of this Prepayment Agreement, the introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any governmental authority charged with the interpretation or administration thereof or compliance by the Bank with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for the Bank to make, maintain or fund the Advance, and after the Bank has made reasonable efforts to make, maintain or fund the Advance using other alternatives such as lending offices in other jurisdictions, the Bank forthwith shall so notify the Borrower in writing, whereupon the obligation of the Bank to make or maintain the Advance shall be terminated. Upon receipt of such notice, the Borrower shall prepay in full the then outstanding principal amount of the Advance, together with accrued interest thereon, on the shorter of either (a) the last day of Interest Period applicable thereto or (b) within sixty-six (60) Business Days, provided that the Borrower has obtained all necessary and advisable required governmental consents (including approval from the Central Bank of Brazil).

9.      REPRESENTATIONS AND WARRANTIES OF THE BORROWER. The Borrower hereby represents and warrants to the Bank as follows:

(a)	It is a company duly organized, validly existing and in good standing under the laws of Brazil and duly registered with the “Departamento do Comércio Exterior - Decex”, as eligible to receive the Advance.
(b)	its execution, delivery and performance of this Agreement and all documents to be delivered by it hereunder are within its corporate powers, have been duly authorized by all necessary corporate action, and do not contravene (i) its charter or by-laws or (ii) any law or any contractual restriction binding on or affecting it.
(c)	No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is required for the due execution, delivery and performance thereby of this Agreement (except that the Borrower shall have to file an exchange contract application through a bank authorized to operate in the exchange market in Brazil whenever it shall pay interest to the Bank hereunder).
(d)	This Agreement is, and each document to be delivered by it hereunder or in connection herewith will be, its legal, valid and binding obligation, enforceable against it in accordance with the terms thereof, and such obligation ranks at least pari passu in all respects with all other of its obligations.
(e)	It has furnished to the Bank its consolidated balance sheet and statement of income, stockholders’ equity and cash flows as of and for the fiscal year ended 2003. Such consolidated financial statements are complete and correct, and fairly present the Borrower’s consolidated financial condition and the results of its operations and cash flows as of such dates and for such periods in accordance with Brazilian GAAP and since December 31, 2004, there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.

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(f)	There is no pending or threatened action or proceeding affecting it or any of its subsidiaries or Affiliates before any court, governmental agency or arbitrator, which may materially adversely affect its consolidated financial condition or operations.
(g)	Neither it or any of its property has any immunity from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgment, attachment in aid of execution, or otherwise) under the laws of the jurisdiction of its organization.
(h)	There is no tax, levy, impost, duty, deduction, charge or withholding imposed by Brazil or any political subdivision thereof either (i) on or by virtue of the execution or delivery of this Agreement, the Notes or any other document to be furnished hereunder or (ii) on any payment to be made pursuant to this Agreement or the Notes. To the extent that in the future any Brazilian statutory withholding tax on each payment of interest hereunder is required to be paid, such tax shall be borne by the Borrower.
(i)	In any proceedings taken in Brazil in relation to this Agreement or the Notes the Borrower will not be entitled to claim for itself, or any of its assets, immunity from suit, execution, attachment or other legal process.
(j)	In any proceedings taken in Brazil in relation to this Agreement or the Notes, the choice of the law of the State of New York as the governing law of this Agreement and the Notes and any judgment obtained in the Courts of New York will be recognized and enforced.
(k)	All acts, conditions and things required to be done, fulfilled and performed in order (a) to enable the Borrower to lawfully to enter into, exercise its rights under and perform and comply with the obligations expressed to be assumed by the Borrower in this Agreement and Notes, (b) to ensure that the obligations expressed to be assumed by it in this Agreement and the Notes are legal, valid and binding, (except that a certified translation into Portuguese of the Agreement and the Notes is required to be filed with a competent Registry of Deeds in Brazil in order to ensure the legality, validity and binding effect of this Agreement and the Notes) and (c) to make this Agreement and the Notes admissible in evidence in Brazil, have been done, fulfilled and performed.
(l)	Under the laws of Brazil in force at the date hereof, it is not necessary that this Agreement or the Notes be filed, recorded or enrolled with any court or any other authority in Brazil or that any stamp, registration or similar tax be paid on or in relation to the Agreement or the Notes; except that a certified translation into Portuguese of this Agreement and the Notes is required to be filed with a competent Registry of Deeds in Brazil in order to ensure the legality, validity and binding effect of this Agreement and the Notes.

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10.     FINANCIAL INFORMATION.

10.1.      So long as any amount shall remain owing to the Bank under this Agreement or Notes, the Borrower shall from time to time on the request of the Bank, furnish the Bank with such information about the business and consolidated financial condition of the Borrower as the Bank may reasonably request.

10.2.      So long as any amount shall remain owing to the Bank under this Agreement or the Notes, the Borrower will ensure that:

(i)

each set of consolidated financial statements delivered by it pursuant to this Agreement is prepared on the same basis as was used in the preparation of the consolidated financial statements originally presented to the Bank and in accordance with accounting principles generally accepted in Brazil and consistently applied (subject to normal year-end audit adjustments, in the case of the financial statements required to be delivered pursuant to Section 10.2(ii) above); and

(ii)

each set of consolidated financial statements delivered by it pursuant to this Agreement is certified by a duly authorized officer of the Borrower as fairly and accurately presenting the consolidated financial condition of the Borrower as at the end of the period to which those consolidated financial statements relate and of the results of its operations during such period.

11.      COVENANTS. So long as any amount shall remain owing to the Bank under this Agreement or the Notes, the Borrower shall:

(i)	obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorizations, approvals, licenses and consents required in or by the laws and regulations of Brazil to enable it lawfully to enter into and perform its obligations under this Agreement, the Notes and the Export Agreements or to ensure the legality, validity, enforceability or admissibility thereof in evidence in Brazil;
(ii)	promptly upon receipt of each Advance, enter into and perform its obligations under the currency exchange agreement, on terms and subject to conditions approved by the Bank, with the Exchange Bank pursuant to which the Borrower sells the dollars represented by the Advance to, and receives Brazilian currency in respect thereof from, the Exchange Bank and procure that such currency exchange agreement is promptly registered as a “Pagamento Antecipado de Exportação” with the Central Bank of Brazil;
(iii)	allocate Export Agreements to this Agreement having an Aggregate Purchase Price and such shipment and payment dates as will ensure that, and procure the payment of the proceeds thereunder to the Bank so that, on each Repayment Date and on each Interest Payment Date there are funds standing to the credit of the Borrower at least equal to the amount of each Advance plus accrued interest due for payment by the Borrower on the respective Repayment Date;
(iv)	For Export Agreements allocated to this Agreement, issue to each Importer an irrevocable direction to pay the Purchase Price under each Export Agreement to Bank;

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(v)	deliver to the Exchange Bank all export documentation relating to each Export Agreement;
(vi)	perform all of its obligations under each Export Agreement; and ensure that, at all times, the claims of the Bank hereunder and under the Notes rank, at least pari passu with the claims of all of its unsecured creditors, except those whose claims are preferred solely by any bankruptcy, insolvency, liquidation or other laws of similar application.

12.      EVENTS OF DEFAULT. If any of the following events (each an “Event of Default”) shall occur and be continuing:

(a)	The Borrower shall fail to pay any sum due under this Agreement or under the Notes when and as due, shall fail to provide instructions to the Importers as required pursuant to this Agreement or shall fail to observe or perform any of its other covenants or obligations hereunder or under the Notes; or
(b)	The Borrower shall fail to export Covered Shipments with an Aggregate Purchase Price of at least the amount of each Advance by the end of the shipment periods set forth in Exhibit I hereto; or
(c)	Any representation or warranty made by the Borrower under or in connection with this Agreement or the Notes shall prove to have been incorrect when made; or
(d)	Any proceeding shall be instituted by or against the Borrower or any of its subsidiaries seeking to adjudicate it as bankrupt or insolvent, or seeking liquidation, winding up, reorganization, arrangement, adjustment, relief or composition of it or its debts under any law relating to bankruptcy, insolvency or reorganization or relief of debtors, or seeking the entry of an order for relief or the appointment of a receiver, trustee, or other similar official for it or for any substantial part of its property; or the Borrower or any of its subsidiaries shall take any corporate action to authorize any of the actions set forth above in this subsection (d); or
(e)	Any default or event of default shall occur or be continuing under any agreement, instrument or other document of the Borrower evidencing Indebtedness (as defined below) and such default or event of default may allow the Bank to cause the acceleration of such Indebtedness and shall not have been waived. For purposes of this paragraph (e) “Indebtedness” shall mean any indebtedness for borrowed money which is payable or may be paid (i) in any currency and (ii) to any person resident or having its principal place of business in any country;
(f)	The Borrower ceases to be involved in (i) the business of producing pulp and paper and/or other related products and (ii) other lines of business that are related or incidental to the business described under clause (i) of this definition.

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(g)	there shall occur any change in the ownership of the Borrower from that existing on the date hereof;
(h)	The Borrower repudiates any of its obligations under this Agreement or the Notes or it becomes unlawful for the Borrower to perform any of its obligations or covenants under this Agreement or the Notes or any governmental approval, permit, registration or authorization necessary for the Borrower to perform such obligations or covenants shall fail to be obtained or shall cease to be in full force and effect;
(i)	Any Importer shall fail to remit amounts due under an Export Agreement to the Bank or any allocated Export Agreement shall cease to be in full force and effect or in default which results in the Advance or accrued interest not being repaid after the applicable grace period ; or
(j)	An extraordinary event shall occur, including, without limitation, any material adverse change in the business or financial condition or operations of the Borrower, which in the judgment of the Bank indicates that the Borrower may not, or may be unable to, perform or observe, in the normal course, its obligations under this Agreement and the Notes; then, and in such event, the Bank may, by notice to the Borrower, (i) declare its obligation to make the Advance terminated, whereupon the same shall forthwith terminate, and/or (ii) declare, upon notice to the Borrower, the Advances, the Notes, all interest thereon and all other amounts payable under this Agreement to be forthwith due and payable, whereupon the Borrower shall be obligated forthwith to make payment of the Advances, the Notes, all such interest and all such other amounts without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower.
(k)	The Debt Service Coverage Ratio as of the end of any fiscal quarter of VCP shall be less than 1.30 (it being understood that such ratio shall not be calculated until the delivery of the consolidated financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant fiscal quarter);
(l)	The Net Debt to EBITDA Ratio as of the end of any fiscal semester of VCP shall exceed 3.00 (it being understood that such ratio shall not be calculated until the delivery of the consolidated financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant fiscal semester);
(m)	The Debt to Total Capitalization Ratio as of the end of any fiscal semester of VCP shall exceed 0.70 (it being understood that such ratio shall not be calculated until the delivery of the consolidated financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant fiscal semester);

For the purposes herein,

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“Affiliate” means any person that, directly or indirectly, is in control of, is controlled by or, is under common control of the Borrower;

 “Brazilian GAAP” means the accounting principles prescribed by Brazilian corporate law (Lei de Sociedades Anônimas);

“Capital Lease Obligations” means the obligations of the Borrower to pay rent o rother amounts under any lease of real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on the balance sheet of the Borrower;

 “Cash Equivalents” means any of the following: (a) readily marketable direct obligations of the government of the United States of America or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States, (b)insured certificates of deposit of or time deposits with the Lenders or a member of the Federal Reserve System, which issues (or the parent of which issues) commercial paper rated as described in clause (c), is organized under the laws of the United States of America or any State (or the District of Columbia) thereof and has combined capital and surplus of at least US$1,000,000,000, (c) commercial paper in an aggregate amount of no more than US$10,000,000 per issuer outstanding at any time, issued by any corporation organized under the laws of any State (or the District of Columbia) of the United States of America and rated at least  “Prime-1” (or the then equivalent grade) by Moody’s and “A-1” (or the then equivalent grade) by S&P, or (d) other investments considered as cash equivalents under Brazilian GAAP;

“Debt Service Coverage Ratio” means, as of the last day of any fiscal quarter of VCP, the ratio (expressed as a decimal) of: (a) the sum of: (i) EBITDA for the four consecutive fiscal quarters ending on such day plus (ii) the amount of cash on VCP’s consolidated balance sheet as of such day plus (iii) the sum of, for each marketable security (including Cash Equivalents) on VCP’s consolidated balance sheet as of such day, the lower of: (A) the face value and (B) the market value of such marketable security as of such day, to (b) the amount of Total Debt that is scheduled to mature during the four consecutive fiscal quarters after such day plus the actual Interest Expense incurred during the four consecutive fiscal quarters ending on such day. For the purpose of clarification, the calculation of Debt Service Coverage Ratio (and all components thereof) shall be made using Brazilian GAAP;

EBITDA” means, during any period, the total earnings of VCP (on a consolidated basis) before income taxes, Interest Expense, depreciation and amortization during such period, eliminating from the calculation of such earnings: (a) any net income or gain (or net loss), net of any tax effect, during such period from any extraordinary items, (b) any interest income during such period, (c) gains or losses during such period on the sale of Property (other than the sale of inventory in the ordinary course of business), (d) any other extraordinary non-cash items deducted from or included in the calculation of pre-tax net income for such period (other than items that will require cash payments and for which an accrual or reserve has been, or is required by GAAP to be, made), (e) the EBITDA for such period of any Subsidiaries or other Property disposed of or discontinued during such period and (f) any net income or gain (or net loss) on any foreign exchange transactions or net monetary positions;

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“Interest Expense” means, for any period, interest (or similar) expense on the Debt of VCP (on a consolidated basis), including (without duplication): (a) fees (including commitment fees and insurance premiums), (b) net payments under any interest rate protection agreement or other hedging agreement, (c) the interest portion of any deferred payment obligations, d) all fees and charges owed with respect to letters of credit or performance or other bonds, e) all accrued or capitalized interest, (f)any amortization of debt discount and (g) all but the principal component of payments relating to Capital Lease Obligations;

“Net Debt” means Total Debt of VCP as of such day minus the sum of: (a) the aggregate amount of cash on its consolidated balance sheet as of such day plus (b) the sum of, for each marketable security (including Cash Equivalents) on VCP’s consolidated balance sheet as of such day, the lower of: (i) the face value and (ii) the market value of such marketable security as of such day. For the purpose of clarification, the calculation of Net Debt (and all components thereof) shall be made using Brazilian GAAP;

 “Net Debt” to EBITDA Ratio” means, the ratio (expressed as a decimal) of (a) Net Debt as of such date to (b) EBITDA for the two most recent fiscal semesters preceding such date. For the purpose of clarification, the calculation of Net Debt to EBITDA Ratio (and all components thereof) shall be made using Brazilian GAAP;

“Total Debt” means, with respect to VCP (determined without duplication): (a) all Indebtedness for borrowed money, (b) all obligations for the deferred purchase price of property or services (other than trade payables (whether payable to Affiliates or third parties) incurred in the ordinary course of business, but only if and for so long as such trade payables remain payable on customary trade terms, and accrued expenses incurred in the ordinary course of business), (c) all obligations evidenced by notes, bonds, debentures or other similar documents, (d) all obligations, contingent or otherwise, in connection with any securitization of any products, receivables or other property, (e) all obligations created or arising under any conditional sale or other title retention agreement with respect to property acquired (even though the rights and remedies of the seller or the lender under such agreement in the event of default are limited to repossession or sale of such Property), (f) all capital lease obligations and similar obligations under “synthetic leases”, (g) all obligations, contingent or otherwise, in respect of acceptances, letters of credit, financial guaranty insurance policies or similar extensions of credit (excluding trade payables to the extent excluded from clause (b)), (h) all obligations to redeem, retire, defease or otherwise make any payment in respect of any capital stock, (i) all net obligations in respect of any interest rate protection agreement or any currency swap,  cap or collar agreement or similar arrangement providing for the transfer or mitigation of interest rate or currency risks either generally or under specific contingencies (but without regard to any notional principal amount relating thereto), (j) all Debt that is guaranteed by VCP and (k) all Debt referred to in clauses (a) through (j) secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any lien on property even though VCP has not assumed or become liable for the payment of such Debt;

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“VCP” means Votorantim Celulose e Papel S.A.;

then the Bank may, at its sole option and discretion, (A) take possession of those of the Goods which have therefore not been shipped by the Borrower and/or (B) demand that the Borrower make payment with respect to any or all amounts due and payable as specified by the Bank by delivering Goods (with an invoice value at least equal to the amount due and payable as specified by the Bank) to the Bank or any Affiliate designed thereby, with such delivery to be made at Borrower’s principal offices as identified  above. The Bank may thereupon take such steps as may reasonable to sell, assign or otherwise transfer those Goods (either directly or through any Affiliate thereof, as applicable), with proceeds of such sale, assignment, or transfer to be applied in total or partial satisfaction of the Borrower’s obligations under this Agreement and the Notes. The Borrower shall remain liable to the Bank for any such obligations, which are not satisfied by the said proceeds. This remedy shall be in addition to, and not in limitation of, any other remedy which may be available to the Bank under this Agreement or under applicable law.

13.      INDEMNITY. The Borrower agrees to indemnify the Bank against: (i) any cost (including, without limitation, any breakage costs), claim, loss, expense or liability, together with any taxes, duties or levies in respect thereof, which the Bank may sustain or incur as a consequence of the occurrence of any Event of Default or any default by the Borrower in the performance of any of its obligations hereunder or under the Notes; and (ii) any loss (including, without limitation, any reemployment loss), cost (including, without limitation, any breakage cost) or expense the Bank may suffer as a result of its funding or hedging the Advance requested by the Borrower hereunder but not made by reason of the operation of any one or more of the provisions hereof or the payment by the Borrower of any amount due in respect of the Advance on a date other than a Business Day in the calendar month in which the respective Repayment Date is scheduled.

13.      COSTS AND EXPENSES.

13.1.      The Borrower may , from time to time on written demand of the Bank and upon submission of relevant and reasonable proof, reimburse the Bank for all costs and expenses (including, court costs and attorneys’ fees) together with any taxes, duties or levies in respect thereof incurred in connection with the preservation and/or enforcement of any of its rights under this Agreement and the Notes.

13.2.      The Borrower shall pay all stamp, registration and other taxes to which this Agreement or the Notes or any judgment given in connection therewith is or at any time may be subject and shall, from time to time on demand, indemnify the Bank against any liabilities, costs, claims and expenses resulting from any failure to pay or any delay in paying any such tax, duty or levy.

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14.      CURRENCY OF ACCOUNT AND PAYMENT.

14.1.      The United States dollar is the currency of account and payment for each and every sum at any time due from the Borrower hereunder; provided that: each payment in respect of costs and expenses shall be made in the currency in which the same were incurred.

14.2.      If any amount payable by the Borrower under this Agreement or the Notes or under any order or judgment given or made in relation thereto has to be converted from the currency (the “first currency”) in which the same is payable thereunder or under such order or judgment into another currency (the “second currency”) for the purpose of (i) making or filing a claim or proof against the Borrower, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made with respect thereto, the Borrower shall indemnify and hold harmless the Bank from and against any loss suffered as a result of any discrepancy between (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (b) the rate or rates of exchange at which the Bank may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof.

15.      BENEFIT OF AGREEMENT. This Agreement shall be binding upon and inure to the benefit of each party hereto and its or any subsequent successors and assigns.

16.      ASSIGNMENTS.

16.1.      Except as provided herein, the Borrower may not assign or otherwise transfer all or any part of its respective rights or obligations under this Agreement and the Notes without the prior written consent of the Bank.

16.2.      With Prior written notice to the Borrower, the Bank may assign in whole and in part its rights and obligations under this Agreement and the Notes, provided, however, that such assignment does not increase the overall cost hereunder to the Borrower, in any way whatsoever.

18.      REMEDIES AND WAIVERS. No failure by the Bank to exercise, nor any delay by the Bank in exercising, any right or remedy hereunder shall operate as a waiver thereof nor shall any single or partial exercise of any right or remedy prevent any further or other exercise thereof or the exercise of any other right or remedy. The rights and remedies provided in this Agreement and the Notes are cumulative and not exclusive of any rights or remedies provided by law.

19.      PARTIAL INVALIDITY. If, at any time, any provision hereof or of the Notes is or becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions thereof nor the legality, validity or enforceability of such provision under the law of any other jurisdiction shall in any way be affected or impaired thereby.

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20.      NOTICES.

20.1.      Each communication to be made hereunder shall be made in writing but, unless otherwise stated, may be made by telex, facsimile or letter.

20.2.      Any notice or other communication given in connection herewith to the Bank shall be sent to the Bank by hand delivery, by mail (postage prepaid), or by telefax, as follows: if by mail to ABN AMRO Bank N.V. - Amsterdam, Gustav Mahlerlaan,10 - 1082 PP - Amsterdam, if by telefax, to (3120) 628.1286 attn to RUUD FARENHORST ,or in such manner or at such address or telefax designation as the Bank gives the Borrower notice of in the fashion provided herein. Any notice, confirmation from, or other communication given in connection herewith by the Bank may be sent to the Borrower by hand delivery, by mail (postage prepaid), or by telefax, as follows: if by mail to FINANCIAL DEPARTMENT, and, if by telefax, to 0 55 xx 11 3269-4165.

21.      LAW. This Agreement shall be governed by and shall be construed in accordance with, the laws of the State of New York without giving effect to the choice of law rules of the State of New York.

22.      JURISDICTION.

22.1.      The Borrower hereby irrevocably agrees that the courts of the State of New York and the courts of the United States of America in New York shall have jurisdiction to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and the Notes and, for such purposes, irrevocably submits to the jurisdiction of such courts.

22.2.      The Borrower hereby irrevocably waives any objection which it might now or hereafter have to the courts referred to in Section 22.1 being nominated as the forum to hear and determine any suit, action or proceeding, and to settle any disputes, which may arise out of or in connection with this Agreement and the Notes and agrees not to claim that any such court is not a convenient or appropriate forum.

22.3.      The submission to the jurisdiction of the courts referred to in Section 23.1 shall not (and shall not be construed so as to) limit the right of the Bank to institute proceedings against the Borrower in any other court of competent jurisdiction.

22.4.      The Borrower hereby consents generally in respect of any legal action or proceeding arising out of or in connection with this Agreement and the Notes to the giving of any relief or the issue of any process in connection with such action or proceeding including, without limitation, the making, enforcement or execution against any property whatsoever (irrespective of its use or intended use) of any order or judgment which may be made or given in such action or proceeding.

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23.5.      To the extent that the Borrower may in any jurisdiction claim for itself or its assets immunity from suit, execution, attachment (whether in aid of execution, before judgment or otherwise) or other legal process and to the extent that in any such jurisdiction there may be attributed to itself or its assets such immunity (whether or not claimed), the Borrower hereby irrevocably agrees not to claim and hereby irrevocably waives such immunity to the full extent permitted by the laws of such jurisdiction and, in particular, to the intent that in any proceedings taken in New York the foregoing waiver of immunity shall have effect under and be construed in accordance with the United States Foreign Sovereign Immunities Act of 1976. IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and year first above written.

VOTORANTIM CELULOSE E PAPEL S.A.	ABN AMRO Bank N.V.
the Borrower
By:	By:
Name :	Name:
Title:	Title:
By:	By:
Name :	Name :
Title:

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EX-4.4

Exhibit 4.4

US$ 100,000,000

EXPORT PREPAYMENT AGREEMENT

dated as of July 22, 2005

among

VOTORANTIM CELULOSE E PAPEL S.A. – VCP
as Exporter

VCP EXPORTADORA E PARTICIPAÇÕES LTDA.
as Guarantor

VCP TRADING N.V.,
as Paying Agent

The LENDERS from time to time hereunder

BANCO SANTANDER CENTRAL HISPANO, LONDON BRANCH
as Lead Arranger

and

BANCO SANTANDER CENTRAL HISPANO, S.A., LONDON BRANCH
as Administrative Agent

EXPORT PREPAYMENT AGREEMENT

This EXPORT PREPAYMENT AGREEMENT (the “Prepayment Agreement”) is made as of July 22, 2005 by and among:

(1)	VOTORANTIM CELULOSE E PAPEL S.A., a company duly organised and existing under the laws of the Federative Republic of Brazil, with its head office located at 1357, Alameda Santos, 6th floor, Sao Paulo, Brazil, (“VCP” or the “Exporter”);
(2)	VCP EXPORTADORA E PARTICIPAÇÕES LTDA., a corporation organised and existing under the laws of t the Federative Republic of Brazil, with its head office located at 1357, Alameda Santos, 7th floor, Sao Paulo, Brazil, (the “Guarantor”);
(3)	VCP TRADING N.V., a corporation organised and existing under the laws of The Netherlands Antilles, with its principal offices located at Netherlands Antilles or its successor and/or assignee as may be informed to the Bank from time to time and which shall perform the same duties as VCP Trading N.V. (the “Paying Agent”) ;
(4)	The BANKS listed in Schedule 2 as Lenders;
(5)	BANCO SANTANDER CENTRAL HISPANO, S.A., LONDON BRANCH, a bank duly organised and existing under the laws of Spain, acting through its London Branch, (together with its successors and assigns, the “Lead Arranger”); and
(6)	BANCO SANTANDER CENTRAL HISPANO, S.A., in its capacity as the Administrative Agent for the Lenders (in such capacity and, together with its successors and assigns, the “Administrative Agent”).

WITNESSETH

WHEREAS,  the Exporter and/or the Paying Agent, as the case may be, has entered or will enter into one or more Export Agreements with the Importers, pursuant to which the Exporter will export Goods from Brazil to the Importers (all capitalised terms used herein have the meanings assigned to them Section 1 below);

WHEREAS,  the Exporter’s and/or Paying Agent’s, as the case may be, sales of Goods under the Export Agreements will be made through several shipments (the “Covered Shipments”) with the aggregate Purchase Price for such Covered Shipments being at least US$ 125,000,000 (One hundred and twenty five million United States Dollars);

WHEREAS, the Exporter and/or the Paying Agent, as the case may be, shall instruct each of the Importers to make payment due in respect of the Covered Shipments made to such Importer by forwarding the Purchase Price for the Goods so shipped to the Collection Account which shall be an account held in the name of the Administrative Agent;

WHEREAS, the Paying Agent, or any substitute or replacement thereof, will act as paying agent for the Exporter and/or Guarantor, as the case may be, and shall act at all times on their behalf and will comply with the payment instructions given by them to fulfil their obligation to make payments to the Administrative Agent through the Collection Account as set forth herein;

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WHEREAS, the Exporter has requested that the Lead Arranger act as lead arranger for an export prepayment financing facility pursuant to which certain Lenders listed on Schedule 2 hereto shall make advances in an aggregate principal amount of up to US$ 100,000,000.00 (collectively referred to as the “Advance”) for the prepayment of future exports to the Exporter in accordance with the prepayment mechanisms established under applicable Brazilian laws and regulations for financing export receivables, in particular with Central Bank regulations including without limitation the “Regulamento do Mercado de Câmbio e Capitais Internacionais”, the Resolution No. 1834 dated June 26, 1991 of the National Monetary Council and Circular No. 3027 dated February 2, 2001 and Circular No. 3280 dated March 9, 2005 of the Central Bank, with respect to the payments to be due from the Importer to the Exporter as provided above;

WHEREAS, the Lenders have agreed to make the Advance to the Exporter, subject to the terms and conditions set forth herein and provided that the Exporter grants to the Administrative Agent for the benefit of the Administrative Agent and the Lenders a first priority security interest in the Export Agreements;

WHEREAS, the Exporter agrees to repay any and all principal and interest on the Advance provided hereunder and to pay all fees, expenses and other amounts due hereunder in accordance with the terms and conditions set forth herein;

WHEREAS, the Exporter, shall irrevocably instruct the Administrative Agent to apply funds received in the Collection Account to make payments due hereunder to the Lenders;

WHEREAS, the Guarantor shall issue a guarantee in the form contained in Section 21 hereof as security for the liabilities and obligations of the Exporter; and

WHEREAS, the Exporter has agreed to assign to the Administrative Agent, for the benefit of the Lenders, sixty (60) days prior to each Instalment, export receivables with a value in aggregate not less than 125% of the amount of such Instalment and any Interest due thereon, it being understood that provisions under Section 12 (t) shall apply.

NOW, THEREFORE, In consideration of the undertakings contained herein, the parties agree as follows:

Section 1.     Definitions

The following terms shall have the meanings ascribed hereunder (all the terms defined in the singular to have the same meaning when used in the plural and vice versa):

“Administrative Agent” shall mean Banco Santander Central Hispano, S.A., London Branch.

“Administrative Fee” shall have the meaning ascribed in Section 15 below.

“Advance” shall mean each and all amounts disbursed under this Prepayment Agreement by the Lenders to the Exporter, as designated in each Promissory Note for the Advance, provided the aggregate amount of all disbursements shall not exceed US$100,000,000.00 (One Hundred Million United States Dollars).

“Advance Document” shall mean any of this Prepayment Agreement, the Promissory Note, and the Disbursement Request.

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“Affiliate” shall mean any Person directly or indirectly controlling, controlled by, or under common control with, any other Person. For this purpose, “control” of any Person means ownership of 10% or more of the Voting Stock of the Person or the ability, directly or indirectly, to direct or cause the direction of the management and policies of such Person, whether by contract or otherwise; provided that Aracruz Celulose S.A. shall not be considered an Affiliate of the Obligors unless the Votorantim Group (in the aggregate) possesses, directly or indirectly, the power to vote 30% or more of the Voting Stock of Aracruz Celulose S.A. or to direct or cause the direction of the management and policies of Aracruz Celulose S.A., whether through ownership of the Voting Stock, by contract or otherwise.

“Arrangement Fee” shall have the meaning set forth in Section 15 below.

“Assignment” shall mean the assignment made by the Exporter in Section 22 of this Prepayment Agreement.

“Assignment Agreement” shall have the meaning set forth in Section 18 below.

“Availability Period” shall mean the period commencing on the date hereof and ending on the 30th day following the date of execution of this Prepayment Agreement, during which the Lenders agree to make Advances in accordance with Section 2 of this Prepayment Agreement.

“Banking Day” shall mean any day on which commercial banks are open for business in New York City, United States of America, London, England and São Paulo, Brazil.

“Brazil” shall mean the Federative Republic of Brazil.

“Brazilian GAAP” shall mean the accounting principles prescribed by Brazilian corporate law.

“Breakage Costs” shall mean the costs referred to in Section 16 (a) of this Prepayment Agreement.

“Business” shall mean (i) the business of producing pulp and paper and/or other related products and (ii) other lines of business that are related or incidental to the business described under clause (i) of this definition.

“Capital Lease Obligations” means, as to a Surviving Entity, the obligations of such Person to pay rent or other amounts under a lease of (or other agreement conveying the right to use) real and/or personal property, which obligations are required to be classified and accounted for as a capital lease on a balance sheet of such Person under GAAP and, for purposes of this Prepayment Agreement, the amount of such obligations shall be the capitalised amount thereof determined in accordance with GAAP.

“Capital Stock” means any and all shares, interests, participations, quotas or other equivalents (however designated) of capital stock of a corporation, any and all ownership interests in a Person other than a corporation and any and all warrants or options to purchase any of the foregoing.

“Cash Equivalents” means any of the following: (a) readily marketable direct obligations of the government of the United States of America or any agency or instrumentality thereof or obligations unconditionally guaranteed by the full faith and credit of the government of the United States, (b) insured certificates of deposit of or time deposits with the Lenders or a member of the Federal Reserve System, which issues (or the parent of which issues) commercial paper rated as described in clause (c), is organised under the laws of the United States of America or any State (or the District of Columbia) thereof and has combined capital and surplus of at least US$1,000,000,000, (c) commercial paper in an aggregate amount of no more than US$10,000,000 per issuer outstanding at any time, issued by any corporation organised under the laws of any State (or the District of Columbia) of the United States of America and rated at least “Prime-1” (or the then equivalent grade) by Moody’s and “A-1” (or the then equivalent grade) by S&P, or (d) other investments considered as cash equivalents under Brazilian GAAP.

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“Central Bank” shall mean Banco Central do Brasil.

“Change of Control” shall mean the Exporter shall cease to (i) own beneficially and control (either directly or indirectly) more than 50 (fifty percent) of the Guarantor’s or the Paying Agent’s issued and outstanding voting capital stock and other equity interests in the Guarantor or the Paying Agent as of the date hereof, or (ii) have the power (by ownership of capital stock or otherwise) to control the management or policies of the Guarantor or the Paying Agent.

“Collection Account” shall mean that account held by the Administrative Agent and informed in writing to the Exporter, Guarantor and Paying Agent from time to time.

“Coverage Ratio” shall mean, for each Interest Period the ratio of 1.25 corresponding to the amount paid by the Importers under the assigned Export Agreements and Export Receivables into the Collection Account during the Measurement Period divided by the amounts due by the Exporter in the next applicable Instalment as stated in Section 5(a) hereof plus any applicable interest..

“Debt” means, with respect to any Person (determined without duplication): (a) all indebtedness of such Person for borrowed money, (b) all obligations of such Person for the deferred purchase price of Property or services (other than trade payables (whether payable to Affiliates or other Persons) incurred in the ordinary course of such Person’s business, but only if and for so long as such trade payables remain payable on customary trade terms, and accrued expenses incurred in the ordinary course of business), (c) all obligations of such Person evidenced by notes, bonds, debentures or other similar documents, (d) all obligations, contingent or otherwise, of such Person in connection with any securitization of any products, receivables or other Property, (e) all obligations of such Person created or arising under any conditional sale or other title retention agreement with respect to Property acquired by such Person (even though the rights and remedies of the seller or the lender under such agreement in the event of default are limited to repossession or sale of such Property), (f) all Capital Lease Obligations and similar obligations under “synthetic leases” of such Person, (g) all obligations, contingent or otherwise, of such Person in respect of acceptances, letters of credit, financial guaranty insurance policies or similar extensions of credit (excluding trade payables to the extent excluded from clause (b)), (h) all obligations of such Person to redeem, retire, defease or otherwise make any payment in respect of any Capital Stock of such Person, (i) all net obligations of such Person in respect of any interest rate protection agreement or any currency swap, cap or collar agreement or similar arrangement entered into by such Person providing for the transfer or mitigation of interest rate or currency risks either generally or under specific contingencies (but without regard to any notional principal amount relating thereto), (j) all Debt of other Persons referred to in clauses (a) through (i) or clause (k) that is Guaranteed by such Person and (k) all Debt referred to in clauses (a) through (j) secured by (or for which the holder of such Debt has an existing right, contingent or otherwise, to be secured by) any Lien on Property of such Person even though such Person has not assumed or become liable for the payment of such Debt.

“Debt Service Coverage Ratio” means, as of the last day of any fiscal quarter of VCP, the ratio (expressed as a decimal) of: (a) the sum of: (i) EBITDA for the four consecutive fiscal quarters ending on such day plus (ii) the amount of cash on VCP’s consolidated balance sheet as of such day plus (iii) the sum of, for each marketable security (including Cash Equivalents) on VCP’s consolidated balance sheet as of such day, the lower of: (A) the face value and (B) the market value of such marketable security as of such day, to (b) the amount of Total Debt that is scheduled to mature during the four consecutive fiscal quarters after such day plus the actual Interest Expense incurred during the four consecutive fiscal quarters ending on such day. For the purpose of clarification, the calculation of Debt Service Coverage Ratio (and all components thereof) shall be made using Brazilian GAAP.

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“Disbursement Date” shall mean each date of disbursement of the Advance in accordance with the applicable Disbursement Request.

“Disbursement Request” shall mean each Disbursement Request by the Exporter to the Administrative Agent, substantially in the form of Exhibit B hereto, for a disbursement of the proceeds of the Advance.

“EBITDA” means, during any period, the total earnings of a Surviving Entity (on a consolidated basis) before income taxes, Interest Expense, depreciation and amortisation during such period, eliminating from the calculation of such earnings: (a) any net income or gain (or net loss), net of any tax effect, during such period from any extraordinary items, (b) any interest income during such period, (c) gains or losses during such period on the sale of Property (other than the sale of inventory in the ordinary course of business), (d) any other extraordinary non-cash items deducted from or included in the calculation of pre-tax net income for such period (other than items that will require cash payments and for which an accrual or reserve has been, or is required by GAAP to be, made), (e) the EBITDA for such period of any Subsidiaries or other Property disposed of or discontinued during such period and (f) any net income or gain (or net loss) on any foreign exchange transactions or net monetary positions.

“Export Agreements” shall mean the agreements, made from time to time, with the Importers pursuant to which the Exporter, the Paying Agent and/or the Guarantor, as the case may be, will export Goods from Brazil to the Importers.

“Export Receivables” shall mean all account receivables arising out of any Export Agreement.

“Event of Default” shall have the meaning set forth in Section 12 hereof.

“Final Maturity Date” shall mean, subject to Section 5(e), in relation to each disbursement, the day which is 84 (eighty-four) months after the Disbursement Date.

“First Instalment Date” shall have the meaning set forth in Section 5(a).

“Fiscal Semester” means each period from and including January 1 through and including June 30 of each year and from and including July 1 through and including December 31 of each year.

“GAAP” means, with respect to any Person, the generally accepted accounting principles (as in effect from time to time) applicable to it in its home jurisdiction.

“Goods” shall mean pulp and paper and/or other related products.

“Governmental Authority” shall mean any nation or government, any state or other political subdivision thereof, any central bank (or similar monetary or regulatory authority) and any entity exercising executive, legislative, judicial, regulatory or administrative authority of or pertaining to government (whether such authority is recognised as a de jure government or is a de facto government).

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“Guarantee” shall mean the guarantee given by the Guarantor in Section 21 of this Prepayment Agreement.

“Importers” shall mean, jointly or severally:

(i)	OECD-based commercial counterparts acceptable to the Lead Arranger, the Administrative Agent and the Lenders to be determined prior to the date hereof, (collectively the “Initial Importers”) as evidenced in Schedule I hereto, or
(ii)	At any time after the date hereof, certain other importers approved by the Lead Arranger, the Administrative Agent and the Lenders, or
(iii)	Commercial counterparts whose obligations to the Exporter, the Paying Agent or the Guarantor, as the case may be,  are insured by certain policies or guaranteed by letters of credit issued by financial institutions acceptable to the Lenders and rated at least A by Standard & Poors’ or A2 by Moody’s, with exceptions to be agreed (the “Eligible Financial Institutions”), or
(iv)	Commercial counterparts located in any country and whose dealings with which are not generally prohibited by United States law or by the United Nations who enter into sales agreements with the Exporter, the Paying Agent or the Guarantor, as the case may be,  which call for payment in full on a pre-shipment basis,

“Instalments” shall have the meaning set forth in Section 5 (a) below.

“Interest” shall have the meaning ascribed in Section 4 below.

“Interest Expense” means, for any period, interest (or similar) expense on the Debt of a Surviving Entity (on a consolidated basis), including (without duplication): (a) fees (including commitment fees and insurance premiums), (b) net payments under any interest rate protection agreement or other hedging agreement, (c) the interest portion of any deferred payment obligations, (d) all fees and charges owed with respect to letters of credit or performance or other bonds, (e) all accrued or capitalised interest, (f) any amortisation of debt discount and (g) all but the principal component of payments relating to Capital Lease Obligations.

“Interest Payment Date” shall mean the day when interest is due and payable according to Schedule 3.

“Interest Period” shall mean in relation to each Advance, (a) the time period commencing on and including the Disbursement Date corresponding to such Advance and ending on but excluding the first Interest Payment Date; and (b) each subsequent time periods between two consecutive Interest Payment Dates thereafter, provided that the final date of the last of such Interest Period shall be the Final Maturity Date.

“Interest Rate” for an Interest Period shall mean LIBOR plus the Margin.

“Lead Arranger” shall mean Banco Santander Central Hispano S.A., London Branch.

“Lenders” shall mean any of the institutions identified in Schedule 2. attached hereto, together with its successors and permitted assigns pursuant to the Section 18 below.

“LIBOR” shall mean, for any Interest Period, an interest rate per annum determined on the basis of the London interbank offered rate for deposits in Dollars for a period of time comparable to the relevant Interest Period, shown on the display page designated British Bankers Association Interest Settlement Rates, “LIBOR 01” Page, on the Reuters screen or such other page as may replace that page in that service, at approximately 11:00 a.m., London time, 2 (two) Banking Days prior to the first day of such Interest Period. In the event that such rate does not appear on such LIBOR 01 Reuters screen page, or such other page as may replace that page in that service, then LIBOR shall be the arithmetic mean (expressed as an annual rate and rounded upwards, if necessary, to the nearest 1/16 of 1%) of the rates quoted at approximately 11:00 a.m.

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London time by 3 (three) leading banks, chosen by the Administrative Agent and agreed by the parties hereto as the rate at which deposits in Dollars are offered to such banks by prime banks, in the London interbank market for a period of time comparable to the relevant Interest Period, at approximately 11:00 a.m. 2 (two) Banking Days prior to the first day of such Interest Period. If the Exporter does not agree with the LIBOR quoted by the Administrative Agent, the Lenders shall have no obligation to make the disbursement related to the Advance or if the Advance has already been made, the rate will be reasonably determined by the Administrative Agent.

“Lien” means any mortgage, lien, pledge, usufruct, fiduciary transfer (alienação fiduciária), charge, encumbrance or other security interest or any preferential arrangement (including a securitization) that has the practical effect of creating a security interest.

“Majority Lenders” shall mean the Lenders holding at least 66% (sixty-six percent) of the Advances.

“Margin” shall mean 1.49% p.a. (One point Forty Nine percent per annum).

“Material Adverse Effect” shall mean a material adverse effect on the business, operations, property, or financial condition of the Exporter or the Guarantor and its direct or indirect subsidiaries (taken as a whole) which will, in the opinion of the Lenders, as justified in writing, impair the ability of the Exporter or the Guarantor to perform its obligations under any of the Advance Documents; provided that there should be no Material Adverse Effect in the event the Lenders receive a remedy, that it considers satisfactory, from the Exporter, the Paying Agent and/or the Guarantor upon demand.

“Measurement Period” shall mean the period beginning and including the day that is 60 days (each a “Measurement Date”) before the next Interest Payment Date and ending on and including such Interest Payment Date.

“Net Debt” means, as of the date of the consummation of any merger, consolidation, sale, transfer, lease or other disposition pursuant to Section 11(a), a Surviving Entity’s Total Debt as of such day minus the sum of: (a) the aggregate amount of cash on its consolidated balance sheet as of such day plus (b) the sum of, for each marketable security (including Cash Equivalents) on such Surviving Entity’s consolidated balance sheet as of such day, the lower of: (i) the face value and (ii) the market value of such marketable security as of such day. For the purpose of clarification, the calculation of Net Debt (and all components thereof) shall be made using Brazilian GAAP.

“Net Debt to EBITDA Ratio” means, the ratio (expressed as a decimal) of (a) Net Debt as of such date to (b) EBITDA for the two most recent Fiscal Semesters preceding such date. For the purpose of clarification, the calculation of Net Debt to EBITDA Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Obligors” shall mean either of the Exporter, the Paying Agent and/or the Importers.

“OECD Country” means, at any time, any nation that is a member of the Organisation for Economic Co-operation and Development at such time.

“Person” shall mean any individual, corporation, partnership, trust, unincorporated organisation, joint stock company or other legal entity or organisation and any government or agency or political subdivision thereof.

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“Promissory Note” shall mean each promissory note substantially in the form of Exhibit A hereto duly executed and delivered by an authorised signatory of the Exporter and the Guarantor.

“Property” of any Person means any property, rights or revenues, or interest therein, of such Person.

“Purchase Price” shall mean in relation to each Covered Shipment the purchase price to be paid therefore by the relevant Importer.

“Receivable” means each account or payment intangible or similar obligation arising under any Export Agreement.

“Relevant Person” shall mean any Affiliate, Subsidiary or group company of VCP.

“Responsible Officer” of a Person shall mean any Executive Officer of that Person.

“Shipping Documents” shall mean in relation to each Covered Shipment, originals or copies of (a) the “despacho aduaneiro” (customs receipt) related thereto, (b) the bill of lading or other shipping document evidencing such shipment, and (c) any draft or other payment document presented to the relevant Importer.

“Subsidiary” means with respect to any Person, any corporation or other entity more than 50% of the Voting Stock of which is owned or controlled directly or indirectly, by such Person and/or by any Subsidiary of such Person.

“Surviving Entity” means any surviving Person as described in Section 11(a)(i)(A)(1) or Person to whom substantially all of the assets of the Exporter or the Guarantor, as the case may be, shall have been transferred as described in Section 11(a)(i)(A)(2), in each case, that is not the Guarantor, the Exporter or a Subsidiary thereof.

“Total Capitalisation” means, as of the last day of any fiscal quarter of the Exporter, the sum of: (a) the Total Debt as of such day plus (b) the net worth of the Exporter (on a consolidated basis) as of such day plus (c) without duplication of clause (b), the sum of minority interests in other Persons held by the Exporter (on a consolidated basis) as of such day.

“Total Debt” means, as of the last day of any fiscal quarter of the Exporter, the aggregate outstanding principal amount of Debt of the Exporter (on a consolidated basis) as of such day and as it refers to 11(a) as of the date of the consummation of any merger, consolidation, sale, transfer, lease or other disposition, the aggregate outstanding principal amount of Debt of a Surviving Entity (on a consolidated basis) as of such day.

“Total Debt to Total Capitalisation Ratio” means, as of the last day of any Fiscal Semester of the Exporter, the ratio (expressed as a decimal) of: (a) the Total Debt as of such day to (b) the Total Capitalisation as of such day. For the purpose of clarification, the calculation of the Total Debt to Total Capitalisation Ratio (and all components thereof) shall be made using Brazilian GAAP.

“Undertaking” means all of the Exporter’s present and future, rights and remedies under the Export Agreement together with all present and future rights under any security, guarantee or other form of credit support created in its favour in respect of an Importer’s obligations under the Export Agreements (collectively, the “Undertakings”).

“Up-front-Participation Fee” shall have the meaning ascribed in Section 15 below.

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“US Dollars”, “Dollars” or “US$” shall mean the lawful currency of the United States of America.

“Votorantim Group” means the group of related companies comprised of Hejoassu Administração Ltda. and its Subsidiaries.

“Voting Stock” of a Person means Capital Stock in such Person having power to vote for the election of directors or similar officials of such Person or otherwise voting with respect to actions of such Person (other than such Capital Stock having such power only by reason of the happening of a contingency).

Section 2.     The Commitment

(a)	Subject to the terms and conditions set forth in this Prepayment Agreement, the Lenders hereby agrees to make the Advance during the Availability Period as an anticipated payment of certain future exports in accordance with Central Bank regulations.
(b)	Each Advance shall be evidenced by a single Promissory Note dated the applicable Disbursement Date and duly completed and executed by the Exporter and the Guarantor. The maximum amount disbursed under the Prepayment Agreement shall be US$100,000,000 (One Hundred Million US Dollars).

Section 3.     Making of the Advance; Use of Proceeds

(a)

Subject to the satisfaction of the conditions set forth in Section 8 herein, the Lenders shall make an Advance provided that (i) the Administrative Agent shall have received from the Exporter a Disbursement Request at least three (3) Banking Days, and not later than 11:00 a.m. (São Paulo time), prior to the applicable Disbursement Date of the Advance and (ii) the Administrative Agent, on behalf of the Lenders, shall send to the Exporter its acknowledgement and agreement to the Disbursement Request on the same date.

(b)

The Exporter shall treat the proceeds of the Advance as a pre-payment of future exports of the Goods to the Importers, all in accordance with and pursuant to the terms and conditions of current Brazilian laws and regulations applicable to export prepayment operations.

Section 4.     Interest

(a)

The Exporter shall pay interest (the “Interest”) on the outstanding Advance on each Interest Payment Date during the relevant Interest Periods at the Interest Rate for the Advance, from the Disbursement Date until the Final Maturity Date. Such payment shall be made, at Exporter’s option, except as provided in paragraph (d) below, either (i) directly by the Exporter to the Administrative Agent ‘s account as listed herein in Section 5(b) or (ii) if so determined by the Exporter as notified in writing to the Administrative Agent, through the Paying Agent.  The Paying Agent hereby agrees to make such payment of Interest then due in accordance with the terms hereof if so instructed by the Exporter.

(b)

The Advance , any Interest thereon (to the extent permitted by law), and any other amount due and payable under this Prepayment Agreement that is past due (whether at the Final Maturity Date, by acceleration or otherwise) shall bear interest from the date such amount is due until such amount is paid in full at the per annum rate that is the then applicable Interest Rate plus 1% p.a. (one percent per annum).

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(c)

Interest shall be calculated on the basis of a year of 360 days for the actual number of days elapsed (including the first day, but excluding the last day). Accrued Interest shall be due and payable in arrears upon any payment of the Advance and on each applicable Interest Payment Date. However, interest accruing according to paragraph (b) shall be due and payable from time to time on demand of the Lenders.

(d)

In the event that the Exporter (or the Paying Agent, as provided in paragraph (a) above) is unable for any reason, including without limitation, because of an action or inaction by any Governmental Authority of Brazil, to pay Interest as provided hereunder, the Exporter shall make additional Covered Shipments to Importers at such times and in such amounts as permitted by the relevant Governmental Authority so that the aggregate Purchase Prices paid for such Covered Shipments by the Importers and/or paid in connection of any Undertakings and deposited in the Collection Account are sufficient to pay to the Administrative Agent (for the benefit of the Lenders) the amount of Interest due hereunder as and when due. In such case, the Paying Agent, on behalf of the Exporter, shall make such payments of Interest to the Administrative Agent (for the benefit of the Lenders) using funds available in the Collection Account.

Section 5.     Repayments; Prepayments

(a)	Each Advance shall be due and payable in 25 equal monthly instalments (each, an “Instalment”) beginning on the Banking Day that is 60 months after the Disbursement Date (the “First Instalment Date”), as shown in Schedule 3. Notwithstanding the foregoing, any monies received by the Administrative Agent shall be applied in the following order: (a) Breakage Costs (if any); (b) Interest due and unpaid; (c) to reduce the amount of principal due and unpaid on the next Instalment. Provided no Event of Default has occurred and is continuing, the amount paid into the Collection Account corresponding the payment of the next Instalment in excess of the amount due in the next Instalment plus applicable Interest therein shall be made available to the Exporter.
(b)	The Exporter shall itself, or shall cause the Paying Agent to (for the benefit and on behalf of the Exporter), instruct all Importers to make all payments due hereunder and/or shall cause to be paid the proceeds arising from the Undertakings in US Dollars, in same day funds, no later than 10:00 a.m. (New York time), on the dates such payments are due, without set-off, counterclaim or deduction, directly to the account informed by the Administrative Agent in writing from time to time.
(c)	Repayment of the Advance shall be made by payment of funds to the Collection Account. To that end, the Exporter agrees to, or cause the Paying Agent to (i) act in accordance with sub-item (b) above, (ii) upon request, but in any case not before 10 (ten) days after the relevant repayment date, provide the Administrative Agent with originals or copies of all Shipping Documents related to such Covered Shipments. The Administrative Agent shall transfer sufficient funds from the Collection Account towards repayment of the Exporter’s indebtedness hereunder. It is hereby understood that funds not received by 10:00 a.m. (New York time) and, in the absence of any authenticated notification received in form and substance satisfactory to the Administrative Agent from the Importer’s bank(s) confirming that such payment has been made, then the Administrative Agent will make payment next day value after receipt of funds.

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(d)	The Exporter or the Paying Agent, on behalf of the Exporter, shall make available, when and as due, funds in the Collection Account sufficient to satisfy the payment obligations of the Exporter hereunder and under the Advance on the due dates thereof, notwithstanding any other obligations which the Exporter or the Paying Agent may have to any other Person, repayment of which is intended to be made from funds in such Collection Account. Funds paid into the Collection Account on a date that is not an Interest Payment Date shall be invested by the Administrative Agent on behalf of the Exporter until the next Interest Payment Date.
(e)	If the due date of any payment under this Prepayment Agreement or under the Promissory Note would fall on a day which is not a Banking Day, such date shall be extended to the next Banking Day (and Interest shall be payable for the Advance so extended for the period of such extension), unless such Banking Day falls in the next calendar month, in which case the payment shall be due on the immediately preceding Banking Day.
(f)	If the Lenders holding at least 66% (sixty six per cent) determine that a Material Adverse Effect has occurred, such Lenders shall promptly inform the Administrative Agent in writing who shall in turn, within a period of no more than three Banking Days, provide written notice thereof to the Guarantor and the Exporter and, in case each Lender does not receive satisfactory remedy from the Exporter, the Paying Agent and/or the Guarantor, the Administrative Agent (after consultation with the Lenders) shall provide to the Guarantor and the Exporter a written demand for prepayment of the then outstanding principal amount of the Advance and within 90 (ninety) Banking Days of receipt of such demand by the Exporter and the Guarantor, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon.
(g)	The Exporter may, on a Banking Day, prepay all or a portion of any Advance  at any time or from time to time, which pre-payment shall in each case, be made together with accrued and unpaid Interest on the principal amount, so prepaid and all other amounts then payable under this Prepayment Agreement without premium but subject to the costs and expenses described in Section 16 (solely in the event that such prepayment is made on a day other than the final day of an Interest Period); provided that: (a) the Exporter shall give the Lenders  notice of each such pre-payment at least three (3) Banking Days prior to the date of such prepayment (and, upon the date specified in any such notice, the amount to be prepaid shall become due and payable hereunder), (b) each such notice of pre-payment shall specify the amount of the Advance being prepaid and (c) each partial pre-payment shall be applied to the outstanding Advances in the inverse order of maturity.

Section 6.     Taxes

(a)

The Exporter will pay to the Administrative Agent (for the benefit of the Lenders), all amounts due under this Prepayment Agreement and the Promissory Note free and clear of all deduction of any present or future taxes, levies, imposts, charges, withholdings, penalties, fines, additions to tax and interest, imposed or levied in Brazil or any other jurisdictions from which any payment hereunder or under the Promissory Note is remitted, or any political subdivision or taxing authority thereof (the “Taxes”), except taxes imposed on each of the Lenders’ income by the jurisdiction under which such Lender is incorporated.

(b)

In the event the Exporter is required to deduct or withhold any Taxes, the Exporter hereby agrees to pay the required deductions contemplated in Section 6(a) herein, including deductions applicable to the additional amounts payable thereunder, so that the Administrative Agent shall receive an amount equal to the sum the Lenders would have received had no such deductions been made.

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(c)	Upon the Administrative Agent’s request, the Exporter shall, within thirty (30) days, furnish a copy of the official receipts evidencing payment of Taxes made according to this Section 6, if any.
(d)	The Exporter shall indemnify the Administrative Agent and the Lenders for the full amount of Taxes or any penalties, interest and expenses arising therefrom paid by each Lender. This indemnification shall be made within 45 days from the date the Lenders make written request therefor, subject to Central Bank authorisation.

Section 7.     Illegality

(a)	If, after the date of this Prepayment Agreement, the introduction of, or any change in, any applicable law, rule or regulation or in the interpretation or administration thereof by any Governmental Authority charged with the interpretation or administration thereof or compliance by any of the Lenders with any request or directive (whether or not having the force of law) of any such authority shall make it unlawful or impossible for any of the Lenders to make, maintain or fund the Advance, and after such Lender or Lenders have made reasonable efforts to make, maintain or fund the Advance using other alternatives such as lending offices in other jurisdictions, then such Lender or Lenders forthwith shall so notify the Exporter in writing, whereupon the obligation of such Lender or Lenders to make or maintain the Advance shall be terminated. Upon receipt of such notice, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the later of either (a) the last day of Interest Period applicable thereto or (b) within sixty-six (66) Banking Days.
(b)	If Brazil or any competent authority thereof shall declare a moratorium on the payment of or default on, all or a substantial part of the Indebtedness of Brazil or any governmental agency or authority thereof or persons or corporations therein, the effect of which does or will prevent or impede any payment in respect of the Advance and the validity of “pre-pagamento” agreements in Brazil, then the Exporter forthwith shall so notify the Administrative Agent in writing within ten (10) Banking Days. Whereupon, unless within 20 (twenty) Banking Days the Administrative Agent, after consultation with the Lenders certifies in writing that it is satisfied that the Exporter, the Paying Agent and/or the Guarantor, shall be able to meet their respective obligations hereunder, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the later of either (a) the last day of Interest Period applicable thereto or (b) within ninety (90) Banking Days.
(c)	If, after the date of this Prepayment Agreement, the introduction of, or any change in the law in the Exporter’s country shall occur which renders this Prepayment Agreement invalid, illegal or unenforceable, the Exporter shall prepay in full the then outstanding principal amount of the Advance, together with accrued Interest thereon, on the later of either (a) the last day of Interest Period applicable thereto or (b) within sixty-six (66) Banking Days.
(d)	Prepayment pursuant to this Section 7 shall be made without payment of Costs and Expenses as defined in Section 16.

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Section 8.     Conditions Precedent

(a)	The obligation of the Lenders to make the Advance is subject to the condition precedent that the Administrative Agent shall have received the following documents and instruments, duly executed, created or issued, as the case may be:
(i)		This Prepayment Agreement;
(ii)		A copy of the Financial Transaction Registration (“Registro de Operações Financeiras – ROF”) issued by Central Bank of Brazil;
(iii)		Evidence of  payment of the fees due hereunder;
(iv)		A Disbursement Request and the Promissory Note;
(v)		The Exporter’s and the Guarantor’s balance sheet and statement of income, stockholders’ equity and cash flows as of and for the fiscal year ended 2004, certified by its independent public accountants;
(A)	Legal opinion from Brazilian counsel to the Exporter addressed to the Administrative Agent and regarding matters requested by the Administrative Agent;
(vi)		Copies of (A) the by-laws of the Exporter, the Paying Agent and Guarantor and Articles of Incorporation, if applicable, and (B) relevant corporate authorisations of the Exporter, the Paying Agent and the Guarantor necessary to authorise the execution, delivery and performance of the Advance Documents;
(vii)		A certificate from a duly authorised Responsible Officer of each of the Exporter, the Paying Agent and the Guarantor as to the incumbency and signatures of its duly authorised officers that are authorised to execute and deliver the Advance Documents in form and substance acceptable to the Administrative Agent;
(viii)		The relevant certificate from the Law Debenture Corporate Services Limited, referred to in Section 17.
(b)	The obligation of the Lenders to make the Advance is also subject to the satisfaction of the following conditions precedent, and the disbursement by the Lenders of the Advance shall constitute a representation by the Exporter that items (i), (ii) and (iii) below shall have been satisfied on and as of the Disbursement Date:
(i)		the representations and warranties made by the Exporter, the Guarantor and the Paying Agent herein shall be true and correct on and as of the Disbursement Date;
(ii)		both immediately prior to the making of the Advance and after giving effect thereto and to the intended use of the proceeds thereof, no Event of Default shall have occurred and be continuing; and
(iii)		there has been no material adverse change, since the last audited financial statements of the Exporter, the Paying Agent and the Guarantor received by the Administrative Agent, in the economic and/or financial condition of the Exporter or the Guarantor.
(c)	Upon the receipt by the Exporter of the Disbursement Request duly acknowledged and agreed by the Administrative Agent, the Lenders shall make the Advance, notwithstanding the provisions of item b (iii) above.

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Section 9.     Representations and Warranties

(a)	Each of the Exporter, the Paying Agent and the Guarantor hereby represent and warrant that:
(i)		It is duly organised and validly existing under the laws of the jurisdiction of its organisation, registered with the “Departamento do Comércio Exterior – Decex”, and has full power, authority and legal right to borrow the Advance and to execute, deliver and perform this Prepayment Agreement and any Promissory Note in the form set forth in Exhibit A.
(ii)		The Advance contemplated herein and the execution, delivery and performance of this Prepayment Agreement and of the Promissory Note are within its powers, and have been duly authorised by all necessary actions, and do not violate any provision of applicable law, regulation or order of any court or regulatory body. Furthermore, the Advance contemplated under this Prepayment Agreement and evidenced by the Promissory Note will not result in the breach of, constitute a default, or require any consent under any agreement, instrument or document to which it is a party or by which it or any of its property may be bound or affected.
(iii)		This Prepayment Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms.
(iv)		There are no actions, suits or proceedings pending or, to its knowledge, threatened against or affecting it before any court, governmental agency or arbitrator, which may, in any one case or in the aggregate, have a Material Adverse Effect and which as of the Disbursement Date have not been remedied in full or otherwise are not being remedied in a manner satisfactory to the Administrative Agent and the Lenders.
(v)		It has good title to, or valid leasehold interests in, all its real and personal property material to its business, except for defects in title that do not interfere with its ability to conduct its business as currently conducted or to utilise such property for its intended purposes. It owns or is licensed or otherwise has the right to use all of the patents, contractual franchises, licenses, authorisations and other rights that are reasonably necessary for the operation of its business, without conflict with the rights of any other Person.
(b)	The Exporter hereby represents and warrants further that:
(i)		It has furnished to the Administrative Agent its balance sheet and statement of income, stockholders’ equity and cash flows as of and for the fiscal year ended 2004, certified by its independent public accountants. Such financial statements are complete and correct, and fairly present the Exporter’s financial condition and the results of its operations and cash flows as of such dates and for such periods in accordance with Brazilian GAAP. Since December 31, 2004 there has been no development or event that has had or could reasonably be expected to have a Material Adverse Effect.
(ii)		Other than the approval of the Central Bank, which will be obtained as per Section 8(a)(ii), no authorisation or approval or other action by, and no notice to or filing with, any Governmental Authority or regulatory body is required for the due execution, delivery and performance of this Prepayment Agreement (except that the Exporter shall have to enter into an exchange contract with a bank authorised to operate in the exchange market in Brazil whenever it shall pay interest hereunder) or any of the other Advance Documents.

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(iii)	Its obligations evidenced by this Prepayment Agreement and the Advance Documents to which it is a party are its direct and unconditional obligations, and rank in priority of payment and in all other respects at least pari passu with all its other similarly secured and unsubordinated indebtedness, subject to statutorily preferred exceptions.
(iv)	It is not in default under or with respect to any agreement, instrument or undertaking to which it is a party or by which it or any of its property or assets are bound which default would have or cause a Material Adverse Effect.
(v)	Neither it nor any of its property or assets has any immunity (sovereign or otherwise) from jurisdiction of any court or from any legal process (whether through service or notice, attachment prior to judgement, attachment in aid of execution, execution or otherwise) under the laws of the jurisdiction of its organisation, except for public concessions.
(vi)	Under the laws of Brazil in force at the date hereof, it is not necessary that this Prepayment Agreement or the Promissory Note be filed, recorded or enrolled with any court or any other authority in Brazil or that any stamp, registration or similar tax be paid on or in relation to this Prepayment Agreement or the Promissory Note; except that a certified translation into Portuguese of this Agreement and the Promissory Note is required to be filed with a competent Registry of Deeds in Brazil in order to ensure the legality, validity and binding effect of this Prepayment Agreement and the Promissory Note;

Section 10.     Affirmative Covenants

Each of the Exporter and the Guarantor covenant and agree that, so long as any part of the Advance is outstanding it will:

(a)

Furnish to the Administrative Agent (i) upon demand, but not earlier than 120 days after the end of each fiscal year, its consolidated and, if available, consolidated balance sheet, as of the end of its fiscal year, and the related statement of earnings, shareholders’ equity and changes in financial condition prepared in accordance with Brazilian GAAP, in each case setting forth in comparative form the figures for the previous fiscal year, and certified by independent public accountants of recognised international standing; (ii) promptly after it knows that any Event of Default has occurred, however not later than 20 days after such occurrence, a certificate from a duly authorised officer notifying the Lenders  as to the occurrence of such Event of Default, describing the same in reasonable detail and describing the actions that it proposes to take with respect thereto; (iii) immediately after the commencement thereof, notice in writing of all actions, suits and proceedings before any court or governmental agency or instrumentality of any jurisdiction which, if determined adversely to it, will have a Material Adverse Effect; and (iv) such other publicly available information with respect to its business, properties or its condition or operations, financial or otherwise, as the Lenders  may from time to time reasonably request.

(b)

Keep proper books of record and account in which full, true and correct entries in conformity with Brazilian GAAP and the requirements of applicable law shall be made of all dealings and transactions in relation to its business.

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(c)	Obtain, comply with the terms of and do all that is necessary to maintain in full force and effect all authorisations, approvals, licenses and consents required in or by the laws and regulations of Brazil to enable it lawfully to enter into and perform its obligations under this Prepayment Agreement, the Promissory Note and the Export Agreements or to ensure the legality, validity, enforceability or admissibility thereof in evidence in Brazil;
(d)	Promptly upon receipt of the Advance, enter into and perform its obligations under the currency exchange agreement, on terms and subject to conditions approved by the Administrative Agent, preferably with Banco Santander Brasil S.A. pursuant to which the Exporter sells the dollars represented by the Advance to, and receives Brazilian currency in respect thereof from, the bank responsible for the currency exchange agreement (Banco Santander Brasil S.A. or otherwise a third financial institutions authorised by the Central Bank) and procure that such currency exchange agreement is promptly registered as a “Pagamento Antecipado de Exportação” with the Central Bank;
(e)	Comply with the requirements of all applicable laws, rules, regulations and orders of Governmental Authorities; and take all necessary actions in order to obtain and maintain in full force and effect all such governmental authorisations, approvals and consents as may be required for it to comply with its obligations under this Prepayment Agreement and the other Advance Documents.
(f)	Continue to engage in its existing Business and preserve, renew and keep in full force and effect its corporate existence and take all reasonable action to maintain all rights, privileges and franchises necessary or desirable in the normal conduct of its business, and comply with all contractual obligations binding on it and its property.
(g)	Take any and all actions necessary so that its obligations under the Advance Documents to which it is a party shall at all times rank at least pari passu in priority of payment and in all other respects with all present and future similarly secured and unsubordinated indebtedness, subject to statutorily preferred exceptions.

Section 11.     Negative Covenants

Each of the Exporter and the Guarantor covenant and agree with the Administrative Agent and the Lenders that, so long as any part of the Advance is outstanding, it will not:

(a)	enter into any transaction of merger, amalgamation or consolidation, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution), or sell, transfer, lease or otherwise dispose of (in one transaction or in a series of transactions) all or substantially all of its assets; provided that:
	(i)	it may merge or consolidate with or into, or sell or transfer all or substantially all of its assets to, any other Person that is organised in an OECD Country (or, if not an OECD Country, its current jurisdiction of organisation) if, immediately after giving effect thereto:
		(B)	(1) with respect to any merger or consolidation, it is the surviving Person or, if not, the surviving Person has validly assumed its obligations under the Advance Documents to which it is a party, or (2) with respect to a sale, transfer, lease or other disposition of all or substantially all of its assets, the Person to whom the assets have been sold, transferred, leased or otherwise disposed has validly assumed all obligations under the Advance Documents to which the transferor is a party (which assumption may constitute a novation of such obligations under applicable law); provided that, with respect to both clauses (1) and (2): with respect to any such transaction by the Exporter, the Guarantor owns a majority of the Voting Stock of the surviving Person and has the power to direct or cause the direction of the management and policies of such surviving Person,

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		(C)	no Event of Default or event that (with notice, lapse of time or both) would become an Event of Default (including under Section 12(m) or resulting from a breach of Section 10(d)) exists or would exist immediately after such merger, consolidation, sale, transfer, lease or other disposition;
		(D)	the Administrative Agent shall have received any other opinions, evidence of security interest filings and other documents or evidence as it may reasonably request in connection therewith;
		(E)	to the extent reasonably requested by the Administrative Agent, the Advance Documents shall have been amended (or amended and restated) to reflect such merger, consolidation, sale, transfer, lease or other disposition.
		(F)	Notwithstanding the foregoing clauses (A)-(D), the Net Debt to EBITDA Ratio of any Surviving Entity shall not exceed 3.00 as of the date of consummation of such merger, consolidation, sale, transfer, lease or other disposition.
	(ii)	the Exporter may be merged into the Guarantor, in which case the Financial Transaction Registration (“Registro de Operações Financeiras – ROF”) issued by Central Bank of Brazil shall have to be amended to reflect such merger.
	(iii)	the Guarantor may be merged into the Exporter, in which case the Financial Transaction Registration (“Registro de Operações Financeiras – ROF”) issued by Central Bank of Brazil shall have to be amended to reflect such merger.
	(iv)	it may sell, lease, transfer or otherwise dispose of obsolete or worn-out property or equipment no longer used or useful in its business and any inventory or other assets sold or disposed of in the ordinary course of its business, and
	(v)	it may sell or otherwise transfer Goods and other assets to the Exporter or the Guarantor, as the case may be, in the manner contemplated in the Advance Documents.
(b)	Enter into any transaction or series of related transactions with any Affiliate thereof (other than its wholly-owned Subsidiaries), other than in the ordinary course of their respective businesses and on terms and conditions substantially as favourable to it as would reasonably be obtained at that time in a comparable arm’s -length transaction with a Person other than such Affiliate. Notwithstanding the foregoing, this provision shall not apply to: (a) any loan or similar financial transaction (or series of related financial transactions) entered into for the sole purpose of performing cash management or other financial management functions of an Affiliate or Subsidiary as the case may be and/or (b) tax allocation agreements entered into from time to time between an Affiliate or a Subsidiary as the case may be provided always none of the foregoing shall materially impair the ability of the Exporter and/or Guarantor to comply with their respective obligations under this Prepayment Agreement.
(c)	Except as provided herein, assign, pledge or allow any form of security on Export Receivables  that are to be assigned to the Administrative Agent on behalf of the Lenders under this Prepayment Agreement for the repayment of the Advance.

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Section 12.     Events of Default

If one, or more, of the following events (each an “Event of Default”) shall occur and be continuing:

(a)	The Exporter shall fail to make payment of any amount of principal due hereunder;
(b)	The Exporter shall fail to make payment, due to administrative reasons, of any Interest, fees or other amounts due hereunder (whether at stated maturity, at acceleration or otherwise), after the expiry of three (3) Banking Days after the date the same becomes due; or
(c)	Any representation, warranty or certification made herein (or any modification or supplement hereto) by the Exporter or the Guarantor shall prove to have been false or misleading in any material respect as of the time made or furnished, and is not cured within 22 (twenty-two) Banking Days upon notice of the Administrative Agent;
(d)	The Exporter ceases to be involved in (i) the business of producing pulp and paper and/or other related products and (ii) other lines of business that are related or incidental to the business described under this Prepayment Agreement;
(e)	The Exporter, the Paying Agent or the Guarantor shall default in the performance of any other obligation under this Prepayment Agreement and such default continue unremedied for a period of 10 Banking Days after notice thereof to the Exporter by the Administrative Agent, provided always that the Guarantee shall always be legally binding and effective on the Guarantor;
(f)	The Exporter shall admit in writing its inability to be generally able to pay its debts;
(g)	The Guarantor shall admit in writing its inability to be generally able to pay its debts and the Exporter shall not have designated a substitute or replacement thereof reasonably acceptable to the Administrative Agent within 22 (twenty-two) Banking Days after notice thereof to the Exporter by the Administrative Agent;
(h)	The Paying Agent shall admit in writing its inability to be generally able to pay its debts and the Exporter shall not have designated a substitute or replacement thereof reasonably acceptable to the Administrative Agent within 22 (twenty-two) Banking Days after notice thereof to the Exporter by the Administrative Agent;
(i)	The Exporter shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all, or substantially all, its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing;
(j)	The Paying Agent shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or substantially all its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing and the Exporter shall not have designated a substitute or replacement thereof reasonably acceptable to the Lenders within 22 (twenty-two) Banking Days after notice thereof to the Exporter by the Administrative Agent;

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(k)	The Guarantor shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee, examiner or liquidator of itself or of all or substantially all its respective property or assets, (ii) make a general assignment for the benefit of creditors, (iii) file a petition seeking to take advantage of any law relating to bankruptcy, insolvency, liquidation, dissolution, arrangement or winding-up, or composition or readjustment of its respective debts, or (iv) take any corporate action for purpose of effecting any of the foregoing and the Exporter shall not have designated a substitute or replacement thereof reasonably acceptable to the Administrative Agent within 22 (twenty-two) Banking Days after notice thereof to the Exporter by the Administrative Agent;
(l)	A proceeding or case shall be commenced, without the application or consent of the Exporter , in any court of competent jurisdiction, seeking (i) its liquidation, dissolution, arrangement or winding-up, or the composition or readjustment of its respective debts, (ii) the appointment of a receiver, custodian, trustee, examiner, liquidator or the like of the Exporter, the Paying Agent or the Guarantor of all or substantially all of its respective property or assets, or (iii) similar relief in respect of the Exporter, the Paying Agent or the Guarantor under any law relating to bankruptcy, insolvency, winding-up, or composition or adjustment of debts, and such proceeding or case shall continue undismissed, or any order, judgement or decree approving or ordering any of the foregoing shall be entered and continue unstayed and in effect, for a period of 44 (forty-four) Banking Days;
(m)	Any default or event of default shall occur or be continuing under any agreement, instrument or other document of the Exporter or the Guarantor evidencing External Indebtedness (as defined below) in excess of Fifty Million Dollars (US$50,000,000.00) (or its equivalent in other currencies) and such default or event of default causes the acceleration of such External Indebtedness and shall not have been waived.  For purposes of this paragraph (h), “External Indebtedness” shall mean indebtedness for borrowed money which is payable or may be paid (i) in a currency other than the lawful currency of Brazil an (ii) to a Person resident or having its principal place of business outside of Brazil;
(n)	Any judgement or order from which no further appeal is permissible under applicable law for the payment of money aggregating in excess of Fifty Million Dollars (US$50,000,000.00) (or its equivalent in another currency) shall be rendered against the Exporter or the Guarantor and such judgement or order shall continue unsatisfied and in effect for a period of 30 (thirty) calendar days;
(o)	A Change of Control shall occur;
(p)	An event shall occur which results in a Material Adverse Effect;
(q)	The Debt Service Coverage Ratio as of the end of any fiscal quarter of the Exporter shall be less than 1.30 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant fiscal quarter);
(r)	The Net Debt to EBITDA Ratio as of the end of any fiscal semester of the Exporter shall exceed 3.00 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant Fiscal Semester);

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(s)	The Debt to Total Capitalisation Ratio as of the end of any fiscal semester of the Exporter shall exceed 0.70 (it being understood that such ratio shall not be calculated until the delivery of the financial statements referred to in Section 10, but that any related Event of Default shall be considered to have begun as of the last day of the relevant Fiscal Semester);
(t)	For any two consecutive Measurement Periods  (or four during the life of the Advances), failure to achieve the Coverage Ratio;

then, in such event, the Administrative Agent may by notice to the Exporter and the Guarantor, declare the Advance then outstanding, the accrued Interest on the Advance and all other amounts payable by the Exporter hereunder to be, whereupon the same shall become, forthwith due and payable, without presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Exporter. Notwithstanding the foregoing, any event referred to in clause (a) or (b) above existing for a period of up to 5 (five) Banking Days after the applicable grace period will not constitute an Event of Default if such delay or failure could not have been prevented by the exercise of reasonable diligence by the Exporter or the Guarantor, and such delay or failure was caused by an act of God, riot, an act of war, terrorism, epidemic, flood, weather, landslide, fire, earthquake, electrical outage or similar causes.

Section 13.     The Administrative Agent

Each of the Lenders hereby irrevocably confirms the appointment of the Administrative Agent as its agent and authorises the Administrative Agent to take such actions on its behalf, and to exercise such powers as are delegated to the Administrative Agent by the terms hereof, together with such actions and powers as are reasonably incidental thereto.

(a)

The bank serving as the Administrative Agent hereunder shall have the same rights and powers in its capacity as a Lender as any other Lender and may exercise the same as though it were not the Administrative Agent, and such bank may accept deposits from, lend money to and generally engage in any kind of business with the Exporter or any Subsidiary or Affiliate thereof as if it were not the Administrative Agent hereunder.

(b)

The Administrative Agent shall not have any duties or obligations except those expressly set forth herein or in any other loan documents to which it is a party.  Without limiting the generality of the foregoing:  (i) the Administrative Agent shall not be subject to any fiduciary or other implied duties, regardless of whether an Event of Default has occurred and is continuing; (ii) the Administrative Agent shall not have any duty to take any discretionary action or exercise any discretionary powers, except discretionary rights and powers expressly contemplated hereby that the Administrative Agent is required to exercise in writing by the Majority Lenders; and (iii) except as expressly set forth herein, the Administrative Agent shall not have any duty to disclose, and shall not be liable for the failure to disclose, any information relating to the Exporter, the Guarantor or any of its Subsidiaries that is communicated to or obtained by the bank serving as Administrative Agent.  The Administrative Agent shall not be liable for any action taken or not taken by it with the consent or at the request of the Majority Lenders or in the absence of its own gross negligence or wilful misconduct.  The Administrative Agent shall be deemed not to have knowledge of any Event of Default unless and until written notice thereof is given to the Administrative Agent by the Exporter, the Guarantor or a Lender, and the Administrative Agent shall not be responsible for or have any duty to ascertain or inquire into (A) any statement, warranty or representation made in or in connection with this Prepayment Agreement and any other Advance Document, (B) the contents of any certificate, report or other document delivered hereunder or in connection herewith,

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	(C) the performance or observance of any of the covenants, agreements or other terms or conditions set forth herein, (D) the validity, enforceability, effectiveness or genuineness of this Prepayment Agreement or any Advance Document or any other agreement, instrument or document, or (E) the satisfaction of any condition set forth hereunder or elsewhere herein, other than to confirm receipt of items expressly required to be delivered to the Administrative Agent.
(c)	The Administrative Agent shall be entitled to rely upon, and shall not incur any liability for relying upon, any notice, request, certificate, consent, statement, instrument, document or other writing reasonably believed by it to be genuine and to have been signed or sent by the proper Person.  The Administrative Agent also may rely upon any statement made to it orally or by telephone and reasonably believed by it to be made by the proper Person, and shall not incur any liability for relying thereon.  The Administrative Agent may consult with legal counsel (who may be counsel for the Exporter or the Guarantor), independent accountants and other experts selected by it, and shall not be liable for any action taken or not taken by it in accordance with the advice of any such counsel, accountants or experts other than through wilful misconduct and/or gross negligence.
(d)	The Administrative Agent may perform any and all of its duties and exercise its rights and powers by or through any one or more sub-agents appointed by the Administrative Agent.  The exculpatory provisions of the preceding paragraphs shall apply to any such sub-agent of the Administrative Agent, and shall apply to their respective activities in connection with the syndication of the credit facilities provided for herein as well as activities as Administrative Agent.
(e)	Subject to the appointment and acceptance of a successor Administrative Agent as provided in this paragraph, the Administrative Agent may resign at any time by giving sixty (60) days written notice to the Lenders and the Exporter.  Upon any such resignation, the Majority Lenders shall have the right, in consultation with the Exporter, to appoint a successor.  If no successor shall have been so appointed by the Majority Lenders and shall have accepted such appointment within sixty (60) days after the retiring Administrative Agent gives notice of its resignation, then the retiring Administrative Agent may, on behalf of the Lenders, appoint a successor Administrative Agent.  Upon the acceptance of its appointment as Administrative Agent hereunder by a successor, such successor shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After the Administrative Agent’s resignation hereunder, the provisions of this Article hereof shall continue in effect for the benefit of such retiring Administrative Agent and its sub-agents in respect of any actions taken or omitted to be taken by any of them while it was acting as Administrative Agent.
(f)	Each Lender acknowledges that it has, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it has deemed appropriate, made its own credit analysis and decision to enter into the Advance established pursuant to this Prepayment Agreement. Each Lender also acknowledges that it will, independently and without reliance upon the Administrative Agent or any other Lender and based on such documents and information as it shall from time to time deem appropriate, continue to make its own decisions in taking or not taking action under or based upon this Prepayment Agreement and any other Advance Document, any related agreement or any document furnished hereunder or thereunder.

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Section 14.     Relationship between the Lenders

(a)	The participation in the Advance hereunder shall be for each of the Lenders’ own account and risk. Each Lender shall bear the risks associated with its portion of the Advance under this Prepayment Agreement, including, without limitation, that the Exporter may fail to make payments as required pursuant to the terms of this Prepayment Agreement and any other Advance Document.
(b)	Any action to be taken by the Lenders hereunder shall be taken by the Administrative Agent, upon written request of the Majority Lenders.
(c)	Each Lender has reviewed the text of each document evidencing the Advance, including this Prepayment Agreement and any other Advance Document. Each Lender acknowledges and agrees that no exercise of the rights and benefits provided to the parties in any other loan document shall impose any rights or obligations upon any other Lenders thereof other than are expressly set forth herein or therein.
(d)	Each Lender will contribute to its pro rata participation of any and all costs, expenses and disbursements incurred or made by the Administrative Agent and any other Lender in protection of rights granted pursuant to this Prepayment Agreement or any other Advance Document and enforcing any remedies hereunder or thereunder. Any costs, expenses or disbursements incurred by a Lender pursuant to the immediately preceding sentence must be approved by the Majority Lenders prior to any incidence by any Lender in order to be subject to contribution pursuant thereto.
(e)	Each Lender agrees to indemnify and hold the Administrative Agent harmless, to the extent of each Lender’s pro rata participation, from any and all claims (including, without limitation, any tax claims), losses, liabilities, costs and expenses (including legal fees and disbursements) suffered or incurred by the Administrative Agent in connection with the Advance or the transactions contemplated by this Prepayment Agreement and any other Advance Document (other than those arising out of Administrative Agent’s own gross negligence or wilful misconduct).
(f)	In the event the Administrative Agent makes any payment to a Lender and either does not receive such payment promptly from the Exporter thereafter or for any reason amounts received by the Administrative Agent are rescinded or must otherwise be returned by the Administrative Agent, each Lender will immediately repay to the Administrative Agent, upon request, such Lender’s pro rata participation of such amount not received or so returned or paid.
(g)	Anything in this Prepayment Agreement to the contrary notwithstanding, in no event shall the Administrative Agent or any Lender be liable under or in connection with this Prepayment Agreement or any other loan document for indirect, special, incidental, punitive or consequential losses or damages of any kind whatsoever, including but not limited to lost profits, whether or not foreseeable, even if the Administrative Agent or any Lender has been advised of the possibility thereof and regardless of the form of action in which such damages are sought.

Section 15.     Fees

(a) Up-front-Participation-Fee. The Exporter shall pay to the Administrative Agent (for the benefit of the Lenders) the Up-front-Participation Fee in United States Dollars, in the amount and at the times agreed in the Offer Letter dated 6 June, 2005.

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(b)	Arrangement Fee. The Exporter shall pay to the Lead Arranger an arrangement fee in the amount and at the times agreed in the Offer Letter dated 6 June, 2005.
(c)	Administrative Agent Fee: The Exporter shall pay to the Administrative Agent a fee of US$10,000.00 per annum as long as any amounts due hereunder remain outstanding. Payment of the Administrative Agent Fee shall occur (a) on the date of the first Advance is made and each anniversary thereafter, provided no such payment shall be made on the final anniversary of said Advance.

Section 16.     Costs and Expenses

(a)

If the Exporter makes any payment of principal of the Advance (excluding as a result of the provision set forth in Section 7 hereof and as set forth in Section 5 (g)) on any day, other than the last day of the Interest Period applicable thereto, or fails to borrow the Advance on the date specified therefore in the notice to the Administrative Agent pursuant to Section 3 hereof, the Exporter shall reimburse the Lenders, on demand, for any financial loss, excluding loss of anticipated profits, incurred by it as a result of the timing of such payment or such failure, or as a result of liquidating or employing deposits from third parties, provided that the Administrative Agent shall have delivered to the Exporter a certificate as to the amount of such loss incurred by the Lenders , which certificate shall be conclusive in the absence of manifest error.

(b)

The Exporter agrees to reimburse the Lenders on demand for all reasonable and documented costs and expenses (including without limitation legal fees and registration costs) incurred by the Lenders in connection with the preparation and execution of the Advance Documents, subject to a maximum amount of US$10,000.00 (ten thousand US Dollars).

Section 17.     Governing Law and Jurisdiction

(a)	This Prepayment Agreement shall be governed by and construed in accordance with English Law.
(b)	The Exporter, the Paying Agent and the Guarantor irrevocably agree for the exclusive benefit of the Administrative Agent and the Lenders that the courts of England shall have jurisdiction to hear and determine any suit action or proceeding, and to settle any disputes, which may arise out of in connection with this Prepayment Agreement and for such purposes you hereby irrevocably submit to the jurisdiction of such courts.
(c)	Nothing contained in this Section shall limit the right of the Administrative and the Lenders to take proceedings against the Exporter or the Guarantor, in any other court of competent jurisdiction, nor shall the taking of any such proceedings in one or more jurisdictions preclude the taking of proceedings in any other jurisdiction, whether concurrently or not (unless precluded by applicable law).
(d)	The Exporter, the Guarantor and the Paying Agent waive any objection which it may have now or in the future to the courts of England being nominated for the purpose of Section 17 (b) above and agree not to claim that any such court is not a convenient or appropriate forum.
(e)	Each of the Exporter, Guarantor and Paying Agent hereby authorises and appoints Law Debenture Corporate Services Limited of 100 Wood Street, Fifth Floor, London EC2V 7EX, England (or such other person being a firm of solicitors or authorised institution in England as it may substitute by notice to the Administrative Agent) to accept service of all legal process arising out of or connected with this Prepayment Agreement.

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Service on such person(s) (or substitute) shall be deemed to be service on the Exporter, Guarantor or the Paying Agent whether or not process is forwarded to or received by it. Except upon such a substitution, the Exporter and the Guarantor undertakes not to revoke any such authority or appointment, at all times to maintain an agent for service of process in England and, if any such agent ceases for any reason to be an agent for this purpose, forthwith to appoint another agent and advise the Administrative Agent accordingly. Failing such appointment, the Administrative Agent shall be entitled by notice to the Exporter to appoint such a replacement agent to act on behalf of the Exporter, Guarantor and the Paying Agent (as the case may be).

Section 18.     Successors and Participations

(a)	This Prepayment Agreement and the Promissory Note shall be binding on the Exporter, the Guarantor, the Paying Agent, and its respective successors and assigns and shall inure to the benefit of the Lenders and its successors and assigns.
(b)	Except as provided herein, neither the Exporter, nor the Paying Agent nor the Guarantor may assign or otherwise transfer all or any part of its respective rights or obligations under this Prepayment Agreement and the Promissory Note without the prior written consent of the Lenders as provided to the Administrative Agent.
(c)	The Lenders may: (i) assign in whole and in part its rights and obligations under this Prepayment Agreement and the Promissory Note(s), provided, however, that such assignment (A) does not increase the overall cost hereunder to the Exporter, in any way whatsoever, and (B) is consented by the Exporter in writing (such consent not to be unreasonably withheld); provided, however that no such consent is required in the event  (x) the Lender assigns its rights and obligations to another branch of the Lender or any entity directly or indirectly controlled by, controlling or under common control with, the Lender, or (y) at any time that an Event of Default of payment as described in Section 12 (a) has occurred and is continuing; (ii) sell participations in, all or any part of this Prepayment Agreement and the Promissory Note(s) to another bank or other entity without the prior written consent of the Exporter, provided that the Administrative Agent shall advise the Exporter of each such sale of participations within five Banking Days from such sale.
(d)	For the purposes hereof, (a) “Assignment Agreement” shall mean any agreement entered into by the buyer (the “Assignee”) of specified rights and obligations of the seller (the “Assignor”) in respect of this Prepayment Agreement and the Promissory Note(s), and whereby the Assignee will substitute the Assignor as a Lender and (b) a “Participation” shall mean any agreement entered into by the Lender whereby the Lender sells to any third party (a “Participant”) its interest in all or any part of this Prepayment Agreement and the Promissory Note(s); provided, however, that in any such case the contractual relation between the parties hereto shall not be affected, and the Participant itself shall have no right to directly enforce this Prepayment Agreement and the Promissory Note(s) against the Exporter or the Guarantor.

Section 19.     Indemnification

The Exporter, the Guarantor and the Paying Agent agree to indemnify and hold harmless the Administrative Agent, the Lenders and its officers, directors, employees, agents and representatives (together, the “Indemnified Parties”) from and against any and all liabilities, losses, damages, penalties, actions, judgements, suits, costs, expenses (including the reasonable documented fees and expenses of external counsels) or disbursements of any kind whatsoever (together, “Liabilities”) which may at any time (including following the repayment of the Advance) be imposed upon, incurred by or asserted against the Indemnified Parties as a result of, relating to, or arising out of any of the Advance Document or any document contemplated by or referred to herein or the transactions contemplated hereby or any action taken or omitted by the Indemnified Parties under or in connection with any of the foregoing and that are duly evidenced by the Lenders, provided, however, that the Liabilities do not result directly from the gross negligence or wilful misconduct of the relevant Indemnified Party.

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Section 20.     Miscellaneous

(a)

Any amendment or waiver of any provision of this Prepayment Agreement, or consent to any departure by the parties herefrom must be in writing and signed by the Exporter, the Paying Agent, the Guarantor, the Administrative Agent, the Lenders and the Administrative Agent. Such waiver or consent shall be effective only in the specific instance for which it is stipulated. Any failure or delay by the parties in exercising their rights hereunder shall not be deemed a waiver and shall not preclude the parties from the exercise of their rights.

(b)

All notices, designations, consents, offers, acceptances, or any other communications provided pursuant to this Prepayment Agreement shall be given in writing and sent, to the Administrative Agent, the Paying Agent, the Guarantor and the Exporter at the following addresses or to such other addresses as may be designated in writing from time to time by the parties:

If to the Lead Arranger:

BANCO SANTANDER CENTRAL HISPANO, S.A.
Attn: Olga Valverde
Address: 100 Ludgate Hill
London EC4M 7NJ England
Tel: 00-44-207-332-7747
Fax: 00-44-207-332-7839
e-mail: ovalverde.londres@sinvest.es

If to each of the Lenders:
To such Lender’s address as set forth in such Lender’s administrative details specified on Schedule 2 attached hereto together with its successors and permitted assigns pursuant to the Section 18 above.

If to the Administrative Agent:
BANCO SANTANDER CENTRAL HISPANO S.A.
Attn: Jim Inches
Address: 100 Ludgate Hill
London EC4M 7NJ England
Tel: 00-44-207-3327781
Fax: 00-44-207-3327421
e-mail: jinches.londres@sinvest.es

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If to the Exporter:
Attn: Mr. J. J. Trigo
Address: 1357 Alameda Santos
Sao Paulo, Brazil
Tel.: +55-11-3269-4165
Fax: +55-11-3269-4068
e-mail: trigojj@vcp.com.br

If to the Guarantor:
Attn: Mr. J. J. Trigo
Address: 1357 Alameda Santos
Sao Paulo, Brazil
Tel.: +55-11-3269-4165
Fax:   +55-11-3269-4068
e-mail: trigojj@vcp.com.br

If to the Paying Agent:
Attn: Mr. J. J. Trigo
Address: Kaya W.F.G. (Jambi)
Mensing, 14, Curaçao
Tel.: +55-11-3269-4165
Fax: +55-11-3269-4068
e-mail: trigojj@vcp.com.br

All such notices and communications shall be deemed given:  (i) upon delivery if delivered by hand to the addresses provided in this Section 20(b); (ii) upon receipt if delivered by facsimile transmission to the number provided herein; or (iii) five (5) Banking Days after the date of deposit in the courier agency if delivered by reputable courier, return receipt requested if available, postage prepaid.

(c)	This Prepayment Agreement sets forth the entire understanding of the parties with respect to the subject matter hereof and supersedes all prior agreements and understandings between the parties with respect thereto.
(d)	The various provisions of this Prepayment Agreement are severable from each other. In the event that any provision in this Prepayment Agreement shall be held invalid or unenforceable by a court of competent jurisdiction, the remainder of this Prepayment Agreement shall be fully effective, operative and enforceable.
(e)	No party hereto shall be liable for any delay in performance of any obligation hereunder by reason of any act or circumstance beyond the control of such Party due to the occurrence of a force majeure.
(f)	The obligations of the Exporter, Paying Agent and the Guarantor under Sections 7, 19, and 21 hereof shall survive the repayment in full of the Advance.
(g)	This Prepayment Agreement may be executed in any number of counterparts, and this has the same effect as if the signatures on the counterparts were on a single copy of this Agreement.

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Section 21.     Guarantee

(a)	In consideration of the Lenders entering into the Prepayment Agreement with the Exporter (or for other valuable consideration receipt of which is hereby acknowledged), the Guarantor, as primary obligor unconditionally and irrevocably, jointly and severally, (i) guarantees the Lenders, on first written demand, by way of continuing security, the payment when due of all amounts payable by the Exporter or the Paying Agent under the Prepayment Agreement and other Advance Document and (ii) agrees that if and each time that the Exporter or the Paying Agent shall fail to make any payments as and when the same become due under the Advance Document, the Guarantor will on first written demand (without requiring the Lenders first to take steps against the Exporter or the Paying Agent or any other person) pay to the Lenders such amounts (as to which the certificate of the Lenders shall in the absence of manifest error be conclusive) in the currency in which such amounts are payable by the Exporter or the Paying Agent, free of all tax, charges or deductions whatsoever together with Interest thereon from the date of demand until the date of payment at the rate specified in the Prepayment Agreement. If deductions must be made by law then the Guarantor will pay such additional amounts as may be necessary to ensure that the Lenders receive the full amount provided for.
(b)	The obligations of the Guarantor herein contained shall be in addition to and independent of every other security, if any, that the Lenders may at any time hold in respect of any obligation of the Obligors under the Prepayment Agreement.
(c)	The obligations of the Guarantor hereunder constitute continuing obligations notwithstanding any intermediate payment or satisfaction of any part of any sum or sums of money owed by the Obligors under the Advance Document and shall not be affected by any matter that might operate to affect such obligations including without limitation (i) any time or indulgence granted to or composition with the Obligors or any other person, (ii) the taking, variation, renewal or release of, or neglect to perfect or enforce, any rights, remedies or securities against the Obligors or any other person or (iii) any unenforceability or invalidity of the Advance Document or any enforceability or invalidity of any obligations of the Obligors so that this Guarantee shall be construed as if there were no such unenforceability or invalidity.
(d)	The Guarantor agrees as a primary obligation to indemnify the Lenders from time to time on demand from and against any loss incurred by the Lenders as a result of any of the obligations of the Obligors under the Advance Document being or becoming void, voidable, unenforceable or ineffective for any reason whatsoever, whether or not known to the Lenders, the amount of such loss being the amount which the Lenders would otherwise had been entitled to recover from the Obligors. The Guarantor will reimburse the Lenders for all costs incurred by the Lenders in connection with the enforcement of this Guarantee.
(e)	The Guarantor warrants that this Guarantee is its legally binding obligation enforceable in accordance with its terms and that all necessary governmental consents, authorisations and all other legal requirements for the giving and implementation of this Guarantee have been obtained.
(f)	Until all amounts which may be or become payable under the Advance Document have been irrevocably paid in full, the Guarantor shall not by virtue of this Guarantee be subrogated to any rights of the Lenders or claim in competition with the Lenders against the Obligors or any other person.
(g)	This Guarantee will remain in full force and effect until full discharge of the obligations of the Exporter to the Lenders.

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(h)	The rights of the Administrative Agent (for the benefit of each creditor hereunder or the Promissory Note) shall not be affected, nor shall the Guarantor be exonerated or discharged from its liabilities assumed hereunder by time being given to the Exporter or by any other indulgence or concession to the Exporter granted by the Administrative Agent (for the benefit of each creditor hereunder or the Promissory Note), by the taking, holding, varying, non-enforcement or release by the Administrative Agent (for the benefit of each creditor hereunder or under the Promissory Note) of any rights or remedies against the Exporter or other person or other guaranty or security for any of the sums payment of which is guaranteed hereunder or under the Promissory Note) or by any other indulgence or concession to the Exporter.
(i)	Without conflict of applicable law, the Guarantor waives any and all rights (i) of preference as provided in Article 366, 827 and 838 of the Brazilian Civil Code and (ii) to object to be exonerated or discharged from its liabilities assumed hereunder. [The Guarantor is VCP Exportadora, a Brazilian company and this clause is present in the USD 102MM deal]
(j)	If the Lenders receive an amount in respect of the Guarantor’s liability under this Guarantee or if that liability is converted into a claim, proof, judgement or order in a currency other than the currency (the “Contractual Currency”) in which the amount is expressed to be payable under Section 5 above:
	(i)	The Guarantor shall indemnify the Lenders as an independent obligation against any loss or liability arising as a result of the conversion;
	(ii)	If the amount received by the Lenders, when converted into the Contractual Currency at a market rate in the usual course of its business, is less than the amount owed in the Contractual Currency, the Guarantor shall forthwith on demand pay to the Lenders an amount in the Contractual Currency equal to the deficient amount; and
	(iii)	The Guarantor shall pay to the Lenders on demand any exchange costs and taxes payable and reasonably incurred in connection with any such conversion.
(k)	The Guarantor irrevocably authorises the Lenders to apply any credit balance to which the Guarantor is entitled on any account of the Guarantor with the Lenders in satisfaction of any sum due and payable from the Guarantor to the Lenders hereunder but unpaid; for this purpose, the Lenders are authorised to purchase with the moneys standing to the credit of any such account such other currencies as may be necessary to effect such application.

Section 22.     Assignment of Export Agreement

In consideration of the Lenders entering into this Prepayment Agreement:

(a) The Exporter hereby assigns, as of each date that is 60 (sixty) days prior to each date on which an Instalment, Interest and all amounts due herein, are due and payable pursuant to the terms and conditions of this Prepayment Agreement, with full title guarantee and as a continuing security for the payment of its obligations hereunder (the “Secured Obligation”), an absolute security interest (“Security Interest”) in a portion of the Exporter’s rights, interest and remedies with respect to any and all of the Undertakings (including, but not limited to all of the Exporter’s rights to receive payment from Importers, including (but not limited to) all of the Exporter’s future acquired rights to payment under the Export Agreements whether in the form of a letter of credit or right to title to the Goods or otherwise) which portion shall have a value not less than the value of such Instalment, Interest and all amounts due herein.

29

	The Exporter further agrees to execute and deliver to the Administrative Agent any and all instruments and to issue and deliver such notices and procure such consents and acknowledgements as shall be necessary or as the Administrative Agent may deem necessary to perfect the assignment of the Export Agreement herein contained.
(b)	The Exporter will fully perform all of its material obligations under the Export Agreements, and will enforce all of its rights and remedies thereunder as it deems appropriate in its reasonable business judgement; provided, however, that the Exporter will not take any action or fail to take any action which would result in a waiver or other loss of any material rights or remedy of the Exporter thereunder.
(c)	The Exporter will not, without the Administrative Agent’s prior written consent (which consent shall not be unreasonable withheld), modify, amend, supplement, compromise, satisfy, release or discharge the Export Agreements, any person liable directly or indirectly with respect thereto, or any agreement relating to the Export Agreements.
(d)	The Exporter will at all times remain liable to observe and perform all of its duties and obligations under the Export Agreements, and the Lenders’ exercise of any of its rights with respect to this Prepayment Agreement will not release the Exporter from any of such duties or obligations. The Lenders are not obligated to (I) perform or fulfil any of the Exporter’s duties or obligations under the Export Agreements (II) make any payment under the Export Agreements, (III) make any inquiry as to the sufficiency of any payment of property received by it under the Export Agreements or the sufficiency of performance by any party under the Export Agreements, or (IV) present or file any claim, or take any action to collect or enforce any performance or payment of any amounts, or delivery of any property.
(e)	Effective from and after the occurrence of any Event of Default and during the continuation thereof, the Exporter hereby irrevocably authorises and empowers the Administrative Agent, on behalf of the Lenders, at the Administrative Agent’s sole discretion, to assert, either directly or on behalf of the Exporter any claims the Exporter may then or thereafter have against Importer with respect to the Undertakings that are subject to this Prepayment Agreement, in such a manner, as the Administrative Agent may deem proper, to receive and collect any and all damages, awards and other monies resulting therefrom and to apply the proceeds therefrom on account of the Secured Obligations, whether or not then due, in accordance with the terms of the Prepayment Agreement. The Exporter hereby authorises the Administrative Agent, on behalf of the Lenders to collect all amounts due to the Exporter under and by virtue of the Export Agreements including any future acquired rights to payment thereunder.
(f)	Power-of-Attorney: To facilitate the foregoing, the Exporter hereby irrevocably authorises and empowers the Administrative Agent as its true and lawful attorney at any time after the occurrence and during the continuance of an Event of Default to (a) either directly or on behalf of the Exporter, assert any claims and demands and enforce any rights and remedies as the Exporter may have, from time to time, with respect to the Undertakings that shall have been assigned to the Lenders pursuant to Section 22(a), as the Administrative Agent, and the Lenders may deem proper and (b) receive and collect any and all proceeds, awards or amounts due to the Exporter in respect of any indemnification claims under the Secured Obligations in such manner as the Exporter’s true and lawful attorney to assert, at any time after the occurrence and during the continuance of an Event of Default, any claims and demands or enforce any rights and remedies and collect such proceeds, awards and amounts and to apply such monies to the Secured Obligations in such manner as the Administrative Agent, and the Majority Lenders shall elect. This power of attorney is coupled with an interest and is irrevocable by the Exporter.

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(g) This Prepayment Agreement creates a continuing security interest in the Undertakings and all representations, warranties, and agreements in each case, as specified in Section 22(a), and such security interest shall terminate only upon the full and irrevocable payment of all amounts owing to the Lenders under this Prepayment Agreement; provided that the Lenders have no other commitment to extend credit or make advance to or for the account of the Exporter.  At such time, the Lenders and the Administrative Agent will, at the request of the Exporter, reassign and redeliver to the Exporter all of its rights hereunder which have not been sold, which reassignment and redelivery will be without warranty by or recourse to the Lenders, except as to the absence of any prior assignments by the Lenders of its interest in the Undertakings, and will be at the expense of the Exporter.

IN WITNESS WHEREOF, each of the Exporter, the Paying Agent, the Guarantor, the Administrative Agent and the Lenders have executed this Prepayment Agreement in 3 originals in English as of the date first above written herein.

[   ]

BANCO SANTANDER CENTRAL HISPANO, S.A., LONDON BRANCH
As Lead Arranger
By:	By:
Name:	Name:
Title:	Title:
BANCO SANTANDER CENTRAL HISPANO, S.A., LONDON BRANCH as Administrative Agent
By:	By:
Name:	Name:
Title:	Title:
VOTORANTIM CELULOSE E PAPEL S.A., as Exporter
By:	By:
Name:	Name:
Title:	Title:

31

VCP EXPORTADORA E PARTICIPAÇÕES LTDA., as Guarantor
By:	By:
Name:	Name:
Title:	Title:
VCP TRADING N.V., as Paying Agent
By:	By:
Name:	Name:
Title:	Title:
[   ]
As Lender
By:	By:
Name:	Name:
Title:	Title:
BANCO SANTANDER CENTRAL HISPANO, S.A., LONDON BRANCH
As Lender
By:	By:
Name:	Name:
Title:	Title:
Witnesses:
1.	2.
Name:	Name:

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SCHEDULE 1
INITIAL IMPORTERS

IMPORTER	COUNTRY
AHLSTROM CORP.	GERMANY / FRANCE
ALLCART S.R.L.	ITALY
ANTALIS S.N.C.	FRANCE
ARJO WIGGINS LIMITED	FRANCE
FEDRIGONI CARTIERE SPA	ITALY
GEORGIA-PACIFIC CORP.	USA / FRANCE / NETHERLANDS / ITALY / GRECE / TURQUEY / UK
GOULD PAPER CORPORATION	USA
IMPECO S.L.	SPAIN
ITOCHU CORPORATION	KOREA / JAPAN
J. MC’NAUGHTON PAPER GROUP	UK
KANZAN GMBH	GERMANY
KARTOGROUP DEUTSCHLAND GMBH	GERMANY
KARTOGROUP SPA	ITALY
LINDENMEYR MUNROE	USA
MARUBENI CORPORATION	JAPAN
M-REAL CORPORATION	SWITZERLAND
PAPETERIES DE CLAIREFONTAINE	FRANCE
PKS (KOEHLER AG)	GERMANY
PKS (SCHEUFELEN)	GERMANY
RADECE PAPIR	SLOVENIA
SAPPI EUROPE S.A.	AUSTRIA / UK
SCA HYGIENE PRODUCTS	BELGIUM / NETHERLANDS / FRANCE / ITALY / UK
TRENT PAPER SALES	UK
UPM-KYMMENE (NORDLAND PAPIER AG)	GERMANY
UPM-KYMMENE (PAPETERIES DE DOCELLES)	FRANCE

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SCHEDULE 2
LENDERS’COMMITMENTS

Lender	Commitment
BANCO SANTANDER CENTRAL HISPANO, LONDON BRANCH	US$	100,000,000.00
TOTAL	US$	100,000,000.00

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SCHEDULE 3
PAYMENT DATES

Interest Period	Start Date (Months from Disbursement Date)	Maturity Date (Months from Disbursement Date)	Principal Due at Maturity Date (% of Advance)
1	Disbursement Date of the Advance	6	-
2	6	12	-
3	12	18	-
4	18	24	-
5	24	30	-
6	30	36	-
7	36	42	-
8	42	48	-
9	48	54	-
10	54	60	4%
11	60	61	4%
12	61	62	4%
13	62	63	4%
14	63	64	4%
15	64	65	4%
16	65	66	4%
17	66	67	4%
18	67	68	4%
19	68	69	4%
20	69	70	4%
21	70	71	4%
22	71	72	4%
23	72	73	4%
24	73	74	4%
25	74	75	4%
26	75	76	4%
27	76	77	4%
28	77	78	4%
29	78	79	4%
30	79	80	4%
31	80	81	4%
32	81	82	4%
33	82	83	4%
34	83	Final Maturity Date.	4%

35

PROMISSORY NOTE

Amount in US$ 100,000,000
Place: São Paulo, Brazil.
Date: July 26, 2005

FOR VALUE RECEIVED, VOTORANTIM CELULOSE E PAPEL S.A., a company duly organised and existing under the laws of the Federative Republic of Brazil, with its head office located at 1357 Alameda Santos, 6th floor, São Paulo, Brazil, (the “Exporter”) hereby promises to pay to BANCO SANTANDER CENTRAL HISPANO S.A., LONDON BRANCH, as Administrative Agent, on behalf of the Lenders, the principal sum of US$ 100,000,000.oo [One hundred million United States Dollars] (the “Advance”), on the dates as specified in the Export Prepayment Agreement (as defined below) until (the “Final Maturity Date”) or on such earlier date as may be required by the Lender  in accordance with the terms of the Export Prepayment Agreement (as defined below). The Exporter also promises to pay interest on the unpaid principal amount hereof from the date hereof until such principal amount is paid in full, at such interest rates, and payable at such times, as are specified in the Export Prepayment Agreement.

Both principal and interest hereunder are payable in lawful money of the United States of America, in same day funds, to the Administrative Agent, at its account at Bank of New York (Swift IRVTUS3N), N° 890-0429-399, ABA 021000018 [   ], free and clear of all deduction of any present or future taxes, levies, imposts, charges, withholdings, penalties, fines, additions to tax and interest, imposed or levied in Brazil or any other jurisdictions from which any payment hereunder is remitted, or any political subdivision or taxing authority thereof, except taxes imposed on the Lenders’ income by the jurisdiction under which the Lenders are incorporated.

The Exporter hereby waives, to the fullest extent permitted by applicable law, presentment, demand, protest and all notices of any kind in connection with this Promissory Note. The failure of the Lenders to exercise any of their rights hereunder in any particular instance shall not constitute a waiver thereof in that instance or any subsequent instance.

This promissory note is the Promissory Note referred to in that Export Prepayment Agreement, dated as of [  ] (the “Export Prepayment Agreement”), among the Exporter, the Guarantor, the Paying Agent, the Administrative Agent and the Lenders, which among other things, contains provisions for the acceleration of the maturity hereof upon the happening of certain events therein specified.

This Promissory Note shall be governed by, and construed in accordance with, the English law, without giving effect to its conflict of law principles.

VOTORANTIM CELULOSE E PAPEL S.A.
By:	By:
Name:	Name:
Title:	Title:
Per Aval:
VCP EXPORTADORA E PARTICIPAÇÕES LTDA.
By:	By:
Name:	Name:
Title:	Title:

36

Exhibit B

DISBURSEMENT REQUEST

July 22, 2005

BANCO SANTANDER CENTRAL HISPANO S.A., LONDON BRANCH, as Administrative Agent
100 Ludgate Hill, London EC4M 7NJ, England

Ladies and Gentlemen:

We refer to the Export Prepayment Agreement dated as of July 22, 2005 (the “Prepayment Agreement”) between Votorantim Celulose e Papel S.A., VCP Exportadora e Participações Ltda., VCP Trading N.V., the Administrative Agent, and the Lenders. Terms defined in the Prepayment Agreement shall have the same meaning in this Disbursement Request.

Pursuant to Section 3 of the Prepayment Agreement, we hereby request the Lenders to make an advance to us in the amount of US$ 100,000,000.oo [One hundred million United States Dollars] (the “Advance Amount”) on [July       , 2005] (the “Disbursement Date”) for the purpose of financing future exports to be made by the Exporter to the Importers in accordance with the Prepayment Agreement.

Not later than 2 (two) Banking Days prior to the Disbursement Date, we shall give you in writing the credit instructions for the Advance Amount.

We confirm that, on the date hereof, the representations set out in Section 9 of the Prepayment Agreement are true and correct and that no Event of Default has occurred and is continuing.

Enclosed are the documents required pursuant to Section 8 of the Prepayment Agreement.

Sincerely yours,

VOTORANTIM CELULOSE E PAPEL S.A.
By:	By:
Name:	Name:
Title:	Title:
Acknowledged and agreed by BANCO SANTANDER CENTRAL HISPANO S.A., LONDON BRANCH, as the as Administrative Agent
By:	By:
Name:	Name:
Title:	Title:

37

EX-12.1

EXHIBIT 12.1

CERTIFICATION

I, Jose Luciano Duarte Penido, certify that:
1.	I have reviewed this annual report on Form 20-F of Votorantim Celulose e Papel S.A. (the “company”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(c)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:   June 29, 2006
By:	/s/ Jose Luciano Duarte Penido
Name:	Jose Luciano Duarte Penido
Title:	Chief Executive Officer

EX-12.2

EXHIBIT 12.2

CERTIFICATION

I, Valdir Roque, certify that:
1.	I have reviewed this annual report on Form 20-F of Votorantim Celulose e Papel S.A. (the “company”);
2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the company as of, and for, the periods presented in this report;
4.	The company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the company and have:
	(a)	Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
	(b)	Evaluated the effectiveness of the company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
	(c)	Disclosed in this report any change in the company’s internal control over financial reporting that occurred during the period covered by the annual report that has materially affected, or is reasonably likely to materially affect, the company’s internal control over financial reporting; and
5.	The company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the company’s auditors and the audit committee of the company’s board of directors (or persons performing the equivalent functions):
	(a)	All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the company’s ability to record, process, summarize and report financial information; and
	(b)	Any fraud, whether or not material, that involves management or other employees who have a significant role in the company’s internal control over financial reporting.

Date:   June 29, 2006
By:	/s/ Valdir Roque
Name:	Valdir Roque
Title:	Chief Financial Officer

EX-13.1

EXHIBIT 13.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

          In connection with the Annual Report of Votorantim Celulose e Papel S.A. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2005, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Jose Luciano Duarte Penido, Chief Executive Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

                    (i)     the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and

                    (ii)    the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Jose Luciano Duarte Penido
Name:	Jose Luciano Duarte Penido
Title:	Chief Executive Officer
Date: June 29, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

EX-13.2

EXHIBIT 13.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE U.S. SARBANES-OXLEY ACT OF 2002

          In connection with the Annual Report of Votorantim Celulose e Papel S.A. (the “Company”) on Form 20-F for the fiscal year ended December 31, 2005, as filed with the U.S. Securities and Exchange Commission on the date hereof (the “Report”), I, Valdir Roque, Chief Financial Officer, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to section 906 of the U.S. Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

                    (i)     the Report fully complies with the requirements of section 13(a) or 15(d) of the U.S. Securities Exchange Act of 1934; and

                    (ii)    the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

By:	/s/ Valdir Roque
Name:	Valdir Roque
Title:	Chief Financial Officer
Date:  June 29, 2006

A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement required by Section 906, has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.