Risk Factors

a) Risk factors that may influence investment decisions related to Company securities.

The market prices for our the Company’s products are highly influenced by the international market prices, which the Company cannot control.

Pulp markets are typically cyclical. The prices the Company charges for its pulp products are determined by the international market prices, the balance between supply and demand and the prevailing global economic conditions. These prices may be further influenced by fluctuations in foreign exchange rates, which affect the value of the currencies of major pulp producing countries and consumer markets; and by fluctuations in the inventories of producers and consumers based on differing price forecasts, by the business strategies adopted by competitor producers and the availability of products to replace our products at more competitive prices. The Company cannot control any of these factors, which can adversely affect the demand for pulp and, consequently, affect the operating margins, profitability and return on invested capital.

Additionally, while the prices for our paper products are relatively more stable than the prices of pulp, they are nonetheless influenced by supply and demand in the regional markets in which we operate. Therefore, the prices we charge for paper products may also fluctuate due to multiple factors, among which, fluctuations in pulp prices and the specific characteristics of the markets in which we operate.

The Company cannot predict whether pulp and paper prices will remain at current levels in the future or assure there will be sufficient demand for its products, in which cases the Company’s ability to operate its production facilities in a cost effective manner may be negatively impacted.

The Company is highly dependent on our planted forest areas for the supply of wood, which is essential for our production processes. Any damage to our forest areas may adversely affect the Company’s results of operations.

In 2009, approximately 80.0% of the wood used in the Company’s production processes was supplied by its own forestry operations, which include planted forest areas located in close proximity to its production facilities. The wood market in Brazil is limited, as most pulp and paper producers use wood extracted from their own planted forests to meet their wood requirements. The Company’s planted forests are subject to natural threats, such as drought, fire, pests and diseases, any of which may reduce its supply of wood or increase the price of wood it acquires. As the Company does not carry insurance covering these natural threats, we would not be reimbursed in the event of losses. Moreover, the planted forest areas are also subject to other threats, such as loss of possession due to social unrest. Therefore, any actual damage to our own planted forests could adversely affect the Company’s results of operations.

The Company’s insurance coverage may be insufficient to cover our losses, particular in case of damage to the planted forests.

Our insurance coverage may be insufficient to cover losses to our mills caused by fire, general third-party liability for accidents and operational risks, as well as for international and domestic transportation. In addition, the Company does not maintain insurance coverage against fire, pests, disease and other risks to its planted forests. If it incures losses or other liabilities that are not covered by insurance or that exceed the limits of the insurance coverage could result in significant and unexpected additional costs. Moreover, the terms and conditions for the renewal of the insurance policies may change in the future depending upon market circumstances and the type and amount of risks insured.

The Company’s future growth may require additional funding, which may or may not be available on acceptable terms or at all.

The Company operates a capital intensive business, which means it faces significant working capital requirements. As a result, the Company may need additional funding to finance its future growth and expansion, for which it may resort to equity or debt offerings, or incur additional indebtedness. However, the Company cannot give assurances that either of these sources of financing will be available in the future. Difficulties to access additional capital on acceptable terms as and when it is needed, could adversely affect othe Company’s business, financial condition and results or operations, and the market price of its shares and other securities.

The Company enjoys certain tax benefits that may be suspended, cancelled or not renewed, any of which may adversely affect its net cash generation and results of operations.

The Mucuri Unit, which has two production lines, enjoys tax benefits that result in a 75.0% reduction in income tax charged on profits derived from its activities. The tax benefits related to the first production line at othe Mucuri Unit will expire in 2011 with respect to its pulp production and in 2012 with respect to its paper production. The tax benefits related to the second production line of this unit will expire in 2018. Moreover, the Company is currently allowed to accelerate the depreciation of assets acquired for the Mucuri Unit after January 1, 2006, which results in deferred payment of income tax for the useful life of the equipment. This tax incentive is available because this project is located in an underdeveloped region under the jurisdictions of the Superintendence for Development of the Northeastern Region (Superintendência de Desenvolvimento do Nordeste), or SUDENE, and the Superintendence for Development of the Amazon Region (Superintendência de Desenvolvimento da Amazônia), or SUDAM.

If the Company is unable to fulfill certain obligations undertaken in connection with these tax benefits, the incentives could be suspended, cancelled or not renewed, and it would be required to pay any unpaid income tax plus related charges and penalties, which would adversely affect the Company’s operations, financial condition and results of operations. Additionally, the Company cannot assure that it will be able to renew these tax benefits when they expire, or to obtain additional tax benefits under favorable conditions. If the current tax benefits are not renewed, this could materially and adversely affect the Company’s net cash generation and results of operations.

Adverse conditions may subject the Company’s growth/ expansion plans to delays and/or cost overruns.

The Company’s strategic plans call for actions to increase market share and improve competitiveness through greater economies of scale. Expansion projects are subject to risks and uncertainties, including engineering, construction and regulatory risks, and significant other challenges that may delay or prevent the successful implementation or operation of these projects or significantly increase their costs. Moreover, new or improved facilities may not operate at the projected capacity or may cost more than expected to operate. In addition, demand for the additional production capacity may fall short of the Company’s expectations, and the Company may be unable to sell the additional output at competitive prices.

The Company’s ability to complete any expansion project successfully, on time and at the expected rate of return is also subject, among other factors, to financing risks over which the Company does not have control and the possibility of having to begin servicing debt incurred to finance the project prior to the date on which the project begins to generate cash flows. If the Company is required to invest more than initially estimated, or fail to meet project deadlines or are unable to sell the additional production as expected, the Company’s business, cash position and results of operations could be adversely affected.

The Company’s current and noncurrent loans and financing (including debentures) require that a significant portion of its cash flow be used for the payment of principal and interest related to this debt. .

As of December 31, 2009, the total current and noncurrent loans and financing (including debentures) was R$6,499 million and the Net Debt to EBITDA ratio for the last twelve months was 3.9x. As of December 31, 2008, the total current and noncurrent loans and financing (including debentures) was R$7,635.0 million and the Net Debt to EBITDA ratio was 3.7x. The level of indebtedness has increased significantly over the last few years, due in large part to long-term financing incurred to fund the construction of line 2 of the Mucuri Unit. The indebtedness level could require the use of available cash flow from operations to pay principal and interest on such indebtedness, rather than to distribute dividends. Additionally, it may also reduce the Company’s ability to raise additional funds for working capital and to finance its capital expenditures.

b) Risks relating to the controlling shareholders or controlling group

The controlling shareholders have the power, among other things, to elect a majority of the members of the Board of Directors and to decide any matters requiring shareholder approval, including related-party transactions, corporate reorganizations and dispositions, and the payment of any future dividends (giving regard to mandatory distributions prescribed under Brazilian Corporate Law). The Company has entered into, and intends to continue to enter into, arm's-length commercial and financial transactions with the controlling shareholders and related companies. Commercial and financial transactions between related parties and the Company may result in conflicts of interest. Related party transactions could potentially lead to conflicts of interest.

c) Risks relating to the shareholders

The conversion into shares of debentures issued by the Company, or future issues of new shares or other convertible securities that the Company may implement to finance its future growth, could result in dilution for existing shareholders.

On December 1, 2005, the Company issued convertible debentures that comprises two series. Both the first and second series of debentures mature on December 1, 2012. The debentures in either series may be converted into shares at any time prior to maturity, at the holder's election, upon paying the conversion price, except that first series debentures are convertible into common shares, whereas second series debentures are convertible into class A preferred shares issued by the Company. In any event, shares issued by the Company upon conversion will have the same features and enjoy the same rights and prerogatives assigned under the bylaws to the type of shares being issued. For additional information on the issuance of convertible debentures, see subsection 18.5 of this reference form.

Moreover, in the event the Company needs additional capital to finance its future growth and expansion, it may resort to public or private equity or convertible securities issuances. Under the bylaws and article 172 of Brazilian Corporate Law, if the Company elects to conduct an offering of shares or convertible securities, it is permitted to do so without extending preemptive rights to existing shareholders.

In any event, conversions of debentures into shares, or future issuances of new shares or other convertible securities that may be implemented to finance the Company’s future growth, could result in some degree of dilution for existing shareholders.

The shareholders may not receive any dividends or interest on shareholders’ equity.

The by-laws require the Company to pay out as a mandatory dividend at least 25% of the annual net income for any particular year, as adjusted pursuant to Brazilian Corporate Law. The mandatory dividend may be paid in the form of dividends or interest on shareholders’ equity, provided payments by way of interest on shareholders’ equity are subject to certain legally prescribed deductibility thresholds. Interim dividends may also be declared from retained earnings or profit reserve accounts, based on the most recent yearly or half-yearly financial statements. Moreover, subject to certain limitations, it is permitted to declare interim dividends or interest on shareholders’ equity based on quarterly or other interim financial reports. In any event, payments of interim dividends or interest on shareholders’ equity may be set off against the amount of mandatory dividends distributable to shareholders in any particular year.

However, while under Brazilian Corporate Law the Company is required to pay the mandatory dividend each year, this may be suspended, and net income retained, if management reports to the annual shareholders’ meeting that the distribution would be inadvisable in view of the Company’s financial condition.

Volatility and lack of liquidity in the stock market could hamper the shareholders’ ability to sell their shares at the price and time they may wish to do so.

The Brazilian securities market is substantially smaller, less liquid, more volatile and more concentrated than major international securities markets For example, as of January 31, 2010, the top ten issuers by market capitalization represented approximately 50.4% of the aggregate market capitalization of issuers listed on the stock exchange operated by BM&FBOVESPA. These market characteristics may substantially limit the ability of shareholders to sell the shares at the price and time at which they wish to sell them, which may negatively affect the market price of the Company’s shares.

d) Risks relating to subsidiaries and affiliates

Not applicable.

e) Risks relating to suppliers

The Company depends on third-parties to supply part of the wood it needs to operate and any lack of wood or costs increases could adversely affect its business.

Wood is the principal raw material used for the production of pulp and paper products. The Company currently acquires from third party producers approximately 20% of the wood used in its production lines. Generally, the Company enters into medium- and long-term contracts with these suppliers, which range between seven and 14 years. Any interruption in wood supply representing a material reduction in wood supplies available to the Company, could adversely affect the business, financial condition and results of operations. .

Adverse changes in the credit risk of customers and suppliers, in particular suppliers to whom the Company makes advances and customers to whom it sells on credit, could affect its financial condition and results of operations.

In the markets in which the Company operates, it is typical, and often a condition of the competitive environment, for pulp and paper producers to make advances to suppliers and to provide financing for customers. When advances are made to suppliers or sales on credit to customers, or in any way credit is extended to suppliers or customers, the Company undertakes the risk that any of them may default. Therefore, changes in the macroeconomic environment, market conditions or the particular financial conditions of suppliers and customers could negatively affect their ability to make payments to the Company, which could negatively affect its working capital and cash flow, thus affecting the value of its assets.

In addition, these practices also exposes the Company to risk of a mismatch between the rates at which it obtains financing from third parties and the rates its charges for extending credit to suppliers or customers, and the Company cannot give assurances that it will always be able to match rates when extending this type of credit. Moreover, significant mismatches or adverse changes in the credit risk of customers and suppliers could negatively impact the Company’s business and adversely affect its results of operations.

The Company depends on few suppliers for certain raw materials, such as fuel oil, caustic soda, mechanical pulp and gas, so that unavailability of such materials or significant price increases could adversely affect the Company.

There are few suppliers of certain other raw materials that are essential in the production of pulp and paper, including fuel oil, caustic soda, gas and mechanical pulp. The Company establishes medium-term arrangements with these suppliers to ensure the supply flow. However, significant price increases or reduction in the supply of any of these raw materials could affect the margins, mix or availability of products offered by the Company, any of which would adversely affect the results of operations.

f) Risks relating to customers

See the second risk factor under the preceding item “e.”

g) Risks relating to the industry

The Company faces significant competition in some of its business lines, which could adversely affect its market share, profitability, and business.

The Company faces substantial competition in both the domestic and export markets from a large number of companies, some of which have great financial resources and low capital costs. In the domestic pulp and paper market, the Company faces competition from national products manufactured by Brazilian and foreign companies, as well as from international products. In the international pulp and paper markets, it competes with larger producers that, compared to the Company, have higher production and distribution capacity, a larger consumer base and great product variety.

Historically, imports of pulp have not competed with the Company in Brazil due to, among other factors, lower logistical and production costs of local producers. Paper imports have also not represented relevant competition for the Company, especially due to logistics ans import taxes on these products. However, the Real appreciation against the U.S. Dollar since the second half of 2008 has caused competition from imported paper products to increase. Therefore, if the Brazilian government were to decrease import taxes, or in the event of sustained appreciation of the Real against the U.S. Dollar, the Company could face greater competition domestically from international producers.

The pulp and paper markets are served by suppliers located in many countries. Many factors influence the Company’s competitive position, including the efficient operation of its mills, the availability, quality and cost of raw materials, such as wood, energy, water and chemicals, and labor, and the availability of several suppliers, often from different countries, to service the export markets for pulp and paper. If the Company is unable to remain competitive against other producers, its business would be adversely affected. In addition, downward pressure on the prices of pulp and paper by its competitors, which may be better equipped to sustain lower prices, may affect the Company’s profitability.

Volatility in the Brazilian Real exchange rate against the U.S. Dollar may adversely affect the Company’s revenues and the ability to service its debt.

Fluctuations in the Real exchange rate against the U.S. Dollar have affected and will continue to affect the consolidated financial condition and results of operations expressed in Brazilian Reais, in addition to affecting revenues, expenses and assets denominated in foreign currency. The export revenues are directly affected by exchange rate fluctuations, with direct impact on cash flow. While depreciation of the Brazilian Real against the U.S. Dollar increases such revenues when translated into Brazilian Reais, appreciation of the Real against the Dollar decreases the export revenues. Our local revenues are also influenced by fluctuations in exchange rates to the extent that imported products quoted in U.S. Dollars become more or less competitive in the domestic market depending on the exchange-rate direction.

Moreover, some of the costs and operating expenses are also affected by exchange rate fluctuations, including export insurance, freight costs and the cost of certain chemicals used as raw materials. Accordingly, these costs and operating expenses climb as a result of depreciation of the Brazilian Real against the U.S. Dollar, whereas declining in case the domestic currency appreciates relatively to the U.S. Dollar.

Consolidated balance sheet items denominated in, or indexed to a foreign currency, particularly current and noncurrent loans and financing (including bond financing), cash and cash equivalents as well as inventory sitting abroad, and accounts receivable in foreign currency, each is directly influenced by fluctuations in exchange rates, including at year end, when the Company prepares its financial statements.

Additionally, the Company may be adversely affected by depreciations of the Brazilian Real against the U.S. Dollar because a significant portion of the debt is denominated in U.S. Dollars. As of December 31, 2009, approximately 50% of the consolidated gross debt was denominated in U.S. Dollars. Volatility in the Brazilian Real exchange rate against the U.S. Dollar may adversely affect the indebtedness of the Company and its results of operations.

Periods of restricted market liquidity would negatively impact the cost and terms of raising capital in the market, or even make it not feasible, which could adversely affect the Company’s business and operations.

Brazilian pulp and paper producers in pursuit of gaining scale and competitive efficiency to operate in international markets have invested heavily in their operations in the last few years. This movement resulted in heightened funding requirements and a diversification of both local and foreign sources of funds and financing.

Against this backdrop, the Company relies on third-party financing to carry out its activities, in particular to fund its capital expenditures and working capital requirements and to finance its growth plans. Periods of restricted market liquidity, such as occurred in 2008 due to the global financial crisis, could drive up financing costs, shorten maturity, and make the availability of credit and other capital raising alternatives scarce, if at all available, which could result in the Company’s inability to reach out to the market to obtain the required financing for its activities and to honor its financial commitments, adversely impacting its results of operations.

h) Risks relating to the industry regulation

Changes in environmental regulation could implicate in higher expenditures by the Company.

The activities carried out by the Company are subject to extensive environmental regulation, including rules on gas emissions, disposal of liquid effluents and solid waste, reforestation and odor control. In Brazil, violations of the environmental regulation may result in fines, imprisonment, and dissolution of the company, among others.

The Company also depends on several governmental authorizations and licensing requirements for the development of certain activities. For example, the licensing process for a project deemed to have significant environmental impact requires a minimum investment in preservation areas in order to offset damage to the environment. The Company is also required to hold licenses for the operation of its mills, which are typically granted for renewable five-year periods. The licensing renewal process requires that the Company provides periodic information to the environmental authorities regarding compliance with certain environmental standards.

Therefore, changes in environmental laws or regulations, or in the interpretation thereof, or in the administrative procedures and policies adopted under current environmental rules could affect the Company’s business, financial condition and results of operations. Moreover, noncompliance could result in fines, license cancellation, shutdown of operations, liability for environmental remediation costs, which could be substantial, and in certain cases, criminal charges.

Portanto, mudanças nas referidas regras e leis e/ou na política ou nos procedimentos adotados nas leis atuais poderão afetar adversamente a Companhia. O descumprimento de uma determinada regra ou lei ambiental poderá implicar o pagamento de multa ou mesmo uma sanção criminal, bem como ocasionar a revogação da sua licença ou suspensão de determinadas atividades.

The Company cannot give assurances that the Brazilian government will not adopt more stringent and costlier environmental rules, or that the expenses with environmental regulation compliance will not be significant, or that it will be able to renew its operating licenses.

If the Company does not obtain approval from Brazilian antitrust authorities referring to the 50% acquisition of Conpacel Assets owned by Fibria, the Company’s business, financial condition, results of operations, cash generation and the market price of its shares may be adversely affected.

The Company, jointly with Fibria, submitted the acquisition of 50% of Conpacel Assets to the approval of the Brazilian antitrust authorities (see subsection 8.3 of this reference form). The Company awaits opinions from SEAE (Secretariat for Economic Monitoring of the Ministry of Finance) and SDE (Secretariat of Economic Law of the Ministry of Justice), and a final decision from CADE (Administrative Council for Economic Defense), which may approve this acquisition on an unrestricted basis, partially approve it or reject it. In the last two cases, the Company will be forced to make the adjustments necessary in its operations and results, which may adversely affect its businesses, financial condition and the market price of its shares.

i) Risks relating to operations in other countries

A decrease in Chinese demand could materially and adversely affect the Company’s revenue.

China has become an increasingly important market for the industry and the Company. It is the fastest growing market in the industry and represents a significant percentage of the Company’s sales. In 2009, sales to China represented 25.0% of the total sales and 35.0% of the Company’s overall export sales, as compared to 8.0% and 13.0%, respectively, in 2007. Consequently, unless the Company can promptly and successfully reallocate its export sales to other markets, a decrease in Chinese demand could have a material adverse impact on its export prices and volumes and, ultimately, on the Company’s financial condition and results of operations.

Company’s exports are subject to special risks that may adversely affect its business.

The Company exports to several different countries across the world. Therefore, it is subject to certain policy and regulatory risks, including foreign exchange controls, formal or informal trade barriers, and political incentives such as tariffs and quotas, or subsidies to local producers, and so forth. These barriers and other government safeguards in any country in which the Company sells its products could adversely impact its business, financial condition and results of operations. For example, in 2009, pulp producers in the United States received cash to use black liquor in their pulp production process for electricity generation, which distorted the production costs and artificially increased competition against the Company’s products in the U.S. Similar measures by governments in other countries to which the Company exports could adversely affect it.

Expectations that exposure to these risk factors will increase or decrease over time.

We systematically assess our exposure to risk factors and uncertainties that could adversely affect our business, financial condition and results of operations. This implies constantly monitoring of changes to the macroeconomic environment and market conditions within our industry, and analyzing developments and performance indicators. In addition, we closely monitor the activities of suppliers and the environment in which they operate with a view to taking action as may be required to prevent adverse effects on our production lines and our business as a whole. We further adopt a policy of continuing focus on financial discipline and conservative approach to cash management. We have not currently identified and do not expect to face any significant changes for better or worse to any of the risk factors discussed under subsection 4.1 above.

Arbitration, administrative and court proceedings (not protected by absolute privilege) in which the Company or a subsidiary participates as a party, and whose outcome could materially influence the Company business.

We and/or our subsidiaries are parties to the following court and administrative proceedings not protected by absolute privilege, which involve disputes related to tax, labor, civil or environmental law, whose outcome could have a material impact on us.

i) Tax cases

As of December 31, 2009, we were a party to 375 administrative and court tax cases, and had reserved for tax contingencies approximately R$92.0 million. None of these tax cases entails value on the action in excess of R$40.0 million. Moreover, based on the assessment of counsel and Management’s judgment as to cases in which a defeat has been deemed to be probable, we believe none of these contingent liabilities, if materialized, would substantially and adversely affect our business.

ii) Labor Cases

As of December 31, 2009, we were a party to 471 labor and occupational accident claims, and had provisioned contingencies of approximately R$11.8 million, based on counsel and management’s assessments of probable defeats. These labor-related cases generally relate to claims for overtime and differences in severance payments from former employees, in addition to claims from employees of outsourced providers seeking to hold us secondarily liable for payment they claim to be owed by their former employers, which are our outsourced providers. The tables below set forth detailed information on certain claims for payment of health hazard allowance and risk premium filed against us.

Case No. 1434/1997
Court of origin Lower labor court of the city of Teixeira de Freitas (state of Bahia)
Stage (degree of jurisdiction) Higher labor court
Filing date July 14, 1997
Litigating parties Bahia Workers’ Union of Pulp and Paper, Wood Paste, Paperboard and Cork Industries vs. Suzano Papel e Celulose S.A.
Amounts, assets or rights at risk R$30.5 million
Purpose and principal related facts Claimant seeks payment of health hazard allowance and risk premium for union members employed to work at the Mucuri Unit in Bahia.
Prospects for defeat Probable ( relative to part of the claim representing contingency of approximately R$10 million)
Remote (relative to the part representing contingency of approximately R$20 million)
Impact in case of defeat Disbursement of that portion of the claim which is held valid by the court, with impact on our payroll.
Provisioned contingency, if any R$10 million
 
Case No. 0047/2003
Court of origin 1st Lower labor court of Suzano (state of São Paulo)
Stage (degree of jurisdiction) Appellate labor court
Filing date August 10, 2005
Litigating parties Workers’ Union of Paper, Paperboard and Cork Industries of the cities of Mogi das Cruzes, Suzano, Poá, Ferraz de Vasconcelos and Region vs. Suzano Papel e Celulose S.A.
Amounts, assets or rights at risk R$7 million
Purpose and principal related facts Claimant seeks payment of health hazard allowance and risk premium for union members employed to work at our Rio Verde Unit.
Prospects for defeat Possible
Impact in case of defeat Disbursement of the amount claimed, as the court may hold valid, with impact on our payroll.
Provisioned contingency, if any R$2.1 million
Case No. 1020/2005
Court of origin 1st Lower labor court of Suzano (state of São Paulo)
Stage (degree of jurisdiction) Appellate labor court
Filing date August 10, 2005
Litigating parties Workers’ Union of Paper, Paperboard and Cork Industries of the cities of Mogi das Cruzes, Suzano, Poá, Ferraz de Vasconcelos and Region vs. Suzano Papel e Celulose S.A.
Amounts, assets or rights at risk R$2 million
Purpose and principal related facts Claimant seeks payment of health hazard allowance for union members employed to work at our Suzano facilities.
Prospects for defeat Possible
Impact in case of defeat Disbursement of the amount claimed, as the court may hold valid, with impact on our payroll.
Provisioned contingency, if any R$600 thousand.
Case No. 1943/2007
Court of origin Lower labor court of the city of Teixeira de Freitas (state of Bahia)
Stage (degree of jurisdiction) Lower court
Filing date November 12, 2007
Litigating parties Bahia Workers’ Union of Pulp and Paper, Wood Paste, Paperboard and Cork Industries vs. Suzano Papel e Celulose S.A.
Amounts, assets or rights at risk Estimate of value on the action still pending.
Purpose and principal related facts Claimant seeks payment of health hazard allowance and risk premium for union members employed to work at our Mucuri Unit in Bahia.
Prospects for defeat Possible
Impact in case of defeat Disbursement of the amount claimed, as the court may hold valid, with impact on our payroll.
Provisioned contingency, if any As of yet, no amount has been provisioned.

iii) Civil Law Cases

Court proceedings

As of December 31, 2009, we were a party to 432 civil law cases, and had provisioned contingencies of approximately R$2.2 million. Civil law cases refer mainly to indemnification claims, precautionary motions, real property possessory and adverse possession cases, and claims for revision of contractual provisions. The table below sets forth information on a case brought against us, whose outcome could have a material impact on our business:

Case No. 579.01.2007.001195-5
Court of origin Single lower court of the judicial district of São Luiz do Paraitinga (state of São Paulo)
Stage (degree of jurisdiction) Lower court
Filing date November 13, 2007
Litigating parties Office of the São Paulo State Attorney General vs. Suzano Papel e Celulose S/A and Fibria Celulose S/A.
Amounts, assets or rights at risk R$8,258,741.98
Purpose and principal related facts This is a public civil action in which the state attorney’s office seeks a court order halting any further planting of eucalyptus forests within the municipality of São Luiz do Paraitinga pending completion of a thorough environmental impact study (Estudo de Impacto Ambiental e Relatório de Impacto e Relatório de Impacto Ambiental), or EIA-RIMA study.
Prospects for defeat Possible
Impact in case of defeat If the order is granted, the Company will interrupt planting activities until completion and approval of the environmental impact study.
Provisioned contingency, if any As of yet, no amount has been provisioned.

Arbitration Case

Arbitration case
Arbitration tribunal ICC International Court of Arbitration
Stage Arbitration proceeding conducted pursuant to the Rules of Arbitration of the International Chamber of Commerce
Filing date December 19, 2008
Litigating parties Consórcio Capim Branco Energia (energy consortium) vs. Consórcio Construtor Capim Branco (construction consortium)
Amounts, assets or rights at risk R$8,258,741.98
Purpose and principal related facts The arbitration proceeding was established to settle a dispute between the concession holders and operators of the Amador Aguiar hydroelectric complex and the construction consortium in connection with the September 2002 agreement for implementation of the hydroelectric complex.
Prospects for defeat Remote. However, in the event of defeat, the Company will be responsible for contributing 17.8% of the amount established in the arbitration award.
Impact in case of defeat Disbursement of the abovementioned amount.
Provisioned contingency, if any No contingency has been reserved.
Arbitration, administrative and court proceedings (not protected by absolute privilege) in which the Company or a subsidiary participates as a party having as opposite party or parties any current or former directors or officers or controlling shareholders or investors in its own or a controlling shareholders’ securities.

Not applicable.

Impact and contingency in case of defeat in disputes protected by absolute privilege whose outcome could materially affect the Company or a subsidiary.

We and our subsidiaries are not parties to disputes protected by absolute privilege. Cases whose outcome could materially affect us have been disclosed under subsections "Arbitration, administrative and court proceedings (not protected by absolute privilege) in which the Company or a subsidiary participates as a party, and whose outcome could materially influence the Company business" and "Arbitration, administrative and court proceedings (not protected by absolute privilege) in which the Company or a subsidiary participates as a party having as opposite party or parties any current or former directors or officers or controlling shareholders or investors in its own or a controlling shareholders’ securities" of this Reference Form.

Arbitration, administrative and court proceedings not protected by absolute privilege, which consist of repetitive or connected cases as to the facts and rights on action, whose outcome (taken collectively) could materially affect the Company or a subsidiary.

We and our subsidiaries are not parties to repetitive or connected cases, based on similar facts and rights of action or otherwise, whose outcome could materially affect us.

Other material contingent liabilities not previously discussed.

Not applicable.

Information on the rules applying in the jurisdiction of the issuer’s home country, if based abroad, and on the rules applying in the foreign jurisdiction in which securities are held under custody.

Not applicable.

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