Decree No. 677/01 - New corporate regime and capital market practice

* When approving a capital increase, the Shareholders’ Meeting, may delegate on the Board of Directors the authority to increase the amount of shares initially authorized to provide for an over subscription of shares (green shoe option).

* Public companies may issue options and warrants on their shares to compensate directors.

* Public companies may allocate up to 10% of their capital stock to employee stock option plans.

* The certificates issued by depositories representing the ownership of securities shall be sufficient to initiate summary proceedings (to the extent that such securities have “título ejecutivo” (executive title)), as well as other judicial claims (i.e., claims in reorganization or bankruptcy proceedings). These changes are aimed at providing legal solutions to actual problems faced by market participants in the past. In the case of global notes, the trustee, if any, shall be legitimated to initiate the above-referred proceedings upon the sole proof of its appointment as such.

* The legal framework applicable to the creation, transfer and pledge of book-entry or account registered securities is broadened.

* Freedom of creation of securities by legal entities is enhanced.

* The defined term “certificated security” (título valor) is replaced by “security” (valor negociable) and investment contracts are expressly included by the Decree.

* The legal framework applicable to share repurchases by public companies is expanded.

* Public Companies shall appoint a person who shall be “Responsible for Market Relations”.

* Public Companies may contract insurance for its directors to cover risks arising from the performance of their duties as such.

* In case of doubt, the burden of proof regarding compliance by the directors with their duties of loyalty is reversed, now lying on the directors themselves.

* Shareholders’ agreements shall be informed and submitted to the CNV.

* Transactions and agreements entered between a public company and a “related party” (as such term is defined in the Decree) and involving a relevant amount (i.e., an amount in excess of 1% of the assets of the company pursuant to the last balance sheet approved, and provided further that such amount exceeds 100,000 Pesos) shall be subject to a special approval procedure and should be informed to the CNV.

* Encumbering material assets of a company must be approved by an Ordinary Shareholders’ Meeting.

* Management agreements must be approved by an Ordinary Shareholders’ Meeting.

* Prior to a shareholders’ meeting, shareholders representing 2% of the capital stock may submit comments or proposals relating to the business of the company.

* Proxy solicitation is authorized subject to implementing regulations to be issued by the CNV.

* Adoption of certain guidelines for holding Board of Directors and Shareholders’ Meetings by means of simultaneous transmission of voice, image or words (i.e., teleconferences and videoconferences).

* A digital signature on documentation submitted by electronic means to the CNV is awarded the same status as a printed signature.

* Disclosure information standards are enhanced.

* The duties imposed on directors are enhanced to resemble “fiduciary duties” imposed on managers under the common law.

* Public companies shall create an Audit Committee comprised of three or more independent directors. The Audit Committee shall prepare an annual plan, opine on the appointment of external auditors, fee estimates, stock option plans and transactions with related parties, opine and inform on conflicts of interest, and supervise internal control systems, accounting matters and risk management.

* Minority shareholders representing at least 5% of the capital stock shall be entitled to appoint an external auditor.

* Additional information requirements are to be included in the financial statements of the companies.

* For information purposes, the CNV may authorize controlling companies the disclosure of consolidated financial statements, provided that such financial statements accurately describe the situation and information of the public company.

* Public companies must mandatorily subject any corporate conflicts to arbitration procedures. However, investors and shareholders may choose to submit their conflicts to ordinary courts.

* For purposes of exemption of directors’ liabilities, the personal registration of the allocation of duties shall be deemed effected when such information is submitted to the CNV and to the self-regulated organization where the shares of the company are traded.

* Liability proceedings that shareholders are entitled to initiate individually under corporate law for their own benefit may also be pursued on behalf of the company.

* The burden of proof is reversed in case of lawsuits based on transactions or agreements entered into with related parties.

* An extensive regulation of public tender offers (“OPAs”) including, inter alia, the principles of equal treatment to all shareholders and of non-interference by the board of directors with respect to offers (subject to certain exceptions).

* A mandatory OPA regime applicable to any intent of acquiring the control of a public company. Accordingly, the Decree introduces the concepts of “significant participation” (a minimum of 35%) and “almost total control” (95% or more of the subscribed capital stock).

* In certain cases the regime is optional, provided that the choice is exercised within a specified period of time. In cases of “almost total control”, the regime is mandatory (“residual participations regime”).

* Certain guidelines for determining the “fair price” of an OPA.

* Upon its voluntary delisting and withdrawal from the public offer regime, the company must effect a mandatory OPA (squeeze out).

* Regulation of exchange offers .

* Fines imposed by the CNV shall have “título ejecutivo” (executive title) and, therefore, execution through summary proceedings.

* The statute of limitations for actions arising from violations to the Securities Law No. 17,811 is increased to 6 years.

* Arrangers, underwriters or placement agents in a public offering of securities shall be jointly and severally liable (together with the issuer, management, the individuals signing the prospectus, the auditors in accordance with their duties, and any offerors with respect to any information related to them) for the information included in the prospectus, to the extent that they have not performed careful due diligence on such information.

* The issuer or the shareholders shall be entitled to recovery proceedings in connection with the use of privileged information by insiders (short swing profits).

* Furthermore, any actual participant shall be entitled to recovery proceedings against any person who breaches the duty of transparency imposed by the Decree, for any damages or losses arising from such violation.

* Introduction of new regulations on participation in a public offering, disclosure of relevant information, insider trading and market manipulation.

* Market stabilization, in accordance with the regulations to be further enacted by the CNV, shall constitute neither market manipulation nor fraud.

* New regulations are established with respect to the supervising capacity of the CNV, summary investigations and administrative sanctions imposed under the Securities Law No. 17,811.