/raid1/www/Hosts/bankrupt/TCRLA

/raid1/www/Hosts/bankrupt/TCRLA_Public/040831.mbx T R O U B L E D C O M P A N Y R E P O R T E R L A T I N A M E R I C A Tuesday, August 31, 2004, Vol. 5, Issue 172 Headlines A R G E N T I N A ATLANTIC SPORT: General Report Due Today AGENTES COMERCIALES: Claims Verification Deadline Tomorrow FAVA: Claims Check Ends Tomorrow FIDAL: Verification of Claims Ends Tomorrow GRAN DORA: Enters Bankruptcy on Court Orders JULIAN CALZADA: Liquidates Assets to Pay Debts LAS TRES: Reports Submission Set LEACO: Trustee to Complete Validations MATADERO Y FRIGORIFICO: Court Fixes Assembly Schedule PAXCO S.R.L.: Verification Deadline Approaches TENUTA S.A.: Court Orders Liquidation B R A Z I L BAXTER INTERNATIONAL: Berger & Montague Files Class Action Suit ELETROPAULO METROPOLITANA: S&P Raises Global Scale Ratings NET SERVICOS: Issuing New Shares as Part of Debt Restructuring TELEMAR: To Declare Winner of $67M Tender in September USIMINAS: To Pay Interest on Equity Capital USIMINAS: To Kick Off Construction of Thermo Plant H O N D U R A S * HONDURAS: PRGF Program Delivering Results says IMF M E X I C O CORPORACION DURANGO: Forges Restructuring Agreement JAFRA COSMETICS: Moody's Confirms Ratings NAFIN-BANCOMEXT: Congress Rules Out Merger, Liquidation PEMEX: Issues Another $44M Short-Term Bonds VITRO: S&P Affirms Ratings; Outlook Negative U R U G U A Y * $204M IMF Credit Line Available for Uruguay V E N E Z U E L A CANTV: S&P Upgrades Foreign Currency Corporate Credit Rating - - - - - - - - ================= A R G E N T I N A ================= ATLANTIC SPORT: General Report Due Today ---------------------------------------- A general report on the Atlantic Sport S.A. bankruptcy is due for court submission today. Mr. Alberto Antonio Vilela, the trustee supervising the proceedings, prepared this report from the Company's accounting and business records. The report also details relevant events during the course of the bankruptcy. Court No. 22 of Buenos Aires' civil and commercial tribunal has jurisdiction over this case. CONTACT: Mr. Alberto Antonio Vilela, Trustee Rodriguez Pena 431 Buenos Aires AGENTES COMERCIALES: Claims Verification Deadline Tomorrow ---------------------------------------------------------- The verification of claims for the Agentes Comerciales S.A. bankruptcy will end tomorrow, September 1, 2004. Creditors with claims against the bankrupt company must present proof of the liabilities to Mr. Miguel Angel Tregob, the court-appointed trustee, before the stated deadline. The bankruptcy will conclude with the liquidation of the Company's assets to pay its creditors. CONTACT: Mr. Miguel Angel Tregob, Trustee Lima 287 Buenos Aires FAVA: Claims Check Ends Tomorrow -------------------------------- Mr. Abraham Gutt, the trustee overseeing the Fava S.R.L. liquidation, will close the verification of creditors claims tomorrow, September 1, 2004. Creditors are required to submit proofs of their claims to the trustee within the verification period to qualify for the post-liquidation payments. Judge Paez Castaneda of Buenos Aires' Civil and Commercial Tribunal Court No. 21 handles this case with the assistance of Dr. Rey, Clerk No. 41. CONTACTS: Fava S.R.L. Sucre 2020, Piso 14 "A" Buenos Aires Mr. Abraham Gutt, Receiver Tucuman 1484 Buenos Aires FIDAL: Verification of Claims Ends Tomorrow ------------------------------------------- Creditors of bankrupt Buenos Aires Company Fidal S.A. must submit proofs of their claims before the verification period closes tomorrow, September 1, 2004. All documents should be forwarded to Mr. Gabriel Eduardo Bigal, court-appointed trustee, before the deadline. Court No. 7 of Buenos Aires' Civil and Commercial Tribunal handles this case with assistance from Clerk No. 13. CONTACT: Mr. Gabriel Eduardo Bigal, Trustee Reconquista 1011 Buenos Aires GRAN DORA: Enters Bankruptcy on Court Orders -------------------------------------------- Court No. 9 of Buenos Aires' civil and commercial tribunal declared Gran Dora S.A. bankrupt after the company defaulted on its debt payments. The bankruptcy order effectively places the company's affairs as well as its assets under the control of court-appointed trustee, Mr. Miguel Angel Troisi. As the trustee, Mr. Troisi is tasked with verifying the authenticity of claims presented by the company's creditors. The verification phase is ongoing until September 27, 2004. Following claims verification, the trustee will submit the individual reports based on the forwarded claims for final approval by the court on November 9, 2004. A general report will also be submitted on December 22, 2004. Infobae reports that Clerk No. 17 assists the court on this case, which will end with the disposal of the company's assets in favor of its creditors. CONTACT: Mr. Miguel Angel Troisi, Trustee Cerrito 146 Buenos Aires JULIAN CALZADA: Liquidates Assets to Pay Debts ---------------------------------------------- Julian Calzada y Hermano S.A.I.C. y F. liquidates its assets following the bankruptcy pronouncement issued by Court No. 7 of Cordoba's civil and commercial tribunal, Infobae reports. The bankruptcy ruling places the company under the supervision of court-appointed trustee, Mr. Alejandro Aureli. The trustee closed the verification of creditors' proofs of claims Monday, August 30, 2004. The bankruptcy process will end with the disposal company assets in favor of its creditors. CONTACT: Mr. Alejandro Aureli, Trustee Duarte Quiros 977 Cordoba LAS TRES: Reports Submission Set -------------------------------- Mr. Aldo Ruben Maggiolo, the trustee assigned to supervise the liquidation of Las Tres Z Construcciones S.R.L., will submit the validated individual claims for court approval on November 9, 2004. These reports explain the basis for the accepted and rejected claims. The trustee will also submit a general report on December 12, 2004. Infobae reports that Court No. 23 of Buenos Aires' Civil and Commercial Tribunal has jurisdiction over this bankruptcy case. Clerk No. 45 assists the court CONTACT: Mr. Las Tres Z Construcciones S.R.L. Paraguay 610 Buenos Aires LEACO: Trustee to Complete Validations -------------------------------------- Mr. Anibal Carillo, serving as trustee for the Leaco S.A. bankruptcy, will be validating creditors' proofs of claims from the case until tomorrow, September 1, 2004. Failure to comply with the validation deadline will mean disqualification from the payments to be made after the company's assets are liquidated. Leaco reported liabilities totaling to US$1,057,578.26 when it filed for bankruptcy protection. Judge Sala of Buenos Aires Court No. 14, with assistance from Clerk No. 27 Dr. Aleman, has jurisdiction over this case. CONTACT: Leaco S.A. Viamonte 1546 Buenos Aires Mr. Anibal Carillo, Trustee Juncal 615 Buenos Aires MATADERO Y FRIGORIFICO: Court Fixes Assembly Schedule ----------------------------------------------------- Court No. 4 of Lomas de Zamora's civil and commercial tribunal scheduled the informative assembly for the Matadero y Frigorifico Federal S.A. bankruptcy on October 13, 2004, reports Infobae. The company will present a completed settlement plan during the assembly for the approval of its creditors. CONTACT: Matadero y Frigorifico Federal S.A. Buenos Aires PAXCO S.R.L.: Verification Deadline Approaches ---------------------------------------------- The verification of claims for the Paxco S.R.L. bankruptcy will end on October 19, 2004 according to local news source Infobae. Creditors with claims against the bankrupt company must present proof of the liabilities to Mr. Roberto Leonardo Sapollnik, the court-appointed trustee, before the deadline. Court No. 7 of Buenos Aires' civil and commercial tribunal handles the company's case with assistance from Clerk No. 13. The bankruptcy proceedings will conclude with the liquidation of the company's assets to pay its creditors. CONTACT: Mr. Roberto Leonardo Sapollnik, Trustee Parana 851 Buenos Aires TENUTA S.A.: Court Orders Liquidation ------------------------------------- Tenuta S.A. prepares to wind-up its operations following the bankruptcy pronouncement issued by Court No. 24 of Buenos Aires' civil and commercial tribunal. The declaration effectively prohibits the company from administering its assets, control of which will be transferred to a court-appointed trustee. Infobae reports that the court appointed Mr. Ricardo Felix Fernandez as trustee. He will be reviewing creditors' proofs of claims until October 15, 2004. The verified claims will be the basis for the individual reports to be presented for court approval on November 26, 2004. The trustee will also submit a general report on February 11 next year. Clerk No. 47 assists the court on this case, which will end with the disposal of the company's assets to cover its liabilities. CONTACT: Mr. Ricardo Felix Fernandez, Trustee Tucuman 1567 Buenos Aires =========== B R A Z I L =========== BAXTER INTERNATIONAL: Berger & Montague Files Class Action Suit --------------------------------------------------------------- On August 13, 2004, the law firm of Berger & Montague, P.C. (http://www.bergermontague.com)filed a class action suit against Baxter International Inc. ("Baxter" or the "Company") (NYSE: BAX) (CUSIP:071813109) and certain of its officers, in the United States District Court for the Northern District of Illinois on behalf of all persons or entities who purchased Baxter securities from April 19, 2001 through July 21, 2004 (the "Class Period"). The complaint alleges that defendants violated Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder by the SEC by issuing materially false and misleading statements throughout the Class Period that had the effect of artificially inflating the market price of the Company's securities. More specifically, the complaint alleges that defendants failed to disclose and misrepresented the following material adverse facts which were known to defendants or recklessly disregarded by them: (1) that the Company's financial results during the Class Period were materially overstated; (2) that the overstatement occurred because the Company improperly and "incorrectly" recognized $40 million in revenues and maintained inadequate and "incorrect" provisions for bad debts relating to its Brazilian operations; (3) that as a result of this, the Company's financial results were in violation of Generally Accepted Accounting Principles ("GAAP"); (4) that the Company lacked adequate internal controls; and (5) that as a result of the above, the Company's financial results, including its net income figures, were materially and artificially inflated at all relevant times. On July 22, 2004, Baxter announced that it planned to restate its financial results for the years 2001 through 2003, and for the first quarter of 2004. The restatement was primarily the result of incorrect revenue recognition and inadequate provisions for bad debts in Brazil during that period, which would result in a decrease in net income over the restatement period by an amount expected to be no more than $40 million, or $0.07 per diluted share. News of this shocked the market. Shares of Baxter fell $1.48 per share, or 4.59 percent, to close at $30.79 per share on unusually heavy trading volume. If you purchased Baxter securities during the period from April 19, 2001 through July 21, 2004, inclusive, you may, no later than September 27, 2004, move to be appointed as a Lead Plaintiff. A Lead Plaintiff is a representative party that acts on behalf of other class members in directing the litigation. If you have sustained substantial losses in Baxter securities during the Class Period, please contact Berger & Montague, P.C. for a more thorough explanation of the Lead Plaintiff selection process. CONTACT: Sherrie R. Savett, Esquire Douglas M. Risen, Esquire Diane Werwinski, Investor Relations Manager BERGER & MONTAGUE, P.C. 1622 Locust Street Philadelphia, PA 19103 Phone: 888-891-2289 or 215-875-3000 Fax: 215-875-5715 Website: http://www.bergermontague.com E-mail: InvestorProtect@bm.net ELETROPAULO METROPOLITANA: S&P Raises Global Scale Ratings ---------------------------------------------------------- Standard & Poor's Ratings Services raised its global scale foreign and local currency ratings on Brazilian utility Eletropaulo Metropolitana Eletricidade de Sao Paulo S.A. (Eletropaulo) to 'B' from 'CCC-'. At the same time, Standard & Poor's raised its national scale corporate credit rating on Eletropaulo and its national scale issue rating on Eletropaulo's 7th debentures to 'brBB+' from 'brCCC-'. The ratings were removed from CreditWatch, where they were placed with positive implications on June 22, 2004. The outlook on all Eletropaulo ratings is now stable. The rating action reflects the reassessment of Eletropaulo's creditworthiness following the conclusion of the debt restructuring the company had started in 2002. The company refinanced some BrR2.3 billion in debt in March 2004. In June 2004 Eletropaulo also completed the exchange offer on a US$2.3 million portion of a euro commercial paper issue still in default (over 99.9% of bondholders accepted the exchange). "The ratings reflect that, although the new terms and conditions of the debt restructuring are more favorable and the amortization schedule is smoother than before, Eletropaulo still faces fairly tight cash flow to handle its debt maturities in 2005, and will need to raise additional debt to refinance debt amortizations in 2007," said credit analyst Marcelo Costa. "Even though Eletropaulo demonstrates resilient cash generation, as the company has just completed far-reaching debt renegotiations, its credit access has not been fully restored or tested so far." The stable outlook assigned to Eletropaulo's ratings reflects the expectation that the company will continue to present financial indicators that are in-line with the rating category (minimum EBITDA margin of 18%, minimum FFO to interest coverage of 2.0x, FFO to total debt higher than 12%). The ratings also include Standard & Poor's expectation that the company should not need external sources of funding before 2007, and the foreign currency exposure on financial debt should not materially increase. Eletropaulo's creditworthiness should improve as the company shows better financial flexibility and market perception, accesses new funding (banks or capital markets), and delivers more sustainable cash flow protection ratios. Conversely, the ratings would come under downward pressure if the company fails to deliver the financial performance required for the current rating. ANALYST: Marcelo Costa, Sao Paulo (55) 11-5501-8955 Milena Zaniboni, Sao Paulo (55) 11-5501-8945 NET SERVICOS: Issuing New Shares as Part of Debt Restructuring --------------------------------------------------------------- Brazil's Net Servicos de Comunicacao (Sao Paolo: PLIM4.SA - Nasdaq NM:NETC), the largest Pay-TV multi-service operator in Latin America, will seek regulators' permission next month to issue up to 1.8 billion new shares, reports Reuters. Net Servicos plans to issue the new shares by November. According to Leonardo Pereira, head of investor relations, the company will register the local stock issue with Brazil's CVM securities regulator. But it is yet to decide whether it would also register the new issue in the United States, where its stock trades on Nasdaq. The move to issue new shares is part of the company's wider effort to restructure or pay down BRL1.4 billion (US$474 million) in debt. The share issue and debt restructuring will eventually allow Mexico's Telefonos de Mexico (Telmex) to buy a yet-to-be decided stake in Net Servicos as part of an aggressive expansion throughout Latin America. CONTACT: Net Servicos de Comunicacao SA R. Verbo Divino, 1356 First Floor Sao Paulo - SP, Phone: (212) 688-6840 Fax: (212) 437-5749 Web Site: www.nettv.globo.com TELEMAR: To Declare Winner of $67M Tender in September ------------------------------------------------------ Brazilian telecom operator Telemar will announce by September 20 the results of a tender to supply telephones as part of Telemar's BRL200-million (US$67.6mn) project, Business News Americas reports, citing local daily Valor Economico. Telemar must install telephones in approximately 5,500 locations in the 16 states where it operates to meet the 2005 requirements of Brazilian telecom regulator Anatel's universal access plan. Nineteen (19) suppliers have submitted their bids. Some suppliers think Telemar will probably need to invest much more than BRL200 million in the project and possibly as much as BRL500 million. But according to a Telemar executive, the company does not want to make more than BRL200 million available for the project and suppliers will have to adjust. Telemar required bidders to present a turnkey proposal, including infrastructure based on either a cable or radio network such as cellular or even satellite service, which can reach remote areas. CONTACT: TNE - INVESTOR RELATIONS Mr. Roberto Terziani (terziani@telemar.com.br) 55 21 3131 1208 or Mr. Carlos Lacerda (carlosl@telemar.com.br) 55 21 3131 1314 Fax: 55 21 3131 1155 The Global Consulting Mr. Kevin Kirkeby Tel: 1 646.284.9416 (kkirkeby@hfgcg.com) Web site http://www.telemar.com.br/ir USIMINAS: To Pay Interest on Equity Capital ------------------------------------------- We hereby notify shareholders that, pursuant to deliberations at a meeting of the Board of Directors held on 8/26/2004, we will begin the payment, as of 9/14/04, of Interest on Equity Capital related to the first half of 2004, in the amount of R$ 1.17318 per common share and R$ 1.29050 per preferred share, to all those shareholders holding shares on 8/27/04. Shares transferred as of 8/30/2004 (that date inclusive) will be made without interest on equity capital. The amounts now paid will be computed in the calculation for the minimum dividend required for the 2004 fiscal year. Income withholding tax will also be deducted at a rate of fifteen percent (15%), subject to applicable legal exceptions. Form and Location of Payments: Shareholders that maintain bank accounts with BRADESCO or OTHER BANKS and communicate this fact will receive this credit automatically on the first date of payment. All other shareholders with addresses on file will receive a form by mail entitled NOTICE FOR RECEIPT -- PROCEEDS OF BOOK ENTRY SHARES. To receive the credit, these shareholders should proceed to the Bradesco agency of their choice, together with the above- mentioned form, RG identity card and CIC taxpayer identity card. Shareholders not receiving the NOTICE OF CREDIT or NOTICE FOR RECEIPT should proceed to any Bradesco agency to receive this credit and update their personal file information. The credit related to shares held in deposit by the Stock Exchanges' Fungible Custody Service will be credited to the respective Stock Exchanges through the member brokerage houses responsible for paying the respective shareholders. Mr. Paulo Penido Pinto Marques Investor Relations Director Contact: USINAS SIDERURGICAS DE MINAS GERAIS S/A - USIMINAS Rua Prof. Jose Vieira de Mendonca 3011, Eng Nogueira Belo Horizonte , MG 31310-260 Brazil Phone: +55 31 499 8000 Fax: +55 31 441 7710 Web Site: http://www.usiminas.com.br USIMINAS: To Kick Off Construction of Thermo Plant -------------------------------------------------- Brazilian flat steelmaking group Usiminas has gained approval from its board to build a 60MW thermoelectric plant to increase power generation capacity, Business News Americas reports, citing an unnamed company spokesperson. The spokesperson didn't provide details on the investment required for the construction of the plant, but company executives earlier indicated that the thermoelectric project would involve about US$60 million. The power project should be ready for commercial operation in 2007, she added. With the new plant, Usiminas will produce 53% of the power it uses, up from the current 24%. =============== H O N D U R A S =============== * HONDURAS: PRGF Program Delivering Results says IMF ---------------------------------------------------- The following statement was made in Tegucigalpa on August 25, 2004 by an International Monetary Fund (IMF) mission staff: "An IMF mission has visited Tegucigalpa over the past week to conclude discussions for the first semi-annual review of the PRGF program. As in the past, our discussions with the authorities, private sector representatives, and representatives of the international community were very useful and constructive. "Since the approval of the PRGF in February 2004, the authorities have shown great determination in implementing their program, in a difficult social and political environment and against the additional burden of sharply higher oil prices to which Honduras is particularly vulnerable. The quantitative targets of the program have been met, and the program is already delivering favorable results, with a broad-based recovery of growth and employment, and a major improvement in the external position. Nonetheless, high oil prices remain a source of strain, and inflation-buoyed also by the stronger-than-expected balance of payments inflows-has increased above the program path. "In reviewing the macroeconomic policy framework, the mission was reassured by the favorable fiscal performance under the program. Revenues have been buoyant, benefiting from the economic recovery, as well as the strengthening of tax administration. On the expenditure side, appropriate restraint in managing non-essential current spending has allowed poverty- related outlays and public investment to rise, while keeping the overall fiscal program on track. "The recent increase in inflation reflects mainly the impact of oil prices and the liquidity created by the strong international reserves inflows. The mission supports the authorities' strategy to accommodate the direct impact of the oil-price increase, while avoiding any second-round effects. Therefore, the inflation target for this year has been raised somewhat from the initial program objective, while the Central Bank will maintain prudent policies to stem further upward pressures on prices, including through appropriate monetary operations to curtail the impact of higher reserve inflows. "Financial sector reforms are moving ahead, with important progress in strengthening banking regulations and supervision. The recent approval by the National Congress of three financial laws is a significant step in improving the legal and institutional framework of the financial sector. It is now important that Congress also approve the Financial System Law, which is a key element in the efforts to consolidate the health of the financial sector. "Following the mission's return to Washington, and once Congress has approved the pending Financial Institutions Law, the Executive Board is expected to discuss the first review of the PRGF arrangement in September. Completion of the review will permit disbursement of the next tranche under the PRGF arrangement for the equivalent to about US$15 million." CONTACTS: International Monetary Fund 700 19th Street, NW Washington, D.C. 20431 USA Public Affairs: Phone: 202-623-7300 Fax: 202-623-6278 Media Relations: Phone: 202-623-7100 Fax: 202-623-6772 =========== M E X I C O =========== CORPORACION DURANGO: Forges Restructuring Agreement --------------------------------------------------- Corporacion Durango, S.A. de C.V.'s financial restructuring plan will reflect the terms and conditions announced by the Company through this PLAN SUPPORT AGREEMENT: Agreement (together with the Exhibits and Schedules hereto, this "Agreement"), dated as of August 13, 2004, by and among Corporacion Durango, S.A. de C.V. ("Corporacion Durango", or the "Company"), the Note Guarantors listed on Schedule 2 hereto (collectively, the "Note Guarantors"), certain subsidiaries of the Company listed on Schedule 3 hereto that hold claims against the Company (collectively, the "Intercompany Creditors"), the individual signatories listed on Schedule 4 hereto, each in his or her capacity as a creditor and/or shareholder of the Company, as the case may be (collectively, the "Individual Signatories"), Banco Nacional de Mexico, S.A., Integrante del Grupo Financiero Banamex, Bank of America, N.A., JPMorgan Chase Bank, California Commerce Bank, and Banc of America Securities LLC (collectively, the "Bank Lenders"), and the holders of the Company's (i) 13 1/8% Senior Notes due 2006; (ii) 13 1/2% Senior Notes due 2008; (iii) 12 5/8% Senior Notes due 2003; and/or (iv) 13 3/4% Senior Notes due 2009 (collectively, the "Existing Notes") who have executed this Agreement on the signature pages hereto (collectively, the "Initial Signatory Noteholders"), and other holders of Existing Notes who from time to time become bound by this Agreement (collectively, together with the Initial Signatory Noteholders, the "Noteholders" and, together with the Bank Lenders, the Intercompany Creditors and the Individual Signatories, the "Supporting Creditors"). Corporacion Durango's obligations to each of the Bank Lenders are referred to herein collectively as the "Existing Bank Debt." Corporacion Durango, the Note Guarantors, the Bank Lenders, the Intercompany Creditors and the Noteholders are referred to herein collectively as the "Parties." WHEREAS, on April 30, 2004, the Parties entered into that certain agreement (the "Initial Plan Support Agreement") to support a financial restructuring of the Company's unsecured indebtedness upon the terms set forth in the term sheet (the "Initial Term Sheet") attached to such agreement; and WHEREAS, the Initial Plan Support Agreement has been terminated; and WHEREAS, on May 18, 2004, the Company initiated a voluntary insolvency proceeding (the "Concurso Proceeding") under Mexico's Ley de Concurso Mercantiles (the "Mexican Business Reorganization Act") with the Federal District Court of Durango (the "Durango District Court"), and on May 21, 2004, commenced an ancillary case (the "304 Case") under section 304 of title 11 of the United States Code (the "Bankruptcy Code") with the United States Bankruptcy Court for the Southern District of New York (the "Bankruptcy Court"); and WHEREAS, on June 30, 2004, the Bankruptcy Court entered, as to the Bank Lenders and Noteholders, a consensual preliminary injunction (the "Preliminary Injunction") enjoining the commencement or continuation of any action against the Company and certain subsidiaries of the Company,as well as their assets, which Preliminary Injunction is set to expire at midnight on August 16, 2004, unless further extended by order of the Bankruptcy Court; WHEREAS, the Parties have agreed to a revised restructuring proposal, as set forth more fully in the Term Sheet attached hereto as Exhibit A (the "Term Sheet") which provides for a restructuring of the Company's capital structure (the "Restructuring"); and WHEREAS, the Term Sheet provides that the Parties will implement the Restructuring through the prosecution and confirmation of a plan of reorganization under the Mexican Business Reorganization Act on terms substantially similar to those set forth in the Term Sheet (the "Plan") so long as the Company obtains the votes necessary under the Mexican Business Reorganization Act to confirm the Plan. NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, each of the Parties hereby agrees as follows: 1. Initial Signatories. It shall be a condition to the effectiveness of this Agreement that each of the Initial Signatory Noteholders, each Bank Lender, the Company, the Note Guarantors, the Intercompany Creditors and the Individual Signatories shall have entered into this Agreement. 2. Definitions. Capitalized terms used but not defined herein shall have the meanings ascribed to such terms in the Term Sheet. 3. Pursue Restructuring. Upon an entry of declaration of concurso by the Durango District Court in the Concurso Proceeding, the Company will use commercially reasonable efforts to implement the Restructuring in the Concurso Proceeding, including without limitation: (a) supporting applications by the ad hoc committee of Existing Notes (the "Ad Hoc Bondholders Committee") and the Bank Lenders, acting through their respective counsel, to appoint one conservator for each of the Ad Hoc Bondholders Committee and the Bank Lenders, respectively, pursuant to Article 63 of the Mexican Business Reorganization Act with the powers set forth in Article 64 of the Mexican Business Reorganization Act, including the right to be heard in the Concurso Proceeding; (b) on or before fourteen (14) days prior to the deadline for creditors to file proofs of claim in the Concurso Proceeding, delivering to the Indenture Trustee for further dissemination to the holders of Existing Notes, an English language explanation containing: (i) a description of the concurso mercantil process under the Mexican Business Reorganization Act and of the Concurso Proceeding; (ii) the procedure for filing proofs of claim in the Concurso Proceeding, including a discussion of the powers of attorney and other documentation required under the Mexican Business Reorganization Act or in the Concurso Proceeding in connection with the filing of proofs of claim; and (iii) information on how holders of Existing Notes may contact either the Indenture Trustee or counsel to the Ad Hoc Bondholders Committee for further information regarding how to file proofs of claim; (c) (i) supporting and not objecting to (x) the Indenture Trustee (as defined herein) (or any other lawfully authorized representative who would be recognized in the Concurso Proceeding as such, collectively, the "Authorized Representative"), on behalf of all holders of Existing Notes, and (y) any holder of Existing Notes or any Bank Lender who executes this Agreement, becoming recognized creditors (as such term is contemplated under the Mexican Business Reorganization Act) in the Concurso Proceeding; and (ii) cooperating with any reasonable requests of the Authorized Representative for ordersin the 304 Case for procedures to facilitate (x) the filing of proofs of claim by the Authorized Representative on behalf of holders of Existing Notes (other than Noteholders) including any powers of attorney or other documentationthat may be required under the Mexican Business Reorganization Act or in the Concurso Proceeding in connection therewith; and (y) the execution of the Plan within the time period set forth in Article 161 of the Mexican Business Reorganization Act by the Authorized Representative on behalf of and pursuant to the instructions (whether through electronic instruction through the DTC or other clearing system, as applicable, or otherwise, so long as any such method is legally valid, acceptable to the Authorized Representative, and does not require any disclosure obligations on the part of the Company other than that set forth in Sections 3(b) and 3(d) hereof) of holders of Existing Notes (other than Noteholders), or by individual holders of Existing Notes who have timely filed proofs of claim separately; (d) (x) supporting the dissemination to creditors who become recognized creditors (as such term is contemplated under the Mexican Business Reorganization Act) (the "Recognized Creditors") of (i) a summary of the Restructuring, (ii) the Plan, and (iii) the other Restructuring Documents by the person appointed by the Institute (as defined below) to act as conciliador in the Concurso Proceeding; and (y) in the e vent the documents listed in this Section 3(d) are disseminated by the conciliador without an English language translation of same, (i) promptly preparing an English language translation of such documents and (ii) disseminating such English language translation to all Recognized Creditors no less than five (5) business days prior to the deadline for such Recognized Creditors to communicate to the conciliador their assent to the Restructuring; and (e) timely file in the United States with the Securities and Exchange Commission its quarterly and annual consolidated financial statements for the Company in scope and format consistent with its historical practices. 4. Cooperation and Support. Each of the Parties covenants and agrees to negotiate in good faith to arrive at mutually agreeable definitive documents to implement the Restructuring and to agree upon non-binding target dates for the drafting and exchange of such documents. The Supporting Creditors shall have the opportunity to review drafts of each Restructuring Document prior to its presentation to the Durango District Court. Each Restructuring Document shall be subject to each Supporting Creditor's approval, which will not be unreasonably withheld or delayed so long as it is (i) consistent in all material respects with, and at least as favorable to the Supporting Creditor in all material respects as, the Term Sheet and (ii) consistent in all material respects with the information previously provided to the Supporting Creditors. So long as this Agreement remains in effect, and except as may otherwise be provided below, each Supporting Creditor shall: (a) (i) timely complete and file a proof of claim in the form approved by the Instituto Federal de Especialistas de Concursos Mercantiles (the "Institute") in respect of its Holdings; (ii) grant a duly executed power of attorney exercisable in Mexico in favor of its respective Mexican counsel in order that such counsel may take all reasonably necessary action on behalf of the Supporting Creditor in respect of the Concurso Proceeding; and(iii) in the case of a Noteholder, obtain from its brokerage or depositary institution certification letters, and a position listing from the DTC listing the amount of bonds held by such Noteholder as of the date of such certification; (b) so long as such Supporting Creditor shall have approved the Restructuring Documents as provided in Section 4 hereof, timely vote all of its Holdings (as such term is defined hereinafter) to accept the Plan by delivering its duly executed and completed signature to the Plan, and not change, revoke or withdraw (or cause to be changed,revoked or withdrawn) such assent to the Plan, except as permitted by the terms of this Agreement; (c) so long as such Supporting Creditor shall have approved the Restructuring Documents as provided in Section 4 hereof, (i) not object to the Plan filed by the Conciliator and vote in favor of the Plan, in accordance with Articles 161 and 162 of the Mexican Business Reorganization Act; (ii) not (y) object to the Plan or support any such objection by any third party, or otherwise commence any proceeding or take any action to oppose or alter the Plan or (z) propose, file, support or vote for any restructuring, workout, or plan of reorganization for the Company other than the Plan; and (iii) perform any other reasonable requirement under the Mexican Business Reorganization Act reasonably necessary to obtain confirmation of the Plan by the Durango District Court; (d) not object to or oppose any proof of claim filed by a Supporting Creditor in the Concurso Proceeding; (e) not (nor will it encourage any other person to), directly or indirectly, delay, interfere, impede, or take any other action that could reasonably be expected to delay, interfere or impede, or that is inconsistent in any respect with, acceptance, confirmation or implementation of the Plan; (f) with respect to a Noteholder, neither (i) send, (ii) join in or support, nor (iii) instruct any indenture trustee for the Existing Notes (the "Indenture Trustee"), to send a written notice (under section 502 of any indenture governing the Existing Notes) accelerating the Company's or a Note Guarantor's obligations under the Existing Notes (each, an "Acceleration Notice"); and in the event an Acceleration Notice is sent to the Company, shall provide, to the extent permitted in the Indenture, written notice to the Indenture Trustee rescinding and annulling any such Acceleration Notice pursuant to Section 513 of the respective indenture; (g) with respect to its respective Existing Bank Debt or Existing Notes,not take any action or exercise any remedy, whether at law or in equity, against any of Los Cuatro; and (h) (y) support the Preliminary Injunction entered in the 304 Case and any and all extensions to such order through and including February 28, 2005 (collectively, the "Injunctive Relief"), so long as any such Injunctive Relief is substantially in accordance with the Preliminary Injunction and further provides that (i) such order does not enjoin the Supporting Creditors from, in the case an event of termination set forth in Section 7 hereof has occurred and not been cured by the Company and/or any of the Note Guarantors, terminating this Agreement or commencing any action in Mexico against Los Cuatro and (ii) a Supporting Creditor that so terminates this Agreement may seek from the Bankruptcy Court in the 304 Case relief from the Injunctive Relief for any and all remedies or other enforcement actions in the United States, and that the Company and its subsidiaries shall have the burden of proof for justifying the continuation of such Injunctive Relief should any of the Supporting Creditors seek to terminate or modify the Injunctive Relief; and (z) except as provided for in such Injunctive Relief, not object to the Injunctive Relief or support any objection by any third party or otherwise file any pleading or commence any proceeding or take any action to oppose the Injunctive Relief; provided, however, that each Supporting Creditor may raise and be heard on any issue arising in the Concurso Proceeding so long as it is not attempting to oppose or alter a Restructuring Document approved by it. A Supporting Creditor may, but shall not be required to, use commercially reasonable efforts to obtain the joinder of other creditors to this Agreement or an agreement substantially similar to this Agreement. 5. Holdings and Transfers. (a) Each Supporting Creditor severally represents and warrants to the Company that it is the beneficial owner, owner of record with the power to bind the beneficial holder and/or the investment advisor or manager on behalf of the beneficial owner, of Existing Bank Debt, Existing Notes or Intercompany Claims, as the case may be, of the issues and in the principal amounts (i) in the case of a Bank Lender or Intercompany Creditor, set forth on such Supporting Creditor's signature page and (ii) in the case of a Noteholder, disclosed to U.S. counsel to the Ad Hoc Bondholders Committee, Bingham McCutchen LLP ("Bingham"), in the manner described in the following sentence (collectively, the "Holdings"), and has the power to vote and dispose of the Holdings in accordance with this Agreement on behalf of such beneficial owners, and that the amount of the Holdings constitutes the principal amount of all of such Supporting Creditor's unsecured claims against the Company at the time this Agreement becomes effective. Notwithstanding anything in this section to the contrary, each Noteholder shall only be required to disclose its Holdings to Bingham. Bingham shall (i) on the date of the execution and delivery of this Agreement by the Initial Signatory Noteholders, (ii) if a termination event under Section 7 hereof occurs, and (iii) as may be reasonably requested by U.S. counsel to the Company, certify in writing to the Company (with a copy to counsel for the Bank Lenders) the aggregate Holdings of the Initial Signatory Noteholders or Noteholders, as the case may be, as certified to Bingham by such Initial Signatory Noteholders or Noteholders. (b) Each Supporting Creditor severally agrees that it will not sell, pledge, assign, hypothecate, or otherwise transfer any Holdings, and any such attempted sale, pledge, assignment, hypothecation, or other transfer shall be void and without effect unless the transferee executes and there is delivered to the Company and to the other notice parties listed in Section 18 hereof, a written undertaking (in the form of the Transferee Signature Page attached hereto as Schedule 1) agreeing to become a party to this Agreement with respect to the Holdings being transferred (but not any claims against the Company previously owned or thereafter acquired), and such transferee (hereinafter a "Transferee") shall thereupon be deemed to be a Supporting Creditor with respect to the amount of such transferred Holdings for purposes of this Agreement, and the transferor shall no longer be a Supporting Creditor with respect to such transferred Holdings. The Company hereby agrees that any Transferee executing such an undertaking shall be entitled to the benefits of this Agreement. (c) This Agreement shall in no way be construed to preclude a Supporting Creditor from acquiring additional Existing Bank Debt, Existing Notes or other claims against the Company, provided that such Supporting Creditor (other than a Transferee) shall vote, and take such other actions in respect of, such additional Existing Bank Debt, Existing Notes or other claims as is provided for herein. 6. Additional Conditions Precedent. The following shall be additional conditions to the effectiveness of this Agreement: (a) The professional advisors to the Bank Lenders and the Ad Hoc Bondholders Committee shall have been brought current with respect to fees and expenses incurred during the Restructuring negotiations. (b) Each of the Company and Note Guarantors shall have (i) entered into one or more agreements (or reaffirmed a previous agreement) whereby it jointly and severally agrees to pay the fees and expenses of the professional advisors to the Bank Lenders and the Ad Hoc Bondholders Committee, whether incurred before or after the filing of the Concurso Proceeding. Such agreements shall be on terms substantially identical to the terms of the previously existing fee agreements between the Company and such professionals; and (ii) fund the retainers of the professional advisors to the Bank Lenders and the Ad Hoc Bondholders Committee, in the amounts agreed to among the Company and each such professional in a separate writing. (c) The Company shall have certified in writing to U.S. counsel to both the Bank Lenders and the Noteholders that the Supporting Creditors executing this Agreement hold unsecured debt of the Company in a principal amount necessary to confirm the Plan in the Concurso Proceeding. 7. Termination. (a) Except as may otherwise be provided for herein, this Agreement shall terminate as to a Supporting Creditor, if any of the events set forth in the following paragraph occurs and is not cured (which in the case of any date set forth in the following paragraph, shall mean that the Company fulfills the condition(s) notwithstanding such date) prior to the time such Supporting Creditor electing to terminate this Agreement sends a written notice (a "Notice of Termination") to the Company, with a copy to the other Notice Parties in accordance with Section 18 hereof, terminating this Agreement and identifying the event giving rise to such termination. For purposes of this Section 7, the following shall constitute events of termination: 1) The Company shall have failed to file (i) the Term Sheet with the Institute or (ii) a Form 6-K with the Securities and Exchange Commission attaching a copy of the Term Sheet and this Agreement on or before two (2) business days from the declaration of concurso in the Concurso Proceeding by the Durango District Court; or 2) Following approval pursuant to Section 4 hereof, any Restructuring Document shall be amended, modified or supplemented (i) in any respect such that such Restructuring Document is materially inconsistent with the Term Sheet without having first obtained the consent of such Supporting Creditor, or (ii) in any other respect without the consent of Bingham and Mayer, Brown, Rowe & Maw LLP; or 3) The Company shall institute an insolvency proceeding other than the Concurso Proceeding or the 304 Case; or 4) The Company shall allow the Concurso Proceeding to be dismissed or converted to a liquidation under the Mexican Business Reorganization Act; or a concurso shall be declared in an involuntary proceeding under the Mexican Business Reorganization Act commenced against the Company or any Note Guarantor other than the Concurso Proceeding; or 5) Any Note Guarantor shall voluntarily institute an insolvency proceeding or become a debtor under an existing insolvency proceeding, or an involuntary insolvency proceeding other than under the Mexican Business Reorganization Act shall be instituted against any Note Guarantor other than by a Supporting Creditor and not be dismissed within sixty (60) days from its commencement; or 6) The Company or the members of the Note Guarantor Group shall have failed to pay any fees and disbursements of Bingham, Canales y Socios, Asesoria Juridica, Capstone Corporate Recovery, LLC, Mayer, Brown, Rowe & Maw LLP, Martinez Algaba Estrella de Haro y Galvan Duque, or Mexican restructuring counsel to the Bank Lenders, as advisors to the Bank Lenders or Noteholders, within seven (7) days of having been given written notice by such party (including, without limitation, notice by electronic mail) that an invoice is past due. If any portion of such fees and expenses is disputed by the Company in good faith, the Company need not pay the disputed portion if (i) the Company timely pays that portion of fees and expenses not subject to dispute, and (ii) the relevant parties promptly proceed in good faith to resolve such dispute within fifteen (15) days; or 7) The Company or one or more Note Guarantors shall have expressed in writing or by public press release or SEC filing or Bolsa Mexicana de Valores filing its intention not to pursue the Restructuring; or 8) The claims alleged against the Company (or any Note Guarantor) consisting of: (i) that certain action filed April 2, 2004 by The Official Committee of Unsecured Creditors of Durango-Georgia Paper Company, Durango-Georgia Converting Corp., and Durango-Georgia Converting LLC in the Name of and Behalf of the Bankruptcy Estates of Durango-Georgia Paper Company, Durango-Georgia Converting Corp, and Durango-Georgia Converting, LLC, Adversary Proceeding No. 04-2070, pending before the United States Bankruptcy Court for the Southern District of Georgia, Brunswick Division; (ii) that certain action filed December 19, 2002, by HG Estate LLC, Case No. 02 CV 10059 (CSH), pending before the United States District Court for the Southern District of New York; and (iii) any other claims arising from or related to Durango-Georgia Paper Company, Durango-Georgia Converting Corp., and Durango-Georgia Converting LLC (collectively, the "Contingent Claims"), are settled, resolved, dismissed or treated in any manner, including, without limitation, under a plan of reorganization, which in any case contemplates the payment or delivery of money, property, securities, or the incurrence of any other obligation of either the Company or any Note Guarantor which is inconsistent with the terms previously agreed upon by the Parties; or 9) The Company or any Note Guarantor shall fail to support an application by the Ad Hoc Bondholders Committee and/or the Bank Lenders, acting through their respective counsel, to be appointed pursuant to Article 63 of the Mexican Business Reorganization Act as conservators with the powers set forth in Article 64 of the Mexican Business Reorganization Act, including the right to be heard in the Concurso Proceeding; or 10) The Company or one or more of the Note Guarantors, Intercompany Creditors or Individual Signatories shall take any action which is materially inconsistent with the implementation of the Restructuring;or 11) If the business, properties, assets or financial condition of the Company and the Note Guarantors (taken as a whole) shall have been materially and adversely affected since the date of this Agreement by reason of any act of God, war, civil disturbance, terrorism, earthquake, flood, fire, other casualty event, expropriation or nationalization, as reasonably determined in writing by (i) Bank Lenders holding at least 66 2/3% of the aggregate amount of the Existing Bank Debt or Noteholders holding at least 66 2/3% of the aggregate amount of the Existing Notes, or (ii) Bank Lenders and Noteholders holding at least 51% of the aggregate amount of Existing Notes and Existing Bank Debt; or 12) The Company shall fail to confirm the Plan by February 28, 2005. (b) Except as otherwise provided in Section 25 hereof, this Agreement shall terminate automatically without any action on the part of any Party to this Agreement upon consummation of the transactions contemplated under the Term Sheet. 8. Representations and Warranties. (a) Each Supporting Creditor (other than the Individual Signatories) severally hereby represents and warrants to the Company that: 1) It has the requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated by, and perform its respective obligations under, this Agreement; 2) The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary corporate or other organizational action on its part; 3) The execution, delivery, and performance by it of this Agreement does not and shall not (i) violate any provision of law, rule, or regulation applicable to it or any of its affiliates, or its certificate of incorporation or bylaws or other organizational documents or those of any of its affiliates, or (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation to which it or any of its affiliates is a party; 4) The execution, delivery, and performance by it of this Agreement does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with any federal, state, or other governmental authority or regulatory body; 5) This Agreement is the legally valid and binding obligation of it, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws relating to or limiting creditors' rights generally, or by equitable principles relating to enforceability; 6) It is an "accredited investor" within the meaning of Rule 501 of the Securities and Exchange Commission under the Securities Act, with sufficient knowledge and experience to evaluate properly the terms and conditions of the Term Sheet and this Agreement, and has been afforded the opportunity to discuss the Term Sheet and other information concerning the Company with the Company's representa- tives, and to consult with its legal and financial advisors with respect to its investment decision to execute this Agreement, and (ii) it has made its own analysis and decision to enter into this Agreement and otherwise investigated this matter to its full satisfaction and will not seek rescission or revocation of this Agreement; and (b) The Company and each of the Note Guarantors represent and warrant to each of the Supporting Creditors that: 1) It has the requisite corporate power and authority to enter into this Agreement and to carry out the transactions contemplated by, and perform its respective obligations under, this Agreement; 2) The execution and delivery of this Agreement and the performance of its obligations hereunder have been duly authorized by all necessary corporate or other organizational action on its part; 3) The execution, delivery, and performance by it of this Agreement does not and shall not (i) violate any provision of law, rule, or regulation applicable to it or any of its affiliates, or its certificate of incorporation or bylaws or other organizational documents or those of any of its affiliates, or (ii) conflict with, result in a breach of, or constitute (with due notice or lapse of time or both) a default under any material contractual obligation to which it or any of its affiliates is a party; 4) The execution, delivery, and performance by it of this Agreement does not and shall not require any registration or filing with, the consent or approval of, notice to, or any other action with any federal, state, or other governmental authority or regulatory body; 5) This Agreement is the legally valid and binding obligation of it, enforceable against it in accordance with its terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium, or other similar laws relating to or limiting creditors' rights generally, or by equitable principles relating to enforceability; 6) It has been advised by professionals of international standing and experience in transactions of this nature, and has been afforded the opportunity to discuss and evaluate the term and conditions of the Term Sheet and this Agreement, and to consult with its legal and financial advisors with respect to its decision to execute this Agreement and it has made its own analysis and decision to enter into this Agreement and otherwise investigated this matter to its full satisfaction and will not seek rescission or revocation of this Agreement; 7) To the best of their knowledge and belief, the debt held by the Intercompany Creditors and the Individual Signatories represent the only debt of the Company held by persons or entities affiliated with the Company; and 8) The Individual Signatories collectively hold, directly or indirectly, a majority of the issued and outstanding shares of the Company's capital stock. 9) Specific Performance. It is understood and agreed by each of the Parties that money damages would not be a sufficient remedy for any breach of this Agreement by any Party, and each non- breaching Party shall be entitled to seek specific performance and injunctive or other equitable relief as a remedy for such breach. 10) Material Non-Public Information. If the Company or any Note Guarantor, Intercompany Creditor or Individual Signatory proposes to provide any Supporting Creditor with material information concerning the Company which is not available to the public, the Company or such Note Guarantor, Intercompany Creditor or Individual Signatory shall first inform such Supporting Creditor of such fact and give it the option to decline to receive such information. 11) Indemnification of Supporting Creditors. The Company and each of the Note Guarantors shall, jointly and severally, indemnify each of the Indemnified Parties and hold them harmless from and against any and all claims, liabilities, actions, suits, damages, fines, and judgments (including the current payment of legal fees and expenses) directly or indirectly resulting from, arising out of, or in any way connected with (a) such Supporting Creditor's entering into this Agreement or (b) any action taken by such Supporting Creditor in good faith which is in furtherance of the Restructuring or required by this Agreement, including any action permitted by the final sentence of Section 4 hereof. An Indemnified Party shall promptly notify the Company and each of the Note Guarantors in writing of any claim made against it which falls within the scope of this indemnity, and the Company and each of the Note Guarantors shall assume the defense of such claim, including, without limitation, the employment of counsel satisfactory to the Company and the Note Guarantors, at its expense. Each Indemnified Party shall have the right to employ separate counsel in any such claim, action or proceeding and to consult with the Company in the defense thereof, and the obligation to pay fees and expenses of such counsel shall be joint and several obligations of the Company and each Note Guarantor unless the Company or a Note Guarantor shall have assumed the defense of such claim, action or proceeding. The Company or any of the Note Guarantors shall not effect any settlement of any such claim unless such settlement contains a full and unconditional release of the Indemnified Party. As used in this Section "Indemnified Party" shall mean any one or more of the Supporting Creditors or their officers, directors, employees, agents,representatives, advisors, attorneys, successors or assigns. 12) Successors and Assigns. Except as otherwise provided in this Agreement, this Agreement is intended to bind and inure to the benefit of each of the Parties and each of their respective successors, assigns, heirs, executors, administrators, and representatives. 13) No Third-Party Beneficiaries. Unless expressly stated herein, this Agreement shall be solely for the benefit of the Parties and no other person or entity shall be a third-party beneficiary of this Agreement. 14) Prior Agreements. This Agreement supersedes all prior negotiations and agreements among the Parties with respect to the matters set forth herein. 15) Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, regardless of the laws that might otherwise govern under applicable principles of conflicts of law of the State of New York. 16) Venue. By execution and delivery of this Agreement, each of the Parties irrevocably and unconditionally agrees that any legal action, suit, proceeding or other contested matter with respect to any matter under or arising out of or in connection with this Agreement, or for recognition or enforcement of any judgment rendered or order entered in any such action, suit, or proceeding, shall be brought in the Bankruptcy Court. Each Party irrevocably waives any objection it may have to the venue of any action, suit or proceeding brought in such court or to the convenience of the forum. 17) Personal Jurisdiction. By execution and delivery of this Agreement, each of the Parties irrevocably and unconditionally submits to the personal jurisdiction of the Bankruptcy Court for purposes of any action, suit or proceeding or other contested matter arising out of or relating to this Agreement, or for recognition or enforcement of any judgment rendered or order entered in any such action, suit, or proceeding or other contested matter. 18) Notices. All notices (including, without limitation, any Notice of Termination) and other communications hereunder shall be in writing and shall be deemed to have been duly given if personally delivered by courier service, messenger, or facsimile to the following addresses, or such other addresses as may be furnished hereafter by notice in writing: (a) if to Corporacion Durango, any of the Note Guarantors or the Intercompany Creditors: Corporacion Durango, S.A. de C.V. Potasio No. 150 Cd. Industrial - Durango C.P. 34220 Durango Mexico Attention: Mayela Rincon Facsimile: 011-52-618-814-0048 -and- Javier Perez Rocha Cuahtemoc 84-A Col. Toriello Guerra 14050 Mexico, D.F. Facsimile: 52 (55) 5666-2562 (b) if to a Noteholder, to counsel for the Noteholders: Bingham McCutchen LLP One State Street Hartford, Connecticut 06103-3178 Attention: Michael J. Reilly; William B. Kelly; and William F. Govier Facsimile: (860) 240-2800 (c) if to a Bank Lender, to counsel for the Bank Lenders: Mayer, Brown, Rowe & Maw LLP 1675 Broadway New York, NY 10019-5820 Attention: David K. Duffee Facsimile: (212) 849-5630 19) Headings. The section headings of this Agreement are for convenience of reference only and shall not, for any purpose, be deemed a part of this Agreement. 20) Amendments. The Parties acknowledge and agree that the Termination Events set forth in Section 7 hereof and the Term Sheet attached hereto as Exhibit A are a material inducement for the Supporting Creditors to enter into this Agreement, and that no grace periods are intended. Accordingly, except as otherwise provided herein, no waiver, extension or modification of any Termination Event or Term Sheet may be effectuated as to any Supporting Creditor except in a writing signed by the Company and such Supporting Creditor. As to any other provision contained in this Agreement, this Agreement may not be modified, amended, or supplemented, and no provision hereof waived, except in a writing signed, as to the Bank Lenders, by the Company and Bank Lenders holding at least 66 2/3% of the aggregate amount of Existing Bank Debt, and as to the Noteholders, by the Company and Noteholders holding at least 66 2/3% of the aggregate amount of Existing Notes. 21) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall constitute one and the same Agreement. Delivery of an executed signature page of this Agreement by facsimile shall be effective as delivery of a manually executed signature page of this Agreement. 22) No Waiver of Participation and Reservation of Rights. Except as expressly provided in this Agreement and in any amendment among the Parties, nothing herein is intended to, or does, in any manner waive, limit, impair, or restrict the ability of any Supporting Creditor or the Company to protect and preserve its rights, remedies and interests, including, without limitation, its claims against Corporacion Durango or any of the Note Guarantors or its full participation in any bankruptcy case filed by Corporacion Durango, or any of its affiliates and subsidiaries, including without limitation, the Concurso Proceeding. The Parties fully reserve any and all of their rights in the event the transactions contemplated by this Agreement or in the Plan are not consummated or this Agreement is terminated, including all rights to (i) object to any request in the 304 Case, including without limitation, the Injunctive Relief, and (ii) request to accelerate the final hearing on the Company's request for the 304 Case. 23) Interpretation. This Agreement is the product of negotiations among the Supporting Creditors, the Company and the Note Guarantors, and in the enforcement or interpretation hereof, is to be interpreted in a neutral manner, and any presumption with regard to interpretation for or against any Party by reason of that Party having drafted or caused to be drafted this Agreement or any portion hereof, shall not be effective in regard to the interpretation hereof. 24) Acknowledgement. This Agreement is not and shall not be deemed to be a solicitation of votes for the acceptance of the Plan. 25) Survival. The representations, warranties, covenants and other agreements contained in this Agreement shall cease to be of any force and effect upon the termination of this Agreement pursuant to Section 7 hereof; provided, however, that the obligations of the Company and the Note Guarantors set forth in Section 11 hereof shall survive any such termination for a period of one year from the date of such termination. 26) Limitation of Liability. Notwithstanding anything in this Agreement to the contrary, (i) if any of the Individual Signatories fails to perform any of its obligations under this Agreement, the sole and exclusive remedy of the other Parties as against the Individual Signatory shall be the right, if any, to terminate this Agreement pursuant to Section 7 hereof; (ii) none of the Individual Signatories, on the one hand, and the other Supporting Creditors, on the other hand, shall be liable to each other for any damages arising from, in connection with, or as a result of a failure to perform or termination of this Agreement by any Party hereto, and (iii) the Individual Signatories, on the one hand, and the other Supporting Creditors, on the other hand, covenant and agree among themselves not to sue each other for any claims arising from, in connection with, or as a result of a failure to perform or termination of this Agreement. CONTACT: Corporacion Durango, S.A. de C.V Ms. Mayela R. Velasco Phone: +52 (618) 829 1008 e-mail: mrinconv@corpdgo.com.mx White & Case LLP Mr. Emilio J. Alvarez-Farre Phone: (305) 995-5219 e-mail: ealvarez@whitecase.com JAFRA COSMETICS: Moody's Confirms Ratings ----------------------------------------- Moody's Investors Service confirmed the ratings of Jafra Cosmetics International, Inc. and its affiliates following Moody's completion of its review of the company's merger with Vorwerk & Co. KG. The following ratings were confirmed: - Distribuidora Comercial Jafra, S.A. de C.V. and Jafra Cosmetics International, Inc.: $200 million senior subordinated notes due 2011, at B3. - Jafra Worldwide Holdings (Lux), S.aR.L: Senior implied rating, at B1 and Senior unsecured issuer rating, at B2 The outlook remains positive. Moody's said the confirmation reflects Jafra's robust business model in Mexico and its more streamlined focus on fewer markets, offset by the limited history of operations under its new corporate parent, limited debt pay down since its 2003 recapitalization, and its heavy reliance for sales and profitability on its core Mexican operations. The ratings also reflect management's experience in implementing strategies to grow its consultant base and improve productivity and a strong track record of product quality and innovation, as well as the relatively recession resistant nature of its business. The ratings also reflect the competitive and operating challenges of a multi-level direct selling model, with the attendant risks of consultant turnover and productivity; the foreign exchange risk of having significant dollar denominated debt service expenses; and Jafra's relatively high inventory levels and its practice of extending credit terms to its consultants that result in ongoing working capital needs. Risks to Jafra's ratings include a new corporate parent, Vorwerk, with a yet unknown impact on Jafra's business and operating strategy and the heavy concentration of the company's business with 63% (2003) of sales and 78% (2003 after certain adjustments) of operating profit coming from Mexico. CONTACT: JAFRA COSMETICS INTERNATIONAL S.A. DE C.V. Blvd. Adolfo Lopez Mateos #515 Colonia Tlacopac 01040 Mexico, D.F. Tel: 52-55-5490-1700 Email: adrian_moncada@jafra.com NAFIN-BANCOMEXT: Congress Rules Out Merger, Liquidation ------------------------------------------------------- Mexico's Congress discussed and rejected Wednesday a proposal by President Vicente Fox to merge or liquidate State credit organization Nacional Financiera (Nafin) and the National Foreign Trade Bank (Bancomext), reports Cronica. Deeming the options unviable, the Permanent Commission requested the Executive branch to find other options to strengthen their financial situations. "Congress rejected the merger or liquidation because it believes that it is an inadequate solution that damages the capacity of the Mexican State and the financial system to support the sustained and equitable development of Mexico," the Commission said in an accord. The document explains that the reasons why these banks cannot fulfill their functions lie in "the lack of an efficient government promotional strategy, in the application of inadequate policies, the need for sufficient support and the incapability of its directors," the accord added. It stated that the merger of liquidation of the institutions is a "false" solution that confuses their problems with the absence of strategy. PEMEX: Issues Another $44M Short-Term Bonds ------------------------------------------- Mexico's state oil company Pemex issued MXN500 million (US$44mn) worth of short-term bonds on the Mexico City stock exchange on August 26, reports Business News Americas. In a statement, the company revealed that the 28-day, fixed interest bonds pay 7.46%, and the auction was 10 times oversubscribed. Scotiabank Inverlat and Santander Serfin acted as intermediaries on the transaction. On August 18, Pemex also issued short-term bonds worth MXN500 million and was 17 times oversubscribed. VITRO: S&P Affirms Ratings; Outlook Negative -------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B+' long-term local and foreign currency corporate credit ratings on glass manufacturer Vitro S.A. de C.V. (Vitro). Vitro's 'mxBBB' long- term national scale corporate credit rating was also affirmed. The outlook is negative. Standard & Poor's also affirmed the 'B-' rating assigned to Vitro's notes due 2013 and to Servicios y Operaciones Financieras Vitro S.A. de C.V.'s notes due 2007 (which are guaranteed by Vitro). "The ratings on Vitro S.A. de C.V. are constrained by the company's high financial leverage, its limited liquidity, and a challenging operating environment across its product lines," said Standard & Poor's credit analyst Jose Coballasi. "The ratings are supported by the company's leading position in flat glass, glass containers, and glassware business in Mexico, and by Vitro's export activities and international operations (particularly in the U.S.), which accounted for 50% of total sales." The negative outlook reflects the fact that continued weakness in the company's key financial measures or the weakening of its liquidity could lead to a downgrade. A recovery in the company's operating and financial performance and the continued success of its refinancing plans could lead to a stable outlook. Monterrey, Mexico-based Vitro, through its subsidiary companies, is Mexico's leading glass producer. Vitro is a major participant in three principal businesses: flat glass, glass containers, and glassware. Vitro also produces raw materials and equipment and capital goods for industrial use. ANALYSTS: Jose Coballasi, Mexico City (52) 55-5081-4414 Santiago Carniado, Mexico City (52) 55-5081-4413 ============= U R U G U A Y ============= * $204M IMF Credit Line Available for Uruguay --------------------------------------------- The Executive Board of the International Monetary Fund (IMF) completed Friday the fifth review under the SDR 2.13 billion (US$3.1 billion) Stand-By Arrangement (SBA) for Uruguay. Completion of the review makes SDR 139.8 million (about US$204 million) immediately available to Uruguay. In completing the review, the Board granted waivers of nonobservance of two structural performance criteria on banking sector reforms and waivers of applicability of end-June 2004 performance criteria, for which data was not available, on the public sector primary balance and the nonfinancial public sector gross debt. Furthermore, upon request by Uruguay in view of the improvement in Uruguay's economic outlook and external position, the remaining access under the SBA was reduced by SDR 139.8 million. Further disbursements under the SBA will be rephased in two equal installments of SDR 139.8 million each (about US$204 million) that will become available following the completion of Executive Board reviews expected in November 2004, and February 2005. The SBA was approved on March 25, 2002 in an amount of SDR 594.1 million (about US$867 million) for a 24-month period (see Press Release No. 02/14). The SBA was augmented by SDR 1.16 billion (about US$1.7 billion) on June 25, 2002 (see News Brief. No. 2 54), and by SDR 376 million (about US$549 million) on August 8, 2002 (see News Brief. No. 02/87). Total commited resources under the Stand-By Arrangement now amount to SDR 1.99 billion (US$2.9 billion) taking into account the recently approved reduction in access. In commenting on the Executive Board decision, Agust�n Carstens, Deputy Managing Director and Acting Chair, said: "Uruguay's performance under the Stand-By Arrangement continues to be strong. The ongoing economic recovery has been faster than expected, reflecting implementation of prudent policies and a favorable external environment. Unemployment is down, financial indicators continue to improve, and the economic outlook for the remainder of 2004 and 2005 is encouraging. Consolidating the stabilization gains and sustaining the recovery will require continued implementation of sound policies, especially in the fiscal and bank restructuring areas, and policy continuity during the upcoming election period. "The authorities' commitment to a higher primary surplus target for 2004 is welcome, and will help enhance prospects for debt sustainability. To ensure that the target for this year will be met, primary spending will need to be kept within the program limits, tax revenue maintained, and public tariffs adjusted in a timely manner in line with cost developments. To bolster fiscal prospects over the medium term, revenue administration and the institutional framework for the budget will need to be strengthened, and pending reforms of the tax system and specialized pension funds implemented. The authorities are seeking consensus in support of the adoption of these essential reforms. "Monetary policy has been appropriately tightened in recent months to ensure that inflation returns within the target band. The authorities' intention to raise the net international reserves target for 2004 will lock in part of the overperformance on the reserves front achieved in the first half of the year. "Good progress is being made in restructuring the public financial institutions. BROU's strategic and operational reforms are proceeding as planned, and the BHU is reforming its operations with World Bank support. The process of asset disposal of three liquidated banks is now moving forward. Additional relief to bondholders and large depositors of the liquidated banks needs to be avoided. "The authorities are committed to maintaining the policy framework through the upcoming election period, and recognize that there is no room for slippages. Attaining the program's objectives will be critical for sustained growth, financial stability, and public debt sustainability," Mr. Carstens said. CONTACTS: International Monetary Fund 700 19th Street, NW Washington, D.C. 20431 USA Public Affairs: Phone: 202-623-7300 Fax: 202-623-6278 Media Relations: Phone: 202-623-7100 Fax: 202-623-6772 ================= V E N E Z U E L A ================= CANTV: S&P Upgrades Foreign Currency Corporate Credit Rating ------------------------------------------------------------ Standard & Poor's Ratings Services raised its foreign-currency corporate credit rating on Venezuelan full-service telecommunications company Compania Anonima Nacional Telefonos de Venezuela (CANTV) to 'B-' from 'CCC'. "The rating action follows the upgrade of the foreign currency sovereign rating on the Bolivarian Republic of Venezuela, which was upgraded yesterday [Thursday] to 'B' from 'B-'," said Standard & Poor's credit analyst Manuel Guerena. Subsequently, Standard & Poor's withdrew its rating on CANTV. There was no debt owed by CANTV rated by Standard & Poor's. ANALYSTS: Manuel Guerena, Mexico City (52) 55-5081-4411 Santiago Carniado, Mexico City (52) 55-5081-4413 *********** S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter - Latin America is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland USA. John D. Resnick, Edem Psamathe P. Alfeche and Lucilo Junior M. Pinili, Editors. Copyright 2004. All rights reserved. ISSN 1529-2746. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR Latin America subscription rate is $575 per half-year, delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. * * * End of Transmission * * *