1. Consensual financial restructuring of companies in Serbia a short presentation of major features of new Law on consensual financial restructuring of companies 1July 2011 Consensual financial restructuring of companies

2. 2July 2011 The Law on consensual financial restructuring of companies The new Law on consensual financial restructuring of companies was adopted by the Serbian Parliament on May 25 th 2011, and published in the Official Gazette no. 36/2011. The Law entered into force on June 4 th 2011, and its application is due to commence after the expiration of 90 days from entering into force – which will be in the first week of September 2011. Consensual financial restructuring of companies  A legal novelty: The new Law on consensual financial restructuring of companies is a significant legal novelty in the Serbian economic and legal systems. It represents the “middle-of-the-road” between debt settlements and prepackaged reorganization plans.  An alternative to more radical solutions: The institute of consensual financial restructuring offers an alternative exit to debtors heavily hit by the economic crisis, but also to creditors who do not wish to go for enforced collection but are ready to give the debtor a second chance.  Will it be successful?: It remains to be seen in practice whether the goals of the legislator will be accomplished in the time to come.

3. 3July 2011 Consensual financial restructuring  Consensual financial restructuring is based on 2 major agreements: Financial Restructuring Agreement and Debt Standstill Agreement  For successful implementation of the consensual financial restructuring, mutual trust between debtors and creditors involved in the process is absolutely necessary  Financial restructuring can be implemented if a minimum of two domestic or foreign banks are involved in the process as creditors Financial Restructuring Agreement is similar to Bankruptcy Reorganization Plan, with some major differences Financial Restructuring Agreement need not include all creditors of the debtor whose debt is being restructured Financial Restructuring Agreement and Debt Standstill Agreement are binding only for the contracting parties It is not possible to impose the Financial Restructuring Agreement and Debt Standstill Agreement onto creditors who do not want to participate in the process Consensual financial restructuring of companies

4. 4July 2011 Debtor in consensual financial restructuring can be… … only a Company (as defined by the Companies Act) can be the Debtor in consensual financial restructuring The following entities can not be debtors: banks, insurance companies, underwriters of securities, private investment funds, fund management companies, broker-dealer companies, companies that provide financial leasing, companies that provide financial services Consensual financial restructuring of companies

5. 5July 2011 The rules and principles of consensual financial restructuring PRINCIPLES OF THE PROCEDURE Principle of Suitability Principle of Voluntariness Principle of “going concern” for the debtor Principle of conduct in good faith Principle of cooperation and coordination between creditors Principle of equality of the status of creditors and status proportionate to the amount of claims Principle of access to information and confidentiality of data Consensual financial restructuring of companies  Consensual financial restructuring, as defined by the Law, is re-arranging of debtor- creditor relationship between a company in financial difficulties and its creditors  Financial difficulties, as defined by the Law, are: inability to pay debts (illiquidity), threatening inability to pay debts (threatening illiquidity) and over- indebtedness  Debt Standstill is a temporary suspension of the fulfillment of the debtor’s obligations; as well as prohibition or stay of enforced collection for creditors who participate in the financial restructuring

6. July 2011 Consensual financial restructuring of companies 6 Measures of financial restructuring Reprogramming of debt Liquidation of the debtor’s property or transfer of the property as a way of debt settlement Discharge of debt Execution, amendment or waiver of lien Providing of additional collateral by the debtor or third parties, including giving guarantees and warranties Debt to equity swap Issuance of Securities Other measures of importance for the implementation of financial restructuring Inter-mediation in negotiations between the debtor and the creditors  Institutional inter-mediation by the Serbian Chamber of Commerce (at the request of the debtor or the creditors)  Contractual inter-mediation by an Expert Consultant (with mandatory participation of the institutional intermediary)

7. Comparison between consensual financial restructuring and bankruptcy reorganization Consensual Financial RestructuringBankruptcy Reorganization Does not affect the reputation of the debtor Bankruptcy proceedings significantly affect the reputation of the debtor Voluntary procedure, written consent of every creditor is mandatory A majority of 50% of creditors in each class is required for the adoption of the Plan, so the Plan can be “crammed down” onto the disagreeing creditors CheaperMore expensive Based on trust and useful for deepening of business relationships and development of better business culture All the parties are usually hostile to each other because everyone wants to gain more No interference by the judiciary or the administrationCourts and bankruptcy trustees No advance paymentsAdvance payments Financial projections are optionalFinancial projections are mandatory The Chamber of Commerce and the Expert Consultant are the intermediaries in negotiations between the debtor and the creditors The debtor usually directly negotiates with the creditors If the debtor fails to fulfill his obligations under the Financial Restructuring Agreement, he may be liable for damages If the debtor fails to fulfill his obligations under the Reorganization Plan, he may be liquidated instead of reorganized Voluntarily Obligingness July 2011 Consensual financial restructuring of companies 7

8. 8July 2011 Our services and contact details Drafting of Financial Restructuring Agreements Drafting of Debt Standstill Agreements Registration of changes with the public registries on behalf of the Client Inter-mediation in negotiations between the debtor and the creditors Financial Advisory Company WM Equity Partners Ltd. Belgrade is specialized in providing full spectrum of services in cases of out-of-court (consensual) restructuring and bankruptcy reorganization. Contact details: WM Equity Partners d.o.o. Beograd Bulevar Mihaila Pupina 10A/II New Belgrade Vladimir Pavlović, MSc, CFA, CEO Tel: +381 11 3343 317 Fax: +381 11 3343 987 vladimir.pavlovic@wmep.rs We remain at your disposal for any further questions or information. Consensual financial restructuring of companies