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At a General Shareholders’ Meeting held on March 31, 2006 Embraer shareholders approved the Company’s corporate restructuring proposal, turning it into the first large Brazilian Company with dispersed corporate control. The restructuring will allow the creation of a basis for the sustainability, growth and continuity of the businesses and activities of Embraer, as its implementation will provide adequate access to the capital markets and the enhancement of its capacity to finance and develop new programs. In addition, the restructuring will strengthen management with regard to the adoption of best corporate governance practices, while preserving the Federal Government’s strategic rights. As a result of the new capital structure, the Company will have only one class of shares outstanding (common shares), thus extending voting rights to all of its shareholders and allowing the Company’s become a member of the São Paulo Stock Exchange’s New Market (“Mercado Novo”), which requires the highest level of corporate governance standards in Brazil. The Golden Share, a special class of share held by the Federal Government and which has veto powers over specific issues in connection with Embraer´s business, will have its rights fully preserved under the new structure. Pursuant to the guidelines issued by the Brazilian Securities Commission (Comissão de Valores Mobiliários) on corporate governance practices, and to provide greater transparency to the voting process, the approval of the restructuring proposal was submitted to all Embraer shareholders, regardless of the class of shares owned. The Corporate By-laws approved by the shareholders on March 31, 2006 establishes control mechanisms in order to ensure not only dispersed capital ownership, but also that a majority vote in the shareholders’ meeting resolutions will be exercised by Brazilian shareholders, thus ensuring that corporate resolutions remain in Brazilian hands - a condition established when the Company was privatized. The key control mechanisms are: 1.No shareholder or group of shareholders, whether Brazilian or foreign, may exercise voting rights in the General Shareholders’ Meetings representing more than 5% of the number of shares in the capital stock; The purpose of this limitation is to discourage the excessive concentration of shares or American Depositary Shares (ADS’s) in the hands of one single shareholder or group of related shareholders; 2.The total votes that may be cast by foreign shareholders, individually or collectively, in any General Shareholders’ Meeting, will be limited to 40% of the total votes present at such meeting. 3.Restriction to the acquisition by any shareholder or group of shareholders of an interest equal to or in excess of 35% of Embraer´s capital stock, unless under the express approval of the Federal Government as the holder of the Golden Share, and subject to a public tender offer for acquisition of shares. 4.The mandatory disclosure of a share ownership whenever: (i) any shareholder’s interest should be equal to or exceed 5% of the company’s capital stock; and (ii) any shareholder’s interest should increase by at least 5% of the company’s capital stock. The Board of Directors elected on March 31, 2006 is composed of 11 members and their respective alternates. In order to prevent a rupture in the short- and medium-term strategies devised by Management, and to ensure a coordinated and stable transition of Embraer to the dispersed capital control environment, the Board of Directors’ term of office was set at three years, and following this transition period consecutive terms of office should not exceed two years. In addition, the Board of Directors elected on the meeting held on April 23 2007, Mr. Frederico Fleury Curado as President and CEO of the Company, replacing Mr. Maurício Novis Botelho that is the Company’s Chairman of the Board of Directors. The Fiscal Board, responsible for monitoring management and examining the Company’s financial statements, will also form part of the transparency and good corporate governance policy. Embraer has a permanent board as provided by its By-laws, which meets at least once every three months. In compliance with the Sarbanes-Oxley Act applicable to foreign companies with shares traded in the US market, in 2004 Embraer introduced a number of changes in its Fiscal Board with a view to performing the functions of an Audit Committee. Consequently, Embraer´s Fiscal Board will act as an Audit Committee and is formed by five effective members, one of which a specialist in finance, and all of them holding a one-year term. More information about the Model of Corporate Governance
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