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By laws, Policies and Regulations

By-laws

Chapter I - Name, objects, head office and duration

Clause 1. GRENDENE S.A. is a Brazilian corporation, ruled by these Bylaws and by the applicable legislation.

§1 With the Company's inclusion in the Novo Mercado listing segment of the São Paulo Stock Exchange ("BM&FBovespa") – Bolsa de Valores, Mercadorias e Futuros ("the Novo Mercado "), the Company, its stockholders, Management and members of its Audit Board (when installed), are subject to the provisions of the Listing Regulations of the Novo Mercado of the BM&FBovespa ("the Novo Mercado Regulations")

§2 The provisions of the Novo Mercado Regulations shall prevail over the provisions of the Bylaws, in the event of any loss or damage being occasioned to the rights of any person to whom any public offer provided for in these Bylaws is addressed.

Clause 2. The Company's objects are:

I. Manufacture, sale, exportation and importation of: 

(a) footwear and apparel items in general; 
(b) components and parts for footwear, and apparel items in general; 
(c) matrices and molds for the footwear industry, apparel items and plastic items of any type; 
(d) PVC, resins, plastifying oils, EVA and other raw materials and inputs used for the manufacture of footwear; 
(e) accessories, perfume items, cosmetics, jewelry, watches, eyewear, games, toys, gifts, and promotional materials associated with the products produced by the company; 
(f) individual protection equipment. 

II. Provision of services, including information technology services, relating to the activities described in item (i).

III. Importation of industrial machines and their accessories, and equipment, specialized tools and devices related to the Company's objects. 

IV. Holding of interests in the form of shares or share units in other companies in Brazil or elsewhere, through investment of its own funds or amounts of tax incentives.

Clause 3. The Company has its headquarters and legal domicile in the city of Sobral, in the State of Ceará, at Avenida Pimentel Gomes 214, CEP 62040-125, and may open or maintain branch offices, agencies, offices or representatives in any place in Brazil or elsewhere, upon decision by the Executive Board.

Clause 4. The Company is of indeterminate duration.

Chapter II - Registered Capital and Shares

Clause 5. The registered capital, subscribed and totally paid up, is R$ 1,231,301,604.46 (one billion, two hundred and thirty one million, three hundred and one thousand, six hundred and four Reais and forty six centavos), divided into 902,160,000 (nine hundred and two million, one hundred and sixty thousand) nominal, book-entry, common shares without par value.

§1 Each common share carries the right to one vote in decisions of the General Meeting of Stockholders.

§2 All the Company's shares are held on deposit in the name of their holders at a depositary institution authorized by the Brazilian Securities Commission (CVM) with which the Company maintains a current custody contract. Certificates are not issued.

§3 The depositary institution may charge stockholders the cost of the service of transfer and registry of ownership of book-entry shares, and also the cost of services relative to the shares held in custody, subject to the maximum limits set by the CVM.

§4 The Company may not issue preferred shares or founders' shares.

§5 Except as specified in § 1 of Clause 6, shareholders have the right of preference, in proportion to their holdings, to subscribe shares, convertible debentures or warrants issued by the Company, which may be exercised within the legal period of 30 (thirty) days for the exercise of this right.

Clause 6. The Company's registered capital may be increased by up to 900,000,000 (nine hundred million) common shares, without the need for a change in the Bylaws, upon decision by the Board of Directors, which has competence to set the issue price and other conditions of subscription and paying-up of the shares within the authorized capital. 

§1 The Company may issue shares, debentures convertible into shares or warrants without the existing stockholders having the right of preference, or with reduction of the period for exercise of the right of preference specified in Article 171, § 4, of Law 6404/76, provided that these securities are placed (a) by sale on a securities exchange or through public subscription or (b) by exchange of shares, in a public offer for acquisition of control.

§2 Within the limit of authorized capital, and in accordance with any plan that is approved by the General Meeting of Stockholders, the Company may grant options to purchase shares to managers, employees, or individuals who provide services to the Company, or to a company under its control.

Chapter III - Shareholders General Meetings

Clause 7. A General Meeting of Stockholders that is called and opened in accordance with the applicable legislation and the provisions of these Bylaws has powers to decide all business relating to the Company's objects and to take all such decisions as it believes to be appropriate to its defense and development.

§1 The General Meetings of Stockholders shall be held at the Company's head office, and may be held elsewhere for any force majeure reason, or in any manner specified by law or by any normative instruction of the competent bodies.

Clause 8. The General Meeting of Stockholders shall be held (a) ordinarily, once a year, in the first 4 (four) months following the closing of each business year, to decide on the matters specified in Clause 131 of Law 6404/76, and (b) extraordinarily, whenever the Company's corporate interests so require, subject to the provisions of the law and the Bylaws.

Clause 9. The General Meeting of Stockholders shall be called by the Chairman of the Board of Directors or, in the event of his omission, by the Vice-chairman of the Board of Directors. In the event of omission by the latter, the meeting shall be called by 2 (two) members of the Board of Directors jointly. The General Meeting of Stockholders may also be called by the persons mentioned in the sole sub-paragraph of Clause 123 of Law 6404/76, in the circumstances therein referred to. The first convocation shall be made at least 15 (fifteen) days prior to the date set for holding the General Meeting, such period to be counted from the publication of the first convocation announcement, which must contain the place, date and time of the meeting, and the agenda. If the General Meeting is not held after the first convocation, a new advertisement shall be published, of second convocation, with minimum prior notice of 8 (eight) days. 

Clause 10.
 To take part in and vote at the General Meeting, for the purpose of optimizing organization stockholders should prove their status as such, presenting an identity document and a document of proof issued by the depositary institution, either original or in the form of a copy sent by fax or e-mail, at least 2 (two) business day in advance of the date of the Meeting. Stockholders represented by persons holding power of attorney must exhibit the powers of attorney up to that same moment and by the same means referred to in this Clause 10. The originals of the documents referred to in this Clause 10, or copies of them, authentication and recognition of signature not being required, must be exhibited to the Company by the moment of opening of the business of the related General Meeting. Independently of the above, any stockholder attending the meeting in possession of the required documents may participate and vote, even if that stockholder has omitted to deposit them previously.

Clause 11. The General Meeting of Stockholders must be installed and chaired by the Chairman of the Board of Directors, who shall appoint the Secretary of the meeting. In the absence of the Chairman of the Board of Directors, the General Meeting of Stockholders shall be installed and chaired by the Vice-chairman of the Board of Directors. In the absence of the Vice-chairman of the Board of Directors, the business of the General Meeting shall be brought into session and chaired by any such other member of the Board of Directors, or Chief Officer, as is appointed by the majority of the votes of the shareholders present at the General Meeting or represented by power of attorney, and this person shall appoint the Secretary of the meeting.

Chapter IV - Management  

Section I
General provisions

Clause 12. The Company shall be managed by the Board of Directors and by the Executive Board in accordance with law and these Bylaws. The members of the Board of Directors shall be elected by the General Meeting of Stockholders and the members of the Executive Board shall be elected by the Board of Directors. 

Clause 13. Managers may take office only after signing the Managers' Term of Consent referred to by the Novo Mercado Regulations, and complying with the other requirements of law.

Clause 14 – The General Meeting of Stockholders has the competence to set the remuneration of the managers, individually or globally. In the latter case, the Board of Directors has the competence to allocate the remuneration to be set, including variable remuneration, between the members of the Board of Directors and the members of the Executive Board.

Section II 
The Board of Directors

Clause 15. The Board of Directors shall have a minimum of five and a maximum of seven sitting members, of whom at least 20% (twenty per cent) must be Independent Members, as defined in the Novo Mercado Regulations, and expressly declared as such in the Minutes of the General Meeting of Stockholders which elects them. Board Members elected under the option specified in Article 141, Paragraphs 4 and 5, or Article 239, of Law 6405/76 shall also be deemed to be Independent Members. At each Ordinary General Meeting, the stockholders shall decide the number of sitting members to be elected at such meeting. The Board of Directors has a Chairman and a Vice-chairman, who are appointed by the General Meeting.

§1 When calculation of the percentage referred to in this Clause results in a fraction, rounding shall be applied in accordance with the terms of the Novo Mercado Regulations.

§2 The offices of Chair of the Board of Directors and President or Chief Executive Officer of the Company may not be held by the same person. 

Clause 16. The periods of office of the members of the Board of Directors shall run concurrently, being a maximum of 2 (two) years, re-election being permitted.

§1 In addition to the provisions of Clause 13, the members of the Board of Directors take office upon signature of an undertaking written in a book maintained for the purpose, and also the Managers' Term of Consent referred to in the Novo Mercado Regulations. No management guarantee is required.

§2 The members of the Board of Directors shall remain in their positions and in exercise of their functions until those replacing them take office, unless otherwise decided by the General Meeting of Stockholders.

Clause 17. In the event of the absence or temporary impediment of the Chairman, his or her functions shall be exercised by the Vice-chairman. In the absence or temporary impediment of the Vice-chairman, his or her functions shall be exercised by the sitting member appointed by the other members of the Board of Directors to assume such functions. In the event of absence or temporary impediment of any other member of the Board of Directors, his or her functions shall be exercised by any other member of the Board of Directors to whom he/she has granted powers for this effect, or, if no such grant exists, by a sitting member of the Board of Directors appointed by the other members to assume such functions.

§1 In the event of vacancy of any position of Board Member, a new member shall be elected by the General Meeting of Stockholders, whose period of office shall continue until the end of the unified period of office of the other Board Members. For the purposes of this Clause, vacancy takes place when there is dismissal, removal, death, resignation, proven impediment, invalidity or unjustified absence for more than 30 (thirty) consecutive days.

Clause 18. The Board of Directors shall meet, ordinarily, 4 (four) times a year, and, extraordinarily, whenever called by the Chairman or by the Vice-chairman or by decision of the majority of its members, or by request of the Executive Board. To be valid, the convocation must be made with at least 5 (five) days' prior notice, such notice to indicate the date and the time of the meeting and the subjects on the agenda.

§1 Convocation is dispensed with if all the members of the Board are present at the meeting.

§2 The Board Members may be called by letter using Advice of Receipt service, or by fax, or by e-mail. 

Clause 19. Meetings of the Board of Directors are chaired by its Chairman, or, in the Chairman's absence, by its Vice-chairman (or, in the latter's absence, by another member appointed by the majority vote of the other members). Meetings are opened with the presence of a majority of the sitting members. In the meetings, the Board Member may be represented by another member to whom he has granted powers for that effect, and such member may send his vote in writing, including by facsimile or e-mail.

§1 The Meetings of the Board of Directors shall be held at the head office of the Company or in the Company's administrative unit in the city of Farroupilha, in the State of Rio Grande do Sul, or at any other location, to be advised by the Chairman of the Board of Directors, or, in his absence by the Vice-chairman of the Board of Directors, or in the latter's absence, by the majority of the members of the Board of Directors, with the same period of prior notice required for convocation of meetings of the Board of Directors.

§2 Exceptionally, members of the Board may take part in meetings by telephone conference call or video conference call, provided that such possibility has been indicated in the announcement of the respective convocation. In this case, the minutes shall be transmitted by fax or e-mail to such Board Members as participate by this method, and such communication shall be re-transmitted to the Company after being signed by the Board Member in question. 

Clause 20. Each Board Member has the right to one vote in the meetings of the Board of Directors, whether in person or represented by one of his peers, upon presentation of a power of attorney that is specific for the meeting in question, including the vote of the absent member of the Board and his respective justification. Votes of members of the Board of Directors that have been sent in writing, prior to the meeting of the Board of Directors, shall be considered valid. Decisions of the meeting shall be valid if they have votes in favor by the majority of the Board members present at the meeting. Decisions must be recorded in minutes and registered in the Book of Minutes of the Meetings of the Board of Directors and, whenever they contain decisions the purpose of which is to produce effects on third parties, summaries of those minutes must be filed in the competent Commercial Registry and be published.

Clause 21. The following are competencies of the Board of Directors:

a. To elect, and to dismiss, the members of the Executive Board and to set their attributions, including the Investor Relations Director.

b. To approve the internal regulations of the Company, if any.

c. To set the general orientation of the business of the Company and of any company controlled by the Company ("Subsidiary");

d. To approve a Business Plan for the Company and its Subsidiaries and any capital investment and, as the case may be, any investment or capital expenditure that is not included in such Plan.

e. To monitor and inspect the management by the Chief Officers, examining, at any time, the minutes, books and papers of the Company and of its Subsidiaries, requesting information on contracts entered into, or in the process of being entered into, and any other acts. 

f. To call the General Meeting of Stockholders, in accordance with Clause 9 above, whenever necessary, or whenever required by law, and in accordance with these Bylaws.

g. To make statement of opinion on the report of management and the accounts presented by the Executive Board and the annual and/or interim financial statements and to propose application of the net profit for each year.

h. To decide on the issuance of shares or warrants within the limit of the authorized capital.

i. To authorize acquisition by the Company of shares issued by the Company to be held in treasury and/or for subsequent disposal.

j. To decide on issuance of debentures not convertible into shares and without real guarantee, and of promissory notes for public distribution in the terms of CVM Instruction 134.

k. To appoint and dismiss the Company's external auditors.

l. To authorize the raising of any loans or financings, by the Company or by any Subsidiary, the amounts of which, when considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, result in an aggregate amount greater than R$ 300,000,000.00 (three hundred million Reais).

m. To authorize disposal of, or placement of a lien or charge upon, any of the permanent assets of the Company or of any Subsidiary, the amount of which, when considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, results in an aggregate amount greater than R$ 360,000,000.00 (three hundred sixty million Reais).

n. To authorize the provision of real or personal guarantees of any nature by the Company or by any Subsidiary the amounts of which, when considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, result in an aggregate amount greater than R$ 360,000,000.00 (three hundred sixty million Reais). 

o. To authorize carrying out of acts that result in waiver of rights by the Company or by any subsidiary the amounts of which, when considered jointly with all such amounts over the period of 3 (three) months prior to the transaction, result in an aggregate amount greater than R$ 45,000,000.00 (forty five million Reais). 

p. To set the general conditions of, and to authorize the Company to enter into, contracts of any nature between the Company and any Subsidiary or Affiliated company or its managers or controlling stockholders, or between the Company and any company controlled by or affiliated with the managers or the controlling stockholders, and also with any other companies which are, by law or de facto, part of a single group with any such parties, when the individual values of any such contracts amount, individually or jointly, over a period of one year, to 1% or more of the Company's stockholders' equity.

q. To make statement of position on such subjects as the Executive Board presents to it for its consideration or to be submitted to the General Meeting of Stockholders.

r. To decide on the suspension of the activities of Company or of any subsidiary.

s. To take upon itself, at any time, examination of any subject relating to the business of the Company and its Subsidiaries that is not in the sphere of private competence of the General Meeting of Stockholders. 

t. To decide the list of three companies specialized in economic valuation of companies, for the preparation of the Valuation Opinion on the Company's shares, in the event of cancellation of the Company's registry with the CVM, or its leaving the Novo Mercado. 

u. To approve the contracting of the depositary institution to provide the book-entry share services.

v. To state a position in favor of or contrary to any public offer for acquisition of shares issued by the Company, through a prior Opinion Statement, expressed with grounds, which must be published no later than 15 (fifteen) days after publication of the announcement of the public offer for acquisition of shares, and such Opinion Statement must deal with at least the following subjects: (i) whether the public offer for acquisition of shares is convenient and opportune in relation to the interests of the stockholders as a group and in relation to the liquidity of the securities they hold; (ii) the repercussions of the public offer for acquisition of shares on the interests of the Company; (iii) the strategic plans published by the offering party in relation to the Company; (iv) any other points that the Board of Directors considers to be relevant, and the information required by the applicable rules established by the CVM.

§1 The amounts mentioned in items “l”, “m”, “n” and “o” above shall be adjusted annually as from April 7, 2014, by the IGP-M index of the Getúlio VargasFoundation or such index as may in the future substitute it.

Section III
The Executive Board

Clause 22. The daily management of the company is the responsibility of the Executive Board, and its members, the Chief Officers, have full powers to manage its business, in accordance with their attributions and subject to the provisions established in law, in these Bylaws and in the Company's internal regulations, if any.

Clause 23. The Executive Board shall have at least three and a maximum of four sitting members, who may be stockholders or not, and are resident in Brazil. It shall have a Chief Executive Officer, a Deputy Chief Executive Officer, a Chief Administration and Financial Officer and a Chief Investor Relations Officer. Any member may hold more than one position, in compliance with the provisions of §2º of clause 15 of these Bylaws. The other members shall have the designation attributed to them by the Board of Directors. The following are the competencies that are specific to the Chief Executive Officer (and, in the latter’s absence, the Deputy Chief Executive Officer):

a. To chair the meetings of the Executive Board.

b. To coordinate the activities of the other members of the Executive Board. 

c. To act at all times in favor of execution of the decisions of the General Meeting of Stockholders, the Board of Directors and the Executive Board.

Clause 24. The period of office of the members of the Executive Board is 3 (three) years, re-election being permitted. In addition to the provisions of Clause 13, the members of the Executive Board take office in their appointments upon signature of the undertaking written in the specific book for the purpose or through their presence at, and signature in the record book of the Minutes of the Meeting of, the Board of Directors by which they were elected, and also signature of the Managers' Term of Consent referred to by the Novo Mercado Regulations. No management guarantee is required.

§1 The members of the Executive Board remain in their positions until their substitutes take office, unless otherwise decided by the Board of Directors.

Clause 25. In the event of absence or temporary impediment of the Chief Executive Officer, his functions shall be carried out by the Deputy Chief Executive Officer. In the absence or temporary impediment of the Deputy Chief Executive Officer, or of any other Director, that person's functions shall be exercised by the Chief Executive Officer.

§1 In the event of vacancy of any Chief Officer position, a new member shall be elected by the next meeting of the Board of Directors, which shall take place within a maximum period of ninety days after such vacancy. For the purposes of this Clause, a vacancy occurs when there is dismissal, removal, death, resignation, proven impediment, invalidity or unjustified absence for more than 30 (thirty) consecutive days.

Clause 26. Except as provided in Clause 27, active and passive representation of the Company, in Court or otherwise, shall be exercised individually by the Chief Executive Officer or by the Deputy Chief Executive Officer or (a) by 2 (two) Directors jointly, (b) by one Director jointly with a person holding a power of attorney with special and specific powers, or (c) by two persons holding powers of attorney with such powers. Powers of attorney granted by the Company shall be signed individually by the Chief Executive Officer or by the Deputy Chief Executive Officer, or by 2 (two) Directors jointly, or by one Chief Officer jointly with a person holding power of attorney, and shall contain specific powers and period of validity not greater than 2 (two) years (except in the case of a grant of such powers ad judicia et extra as the Executive Board may from time to time authorize).

Clause 27. Without prejudice to the provisions of Clause 26, the Company may be represented by 1 (one) Chief Officer or, further, by 1 (one) person holding a power of attorney with specific and special powers, including for grant of power of attorney, in the terms of Clause 26 above, acting in isolation, in the following circumstances:

a. In routine matters before federal, state and municipal public bodies, State authorities and mixed public-private sector companies, including but not limited to the following: the National Social Security Institute (INSS), the Workers' Time of Service Guarantee Fund (FGTS) administered by the Federal Savings Bank (CEF), the Federal Tax Revenue Department, including Inspectors' Offices, Federal Revenue Department Delegations and Agencies, State and/or Municipal Tax Authorities, State Commercial Boards, the National Industrial Property Institute, the Brazilian Central Bank, Secex, Banco do Brasil S.A., the Securities Commission (CVM), Ibama or other environmental bodies, the Civil Aviation Department (DAC) and Infraero, securities and commodities exchanges, Sudene/Adene, Sudam/Adam, state banks, development banks, and lending and investment financial institutions.

b. In collection and receipt of credits in favor of the Company.

c. In signature of correspondence on routine matters.

d. In representation of the Company in General Meetings of Stockholders of its Subsidiaries.

Clause 28. It is a competency of the Executive Board to decide on all such matters as are not in the specific competency of the General Meeting of Stockholders or the competency of the Board of Directors. The Executive Board shall meet, at least, once every three months, or whenever called by any of the Chief Officers. The minutes of the meetings must be in written in the Book of Minutes of Meetings of the Executive Board. The presence of the majority of the members constitutes a quorum for the meetings to be in session. Each member of the Executive Board has the right to one vote in the meetings. The decisions of the Executive Board are valid if they have votes in favor by the majority of the members present. If there is a tie, the Chief Executive Officer, or in his absence, the Deputy Chief Executive Officer, shall have the casting vote.

§1 It is the competency of the Board of Directors to enter into and carry out transactions and contracts, to contract obligations, and to carry out the acts specified in sub-items "l", "m", "n", and "o" of Clause 21 of these Bylaws, up to the limit of amounts therein established, with the exception of the provisions in the sole sub-paragraph of Clause 21 above.

Clause 29. Any act carried out by any member of the Board of Directors, member of the Executive Board, person holding a power of attorney or employee, that constitutes business extraneous to the Company's Objects, including in such definition the giving of a guarantee, surety, endorsement or any guarantee not related to the Objects, or contrary to the provisions of these Bylaws, is expressly forbidden, and is null and without effect in relation to the Company.

Chapter V - The Audit Board

Clause 30. The Company's Audit Board, with the attributions and powers that the law confers upon it, comprises 3 (three) sitting members and an equal number of substitute members, who may be stockholders, elected by the General Meeting of Stockholders, from among persons resident in Brazil, provided that they meet the legal requirements for the position.

§1 The Audit Board functions in a non-permanent manner, being brought into being only when the General Meeting of Stockholders so decides, in obedience at all times to the provisions of Law and these Bylaws.

§2 The Audit Board elects its Chairman in the first Meeting and functions in accordance with the internal regulations approved by the General Meeting of Stockholders that decides on its installation, if any.

§3 The decisions of the Audit Board are taken at all times by absolute majority of votes and shall be written, in the form of Minutes, in the specific book for the purpose, and signed by all those present.

§4 The General Meeting of Stockholders shall set the fees of the Audit Board, when functioning, subject always to the provisions of Law.

§5 Members of the Audit Board may take office only after signing the Term of Consent by Members of the Audit Board referred to in the Novo Mercado Regulations, and complying with the applicable requirements of law.

Chapter VI - The business year, distribution of profit and reserves

Clause 31. The Company's business year begins on January 1 and ends on December 31 of each year. At the end of each business year, the financial statements for the business year that is ending shall be prepared, to be presented to the Board of Directors and the General Meeting of Stockholders.

Clause 32. The shareholders are entitled to an annual obligatory dividend equivalent to, at least, 25% (twenty five per cent) of the net profit for the year, less or augmented by the following amounts:

a. 5% (five per cent) to constitute the legal reserve, until this reserve reaches the limits set by law; and

b. an amount allocated for formation of reserves for contingencies, and reversals of any such reserves that may have been formed in previous business years in the manner specified in Article 195 of the Brazilian Corporate Law.

§1 Payment of the dividend referred to by this Clause is limited to the amount of the net profit for the business year that has been realized, and the difference is recorded as a Future Earnings Reserve in the form specified in Article 197 of the Brazilian Corporate Law.  The profits recorded in the Future Earnings Reserve, when realized, if they have not been absorbed by losses in subsequent business years, shall be added to the first dividend declared after their realization.

§2 The General Meeting of Stockholders may, upon proposal from the Management Bodies, allocate a portion of the net profit for constitution and/or maintenance of a profits reserve arising under the By-laws, named the “Share Acquisition Reserve”, the purpose of which shall be redemption, repurchase or acquisition of shares issued by the Company, for purposes that may include compliance with its obligations to deliver shares to participants exercising their options under the Company’s Stock Options Plan, as approved by the Company.  The Share Acquisition Reserve may be formed from up to 100% of the net profit that remains after the deductions made by obligation of law and the By-laws, and its balance shall be equal to a maximum of 20% of the Company’s registered share capital.  At the end of the business year, any remaining balance not used in this reserve may be used, for the same purpose, for the following business year if management decides this to be necessary, upon approval by the General Meeting of Stockholders and, if not used wholly or in part, such balance shall revert for payment of dividends.  In the form specified in Article 198 of the Brazilian Corporate Law, allocation of profits for constitution of the Reserve for Acquisition of Shares may not be approved insurance such a way as to prejudice distribution of the obligatory dividend.

§3 Allocation of the remaining profits shall be such as is approved by the General Meeting of Stockholders, in accordance with the proposal made by the Executive Board, subject to compliance with the applicable provisions of law, notably Article 202, §6, of Law 6404/76.

Clause 33. By decision of the Executive Board, the Company may pay to its stockholders Interest on Equity, which shall be imputed against the obligatory dividend referred to in Clause 32, becoming, for all purposes, part of the amount of the dividends distributed by the Company.

§1 By decision of the Board of Directors, the Company may pay its stockholders dividends on account of retained earnings from previous years.

Clause 34. The Company may raise balance sheets at six-monthly, or quarterly, intervals, or more frequently, and may declare, by decision of the Board of Directors, dividends based on the profit ascertained in these financial statements, on account of the total to be distributed at the end of the respective business year, subject to the limitations specified by law. Dividends thus declared constitute advances against the obligatory dividend referred to in Clause 32.

§1 Dividends do not attract interest and if not claimed by any stockholder within a period of three years from the date of the decision for their distribution will revert in favor of the Company.

Clause 35. The General Meeting of Stockholders may, upon proposal by the Management Bodies, allocate to the Tax Incentive Reserve, in accordance with Article 195-A of Law 6404/76, as amended by Law 11638/2007, the portion of net profit arising from government donations or subsidies for investments, which may be excluded from the base of calculation of the obligatory dividend.

Chapter VII - Disposal of control

Clause 36. Disposal of shares that give one stockholder, or a group of stockholders which are linked by any type of voting agreement, whether directly or through subsidiaries, holding companies or companies under joint control, or between which there is a relationship of control or which are under joint control, the effective power to direct the company's activities and orient the functioning of the Company's bodies, directly or indirectly, in fact or in law, independently of the actual stockholding interest owned ("Power of Control"), either by means of a single transaction or by means of successive transactions, shall be contracted on the suspensive or cancelling condition that the acquiring party undertakes to make a public offer to acquire the shares of the other stockholders of the Company, complying with the conditions and period specified in the legislation from time to time in force and in the Novo Mercado Regulations, in such a way as to ensure that they receive equal treatment to that given to the disposing party. 

§1 There is a relative presumption of ownership of the Power of Control in relation to the person or group of stockholders that holds shares which have secured for it the absolute majority of the votes of stockholders present in the three most recent prior General Meetings of Stockholders of the Company, even if it is not holder of shares representing the absolute majority of the Company's voting stock.

Clause 37. The public offering for acquisition of shares referred to by the head paragraph of Clause 36 shall also be required when there is assignment, for consideration, of rights to subscribe shares or other securities or rights relating to securities convertible into shares, such as may result in disposal of shares that ensure the Power of Control of the Company. 

Clause 38. The public offer for acquisition of shares referred to in Clause 36 will also be required in the event of disposal of the Power of Control over a company or companies that hold/s the Power of Control over the Company. In this case, the stockholder disposing of the Power of Control of the company or companies shall be obliged to declare to the BM&FBovespa the value attributed to the Company in this disposal, and attach documentation that proves this amount.

Clause 39. Any party that acquires the Power of Control of the Company by reason of a private contract to purchase shares entered into with the stockholder or group of stockholders that represents the Power of Control of the Company, shall be obliged to: 

a. Make the public offer referred to in the head paragraph of Clause 36; and

b. Pay, in the terms set out below, an amount equivalent to the difference between the price of the public offer and the amount paid per share in any acquisition on a securities exchange in the six months prior to the date of acquisition of such shares as ensure for it the Power of Control over the Company, duly updated until the date of payment. This amount shall be distributed between all the parties that sold shares in the Company in the trading sessions in which the Acquiring Party made the acquisitions, in proportion to the net daily vendor balance of each one, it being for the BM&FBovespa to effect the operation of this distribution, in accordance with its regulations.
 

Chapter VIII - Cancellation of registry for listing

Clause 40. Without prejudice to the provisions of law and regulations, cancellation of the Company's registry for listing shall be preceded by a public offer to acquire shares, to be made by the stockholder holding the Power of Control or by the Company ("the Offering Party") having as obligatory minimum price the economic value ascertained in a Valuation Opinion.

Clause 41. The Valuation Opinion shall be prepared by a specialized company or institution with proven experience and independence in relation to the power of decision of the Company, its managers and/or stockholder or group of stockholders holding the Power of Control, and shall also satisfy the requirements of Paragraph 1 of Clause 8 of Law 6404/76, and contain a statement of the responsibility and liability referred to in Paragraph 6 of that Clause. 

§1 The choice of the specialized institution or company responsible for determination of the economic value of the Company is a specific competence of the General Meeting of Stockholders, subsequent to presentation, by the Board of Directors, of a list of three potential suppliers, and the respective decision, not taking into account blank votes, shall be taken by absolute majority of votes of the shares in circulation present at that General Meeting of Stockholders, which if installed on first convocation shall be attended by stockholders representing at least 20% (twenty per cent) of the total of the shares in circulation, or if installed on second convocation, may have attendance by any number of stockholders representing shares in circulation.

§2 For the purposes of the provisions of the first paragraph, shares in circulation are considered to be all the shares issued by the Company, except:

a. those held by the stockholder who holds the Power of Control, or by parties related to that stockholder; and

b. those held by Managers of the Company.

§3 The costs incurred in the preparation of the Opinion shall be borne by the Offering Party.

Clause 42. When announcement is made of a decision to cancel the Company's registry for listing, the Offering Party must publicize the maximum value per share for which it will make the public offer. The public offer shall be conditional on the value ascertained in the Valuation Opinion not being higher than the amount published by the Offering Party. If the economic value of the shares, ascertained in accordance with Clauses 40 and 41, is higher than the amount informed by the Offering Party, the decision to proceed with cancellation of the Company's registry for listing shall automatically be revoked, unless the Offering Party expressly agrees to formulate the public offering at the economic value, and the Offering Party must publish to the market such decision as it has adopted. 

Clause 43. The Company shall not register:

a. Any transfer of shares to the Party Acquiring the Power of Control, or to such person or persons as come to hold the Power of Control, as long as they do not sign the Term of Consent by Controlling Stockholders referred to by the Novo Mercado Regulations.

b. Any stockholders' agreement that governs the exercise of the Power of Control, unless its signatories have signed the Term of Consent by Controlling Stockholders. 
 

Chapter IX - Leaving the Novo Mercado

Clause 44. The Company's leaving the Novo Mercado must be approved by a General Meeting of Stockholders, except in cases of leaving due to cancellation of registry for listing, and thirty days' prior notice of it must be given in writing to the BM&FBovespa. 

§1 If the Company leaves the Novo Mercado, the stockholder or group of stockholders having the Power of Control must make a public offering for acquisition of shares belonging to the other stockholders of the Company, at least for the Economic Value ascertained in accordance with Chapter VIII of these Bylaws, subject to the applicable rules of law and regulations, (1) whether such leaving is for the purpose that its securities should be registered for trading outside the Novo Mercado, or (2) whether it is due to a stockholding reorganization in which the company's securities resulting from such reorganization are not admitted for trading on the Novo Mercado within 120 (one hundred and twenty) calendar days from the date of the General Meeting of Stockholders which approved the said transaction.

Clause 45. Any disposal of the Power of Control of the Company that takes place within 12 (twelve) months subsequent to its leaving the Novo Mercado shall oblige the disposing stockholder holding the Power of Control, jointly and severally with the acquiring party, to offer to the other stockholders acquisition of their shares for the price and on the conditions obtained by such disposing stockholder in the disposal of its own shares, duly updated in accordance with the legislation from time to time in force, obeying the same rules applicable to disposals of control specified in Chapter VII of these Bylaws. 

§1 If the price obtained by such disposing stockholder in the disposal referred to in the head paragraph of this Clause is higher than the value of the public offers carried out in accordance with the other provisions specified in these Bylaws and in the Regulations of the Novo Mercado, duly updated in accordance with the legislation from time to time in force, jointly and severally such stockholder and the acquiring party shall be obliged to pay the difference of value ascertained to the parties accepting the respective public offer, on the same conditions specified in the head paragraph of this Clause.

§2 The Company and such disposing stockholder are obliged to register in the Company's Share Registry Book, in relation to the shares owned by such stockholder, a charge that obliges the purchaser of those shares to offer to the other stockholders of the Company price and conditions of payment identical to those that are paid to such stockholder, in the event of disposal, in the form specified in the head paragraph and the first sub-paragraph of this Clause. 

Clause 46. In the event of there being no single Controlling Stockholder, if a decision is made that the Company shall leave the Novo Mercado so that the securities issued by it shall be registered for trading outside the Novo Mercado, or as a result of a transaction in a stockholding reorganization, in which the company resulting from such reorganization does not have its securities admitted for listing on the Novo Mercado within 120 (one hundred and twenty) calendar days from the date of the General Meeting of Stockholders which approved the said transaction, leaving the Novo Mercado shall be conditional upon a public offer for acquisition of shares being made, on the same conditions specified in Clause 44 above.

§1 The said General Meeting of Stockholders shall decide the party(ies) to be responsible for the carrying out the public offer for acquisition of shares, and such party or parties must be present at the General Meeting and expressly assume the obligation to carry out the offer.

§2 In the absence of a clear decision on what party(ies) shall be responsible for making the public offer for acquisition of shares, in the case of a transaction that is part of a stockholding reorganization, in which the company resulting from such reorganization does not have its securities admitted for trading on the Novo Mercado, then those stockholders who voted in favor of the stockholding reorganization shall make the said offer.

Clause 47. If the Company leaves the Novo Mercado due to non-compliance with the obligations contained in the Novo Mercado Regulations, this shall be conditional upon a public offer being made for acquisition of shares, at least for the Economic Value of the shares, to be ascertained in a Valuation Opinion as referred to by Article 41 of these Bylaws, subject to the applicable legal rules and regulations.

§1 The public offer for acquisition of shares referred to in the head paragraph of this Clause shall be made by the Controlling Stockholder.

§2 In the event that there is not a Controlling Stockholder and that the Company's leaving of the Novo Mercado referred to in the head paragraph arises from a decision by the General Meeting of Stockholders, those stockholders who voted in favor of the decision that resulted in the said non-compliance shall make the public offer for acquisition of shares specified in the head paragraph.

§3 In the event that there is no Controlling Stockholder and that the leaving of the Novo Mercado referred to in the head paragraph takes place by reason of an act by, or an event caused by, the Management, the Board of Directors of the Company shall call a General Meeting of Stockholders the agenda of which shall be decision on how to cure the non-compliance with the obligations contained in the Novo Mercado Regulations or, as the case may be, to decide that the Company shall leave the Novo Mercado.

§4 If the General Meeting of Stockholders referred to in Paragraph 3 above decides that the Company shall leave the Novo Mercado, such General Meeting of Stockholders shall define the party(ies) responsible for making the public offer for acquisition of shares specified in the head paragraph, and such party or parties must be present at the Meeting and must expressly assume the obligation to make the offer.

Chapter X - Liquidation

Clause 48. The Company may not be dissolved or go into liquidation, other than in the cases specified in law, and it is the competence of the General Meeting of Stockholders to establish the manner of liquidation and to elect, as well as the liquidator(s), the members of the Audit Board, which shall function in the period of liquidation, setting their powers and remuneration.

Chapter XI - Arbitration Court

Clause 49. The Company, its Stockholders, Managers, Members of its Board of Directors, and Members of the Audit Board undertake to solve through arbitration, conducted in the Market Arbitration Chamber, all and any dispute or controversy that may arise between them related to or arising from, especially, the application, validity, efficacy, interpretation, or violation, or effects thereof, of the provisions contained in the Corporate Law and the Company's Bylaws, the rules issued by the National Monetary Council, the Brazilian Central Bank and/or the CVM, the other rules applicable to the functioning of the capital markets in general, and those contained in the Novo Mercado Regulations, the Arbitration Regulations, the Sanctions Regulations and the Novo Mercado participation agreement.

Chapter XII - General provisions

Clause 50. The Company shall obey such Stockholders' Agreements as are registered in accordance with Clause 118 of Law 6404/76, and the management shall abstain from registering any transfer of shares contrary to the terms thereof, and the Chairman of the General Meetings of Stockholders and the meetings of the Board of Directors shall abstain from counting any votes given that infringe the provisions of the said agreements.

Clause 51. Cases of omissions in these Bylaws shall be resolved by the General Meeting of Stockholders, and regulated in accordance with the provisions of the Corporate Law and the Novo Mercado Regulations. 

Sobral, April 7, 2014.

Disclosure Policy for Relevant Act or Fact

GRENDENE S.A

Approved by the EGM - Extraordinary General Meeting of The Company on August 18th, 2004 and changed item 4 approved the meeting of grendene's Board of Directors on 24 july 2014.

1. Introduction and Objectives

This manual ("Manual") provides the Disclosure Policy for Relevant Act or Fact of Grendene S/A ("Company"), set forth by the shareholders in the Extra Ordinary General Meeting held on August 18th, 2004 ("Disclosure Policy"). This Manual has the purpose of establishing the norms and procedures to be complied with in the disclosure of Relevant Acts or Facts, by the Company, as provided by the Article 2nd of CVM Instruction N° 358, dated January 3rd, 2002 (" CVM Instruction Nº 358/02 "), as well as the exceptions made to the immediate disclosure of information and the procedures relative to the secrecy maintenance concerning to relevant information not disclosed to the market, yet.

2. Persons Subject to Disclosure Policy and Forms of Adhesion

The persons subject to the norms and procedures of this Manual are, direct or indirect, controlling shareholders, members of the Executive Directors, members of the Board of Directors, members of the Audit Committee and members of any bodies having technical or advisory duties, created by statutory disposition, or any persons who, on account of their job, function or position in the Company, or by the Company's Holding, subsidiaries or associated companies has privileged access to information relative to a Relevant Act or Fact.

These persons should formally adhere to the Disclosure Policy of Information, signing the Terms of Adhesion, whose draft hereinafter is integral part of the present Manual as Annex II.

Besides those persons, any other persons who has privileged access to information relative to a Relevant Acts or Facts not disclosed by the Company, yet ("Related Persons") are required to abide by the provisions hereof.

The Related Persons, whenever they have access to information that may be deemed as a Relevant Act or Fact relating to the Company, shall formally communicate the fact to the Investor Relations Officer.

Whenever a Relevant Act or Fact mentioned in Article 2, Sole Paragraph of CVM Instruction n° 358 occurs, and the event is relevant for the Company, or in face of an imminent occurrence, the Related Persons that holds the information, should formally forward the information to the Investor Relations Officer, in order to decide, according to Section 3, the classification of the information as a Relevant Act or Fact and, consequently, to take further steps to proceeding the disclosure of the Relevant Act of Fact.

The Related Persons that holds a position in statutory body of the Company (members of the Board of Directors, of the Executive Directors, of the Audit Committee and of any bodies having technical or advisory duties), as well as the controlling shareholder, whenever they become personally aware of any Act or Fact deemed as relevant, and find out that the Investor Relations Officer, failed to comply with of her communication and disclosure duties, they will only be exempted of responsibility if they immediately inform the Relevant Act or Fact to the CVM. For these purposes, before the communication to the CVM, the Related Persons should certify along with the Investor Relations Officer if the Board of Directors of the Company have decided to waive to disclosure the Relevant Act or Fact. In this case, the disclosure obligation to the CVM will only happen in case the existence of atypical oscillation in the price, quotation, or trade volume of the securities issued by the Company.

3. Duties and Responsibilities of Disclosure of a Relevant Act or Fact

As part of duties and responsibilities the disclosure and communication of any Relevant Act or Fact shall be forward by the Investor Relations Officer to the CVM and to the Stock Exchange where the securities issued by the Company are traded, as well as to ensure the wide and immediate disclosure of the Relevant Acts or Facts, in the market.

In case of any doubt as for the occurrence or not of a Relevant Act or Fact, it is the Investor Relations Officer responsibility to set for after deliberation of the members of the Board of Directors.

Whenever requested by the CVM, the Investor Relations Officer shall be render additional clarifications, provide corrections, amendments or disclosure of Relevant Act or Fact, without prejudice to the others attributions foreseen in the CVM Instruction 358.

The controlling shareholders, the members of the Board of Directors, of the Executive Directors, of the Audit Committee, and any bodies having technical or advisory duties, created by statutory disposition, or any persons who, on account of their job, position or function in the Company, by the Company's Holding, subsidiaries or associated companies has privileged access of the Relevant Act or Fact they should immediately communicate such Relevant Act or Fact to the CVM, in case they find out that the Investor Relations Officer failed to comply with her communication and disclosure duties.

4. Disclosure of Relevant Act or Fact

The communication of Relevant Act or Fact to the CVM and to the Stock Exchange where the securities of the Company are traded, it should happen immediately after the deliberation, occurrence or knowledge of it, as the case may be, in a clear, precise and summarize form, showing at least, the information demanded by the Regulation.

The disclosure of a Relevant Act or Fact shall be disclosed through a public announcement or advertisement published in at least one of the following channels of communication: a) newspapers with large circulation habitually used by the Company; or b) at least 1 (one) news portal with a page on the Internet that makes the information available in its entirety, in a section with public access free of charge, and content identical to that sent by the CVM to the securities exchange on which the securities issued by the Company are admitted for trading.

The disclosure of a Relevant Act or Fact shall be made, whenever it is possible, prior to the beginning or after the closing hours of trading in the Stock Exchange where the securities of the Company are negotiated.

5. Exception to Immediate Disclosure of Relevant Act or Fact

The Relevant Acts or Facts may be exceptionally waived of disclosure if its controlling shareholders or the management bodies shall consider that such disclosure will put in jeopardy a legitimate interest of the Company. Such action will only be able to be exercised by the Company after deliberation of the Board of Directors and the official communication to the Investor Relations Officer.

In the event above, it shall be incumbent to the Investor Relations Officer to follow the events of the quotation, price and trade volume of the securities issued by the Company. In the event of atypical oscillation in those elements, the Investor Relations Officer shall immediately disclosed to the market the Relevant Acts or Facts previously waived of disclosure by the Company.

6. Secrecy Duty

It is incumbent to the controlling shareholders, the members of the Board of Directors, of the Executive Directors, of the Audit Committee, and any bodies having technical or advisory functions, created by statutory disposition, and the employees, in the Company, the duty of to keep the secrecy of the information related to Relevant Acts or Facts which they have privileged access on account of the function or position they hold, until to be disclosed to the market, as well as to cause subordinates and third parties of their trust also keep secrecy, being jointly liable with them in the event of non compliance with the secrecy obligation.

In the event of the participation of third parties in negotiations or discussions or matters considered strategic, the Company shall require that such persons sign a Confidentiality Term.

A copy of this Manual is available in the CVM and in the headquarters of the Company.

Exhibit I

Relevant Acts or Facts - List of Examples

I - execution of an agreement or contract for transfer of the Company's share control, even though under a suspensive or resolutory condition;

II - change in the Company's share control, including as a result of the execution, amendment or termination of a shareholders' agreement;

III - execution, amendment or termination of a shareholders' agreement to which the Company is a party or intervening party, or which is registered in the Company's proper book;

IV - admission or withdrawal of a partner having entered into an agreement with, or providing operating, financial, technological or administrative services to, the Company;

V - authorization to trade securities issued by the Company in any market whatsoever, either domestic or foreign;

VI - decision to cancel the company's registration as a publicly-held company;

VII - incorporation, merger or spin-off involving the Company or related companies;

VIII - transformation or dissolution of the Company;

IX - change in the Company's equity position;

X - change in accounting criteria;

XI - debt renegotiation;

XII - approval of stock call option plans;

XIII - change in the rights and advantages attached to securities issued by the Company;

XIV - stock split-off, grouping or bonus;

XV - acquisition of Company's shares to be kept as treasury shares or to be cancelled, and disposal of shares thus purchased;

XVI - Company's profit or loss and distribution of cash dividends;

XVII - execution or termination of agreements, or failure to enter into the same, where the anticipated execution thereof is known to the public;

XVIII - approval, change or withdrawal of a project or delay in the implementation thereof;

XIX - beginning, retaking or stoppage of the manufacture or marketing of a product or rendering of a service;

XX - discovery, change or development of technology or of resources of the Company;

XXI - change of projections disclosed by the Company;

XXII - filing of a petition for debt rehabilitation (" concordata ") or bankruptcy or filing of a judicial suit, which may affect the Company's economic-financial condition.

Exhibit II

Disclosure Policy for Relevant Information - Instrument of Adhesion

I, [name and qualification], [function], hereby, in the form of this Term, adhere to the provisions and undertake to abide by all its terms and conditions of the Disclosure Policy of a Relevant Act or Fact of Grendene S/A., approved by the EGM - Extraordinary General Meeting of the Company held on [day] [month] 2004.

(Place and Date)

________________________

Name:
I.D. n°

Dividend Policy

The dividend policy approved by the Company’s Board of Directors in a meeting of February 13, 2014, is maintained.

The Company´s dividend policy is distribute as dividend the total profit that has no origin from government grants, after the constitution of the Legal and Statutory Reserves.  The Company will maintain its policy of quarterly dividend distribution.

Click here to access the Board of Directors meeting (Portuguese version)
 
Trading Policy on Securities Issued by Grendene SA

I - Introduction

GRENDENE S.A. went public on October 29, 2004. Its shares started to be traded on the Novo Mercado of the São Paulo Stock Exchange (BOVESPA) under the ticker GRND3. This shows the company's commitment to the highest levels of Corporate Governance. Therefore, Grendene decided to set forth and divulge its Trading Policy on Securities issued by the company.

The trading policy concerning securities issued by GRENDENE S.A. has the objective of establishing rules and procedures to be complied with by the Company and the persons related thereto when trading on securities issued by the Company or related thereto, and based on CVM Instruction No 358 of January 3, 2002. Such policy guarantees that mechanisms are adopted so as to assure all interested persons that any trading involving any securities issued by GRENDENE S.A. will be carried out under the same degree of control and transparency, without giving any privilege to ones to the detriment of others. In view of the registration on BOVESPA´s Novo Mercado, we are adjusting our current policy to the Exchange's regulation.

The Board of Directors of GRENDENE S.A., in the use of the attributes conferred upon it resolved, as provided for in the minutes drawn up on January 28, 2005, to approve the Trading Policy on securities issued by GRENDENE. It will be incumbent upon the Investors´ Relation Director to implement the procedures required for due compliance with the rules and the general management of the Trading Policy.

II - Adhesion

Any person barred from trading shall adhere to the current Trading Policy by executing the Instrument of Adhesion under Attachment A, including related persons and, at the Company's discretion, any other persons that the Company deems necessary or advisable, who will come to be qualified as Related Persons. The Instrument of Adhesion shall also be executed upon any contracting, election, promotion or transference-related activities and the persons executing thereof shall agree to the policy terms and shall undertake to comply with them.

III - Persons Barred From Trading

The following persons are barred from trading in the event that they are cognizant of any material act or fact not yet divulged:

a) Direct and indirect controlling shareholders;
b) Directors and high management;
c) Members of the Board of Directors;
d) Members of the Audit Committee or Advisory or Technical Boards or Bodies;
e) Those who, on account of their job, function or position in the Company, its parent company, subsidiaries or affiliates, are cognizant of any material information;
f) Related persons: Spouse, female (male) companion, the children of the persons mentioned in letters “a”, “b”, “c”, “d” e “e”, above.

The persons below are on equal footing with those barred from trading:

a) the portfolio managers thereof and investment funds, companies or other institutions or entities in which the persons barred from trading are the only shareholders or can influence any trading decision;
b) any legal entity directly or indirectly controlled by the persons barred from trading;
c) any person who has had access to information relating to any material act or fact via any persons barred from trading.

IV - Trading Forbidden

The Company, its Managers, its Controlling Shareholders (direct and indirect), the members of its Audit Committee, its Employees and Officers with access to Material Information, the members of other Bodies with Technical or Consulting functions in the Company and any persons who, on account of their job, function or position in the Controlling Company, in the Subsidiary and Affiliated Companies are cognizant of any information relating to any Material Act or Fact on the Company and have executed the Instrument of Adhesion, will be forbidden from trading the Company's securities for a period of fifteen (15) days preceding the disclosure or publication, as the case may be, of:

(i) the Company’s quarterly information (ITR);
(ii) the Company’s annual information (DFP and IAN);
(iii) the Company’s financial statements.

Within the period running from the decision by the competent corporate bodies and the divulging to the market of any decision relating to the increase or reduction of capital, the distribution of dividends, stock dividends, reverse splits, issuance of securities and their respective public announcements and notices.

Individual Investment Programs shall strictly comply with such restriction.

Authorized Brokerage Firms will receive written instructions from the Company ? and shall accept them in writing ? that they shall not register any transactions by any of above mentioned persons during the fifteen (15) days preceding the disclosure or publication of such periodic information or financial statements of the Company.

Resolution regarding the Acquisition or Disposal of Shares Issued by the Company is Forbidden (CVM Instruction No 358/02, article 14)

The Company's Board of Directors shall not resolve on the acquisition or disposal of shares issued by the Company unless a Material Act or Fact is divulged on the following events:

(i) execution of any agreement or contract the object of which is the transfer of the Company’s shareholding control; or
(ii) granting of an option or proxy with the purpose of transferring the Company’s shareholding control; or
(iii) existence of the intent to promote a merger, total or partial spin-off, combination, corporate transformation or restructuring.

In the event that, following the approval of the repurchase program, any fact occurs that might be related to any of the above-listed events, the Company shall promptly suspend the trading involving its shares up until the pertinent Material Act or fact is duly published.

Final Provisions, Direct and Indirect Trading

The trading prohibitions listed in this manual are to be applied to trading directly or indirectly carried out by:

(i) Managers, Controlling Shareholders, members of the Audit Committee, Employees and Officers who have access to material Information and persons who are members of other Bodies with Technical or Consulting Functions in the Company; and further

(ii) Any person who, on account of his job, function or position in the Controlling Company, in the Subsidiary and Affiliated Companies is cognizant of any information relating to any Material Act or Fact on the Company, who has executed the Instrument of Adhesion, even when trading by such person is carried out by means of:

(i) a company under his control ;

(ii) third parties with whom a trust agreement or a portfolio or stock management agreement is entered into.

Trading carried out by investment funds whose shareholders are the persons mentioned in the above item will not be deemed as indirect trading, provided that:

(i) such investment funds are not exclusive; and

(ii) trading decisions by the investment fund's manager cannot be influenced by the shareholders.


V - Commitment to Indemnify

The Persons barred from trading and the Related Persons liable for non-compliance with any provision of this Trading Policy agree to indemnify the Company and/or other Related Persons, fully and with no limitation, from any and all losses that the Company and/or other Related Persons may suffer and that are directly or indirectly caused by such non-compliance.

GRENDENE S.A.
Trading Policy on Company´s Securities

Instrument of Adhesion

I, [name and capacity], [job or title], hereby represent that I am cognizant of the terms and conditions of the Trading Policy on Securities Issued by Grendene S.A., under CVM Instruction No 358/2002, approved by its Board of Directors on January 28, 2005. I hereby formalize my adhesion to such Policy, and undertake to comply with all the terms and conditions thereof.

I further represent that I am fully aware that any breach of the provisions contained in the above-mentioned Trading Policy is deemed as serious infringement for the purposes provided for in § 3 of art. 11, Law No 6,385/76.


[Place, date]

___________________________
[Name]

Internal Regulations of the Board of Directors

Chapter I - Objectives

Clause 1 Subject to the provisions of the Bylaws (‘the Bylaws’) of Grendene S.A. (‘the Company’) on the matter, the purpose of these internal regulations (‘the Internal Regulations’) is to set the general rules on composition, election, swearing in, functioning, structure, organization and activities of the Board of Directors of the Company (‘the Board’), for the performance of their duties in accordance with Law 6404/76, the applicable enabling regulations, and the Bylaws.  

Chapter II - Members

Clause 2 Under Article 15 of the By-laws, the Company’s Board of Directors comprises at least five and a maximum of seven sitting members, of which at least two or 20% (twenty per cent), whichever is greater, shall be Independent Members – and must be expressly characterized as such in the minutes of the General Meeting of Stockholders that elects them, on the basis of the criteria and requirements established in the Listing Regulations of the Novo Mercado of the São Paulo stock exchange (‘the Novo Mercado Regulations’). Any Board Member elected under the procedures made available by Article 141, §4 and §5 of Law 6404/76 shall also be deemed to be an Independent Member. In each Ordinary General Meeting the stockholders shall decide the number of sitting members to be elected at that Meeting. The Board of Directors shall have a Chair and a Deputy Chair, who shall be chosen by the General Meeting of Stockholders.

         §1 When the percentage referred to in this clause results in a fractional number of members, the number shall be rounded in accordance with the terms of the Novo Mercado Regulations. 

         §2 The posts of Chairman of the Board of Directors and Chief Executive Officer or principal executive of the Company may not be held by the same person.

Clause 3 Under Article 16 of the Bylaws the members of the Board shall have maximum periods of office of 2 (two) years, to run concurrently, re-election being permitted.  

         §1 In addition to the provisions of Article 13 of the Company’s By-laws, the Board Members shall be sworn into their posts against signature of the Instrument of Investiture, to be inscribed in writing in a book kept for the purpose, and which shall include their agreement to be subject to the arbitration commitment clause specified in the Novo Mercado Regulations. No other management guarantee is required.

         §2 The Board Members shall remain in their positions and in the exercise of their functions until the swearing-in of their replacement/s, unless decided otherwise by the General Meeting of Stockholders. 

         §3 Nominations for membership of the Board of Directors of the Company, including the posts of independent member, must obey the criteria specified in Grendene’s Policy on Nomination of Members of the Board of Directors, their Advisory Committees and the Executive Board, and also the other requirements under the bylaws, legislation and regulations.

Clause 4 Under Article 17 of the Bylaws, in the event of absence, or temporary impediment, of the Chair, his or her function shall be exercised by the Deputy Chair. In the absence, or temporary impediment, of the Deputy Chair, his or her function shall be exercised by another sitting member of the Board, appointed by the other Board Members to assume those functions. In the event of absence, or temporary impediment, of any other Board Member, his/her functions shall be exercised by another Board Member to whom he/she has delegated powers, or if no such delegation has been made, by a sitting member appointed by the other Board Members to assume those functions. 

         §1 In the event of any seat on the Board being vacant, a new member shall be elected by the General Meeting of Stockholders, to serve until the end of the concurrent period of office of the other Board Members.  For the purposes of this Clause, a seat becomes vacant when a Member is dismissed from the Board, dies, resigns, is provenly impeded, is incapacitated, or is absent without justification for more than 30 consecutive days. 

Chapter III - Functioning

Clause 5 Under Clause 18 of the Bylaws, the Board of Directors meets ordinarily, 4 (four) times per year, and, extraordinarily, whenever called by its Chair or Deputy Chair or by decision of the majority of its members, or at the request of the Executive Board. To be valid, the convocation must be made with at least 5 (five) days’ prior notice, and must indicate the date and time of the meeting and the subjects contained on the agenda.

         §1 Convocation is dispensed with if all the Board Members are present at the meeting.

         §2 The Board Members may be called by letter, using the Advice of Receipt service, or by fax, or by electronic message. 

Article 6 Under Clause 19 of the Bylaws, meetings of the Board of Directors shall be chaired by the Chair or in his/her absence by the Deputy Chair (or in his/her absence, by another member appointed by the majority of votes of the other Board Members). Meetings shall be in session when the majority of its sitting members are present. In meetings, a Board Member may be represented by another Member to whom the Member has granted powers for the purpose, and may send his/her vote in writing, or by fax or by electronic message.

         §1 Meetings of the Board of Directors should be held at the Company’s head office, or at the Company’s administrative unit in the city of Farroupilha, in the State of Rio Grande do Sul, or at another location to be stated by the Chair of the Board, or in the Chair’s absence, by the Deputy Chair of the Board, or in that party’s absence, by the majority of the members of the Board of Directors, and shall require the standard period of advance notice for convocation of meetings of the Board of Directors. 

         §2 Exceptionally, Board Members may take part in meetings by telephone or video conference call, provided that this possibility has been indicated in the announcement advertising the convocation. In this case, the minutes shall be transmitted by fax or electronic message to the Board Member who participates in this way, and retransmitted to the Company after signature by that Board Member.  
                                                                                                         
Clause 7 Under Clause 20 of the Bylaws, each Board Member has the right to 1 (one) vote in the meetings of the Board of Directors, either given personally or by one of his/her peers as representative, provided a specific power of attorney for the meeting in question is presented, containing the instruction by the absent Board Member of the vote to be cast, and that Member’s related justification. Votes of any Members that have been sent to the Board of Directors in writing, prior to the meeting of the Board of Directors, shall be considered valid. The decisions of the meeting shall be valid if they have votes in favor by the majority of the Members present at the meeting. Decisions must be recorded in minutes and registered in the Board of Directors’ Meetings Minutes Book; and whenever they contain decisions intended to produce effect in relation to third parties, summary minutes must be filed at the competent Commercial Board and be published.

         §1 Decisions of the Board of Directors shall be valid when taken at meetings duly called in accordance with Clause 5 of these Internal Regulations, and the requirements of law.

         §2 In October of each year the Chair of the Board of Directors shall set an annual calendar with the dates of the ordinary meetings, which shall not be less than four nor more than twelve, and call extraordinary meetings whenever necessary.

         §3 Through its Chair, the Board of Directors may invite members of the management of the Company, and any internal or external employees that have significant information related to the subjects that are on the agenda and relevant to the matters under their responsibility, to take part in its meetings.

         §4 Whenever the Audit Board has been constituted, its members shall be invited to take part in all the meetings of the Board of Directors; and they shall be called to attend, by the Chair of the Board of Directors, whenever there are matters on the agenda of the meeting on which Article 163 of Law 6404 of 1976 requires them to give an opinion.
        
         §5 At the end of any meeting where members are present in person, the Board of Directors may hold an exclusive session only for members of the Board of Directors, without the presence of any executives or other invited parties, for alignment of the members of the Board of Directors.

         §6 This session shall have duration specified on the convocation agenda, and shall deal with any subjects that the Board of Directors may decide. If there are decisions, separate minutes shall be drawn up, on the same date that the meeting is held.

         §7 The minutes of the meeting of the Board of Directors must be drafted with clarity and record the decisions taken, the persons present, any dissenting votes, and any abstentions.

         §8 No member of the Board of Directors may have access to any information, or participate in meetings of the Board of Directors related to any subject, on which that member has or represents an interest conflicting and/or potentially conflicting with the interests of the Company.

         §9 Every member of the Board of Directors has an obligation to declare any interest possibly in conflict with those of the Company in the subjects to be decided in a meeting of the Board, and the scope/extent of the conflict shall be included in minutes, and the Member shall abstain from participating in the decision in which conflict exists.

         §10 Every new member of the Board of Directors must undergo a structured integration program, introducing the member to the Company’s key people and its facilities, and in which essential subjects for understanding of the Company’s business are dealt with.

         §11 The members of the Board of Directors shall carry out their functions exclusively in the interest of the Company, and not in the individual interests of the stockholders nor of the group of stockholders which appointed them to their positions.

         §12 No function of a Member of the Board of Director may be delegated to any person who is outside the Board of Directors.

         §13 The Members of the Board of Directors shall obey all the formalities of the Company, especially those relating to the form of communication with the Executive Board and with the Company’s employees.

Chapter IV - Duties and powers

Clause 8 By Clause 21 of the Bylaws, the Board of Directors has the following duties and powers:

a)   Election, and dismissal, of the Executive Officers (defined as Members of the Executive Board) and setting of their duties and powers, including that of the Investor Relations Director. 
b)   Approval of the Internal Regulations of the Company, if applicable.
c)   Setting of the general orientation of the Company’s business and of any company controlled by the Company (‘Subsidiary’).
d)   Approval of a Business Plan for the Company and its Subsidiaries and any investments or capital expenditure not included in such Plan, if applicable.
e)   Monitoring and inspection of the management by the Executive Officers: the Board of Directors may at any time examine the minutes, books and papers of the Company and of its Subsidiaries, and may request information on contracts entered into, or in the process of being entered into, or any other acts. 
f)   Convocation of the General Meeting of Stockholders, under Clause 9 of the Bylaws, whenever necessary or required by law, and in accordance with the terms of the Bylaws.
g)   Statement of opinion on the Report of Management and the accounts presented by the Executive Board and annual and/or interim financial statements, and proposal of allocation of the net profit for each business period.
h)   Decision on issuance of shares or warrants, within the limit set by the Authorized Capital.
i)    Authorization of any acquisition by the Company of its own shares to be held in treasury and/or subsequently sold. 
j)    Decision on issuance of debentures, not convertible into shares and without asset guarantee, and Promissory Notes for public distribution in accordance with CVM Instruction 134.     
k)   Appointment of, and dismissal of, the Company’s external auditors.
l)    Authorization for raising of loans or financings by the Company or any Subsidiary, in any amount above R$ 300,000,000.00 (three hundred million Reais), as measured over the period of 3 (three) months prior to the related transaction. 
m)  Authorization of disposal of, or placement of a lien or charge on, any assets of the property, plant and equipment of the Company or of any Subsidiary, in an aggregate amount greater than R$ 360,000,000.00 (three hundred sixty million Reais), as measured over the period of 3 (three) months prior to the related transaction. 
n)   Authorization for giving of asset or personal guarantees of any nature by the Company or any Subsidiary in an aggregate amount greater than R$ 360,000,000.00 (three hundred sixty million Reais), as measured over the period of 3 (three) months prior to the related transaction.
o)   Authorization of any acts that result in waiver of any rights by the Company or any Subsidiary in an aggregate amount greater than R$ 45,000,000.00 (forty five million Reais), as measured over the period of 3 (three) months prior to the related transaction.
p)   Setting of the general conditions of, and authorization of signature of, contracts of any nature between the Company and any Subsidiary or Affiliated company, and/or any of their managers, or controlling stockholders, or between the Company and any company controlled by or affiliated with the managers or the controlling stockholders, and/or with any other companies that are, in fact or in law, part of a single group with those persons or entities, of which the value individually or jointly, in a period of one year, is 1% or more of the Company’s Stockholders’ equity. 
q)   Pronouncement on such subjects as the Executive Board presents to it for its decision or for submission to the General Meeting of Stockholders. 
r)   Decision on suspension of the activities of the Company or of any Subsidiary. 
s)   Proposal, at any time, of examination of any subject relating to the business of the Company and/or any Subsidiary that is not within the exclusive competence of the General Meeting of Stockholders. 
t)    Decision, in the event of cancellation of the registry for listing, or exit from the Novo Mercado, on the three-name list of companies specialized in valuation of companies, for preparation of a Valuation Opinion on the Company’s shares. 
u)   Approval of contracting of the depositary institution to provide share bookkeeping services. 
v)   Making of statement in favor of or against any public offer for acquisition of shares issued by the Company, through a prior opinion, with grounds, published within 15 (fifteen) days after publication of the announcement of a public offering for acquisition of shares. This statement must deal with at least the following matters: (i) whether the public offer for acquisition of shares is convenient and opportune for, and in the interests of, the stockholders as a whole, and in relation to the liquidity of the securities they hold; (ii) the repercussions, on the interests of the Company, of the public offer for acquisition of shares; (iii) the strategic plans for the company published by the offering party; and (iv) any other points that the Board of Directors considers to be relevant; and also the information required by the applicable rules laid down by the CVM. 

         §1 The amounts specified in ‘l’, ‘m’, ‘n’ and ‘o’ above shall be adjusted annually, as from April 7, 2014, by the IGP-M inflation index published by the Getúlio Vargas Foundation, or any index which replaces it.

         §2 In the proposal by management to the General Meeting of Stockholders that decides on the election of managers, the Board of Directors shall state an opinion on: (i) acceptance, by each candidate for membership of the Board of Directors, of Grendene’s Policy on Nomination of Members of the Board of Directors, their Advisory Committees and the Executive Board; and (ii) for each candidate, in the light of the provisions of the Novo Mercado Regulations, the reasons why that candidate is considered to be characterized as an independent member.

Chapter V - Committees

Clause 9 For the optimum performance of its functions, the Board of Directors may create committees or working groups with specifically set objectives, for the purpose of giving advice to the Board of Directors. The members of these committees shall be persons designated by it from among members of management and/or other persons directly or indirectly connected with the Company.  

         §1 The Board of Directors hereby rules that the Company shall, by the year 2021, institute the Audit and Risks Management Committee.

         §2 The Committees shall have at least 3 (three) and at most 5 (five) members, all nominated and previously approved by the Board of Directors itself.

Chapter VI - Rights and Duties

Clause 10 The members of the Board of Directors shall carry out their functions obeying the duties of loyalty and diligence set out by law, within the legal limits, contributing to defense of the interests of the Company and of all the stockholders, without distinction, and avoiding any situations of conflict that could affect the interests of the Company.

Clause 11 During meetings, any sitting member of the Board of Directors may request and examine, individually, all such documents as he/she deems necessary for the exercise of his/her functions, with the exception of the matters in Clause 7, §8, and may make annotations and remarks, which shall be discussed and decided upon in the related meetings. Any request for examination of documents or copies of documents must be made to the Chief Executive Officer, with grounds, by the Member of the Board of Directors who is requesting them, and must be signed by the Chair of the Board of Directors.

         §1 The examination of the documents will be permitted on premises of the Company, or exceptionally at such other location as is previously agreed with the Chief Executive Officer of the Company. Copying, photography or reproduction of the documents by any means will not be permitted.

         §2 Any documents or information that have not yet been published in accordance with the law, but have been placed at the disposal of the Board of Directors by the Company’s Executive Board, shall be kept confidential, with a view to safeguarding the interests of the Company, its stockholders and the Market, and may not be published to third parties, and any Board Member who makes any such disclosure shall be made liable for such act.

Clause 12 In the exercise of their activities, the members of the Board of Directors must comply with these Internal Regulations.

Chapter VII - Liability

Clause 13 The Members of the Board of Directors have the duties of the managers of the Company specified in Articles 153 to 156 of Law 6404/76, and shall be liable for any damages resulting from omission in compliance with their duties, and for any actions carried out with negligence or malice, or in violation of the law, the Bylaws, and/or these Internal Regulations.  The Members of the Board of Directors shall hold joint liability in the event of omission in compliance with their duties; except that: a dissident Member shall be exempt from such liability if he/she causes his/her disagreement to be recorded in the minutes of the meeting of the Board of Directors and advises the bodies of Management, and the General Meeting of Stockholders, of it.

Chapter VIII - Matters prohibited

Clause 14 Members of the Board are prohibited from directly or indirectly participating in trading in securities issued by the Company, or referenced to such securities, at the following times:

a) before disclosure to the market of a material fact or event in the Company’s business;
b) within the 15 (fifteen) days prior to publication of the Company’s quarterly information (ITR) and/or annual financial statements (DFP and Reference Form);
c) whenever there is intention to arrange for absorption, total or partial split, merger, transformation or stockholding reorganization; and/or
d) during any process of acquisition or disposal of shares in the Company, exclusively on the dates on which the Company is negotiating.

Clause 15 Members of the Board of Directors may not contract loans from, or make advances to, the Company or any of its Subsidiaries, and such prohibition extends to the Member’s spouse and relatives up to the second degree.

Chapter IX - Remuneration

Clause 16 The General Meeting of Stockholders shall set the total annual remuneration of the Managers.
 
         §1 The Board of Directors shall carry out the distribution of the amount individually to each Manager. 

         §2 The members of the Board of Directors shall be reimbursed by the Company for expenses of travel and accommodation necessary to the performance of their function. 

Chapter X - Assumption of office

Clause 17 The Members elected shall be invested in their posts as sitting members upon signature of the following documents:

a) Instrument of Investiture, in the Board of Directors’ Meetings Minutes Book, which shall include acceptance of submission to the arbitration commitment clause contained in the Novo Mercado Regulations;
b) Term of Agreement to the Company’s Policy on Disclosure of Information on Material Facts or Events;
c) Term of Agreement to the Policy for Trading in the Company’s Securities, in accordance with CVM Instruction 358/02;
d) Statement of Non-impediment under Article 147 of Law 6404/76, containing the following statements:

i) that the Member is not impeded by any special law, nor has been convicted for any crime related to bankruptcy, obstruction for gain, bribery, graft, embezzlement, or crime against the public economy or against public good faith or property, or suffered any criminal penalty;
ii) that the Member has not been subjected to the penalty of suspension or temporary disqualification applied by the Brazilian Securities Commission (CVM) such as makes him/her non-eligible for, or unable to occupy, a position in a Listed Company;
iii) that the Member is qualified under the requirement for unblemished reputation;
iv) that the Member does not occupy a position in any company that might be considered to be a competitor of the Company, and neither has nor represents any interest that conflicts with those of the Company or its other stockholders.

e) If elected as an independent board member, the Statement of Independent Status, attesting to the candidate’s qualification in relation to the criteria for independence established in the Novo Mercado Regulations.

         §1 If during the period of office of a Member of the Board of Directors any situation or event specified in the documents listed above occurs, the Member must advise the Chair of the Board of Directors, describing the circumstances and his/her own position in relation to his/her post.  

Chapter XI - General Provisions

Clause 18 Any cases of omission shall be resolved in meetings of the Board of Directors itself, in accordance with the legislation and the Bylaws.

Clause 19 These Internal Regulations of the Board of Directors may be modified at any time by decision of the Board of Directors.

Clause 20 The Company will adapt to the new rules within the period specified in the Novo Mercado Regulations which came into effect on January 1, 2018 

 

Farroupilha, March 12, 2020.

________________________________

 

________________________________

Alexandre Grendene Bartelle

 

Renato Ochman

CEO

 

Secretary

Policy on Related Party Transactions Internal Regulations of the Investment Committee
 

1. Objectives

The Investment Committee (‘the Committee’) of  Grendene S.A (‘Grendene’ or ‘the Company’)  is a body supporting the Chief Executive Officer (‘CEO’) of Grendene in relation to the matters described in item 2 of these Internal Regulations (‘Regulations’). 

2. Duties

The Committee has the duties of (a) evaluating proposals for financial investments offered to Grendene within the limits established (i) by the Board of Directors at its meeting of May 27, 2019, notably for investments not having collateral in financial institutions and/or the federal government and (ii) by the Company’s Bylaws, and (b) issuing recommendations to the CEO of Grendene as to approval of the transactions presented and analyzed.

3. Functioning of the Committee

3.1. Members; period of office

The Committee shall comprise at least three and a maximum of five members, chosen by the Board of Directors, of which one shall be the CEO, and who shall have periods of office of three years, and may be re-elected.

3.2. Vacancy of position

In the event of a member of the Committee being definitively prevented from participation, the Board of Directors shall appoint a replacement at the next subsequent meeting of the Board of Directors.

3.3. Remuneration

The members of the Committee shall not receive any type of remuneration for their activity as members.

3.4. Coordinator

The CEO, a member of the Committee, shall be the coordinator of the Committee, and shall call the meetings, set the agenda and send documents and provide the necessary information to the operational areas of Grendene, using, whenever necessary, the administrative financial support specified in item 6 below.

The following are duties of the Coordinator of the Committee:

(a) to call and to conduct the meetings of the Committee whenever there are investment opportunities to be analyzed;
(b) to ensure that the convocation and the agenda of the meetings are sent to the members of the Committee, together with all and any support material necessary for analysis of the investments within the period stipulated in these Regulations;
(c) when necessary, to invite external consultants, members of management and Grendene personnel to attend the meeting;
(d) to send the decisions to be implemented, including the analyses, opinions and reports prepared by the Committee, to the operational areas of Grendene, especially to the Treasury for provision of funds, to Investor Relations, and to the Controller’s Department;
(e) to ensure that the drafts of the Minutes of the meetings are sent to the members of the Committee for consideration within seven business days after the meeting or before any decision is implemented, whichever is earlier.

3.5. Process of decision

3.5.1. Frequency of meetings

The Committee shall meet whenever necessary, when demanded to do so by the management of the Company, for the purposes of analysis of a possible transaction.

3.5.2. Convocation

The meetings of the Committee shall be called by the coordinator of the Committee, making available to the other members all the documents necessary for analysis in accordance with these Regulations.

3.5.3. Advisory

For the purpose of providing clarification of any nature, especially if any related parties are identified, the Committee may invite other participants, members of management, members of the other committees advising Grendene (if any), and any other persons whose participation it believes to be necessary, such as, for example, legal advisors; and no related party shall have the right to vote.

3.5.4. Place of meetings

The meetings of the Committee shall be held, preferentially, at the administrative head office of Grendene in Farroupilha, in the State of Rio Grande do Sul.

Meetings by telephone or video conference call shall be allowed, and these may be recorded. Any such participation in a meeting shall be considered to be personal presence.  Members of the Committee who participate remotely in the meeting may express their votes, on the date of the meeting, through a digitally certified letter or email communication.

3.5.5. Agenda

When a meeting of the Committee is called, the related Agenda shall be delivered; it shall set out the subjects to be examined, discussed and decided in the meeting, and must always be accompanied by all the documents and information that are sufficient for detailed analysis and decision on the matters that comprise the Agenda.

3.5.6. Documents and Information

The documents and information necessary for prior analysis and preparation for discussion and decision of the matters that comprise the Agenda shall be disclosed or made available to the members of the Committee at the time of the convocation of the meetings of the Committee.

For presentation of any transaction to the Committee, a minimum group of documents will be necessary to enable the members of the Committee to evaluate the transaction and to issue their opinion. These documents include but are not limited to:

(a) Drafts of contract/s, minutes of corporate/stockholding decisions, share or share quota subscription forms, stockholders’ agreements, deeds, any preliminary prospectus/es, or any other document that the members of the Committee may deem to be necessary for complete understanding of the transaction.
(b) Identification of all the parties and their roles in the transaction, especially in relation to the existence or otherwise of related parties involved in the transaction to be considered.

To analyze transactions in which the involvement of any related party is identified, the Committee must verify that such conditions, evidence and/or documents as are necessary for the transaction to be carried out at market conditions and on commutative terms, are present. For this purpose, one or more of the methods below may be, alternatively, used, without prejudice to any others specified in law or in any applicable regulation:

(a) Comparison with at least two recent transactions, available in the market, that are similar in terms of rates of remuneration, maturity and risk: in the case of a single transaction privately negotiated, the prices/terms sent may be the second best alternatives available in the market for purposes and comparison.
(b) Any participation by independent third parties in the same investment must be stated, with evidence.
(c) Any other methods which, due to the nature of the transaction, the members of the Committee deem will ensure that it is being carried out on market terms and on a commutative basis. 

3.5.7. Quorum for Meeting

The meetings of the Committee shall be in session only with the presence of all of its members.

3.5.8. Quorum for Decision

All the decisions taken by the members of the Committee must be made by unanimous vote of those present, except any who are legally prevented. 

Upon the final decision by the Committee on the investment presented, that decision shall be recorded in writing in Minutes and, based on it, the CEO shall take the investment decision. The operational areas of the Company (Treasury and Administrative Support) must be advised of the decision in writing for them to take the applicable measures.

In the event of certain members of the Committee taking part remotely in the meeting of the Committee, the members of the Committee must later sign the Book of Minutes of Meetings of the Committee, when requested by the Company, or when they are present at the head office.

3.5.9. Conflict of Interests

The members of the Committee must express any conflict of interest at the beginning of each meeting of the Committee, indicating the matter(s) on the Agenda in which they have a conflict of interest. In relation to such matter(s) they shall not be allowed to vote.

Any member of the Committee may allege existence of conflict of interest in any other member of the Committee. If there is not a consensus in relation to the existence of the conflict, the other members of the Committee (except the party alleging and the party alleged against) shall vote on whether or not a conflict of interest exists, thus determining whether or not the member in question may participate in the discussion and decision on the related matter.

If a conflict of interest becomes apparent or is characterized, the other members of the Committee may decide whether or not to exclude the conflicted member from participation in the discussions relating to the matter that is the subject of the conflict.

4. Related Parties

The Committee shall analyze the investment proposals and, jointly with the Company, identify whether they represent Transactions with Related Parties of the Company, and if they do, shall adopt the procedures specified in Grendene’s Policy on Transactions with Related Parties, in particular, ensure that the transaction has all the characteristics of market conditions, among other requirements that are necessary in the case of Transactions with Related Parties.

5. Duties of the Members of the Committee

The activity of the members of the Committee must be oriented in accordance with the following principles:

(a) To protect, value and enhance the Company’s assets and equity.
(b) To take into account the impacts of the transaction from the point of view of and with the purpose of (i) Grendene being a perennial company, (ii) generation of value over the long term, and (iii) fostering transparency of information to stockholders and other stakeholders.
(c) Obey the duties of diligence, provision of information and loyalty that are proper and appropriate to the managers of the Company in accordance with Law 6404/76.

6. Administrative Support

Preparation of minutes, keeping of the Book of Minutes, convocations to meetings, sending of the Agenda and other administrative acts shall have the support of Grendene’s Investor Relations management unit.

7. General Provisions

Any communications between the members of the Committee and other advisors must be made under the regime of confidentiality. 

The Board of Directors at the meeting held on February 13, 2020, approved the Internal Regulations. Minutes approved up to today’s date are hereby ratified. 

Farroupilha, February 13, 2020.

______________________________ ______________________________
Alexandre Grendene Bartelle Renato Ochman
Chairman Secretary

 
Internal Regulations of the Audit Board
 

CHAPTER I

Purpose

1) The purpose of these Regulations is to govern the functioning of the Audit Board, based on the legislation from time to time in force and on Grendene’s Bylaws, its Code of Conduct, its Policy for Trading in Securities issued by Grendene, and its Policy for Disclosure of Material Events, and to orient members of the Audit Board in performance of their activities – when the Audit Board is called into existence by a decision to that effect by a General Meeting of Stockholders.

CHAPTER II

Functioning structure

2) The Audit Board, when sitting, comprises 3 (three) Sitting Members and an equal number of Substitute Members, who may be stockholders, and are elected by the General Meeting of Stockholders.

a) The Board Members shall, at their first meeting, by majority consensus elect the Chair of the Audit Board, in accordance with Clause 30, Paragraph 2 of the Company’s Bylaws.

b) If the Chair is at any time temporarily impeded from activity, the other Board Members present at the meeting shall, by consensus or majority, choose the Chair for that meeting. In the event of permanent impediment, a new election shall be held to appoint the Chair, now including the Substitute Member, acting as Sitting Member.

c) Substitute Members of the Audit Board shall take part in meetings only when they are replacing the Sitting Member due to impediment. The call to a Substitute Member to take part in a meeting shall be made by the Chair of the Audit Board within 3 (three) business days’ prior to the date scheduled for the meeting. 

d) In the event of resignation or permanent impediment of a Sitting Member of the Audit Board, his/her replacement shall be called by the Chair or by the Management to take over the function, as a Sitting Member, until the end of the period of office.

e) Whenever a Substitute Member participated in a meeting of the Audit Board, he/she shall sign the Statement of Appointment and all the other documents specified for signature in these regulations.

f) Meetings of the Audit Board shall be in session when the majority of its Sitting Members are present. Members of the Audit Board shall be considered present when they state their vote through a delegation made in favor of another member of that Board, or by prior written vote, or by any other means of express communication.

g) If the quorum established above is not met, a new meeting shall be called, which shall be in session with any number of persons present, and shall take place in accordance with the urgency required for the subject to be dealt with.

h) Decisions of the Audit Board shall be valid only when taken by absolute majority of the votes of those present, as per Clause 30, Paragraph 3 of the Company’s Bylaws. Any members voting in the minority may have their vote recorded in the Minutes of the meeting in question.

i) In the event of a tie, the Chair of the Audit Board shall have the casting vote.
 

CHAPTER III

Assumption of office

3) Elected Members of the Audit Board shall be invested in their posts as Sitting Members upon signature of the following documents:

a) Term of Appointment, in the Book of Minutes of Meetings of the Audit Baird.
b) Term of Agreement to the Listing Regulations of the Novo Mercado of the São Paulo Exchange, through which they state their agreement with the terms and conditions established in the Regulations of the Arbitration Chamber.
c) Term of Acceptance of Grendene’s Policy for Disclosure of Information on Material Facts or Events.
d) Term of Acceptance of the Policy for Trading in Grendene’s Securities, in accordance with CVM Instruction 358/02.
e) Statement of Non-impediment under Article 147 of Law 6404/76, containing statements that the member:
  1. is not impeded by any special law, nor has been convicted for any crime related to bankruptcy, obstruction for gain, bribery, graft, embezzlement, or crime against the public economy or against public good faith or property, or suffered any criminal penalty; 
  2. has not been subjected to the penalty of suspension or temporary disqualification applied by the Brazilian Securities Commission (CVM) such as makes him/her non-eligible for, or unable to occupy, a position in a Listed Company;
  3. is compliant with the requirement for unblemished reputation; and
  4. does not occupy a position in any company that might be considered to be a competitor of the Company, and neither has nor represents a conflict of interest with that of the Company itself or its other stockholders.
4) If any fact or event specified in the documents listed above takes place during the period of office of a Member of the Audit Board, the Member must advise the Chair of the Audit Board and the Chair of the Board of Directors, describing the circumstances and his/her position in relation to his/her post and period of office.

5) The members of the Audit Board shall carry out their functions exclusively in the interest of the Company, and not in the individual interests of the stockholders nor of the group of stockholders which appointed them to their positions.
 

CHAPTER IV

Responsibilities and duties

6) Under Article 163 of Law 6404/76, the following are attributions of the Audit Board:

a) to monitor and inspect, through any one of its members, the acts of the managers and to verify compliance with their duties under the law and Bylaws;

b) to give opinion on the annual report of management, and to include in such opinion any such complementary information that it deems to be necessary or useful to the decision of the General Meeting of Stockholders;

c) to give opinion on any proposals made by the bodies of management, to be submitted to the General Meeting of Stockholders, in relation to change in the share capital, issuance of debentures or warrants, investment plans and/or capital budgets, distribution of dividends and/or Interest on Equity, transformation, absorption, merger or split;

d) to report such errors, frauds or crimes as they discover to the management bodies, through any one of its members, and if these do not take the measures necessary for the protection of the interests of the Company, to the General Meeting of Stockholders, and to suggest measures that would be useful to the Company;

e) to call the Annual General Meeting, if the management bodies delay its convocation by more than 1 (one) month, and to call an Extraordinary Meeting of Stockholders whenever there are serious or urgent reasons, and include on the agenda of such Meetings whatever matters they consider to be necessary;

f) to analyze, at least quarterly, a trial balance and other financial statements prepared periodically by the Company;

g) to examine the financial statements for the business year and to give opinion on them;

h) to call for the presence of the External Auditors of the Company at meetings, when necessary, for any explanations or information in relation to the financial statements and/or opinions;

i) to carry out these functions during liquidation, having in mind the special provisions that regulate that procedure.

j) Also, at least 1 (one) of the members of the Audit Board must be present at Meetings of the Board of Directors that decide on any subject referred to in items (b), (c) and (g) above; and

k) at least 1 (one) of the members of the Audit Board must attend the General Meeting of Stockholders.

§1   The function of member of the Audit Board may not be delegated, nor may the duties, attributions and/or powers that are conferred by law be transferred, in any way, to any other body of the Company.
§2   The Audit Board does not have the competency to consider the content of the corporate management, that is to say, it is not for the Audit Board to go into judgment on the merit or appropriateness of the business decisions taken by the managers, but rather to observe, inspect and comply with the Bylaws, the Law and decisions of the regulatory bodies.
§3   There is no requirement for the Audit Board in any way to analyze or approve the preparation of any business policies, or any strategic planning.
§4   Information requested from the managers by the Audit Board shall at all times be related to the Audit Board’s function of inspection and monitoring, and to exercise of the competency for which the Audit Board was elected.

CHAPTER V

Competencies and duties of the Chair of the Audit Board

7) The following are competencies and duties of the Chair of the Audit Board:

a) to call and to preside over the meetings of the Audit Board;
b) to assess and decide the subjects to be discussed in meetings, and to include on the agenda the matters to be decided;
c) to comply with the Internal Regulations of the Audit Board, and to cause them to be complied with;
d)to authorize decision on matters not included in the agenda of a meeting;
e) to represent the Audit Board in meetings to which he is called to participate by reason of a provision of law or at the request of any other body of the Company.
f) to prepare the minutes of the meetings of the Audit Board or to appoint a Secretary from among the other Board members, who shall be responsible for their preparation;
g) to ask the bodies of management, or the Company’s external auditors, upon request (in writing and with grounds) by any of its members, for any explanation or information that is necessary for the exercise of his/her duties, and/or for the preparation of any special accounting or financial statements;
h) to invite members of the management of the Company to participate in meetings;
i) to respond, always in writing, to whatever is requested of him/her by stockholders of the Company based on Paragraph 6 of Article 163 of Law 6404/76.

CHAPTER VI

Support

8) The Audit Board shall have a support structure made available by the Company, which shall provide support as follows:

a) support to the Chair of the Audit Board or the Secretary appointed by the Chair, in preparing minutes, recording them in the specific book for the purpose, and collecting the signatures of the Board Members;
b) support by asking the Board Members, with the frequency necessary, for the information which they have the duty of providing in the exercise of their activities, especially the information required by the CVM and Bovespa;
c) by designating an employee responsible for maintaining a file structure, specific for subjects of the Audit Board, providing access exclusively to its members;
d) by including the dates of the ordinary meetings in the Company’s annual calendar;
e) by giving support in the structuring of such other meetings of the Audit Board as are scheduled over the business year;
f) by sending an alert to the Board Members, by email or any other electronic means, when the following are made available on the Company’s website:

–    Quarterly Accounting Information, prepared in accordance with the requirements of the Securities Commission, and supported by the Report of the Independent Auditors and approval of the Executive Board and Board of Directors;
–    Minutes of the Board of Directors;
–    Material Announcements; and other pertinent documents; and

g) by providing the logistical support of travel and accommodation of the Members of the Audit Board at the Company’s expense.

CHAPTER VII

Requirements for the position of Member of Audit Board

9) A person who is a Member of the Audit Board must:

(a) be a private individual, resident in Brazil;
(b) be a person of unblemished reputation;
(c) not be subject to any impediment preventing him/her from holding the position;
(d) not have been convicted for any crime or misdemeanor;
(e) not be a member of any management body, or an employee, of the Company, or of a subsidiary or of a company of the same group, or a spouse or relative up to the third degree of any manager of the Company;
(f) have a diploma from a university level course, or have held a post of company manager or Audit Board Member for a minimum of 3 (three) years; and
(g) be capable of analyzing and issuing opinions on the financial statements.

§1 The requirements set by law for membership of an Audit Board shall be stated in the related ‘Book of Minutes and Opinions’ of the Audit Board, at the time of its members taking office.

CHAPTER VIII

Competencies and duties of a Member of the Audit Board

10) In the exercise of their positions, the Members of the Audit Board shall comply with the following:

a) They shall carry out their functions obeying the duties of loyalty and diligence set out by law, within the legal limits, contributing to defense of the interests of the Company and of all the stockholders, without distinction, and avoiding any situations of conflict that could affect the interests of the Company.

b) During meetings, any sitting member of the Audit Board may request and examine, individually, all such corporate documents as he/she deems necessary for the exercise of his/her functions, and may make annotations and remarks, which shall be discussed and decided upon in the related meetings. Requests for corporate documents must be presented to the management bodies of the Company with grounds, with due period of notice, and shall be signed by the Chair or his/her substitute, of the Audit Board.

c) Examination of the documents shall be permitted only on the premises of Grendene at Farroupilha, Rio Grande do Sul, and no copying, photography or reproduction of them by any means shall be permitted.

d) Any documents or information that have not yet been published in accordance with the law, have been but placed at the disposal of the Audit Board by the Company’s management, shall be kept confidential, with a view to safeguarding the interests of the Company, its stockholders and the Market, and may not be published to third parties, and any member of the Audit Board who makes any such disclosure shall be made liable for such act.

e) Members of the Audit Board may request information and/or explanations about the business of the company, provided that such information is in relation to its function of inspection and monitoring, and that grounds are given for the request, and such request is sent to the Company’s management and/or external auditors, against signed receipt.

f) When requested, members of the Audit Board must attend meetings of the Board of Directors or of the Executive Board, and shall provide such support and grounds as are necessary for the decisions of the Board of Directors or the Executive Board as the case may be.

g) Members of the Audit Board shall obey the Company’s annual calendar of corporate events, published on its website and on the CVM system, especially the dates of the Meetings of the Board of Directors, the Meetings of the Executive Board, General Meetings of Stockholders and publication of results, and adapt the calendar governing meetings of the Audit Board and governing issuance of its opinion in such a way as not to delay or hamper the carrying out of the Company’s various events.

h) Members of the Audit Board shall comply with these Internal Regulations.

CHAPTER IV

Matters prohibited

11) Members of the Audit Board are prohibited from directly or indirectly participating in trading in securities issued by the Company, or related to such securities at the following times:

a)    before disclosure to the market of a Material Announcement of any fact or event that is material to the Company;
b)   within the 15 (fifteen) days prior to publication of the Company’s quarterly information (ITR) and/or annual financial statements (DFP and Reference Form);
c)    whenever there is intention to arrange for absorption, total or partial split, merger, transformation of stockholding reorganization; and
d)   during any process of acquisition or disposal of shares in the Company, exclusively on the date on which the Company is negotiating or trading.

12) Further, members of the Audit Board may not contract loans from, or make advances to, the Company or any one of its Subsidiaries, and such prohibition extends to the member’s spouse and relatives up to the second degree.

CHAPTER X

Meetings

13) The Audit Board shall meet ordinarily once each quarter of the year and, when necessary, extraordinarily, upon convocation by its Chair, or by the majority of the other sitting members.

a) Meetings shall be called in writing by the Chair of the Audit Board, with at least 5 (five) business days’ prior notice, and the convocation shall include indication of the matters to be dealt with in the meeting, and convocation shall not be required in the event that all of its members attend the meeting.

b) The Audit Board shall be validly in session, and decisions shall be valid, when the majority of its members is present.

c) Members may take part in the ordinary and extraordinary meeting through a conference call or video conference system, provided they subsequently sign the related Minutes.

d) The Audit Board may call a member of the management of the Company to attend the meeting of the Audit Board to provide explanations or information and to facilitate understanding of the corporate documents.

e) In the event that a member of the management is unable to attend the meeting the explanations may be made in writing.

f) The member of the management designated to provide information to the Audit Board may, at his or her own option, be accompanied by members of his/her team if he/she believes that this will facilitate the explanations or information.

14) In the ordinary and extraordinary meetings of the Audit Board when the matters to be considered are of an urgent nature, the minimum notice period of 5 (five) business days for convocation and remittance of copies of documents, specified in item 11(a) above, may be waived if the totality of its members are present at the meeting.

15) The meetings of the Audit Board must be transcribed in Minutes to be written in a book maintained specifically for the purpose and signed by the members and representatives of management when present. The Minutes may be written in summary form, containing the subjects on the Agenda, decisions, counting of votes, listings of those present and justifications for absences.

16) The Meetings of the Audit Board shall be carried out on the premises of Grendene in Farroupilha, Rio Grande do Sul, or, if all the Members deem it appropriate, at another location.

17) At the option of its members, the Audit Board may opt to present an opinion or its comments and analysis, as the case may be, without the formal holding of a meeting. In this event, the members of the Audit Board must receive the documents and information necessary, and must present opinion, comments or analysis, as the case may be, in writing. This procedure does not apply to the ordinary annual meeting (decision on the opinion), holding of which is mandatory, nor to meetings which require decisions by the Audit Board that must at all times be made by committee decision as required by Law.

CHAPTER XI

Request for information, explanations and statements

18) The Board, through its Chair, upon request (in writing and with grounds) from any one of its members, shall ask the management bodies, or the Company’s external auditors, for such explanations or information as may be necessary to the carrying out of its duties, and for preparation of special financial or accounting statements.

§1 If the Board decides that a request for information is inappropriate, or is invalid or should be refused, the request shall, even so, be sent to the management of the Company, but accompanied by a summary of the minutes of the meeting that examined the request

19) Whenever requested in writing through its Chair, the Audit Board shall provide whatever is requested of it by stockholders of the Company based on Paragraph 6 of Article 163 of Law 6404/76.

CHAPTER XII

Remuneration

20) The remuneration of the members of the Audit Board, in accordance with Clause 30, Paragraph 4, of the Bylaws, is set by the General Meeting of Stockholders that elects the Audit Board. For this purpose, it shall obey Paragraph 3 of Article 162 of Law 6404/76, which establishes that for each Sitting Member of the Audit Board the remuneration may not be less than 10% (ten percent) of the average remuneration attributed to each member of Executive Board, without taking into account benefits, representation fees or profit shares.

CHAPTER XIII

General provisions

21)
Any cases of omission shall be resolved in meetings of the Audit Board itself, in accordance with law and the Bylaws.
 
Policy For Appointment of Members of the Board of Directors, Its Advisory Committees and the Executive Board
 

1. OBJECTIVE

1.1. The objective of this Policy on Appointment of Members of the Board of Directors, its Advisory Committees and the Executive Board (‘the Policy’) is to set out the criteria and procedures to be obeyed in the composition of the Board of Directors, its Advisory Committees, and the Executive Board of Grendene S.A. (‘the Company’).

2. PRINCIPLES

2.1. All proposals and appointments of members of the Board of Directors, its Advisory Committees, and the Executive Board of the Company must obey this Policy, the Company’s by-laws, the internal regulations of the Board of Directors of the Company and of its Advisory Committees, the Regulations of the Novo Mercado of B3 S.A. – Brasil, Bolsa, Balcão (‘the Novo Mercado Regulations’), Law 6404 of December 15, 1976, as amended (‘the Corporate Law’), and the other applicable law and regulations.

2.2. Persons who are proposed or nominated for membership of the Board of Directors, its Advisory Committees and/or the Executive Board must be highly qualified professionals with proven technical, professional or academic experience, aligned with the Company’s values and culture.

2.3. Nomination for membership of the Board of Directors, its Advisory Committees or the Executive Board must have regard to criteria including complementarity of experiences, academic training and qualifications, availability of time for performance of the function, and diversity.

3. BOARD OF DIRECTORS

3.1. Criteria for the composition of the Board of Directors

3.1.1. The Board of Directors of the Company shall comprise at least five and at most seven members, all elected and able to be dismissed by the General Meeting of Stockholders of the Company. They shall be elected for concurrent periods of two years. Re-election is permitted.

3.1.2. Of the members of the Board of Directors, at least two or 20% (whichever is greater) must be independent Board members, as per the criteria and requirements established by the Novo Mercado Regulations, and this must be characterized in the Minutes of the General Meeting of Stockholders that elects them. A Board member elected under the optional procedures specified in Article 141, §§ 4 and 5, of the Corporate Law, shall also be considered to be an independent Board member.

3.1.3. The posts of Chairman of the Board of Directors and Chief Executive Officer or principal executive of the Company may not be held by the same person.

3.1.4. It is recommended that the Board of Directors should have among its members professionals with experiences in diversified areas and subjects.

3.1.5. Consideration of a candidate’s characterization as an independent Board member, as per item 3.1.2 above, must take into account the candidate’s relationship:

(i) with the Company, its direct or indirect controlling stockholder, and/or its managers; and
(ii) with the subsidiaries, affiliated companies or companies under joint control.

3.1.6. A person is not considered to be an independent Board member if:

(i) they are a direct or indirect holder of stockholding control of the Company;
(ii) their vote in meetings of the Board of Directors is or will be bound by a stockholders’ agreement that governs matters relating to the Company;
(iii) they are spouse, partner, or relative – antecedent, descendant or same-generation – up to the second degree, of the controlling stockholder, or of a manager of the company or of a manager of the controlling stockholder; or
(iv) have been, in the last three years, an employee or director of the company or of its controlling stockholder.

3.1.7. Any of the following situations should be analyzed to ascertain whether, due to their characteristics, magnitude or extension they might result in loss of independence:

(i) the candidate is a relative, up to the second degree, of the controlling stockholder, or of a manager of the company or of a manager of the controlling stockholder;
(ii) the candidate has been, in the prior three years, an employee or director of affiliated companies, subsidiaries or companies under joint control of the Company;
(iii) the candidate has commercial relations with the company, or its controlling stockholder or affiliated companies, subsidiaries or companies under common control;
(iv) the candidate occupies a post in a company or entity, with power of decision in the conduct of its activities, which has commercial relations with the Company or with the Company’s controlling stockholder; or
(v) the candidate receives remuneration from the company, its controlling stockholder, affiliated companies, subsidiaries, or companies under joint control, other than that relating to activity as a member of the Board of Directors or of committees of the Company, except for proceeds in money arising from participation in the share capital of the Company, and/or benefits arising from a private pension plan.

3.2. The process of appointment

3.2.1. Candidates for membership of the Board of Directors may be nominated by the managers or by any stockholders of the Company.

3.2.2. Nomination of members to the Board of Directors must obey at least the following criteria – the candidate must:

(i) have an unblemished reputation;
(ii) be aligned with and committed to the Company’s values and culture;
(iii) have academic qualification from recognized Brazilian or international learning institutions;
(iv) have at least ten years’ professional experience in strategic positions in business management;
(v) be free of any conflicts of interest with the Company;
(vi) not occupy any post in a company or entity that could be considered a competitor of the Company; and
(vii) have reasonable availability of time to dedicate adequately to the function and responsibility assumed.

3.2.3. A stockholder wishing to nominate a candidate for membership of the Board of Directors must send notification in writing to the address of the Company’s head office, for attention of the Legal Department, presenting:

(i) full name;
(ii) copy of the instrument of declaration of non-impediment, or declaration that the nominating party has obtained from the candidate the information that the candidate is in a position to sign such an instrument, indicating any exceptions or qualifications;
(iii) résumé of the nominee, containing at least the nominee’s qualification, professional experience, educational history, principal professional activity currently exercised and indication of which position the nominee occupies in Boards of Directors, auditors or consultancy boards in other companies, as the case may be; and
(iv) in the event of nomination to a position as independent Board member, as well as the information listed above, a declaration signed by the candidate attesting that he/she qualifies in relation to the criteria for independence established by the Novo Mercado Regulations, as per item 3.2.6(i) of this Policy.

3.2.4. Election of the members of the Board of Directors shall be carried out as specified in the by-laws of the Company and in the applicable legislation.

3.2.5. Characterization of the nominee to the Board of Directors as an independent member will be decided by the General Meeting of Stockholders, which may base its decision on the following:

(i) the declaration submitted by the person nominated to be an independent member of the Board of Directors, attesting that he/she qualifies in relation to the criteria for independence established in this Policy and in the Novo Mercado Regulations, including the respective justification, if any of the specific situations specified in item 3.1.7 are found to exist; and
(ii) statement of opinion by the Board of Directors of the Company, included in the proposal by management to the General Meeting of Stockholders for election of managers, as to whether or not the candidate qualifies under the criteria for independence.

3.2.6. The procedure specified in item 3.2.5 above does not apply:

(i) to nominations of candidates for membership of the Board of Directors who do not comply with the prior period required for inclusion of candidates in the Voting Form, as specified in the regulations issued by the CVM on remote voting; and
(ii) in the case of a separate vote in the presence of the Company’s controlling stockholder.

4. ADVISORY COMMITTEES TO THE BOARD OF DIRECTORS

4.1. Criteria for composition of the Advisory Committees

4.1.1. The Board of Directors, for the better performance of its functions, may create committees or work groups with defined objectives, always with the purpose of advising the Board of Directors, comprising at least three and a maximum of five members all nominated and previously approved by the Board of Directors itself, from among the members of management and/or other persons directly or indirectly related or linked to the Company, who should have specific experience in the areas of competence of their respective committees.

4.1.2. The Audit Committee of the Company, when installed, shall comprise at least three and at most five members, as follows:

(i) at least one shall be an independent member of the Board of Directors of the Company;
(ii) at least one shall have recognized experience in corporate accounting matters, in the terms of the regulations issued by the Securities Commission (CVM) governing the registry and exercise of the activity of independent auditing in the ambit of the securities market, which define the duties and responsibilities of the management of entities audited in relationship with external auditors;
(iii) one same member of the Audit Committee may combine the two characteristics described in sub-items (i) and (ii) above.

4.1.3. Directors of the Company, or directors of its subsidiaries, or of its controlling stockholders, or of affiliated companies or of companies under control shared with it, are not permitted to be members of the Audit Committee of the Company.

4.2. Process of nomination

4.2.1. Nominations for membership of the Advisory Committees to the Board of Directors must be made by the managers of the Company.

4.2.2. Nominations for membership of the Advisory Committee to the Board of Directors must obey at least the following criteria: the candidate must –

(i) have an unblemished reputation;
(ii) be aligned with and committed to the Company’s values and culture;
(iii) have academic qualification from recognized Brazilian or international learning instructions;
(iv) be free of any conflicts of interest with the Company;
(v) not occupy any post in a company or entity that could be considered a competitor of the Company; and
(vi) have reasonable availability of time to dedicate adequately to the function and responsibility assumed.

4.2.3. The members of the Advisory Committees to the Board of Directors shall be elected by the Board of Directors as specified in its Internal Regulations.

5. THE EXECUTIVE BOARD (STATUTORY DIRECTORS)

5.1. Criteria for the composition of the Executive Board

5.1.1. The Executive Board shall comprise at least three and at most four sitting members, who may be stockholders, resident in Brazil, with a period of office of three years, re-election being permitted. The Executive Board shall have a Chief Executive Officer, a Deputy CEO, a Chief Administrative and Financial Officer, and a Chief Investor Relations Officer. Any of the officers may hold more than one of these posts, subject to the provision in item 3.1.3 of this Policy, and the other members shall have the designation attributed to them by the Board of Directors.

5.1.2. Nominations to the Executive Board should be from among professional executives who know how to combine, harmoniously, the interests of the Company and of its stockholders, managers and workers with the Company’s social and environmental responsibility, guided by legality and ethics.

5.2. Process of nomination

5.2.1. Candidates for membership of the Executive Board shall be nominated by the Board of Directors.

5.2.2. The nomination must obey at least the following criteria: the nominee must –

(i) have unblemished reputation;
(ii) be aligned with and committed to the Company’s values and culture;
(iii) have academic qualification from recognized Brazilian or international learning institutions;
(iv) have at least five years’ professional experience in strategic positions in business management;
(v) have abilities to implement the strategies, face the challenges and achieve the objectives of the Company;
(vi) be free of any conflicts of interest with the Company;
(vii) not occupy any post in a company or entity that could be considered a competitor of the Company; and
(viii) have reasonable availability of time to dedicate adequately to the function and responsibility assumed.

5.2.3. Election of the members of the Executive Board shall take place as specified in the by-laws of the Company and in the applicable legislation.

5.2.4. Proposals for re-election of the members of the Executive Board should be based on their annual individual evaluations, which consider each member’s performance and potential.

6. PENALTIES

6.1. Any violation of the provisions of this Policy shall be submitted to the management of the Company, and the applicable penalties may be adopted, without prejudice to the penalties specified in the current legislation.

7. FINAL PROVISIONS

7.1. Any alteration or revision of this Policy must be submitted to the Board of Directors of the Company, which shall also have the competency to decide on any cases of omission.

This Policy was approved by the Board of Directors of the Company on March 12, 2020, and comes into force on that date.

 

Farroupilha, Rio Grande do Sul, Brazil – March 12, 2020.

 
______________________________ ______________________________
Alexandre Grendene Bartelle Renato Ochman
CEO Secretary
 

This is a translation. The original in Portuguese is the legally valid document.