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Stock options

Regulations of the Stock Options Purchase and Subscription Plan

I - Presentation
These Regulations establish the rules relating to the Program of Options for Purchase or Subscription of Shares of GRENDENE S.A. and its subsidiaries ("the Company"), instituted under the Stock Options Purchase and Subscription Plan ("the Plan"), submitted to decision of the Extraordinary General Meeting of the Company on April 14, 2008. The Plan and these Regulations were recommended by the Board of Directors in a meeting held on March 13, 2008 and approved changes in the Board of Director's meeting on March 1, 2012 and February 12, 2015, February 12, 2015 and August 1, 2019.

II – Definitions 
For the purposes of the REGULATIONS of Grant of Option for Purchase or Subscription of Shares currently in effect, the terms as employed below obey the following definitions:

  1. Stockholder: Individual or legal entity owning a share in the Company.
  2. Shares: Nominal common shares that will be or have been issued by the Company.
  3. Beneficiary: The Eligible Worker to whom the Option is in fact granted.
  4. Eligible Workers: Executives at the levels of Administrators, Executive Board and Management, except those who are part of the Stockholding Control, who are able to take part in the Stock Options Purchase and Subscription Plan, in the form of the indications specified in the said Regulations.
  5. Company: The company GRENDENE S.A. and its subsidiary companies.
  6. Subscription Contract: The Private Instrument of Grant of Option to Purchase or Subscribe Shares, entered into between the Company and the Eligible Worker, through which the latter becomes a participant in the Stock Options Purchase and Subscription Plan.
  7. Date of Grant: The date of signature of the Subscription Contract, which will formalize the grant of the Options to the Beneficiaries.
  8. Separation: This means any act or event which, whether or not justified, puts an end to the legal relationship between the Beneficiary and the Company, except in cases of retirement, permanent invalidity or death.  Separation also covers the cases of dismissal, replacement or non-reelection of the Beneficiary as an administrator and rescission of the employment contract.
  9. Exercise of the Options: The actual purchase or subscription, by the Beneficiary, of shares relating to the Options granted to him by the Subscription Contract.
  10. Option or Options: The possibility that the Beneficiaries have of acquiring or subscribing shares in the Company for a previously fixed price, during a specified period of time, when the conditions established in the Regulations have been met.
  11. Exercisable Option(s): Such option(s) as have met the conditions specified for the exercise of the right of purchase or subscription of the Shares (vesting), hence are able to be exercised.
  12. Non-Exercisable Option(s): Such option(s) as have/has not met the conditions specified for the exercise of the right of purchase or subscription of the Shares.
  13. Period of Exercise of the Option: Period between the date on which it is possible to buy or subscribe the shares and the limit date for the purchase or subscription.
  14. Regulations: The Regulations of the Plan duly approved by the Board of Directors and the General Meeting of Stockholders of the Company.
  15. Price of Exercise of the Option: Amount determined to be paid by the Beneficiary for the purchase or subscription of the shares that are subject of the option granted to him.
  16. Vesting: The period established by the Company before the period for exercise of the option for purchase or subscription of shares by the Beneficiary.

III – OBJECTIVE AND CONCEPT 
The objective of the Stock Options Purchase and Subscription Plan, governed by the REGULATIONS, is to establish rules for certain executives of the Company to be able to acquire shares issued by the company, aiming to reinforce the levels of attraction, retention and motivation of talents, and also to align interests of executives to those of the stockholders in the generation of profits and sustainable creation of value.  The target is to create a long-term incentive, based on the concept of stock options, which consists of concession of a right – and not an obligation – to buy shares in the Company for pre-defined prices and periods.  The Beneficiary's potential gain will be the result of the Purchase and Sale of the shares, that is to say, any increase in the value of the share over the exercise price.

 

Clause I. – Beneficiaries

1.1. Annually, based on recommendations by the Committee, defined below, the Board of Directors of the Company will decide on approval of Eligible Employees who will receive options.

1.2. The participation of a Beneficiary in a Program or grant does not guarantee to that person participation in subsequent grants.

1.3. New grants will be decided individually by the Board of Directors, which will analyze and decide in respect of the recommendations of the Committee, defined below.

 

Clause II. – Administration of the Plan

2.1. The "PLAN" will be administered by the Board of Directors of the Company, which may delegate its functions, subject to the restrictions specified by law, to a committee specially created for the purpose (the "Committee").

2.2. The Committee will be made up of at least 3 (three) members, of which one must be the Chairman of the Board of Directors of the Company and the others stockholders elected by the Board of Directors. The Board of Directors may not approve members of the Committee as Beneficiaries of stock options.

2.3. Subject to the conditions of these REGULATIONS and the directives set by the General Meeting of Stockholders, the Board of Directors of the Company will have wide powers to take all the measures necessary and appropriate for the administration of the Plan, including but not limited to:

2.3.1. creation and application of general rules relating to the "PLAN", in the terms of these Regulations and solution of doubts of interpretation thereof;

2.3.2. establishment of targets related to the performance of the administrators and managers of the Company, so as to establish objective criteria for the election of Beneficiaries;

2.3.3. election of the Beneficiaries in accordance with Clause I above and authorization to grant options for purchase of shares in their favor, establishing all the conditions of the options to be granted, and the modification of such conditions when necessary to adapt the options to the terms of any supervening law, rule or regulation;

2.3.4. issuance of new shares in the Company within the limit of the authorized capital, to satisfy the exercise of options to purchase shares granted under these Regulations.

2.4. In the exercise of is competency, the Board of Directors will be subject only to the limits established in the Law and these Regulations, it being clear that it will be able to treat administrators and managers in a differentiated manner, with the exception of those who are part of the Stockholding Control, of the Company or of other companies under its control that are in a similar situation, not being obliged, by any rule of isonomy or analogy, to extend to all the conditions that it deems applicable only to the one or to some.

2.5. The decisions of the Board of Directors of the Company or of the Committee (as the case may be) are binding on the Company in relation to all the matters related to the stock options Plan.


Clause III. – Frequency of Grant, Vesting and Period of Validity of the Options

3.1. Annually, during the validity of the Plan, the Board of Directors of the Company, taking into account the premises for grant, shall determine the Beneficiaries, in the form specified in Clause I above, establishing, also, the number of shares which will be able to be acquired with the exercise of each option, the exercise price of each option and conditions of its payment, the periods and conditions of exercise of each option and any other conditions in relation to them.

3.2. The Options shall have a total vesting period of three years, being able to be exercised as follows: (i) up to 1/3 after one (1) year from the date of the grant; (ii) a further 1/3 after two years from the date of the grant, totaling a limit of 2/3; (iii) the remaining 1/3 after three years from the date of the grant.

3.3. The options shall have a period of validity of six (6) years, from the date of grant.

3.4. The grant of options for purchase of shares under these Regulations is carried out through signing of Subscription Contracts between the Company and the Beneficiaries, which must specify, without prejudice to the conditions determined by the Board of Directors or Committee (as the case may be): (a) the number of shares subject of the grant; (b) the conditions for acquisition of the right to the exercise of the option; (c) the final deadline for exercise of the share purchase option; and (d) the price of exercise and conditions of payment.

3.5. The Board of Directors or Committee (as the case may be), may impose terms and/or prior conditions for the exercise of the option and impose restrictions on the transfer of the shares acquired with the exercise of the option, and may also reserve for the Company options of repurchase or rights of preference in the event of disposal by the Beneficiary of those shares, up to the termination of the period and/or compliance with the conditions fixed.

3.6. The Subscription Contracts will be prepared individually for each Beneficiary, and the Board of Directors or the Committee (as the case may be) may establish differentiated terms and conditions for each Subscription Contract, without the need for application of any rule of isonomy or analogy between the Beneficiaries, even if they are in similar or identical situations.

3.7. The options to purchase shares granted under these Regulations, and also their exercise by the Beneficiaries, has no relationship nor is linked to their fixed remuneration or any profit sharing.

3.8. Without prejudice to any provision to the contrary in these Regulations or in the Subscription Contract, the options granted shall be extinguished automatically, and their effects shall cease for full purposes of law, in the following cases: (a) their full exercise; (b) after the expiry of the period of validity of the option; (c) if the Subscription Contract is dissolved by agreement; or (d) if the Company is dissolved, liquidated or declared bankrupt.

3.9. The signing of Subscription Contracts will result in the acceptance, by the Beneficiaries, of all the conditions established in the Plan and in these Regulations.

Clause IV. – Exercise of the Option and Exercise Price

4.1. The exercise of the Option shall consist of purchase of the shares at the established exercise price, after the "Vesting" period has elapsed. The Beneficiary, for this purpose, must formally state the exercise of the options to the Company, through an Exercise Notice, within up to fifteen (15) days subsequent to the meeting of the Board of Directors of the Company which has approved the balance sheet of the previous business period, subject to the limits specified in (3.2) above. Further, at its exclusive option, the Board of Directors may authorize the exercise of options for which right of exercise has been acquired, within 15 (fifteen) days after the publication of the quarterly results, subject to the limits in (3.2) above. The options may be exercised in whole or in part, subject to the periods and conditions established by the Board of Directors, by the Committee (if applicable), by these Regulations (especially, but not limited to the limits in (3.2) above) and by the Subscription Contracts.

4.1.1. The portion of the Option not exercised up to the date specified in 3.3 (iii) above, shall be considered automatically extinguished, without any right or indemnity.
4.1.2. The exercise of the Option may only take place provided that the Beneficiary's link with the Company or its subsidiaries has continued up to the date of actual exercise of the Option.

4.2. The Exercise Notice may be issued by the Beneficiary only after the disclosure of the annual results and/or quarterly results as decided by the Board of Directors. In the Exercise Notice, the Beneficiary should include the quantity of shares that he wishes to acquire, in the terms of the model of notice to be disclosed by the Board of Directors or by the Committee, as the case may be.

4.2.1. If the quantity of shares intended in the Exercise Notice exceeds the limit specified in 3.2 above, the Company will inform the Beneficiary, within five (5) business days from receipt of the Exercise Notice, of the correct quantity of shares the option of which may be exercised.
4.2.2. The Company will inform the Beneficiary within two (2) business days from the decision of the Board of Directors specified in 4.3, 4.4 and 4.5 below, the price of exercise to be paid.
4.2.3. The payment of the price of the exercise of the option shall be on the date determined by the Company, in Brazilian currency, through (i) nominal check to the Company; (ii) bank transfer to an account indicated by the Company; or (iii) any other form of payment expressly permitted by the Company and previously advised to the Beneficiary in writing.

4.3. The Exercise Notices will be checked by the Company Committee which is responsible for the management of the Plan and subsequently sent to the Board of Directors, which will check their accuracy and conformity with the rules of these Regulations, especially, but not limited to the limit specified in 3.2 above. If the Exercise Notices are compliant, the Board of Directors will decide, at its next meeting, on issuance of the respective quantity of shares, in obedience to the precepts of law and the limits of authorized capital of the Company.

4.4. The Exercise Price of the option will be based on the volume-weighted average of the market price of the share in the month prior to the grant and adjusted by inflation (IPCA) up to the Exercise of Option, thus establishing Article 170, § 1, III, of Law 6404/76 as the criterion for setting the issue price.

4.5. The Board of Directors, at its exclusive option, but without disobeying the legal limits referred to above, may apply a discount of up to 50% on the result of the average referred to in this item. Application of the said discount will not create an acquired right, in favor of the same or of other beneficiaries, to similar discounts in other issues of shares.

4.6. When the issuance of the shares or transfer of the shares in treasury has been approved, according to the case and the decision of the Board of Directors, the shares resulting from the Exercises of Option will be transferred or launched in the name of the respective Beneficiary, who must pay to the Company the issue price by five (5) days after the registry or transfer.

4.7. Transitory Provision: The exercise price of the option, in the grant of the year 2008, will be based on the weighted average of the market price of the shares of the Company in February of the same year, without discount and adjusted by the IPCA up to the date of exercise of the option.

4.8. The Board of Directors may determine the suspension of the right to the exercise of the option, whenever a situation takes place which, under the law or regulations in force, restricts or prevents the trading of shares by the Beneficiaries.

4.9. No Beneficiaries shall have any of the rights, privileges or options of a stockholder of the Company until his option has been duly exercised, in the terms of these Regulations and the Subscription Contract. No shares shall be transferred or issued as a result of the exercise of option until all the legal and regulatory requirements have been fully complied with.

4.10. During the period of validity of the Option, the Beneficiary is prohibited from disposing of, or constituting any lien, charge or burden that falls upon, such Options as are still subject to the period of exercise, and also resale of the Shares to the Company.

Clause V. – Shares subject to the Stock Options Plan

5.1. The options for purchase of shares granted under the Stock Options Plan and these Regulations shall have a total limit of 5% (five per cent) of the registered capital of the Company.

5.2. The shares resulting from the exercise of options shall be issued as a result of a decision to increase capital, by the Board of Directors, within the limits of the Company's authorized capital or use of shares in treasury, within the legal limits.

5.3. The present stockholders will not have preference in the grant or in the exercise of option of purchase of shares, specified in these Regulations, as per Article 171, § 3 of Law 6404/76.

Clause VI. – If the Beneficiary leaves the Company

6.1. 6.1. In the event of the Beneficiary separating from the Company by dismissal or rescission of the respective contract, if any, with or without just cause, or resignation or destitution from the position, retirement, permanent disablement or death, the rights conferred on him under the REGULATIONS may be extinguished or modified, as specified in item 6.2 below:

6.2. If, at any time during the period of validity of the Plan, the Beneficiary:

a) separates himself from the Company of his own volition, requesting resignation from his employment, rescinding the respective contract, if any, or resigning his position of administrator: (i) the Non-exercisable options on the date of his separation will be automatically extinguished, for full purposes of law, independently of prior notice or indemnity; and (ii) the Exercisable Options may be exercised within up to thirty (30) days, after which they will be automatically extinguished, independent of advice or service of notice;

b) is separated from the company at the initiative of the Company, by dismissal or rescission of the respective contract, if any, for just cause or destitution from his position due to violating the rights and attributions of manager, all the rights already exercisable or not yet exercisable in accordance with the respective Subscription Contract, on the date of his separation from the Company, will automatically be extinguished, for full purposes of law, independently of prior notice or indemnity;

c) is separated from the Company at the Company's initiative, through dismissal or rescission of the respective contract, if any, without just cause or destitution from his position without violation of the duties and attributions of administrators: (i) the Non-exercisable Options in accordance with the respective Subscription Contract, on the date of his separation, will be automatically cancelled, independently of prior advice, notice or indemnity; (ii) the Exercisable Options will be extended by up to thirty (30) calendar days from the announcement of the separation – no further extension being possible – after which they will automatically be cancelled, independently of prior advice, notice or indemnity;

d) separates himself from the Company by retirement or permanent disablement:

(i) the Non-exercisable Option under the Subscription Contract, on the date of his/her separation, shall be exercised under the terms of the Contract, even after the end of the legal and / or employment relationship with the Company; and

(ii) the Exercisable Options under the Subscription Contract on the date of his separation will remain unchanged, being able to be exercised normally under the Contract;

d.1) In both cases mentioned in the letter "d" above, the Committee which administers the Stock Option Plan, is already now authorized to take all decisions and measures to implement as described in items (i) and (ii) above.

d.2) The Committee shall independently evaluate the work performed by the Beneficiary for his/her succession of its activities in the Company, starting twelve (12) months before the effective date of its Termination. The beneficiary shall indicate, at least six (6) months before his/her effective separate from the Company, his/her successor as well as shall train him and prepare him duly to assume his/her function. The successor must demonstrate in the period of succession and training, be able to exercise the functions of the position as well as respond positively to all the obligations and responsibilities inherent to the position.

d.3) For the purposes of the REGULATIONS, Succession Period means the time period from the date on which the Beneficiary expressly demonstrates to the Committee his/her will to separate from the Company until the date of formalization on his/her withdrawal date.

e) is separated from the Company by death: (i) the Non-exercisable Options in accordance with the Subscription Contract, on the date of his death, will automatically be exercisable, the ending of the vesting period being brought forward, and the legal heirs and successors of the Beneficiary may exercise the respective option within up to twelve (12) months from the date of death, after which such rights shall be automatically extinguished, for full purposes of law, independently of prior advice or indemnity; and (ii) the Exercisable Options under the respective Subscription Contract, on the day of his death may be exercised by the legal heirs and successors of the Beneficiary, provided that they do so within up to twelve (12) months from the date of death, after which the rights shall be automatically extinguished, for full purposes of law, independently of prior advice, notice or indemnity.

– and items 6.3 and 6.4 of the Regulations also transcribed below:

6.3. In the case of dismissals without just cause that take place in the period of 12 months after a change of control, in accordance with the law, all the options become exercisable.

6.4. The Board of Directors shall have liberty and autonomy to decide on exceptional cases and/or change the rules specified above, without prejudice to rights already exercised and/or acquired prior to their decision.

Clause VII. – Dissolution or Liquidation of the Company

7.1. In the event of dissolution, merger, absorption, split or liquidation of the Company, the Beneficiaries will be able to exercise such of their Options as can already be exercised within the period between the date of convocation of the General Meeting of Stockholders the purpose of which is to decide on the dissolution, merger, absorption, split or liquidation of the Company and the date of its being held. To the contrary, the options will be extinguished, as will these Regulations and the respective Subscription Contracts.

Clause VIII. – Period of Validity of the Stock Options Plan

8.1. The "PLAN" and these REGULATIONS come into effect on the date of their approval by the General Meeting of Stockholders of the Company and may be extinguished at any time by decision of the General Meeting of Stockholders. The termination of the period of validity shall obey acquired rights, and shall not affect the efficacy of the Option still in effect, granted on the basis of it.

Clause IX. – General Provisions

9.1. These Regulations shall not prevent the realization of any operations of stockholding reorganization, such as transformation, absorption, merger or split.  The Board of Directors of the Company and the Companies involved in such operations may, at their option, determine, without prejudice to other measures which they decide for the purposes of being equitable: (a) to substitute the shares subject of the Options by shares in the company that is successor to the Company; (b) bringing forward of the acquisition of the right to exercise the option for acquisition of shares, so as to ensure the inclusion of the corresponding shares in the operation in question; and/or (c) payment in cash of the amount to which the Beneficiary would be entitled under the terms of the Plan.

9.2. In the event of the number, type and/or class of shares issued by the Company being altered by reason or share splits, stock bonuses, reverse splits or conversions, the Board of Directors shall carry out the corresponding adjustment to the number, type and/or class of shares object of each Option in force and their respective acquisition or subscription price, as the case may be, informing the Beneficiaries in writing.

9.3. The Board of Directors of the Company will be competent to resolve any doubts as to interpretation of the rules established in these Regulations, and in the event of conflict between the provisions of these Regulations and of the Plan, those of the Plan will prevail.

9.4. The Board of Directors may, at any time, alter the rules of the Stock Options Plan and these Regulations, without prejudice, however, to the rights until then acquired.

9.5. No provision of the Stock Options Plan or of these REGULATIONS shall confer on any Beneficiary the right to remain as a senior manager and/or employee of the Company, nor shall it interfere, in any way, with the Company's right, at any time and subject to the legal and contractual conditions, to rescind the employment contract of the employee and/or to interrupt the mandate of the manager.

9.6. Each Beneficiary must adhere expressly to the conditions of these Regulations, through a declaration in writing, without any reservation.

9.7. Any significant legal alteration in relation to the regulation of corporations, listed companies and/or to the tax effects of a stock options plan, may lead to total or partial review of the Stock Options Plan and of these REGULATIONS, without this subjecting the Company to any indemnity to any party whatsoever.

9.8. Cases of omission will be regulated by the Board of Directors, after consulting, whenever it believes it to be appropriate, the General Meeting of Stockholders of the Company. Any options granted in accordance with the Stock Options Plan is subject to all the terms and conditions established in these Regulations, and such terms and conditions shall prevail in the event of inconsistency in relation to the provisions of any contract or document mentioned in these Regulations.

9.9. The first grant of Options in the form specified in 3.1 above will take place in the month of April 2008. In the following business years, any grants will take place in the meetings of the Board of Directors as specified in items 4.1 and 4.2, above.

Sobral (CE), August 1, 2019.

Pedro Grendene Bartelle
President

 Renato Ochman
Secretary

Granting of share option or purchase plan

Summary of granting of share option or purchase plan and changes are stated as follows:

Program Grant date Quantity of options granted Quantity of options exercised Quantity of options cancelled Balance Maturity
10th 16/02/2017 2.181.456 (1.333.434) (191.988) 656.034 2023
11th 22/02/2018 1.524.825 (451.383) (62.514) 1.010.928 2024
12th 14/02/2019 695.892 - (22.860) 673.032 2025
Total   4.402.173 (1.784.817) (277.362) 2.339.994  
 

Options Exercisable from

Program Balance of the options granted 2019 2020 2021 2022
10th 656.034 15.021 641.013 - -
11th 1.010.928 48.996 480.966 480.966 -
12th 673.032 - 224.344 224.344 224.344
Total 2.339.994 64.017 1.346.323 705.310 224.344
 

Summary of options

Date Opening balance Granted Exercised Cancelled Final Balance
31/12/2015         3.513.669
25/02/2016 3.513.669 2.675.538 - - 6.189.207
08/03/2016 6.189.207 - (1.823.862) - 4.365.345
14/03/2016 4.365.345 - - (62.442) 4.302.903
05/08/2016 4.302.903 - (73.836) - 4.229.067
31/12/2016         4.229.067
30/01/2017 4.229.067 - - (54.222) 4.174.845
16/02/2017 4.174.845 2.181.456 - - 6.356.301
06/03/2017 6.356.301 - (1.831.794) - 4.524.507
30/03/2017 4.524.507 - - (64.410) 4.460.097
10/08/2017 4.460.097 -   (55.380) 4.404.717
14/11/2017 4.404.717 - - (18.090) 4.386.627
24/11/2017 4.386.627 - - (47.508) 4.339.119
31/12/2017         4.339.119
22/02/2018 4.339.119 1.524.825 - - 5.863.944
09/03/2018 5.863.944 - (2.054.658) - 3.809.286
08/05/2018 3.809.286 - - (146.814) 3.662.472
31/07/2018 3.662.472 - - (24.009) 3.638.463
31/12/2018         3.638.463
14/02/2019 3.638.463 695.892 - - 4.334.355
01/03/2019 4.334.355 - (1.905.000) - 2.429.355
18/04/2019 2.429.355 - - (21.666) 2.407.689
10/05/2019 2.407.689 - - (29.355) 2.378.334
15/05/2019 2.378.334 - - (9.627) 2.368.707
24/05/2019 2.368.707 - - (28.713) 2.339.994
30/06/2019         2.339.994
 

Position at June 30, 2019