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Stock Options

The Company has a Stock Option Plan approved at the Extraordinary General Meeting held on January 12, 2018 and at the Board of Directors Meeting held on January 16, 2018.

Stock Options

Summary of the plan
2018 Plan 1st Grant
Date of Grant JANUARY 16, 2018
Number of Options Granted
835,000
Grace Period for Vesting 3 years
Maturity for Vesting MARCH 31, 2021
Maximum Period For Vesting MARCH 31, 2022
Vesting Price R$ 9.50
Beneficiaries (Employees) 24
Definitions Established In The Plan:

For the purposes of the Regulations for Stock Option Grants currently in force, the terms below shall comply with the following definitions:

  1. Potential beneficiaries
    Officers (statutory or otherwise), division managers and employees of Vulcabras Azaleia S.A. (“Company”) and direct or indirect subsidiaries (“Subsidiaries”) may be elected as beneficiaries of stock option grants, including new hires, all of which are subject to approval by the Company’s Board of Directors (“Participants”).
  2. Maximum number of stock option grants
    Options will be granted in a number that does not exceed the limit corresponding to the number established in item 2.c. below.
  3. Maximum number of shares covered by the plan
    The maximum number of shares that will be subject to the Stock Option Grant may not exceed 0.4% (four tenths of a percent) of the Company’s capital on diluted bases.
  4. Acquisition conditions
    There was only one Stock Option Grant held on the date of the Extraordinary Shareholders’ Meeting and the Grant shall remain in force until March 31, 2022. The Stock Options, as well as the rights and obligations arising from the Stock Option Grants and the Agreement, have a very personal nature and shall not be transferable, seizable and communicable to any spouse, and cannot be assigned or transferred in any way to third parties, nor given as collateral. The Participant may not make hedge operations or any type of transaction that reduces the risk attached to the Stock Options such as short selling of the Company’s shares, purchase of put options, future market transactions, etc. The Stock Options may be exercised on specific Vesting Dates, as provided in the Agreement, for the acquisition of Shares, and the base date to ascertain the end of the Grace Period shall be March 30, 2021. On the Vesting Dates, the Participants may exercise the Stock Options that complied with the Grace Period (“Mature Stock Options”) applicable to the Participant’s right to acquire Shares issued by the Company at a fixed price, for a certain period of time, subject to the conditions established in the Agreement (“Stock Options”). Once the Company has been notified, the effective exercise of the Stock Options will be carried out as established in the Agreement, which sets the dates on which the Shares will be acquired and delivered. The exercise of the Stock Options will be formalized through (i) submitting a notice to the Company, as per the template attached in the Agreement, (ii) paying the Vesting Price, and (iii) delivering a receipt or subscription bulletin by the Company, detailing the Vesting Price and the number of shares to be acquired.
  5. Detailed criteria to establish the vesting price
    The vesting price is set at R$9.50 (nine reais and fifty cents), adjusted by the variation of the Brazilian Extended Consumer Price Index (IPCA) from the date of the grate to the date of the effective vesting (“Vesting Price”). The Vesting Price corresponds to the same price paid by the subscribers of the public offering of shares held by the Company in October 2017, given that this price exceeds the average trading price of the Company’s shares at B³ in the 30 trading sessions prior to the date of this proposal of the management.
  6. Criteria for establishing the vesting period
    Participants may exercise the Mature Options only on two specific vesting dates: March 31, 2021 and March 31, 2022, according to the criteria described in the table below:

    Grace Period Vesting Date Percentage Of Options To Be Vested Annually
    Up To March 30, 2021 March 31, 2021 25%, 50% Or 100% Of The Grant Options May Be Vested On This Date, At The Participant’s Criterion.
    MARCH 31, 2022 The remaining balance of options not vested on the first vesting date may be vested on this date, at the participant’s criterion..

    The Options not vested on the last Exercise Date, March 31, 2022, will be extinguished and will no longer be vested by the Participants.

  7. Type of settlement of the stock options
    In the exercise of the Mature Options and consequent acquisition of the Shares, the Participants will be subject to the restrictive rules for trading shares of publicly-held companies, pursuant to the applicable regulations and the Company’s Trading Policy. Observing the criteria set forth in the Agreement, the Participant wishing to exercise its Mature Options shall notify the Company, in writing, of his/her intention, in accordance with the terms of the notice attached to the Agreement. Once the Company has been notified, the effective vesting will be carried out pursuant to the Agreement.
  8. Criteria and events that, when verified, will lead to the suspension, amendment or extinction of the plan
    Notwithstanding any other provision to the contrary, provided for in the Agreement, the Stock Options shall be automatically terminated, with all its effects automatically ceasing, in the following cases:
    (a) after the expiration of the Vesting Period or the Term;
    (b) upon the termination of the Agreement;
    (c) if the Company is dissolved, liquidated or has its bankruptcy decreed; or
    (d) in case of Participant’s Severance.Severance meaning any act or fact that results in the termination of the legal relationship of the participant with the Company.Severance includes the possibility of termination of the labor agreement, dismissal, replacement, resignation or non-reelection of the Participant as member of the management of the Company, retirement, permanent disability, disappearance or death.
Reasoning For The Proposed Plan:
  1. Main purposes of the plan
    The purpose of the Stock Option Grant is to establish rules for certain employees and members of the management of the Company or other companies under its control may acquire shares issued by them by vesting the Stock Options granted to them, to generate an alignment in the medium and long term of the interests of the Participants and the interests of the shareholders, to increase the feeling of ownership and the commitment of the Participants through the concept of investment and risk, to connect the long-term incentives with the Company’s short-term results, as well as to reinforce the retention power of a strategic group of employees and members of the management.
  2. How the plan contributes to these purposes
    The Plan grants Stock Options to the Participants to encourage their better performance in the management and to reach long-term results and, therefore, the valuation of the Company and of the shares issued by the Company.
    The purpose of the Stock Option Grant is to encourage a better performance of the management to achieve long-term results, encouraging ongoing results in subsequent years. The plan also encourages the participant to pursue the continuity of positive results, given the structure of the plan that rewards the Participants for continuous positive results.
  3. How the plan fits into the company’s compensation policy
    The plan is part of the strategy to retain employees and members of the management, with their commitment to generate value for the Company, without being part of the compensation package of the Participants.
  4. How the plan aligns the interests of the beneficiaries and of the company in the short, medium and long term
    The plan seeks to strengthen the retention of employees and members of the management, focusing on their commitment to generate value and sustainable results for the Company in the medium and long term.

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