EMPLOYEE STOCK PURCHASE PLANS

EMPLOYEE STOCK PURCHASE PLANS: EMPLOYMENT

Labor Concerns

To reduce the risk of potential claims from employees that they have entitlements under a Plan, employees should expressly agree in enrollment forms that (i) participation in the Plan is discretionary, and that (ii) participation results in an investment opportunity subject to the risks inherent in stock investment. While payroll deductions may be problematic, the risk can be reduced by obtaining the written consent of the employee. In addition, even in the case of free share awards, there is a risk of the employee requesting that the underlying value of the award be taken into account when determining the extent of all labor and social security rights.

Communications

The translation of Plan documents into Portuguese for employees is recommended, but is not legally required. Government filings must be in Portuguese.

EMPLOYEE STOCK PURCHASE PLANS: REGULATORY

Securities Compliance

There are no securities compliance issues with regard to the offering of purchase plans.

Foreign Exchange

The Brazilian employees or the Brazilian Subsidiary may generally remit funds abroad in order to acquire shares in the parent company. The Subsidiary must present a letter to the bank in charge of the foreign exchange transaction that includes certain information (e.g. the names of the employees, their individual taxpayer enrollment numbers (CPF) and the amounts remitted per employee). The Subsidiary should confer with its bank regarding the specific supporting documents required. The bank is required to maintain records of the supporting documents and information related to foreign exchange remittances.

The employee may be subject to minor annual reporting requirements for any rights and/or assets held outside of Brazil.

Data Protection

Although employee consent is not required for the collection, use, and transfer of personal data, obtaining consent is nevertheless recommended in light of a constitutional right to privacy. The personal consent provision should be included in the enrollment form.

EMPLOYEE STOCK PURCHASE PLANS: TAX

Employee Tax Treatment

Employees are not subject to income tax on either the grant or exercise of the right to purchase shares. However, capital gains tax is imposed upon the subsequent sale of Stock if total proceeds exceed R$35,000 in any given month.

Social Insurance Contributions

Generally, social insurance contributions are not imposed on purchase rights. However, social insurance contributions may apply if rights are granted frequently and are subsequently characterized as part of regular employment income.

Tax Favored Program

None.

Withholding and Reporting

Generally, the employer has no withholding or reporting requirements with respect to a purchase plan.

Employer Tax Treatment

Upon the issuance of new shares to employees, the Brazilian Subsidiary may generally deduct any expenses relating to the Plan from profits recorded in the P&L account in accordance with IFRS accounting rules. The Brazilian Subsidiary may also deduct any costs that it reimburses to the Issuer provided that the offer of shares is made to all of the Subsidiary's employees located in Brazil. However, this reimbursement will increase the likelihood that the Plan will be deemed to be regular employment income to the employee and will be subject to labor and social security charges. Any amount reimbursed for benefits provided to board members, directors, or administrators is not deductible in Brazil.

Tax Rates

Individual income tax is charged at rates of up to 27.5%.

No social taxes are levied unless the local Subsidiary is involved in the grant of the shares or the costs are charged back to the local Subsidiary.

Where social taxes arise for the employer, these are generally levied at a rate of 20%. However, additional social security charges may apply at rates that vary depending on the activities being carried out by the employer.

Any gain made on the sale of shares is currently taxed at a flat rate of 15%. Beginning January 2017 however, such gains will be taxed at a progressive rate of between 15% and 22.5%. However, if the gains made on the sale of shares in any given month do not exceed BRL 20,000 (in respect of shares traded on an exchange) or BRL 35,000 (in all other cases), then no tax will be payable.

RESTRICTED STOCK and RSUs

RESTRICTED STOCK and RSUs: EMPLOYMENT

Labor Concerns

To reduce the risk of potential claims from employees that they have entitlements under a Plan, employees should be required to expressly agree in the award agreement that participation in the Plan is discretionary and should expressly acknowledge that their continued employment by the employer is a condition of the restricted stock or RSU award and that termination of employment will result in the loss of any unvested rights. In addition, as the awards are typically granted at no cost, the risk of the employee requesting the integration of the underlying value of the awards in the base calculation for determining all labor and social security rights is increased.

Communications

The translation into Portuguese of the Plan's documents for employees is recommended, but not legally required. Government filings must be in Portuguese.

RESTRICTED STOCK and RSUs: REGULATORY

Securities Compliance

There are no securities compliance issues with regard to the offering of restricted stock or RSU plans.

Foreign Exchange

The employee may be subject to minor annual reporting requirements for shares and any other rights/assets held outside of Brazil.

Data Protection

Although employee consent is not required for the collection, use, or transfer of personal data, obtaining consent is nevertheless recommended in light of a constitutional right to privacy. A personal consent provision should be included in the award agreement.

RESTRICTED STOCK and RSUs: TAX

Employee Tax Treatment

The employee should not be subject to income tax when the restricted stock or RSU award is granted. However, the employee will be subject to tax on the value of the Stock when the restricted stock or RSU award vests. The employee may also be subject to capital gains tax on a subsequent sale of the underlying Stock.

Social Insurance Contributions

Since RSUs do not usually require the beneficiary to invest cash in order to acquire the Stocks, the tax authorities may conclude that social insurance contributions should be imposed. Such a risk would be increased if grants are made frequently and are subsequently characterized as part of regular employment income.

Tax Favored Program

None.

Withholding and Reporting

If the Issuer is a Brazilian entity, it will be under an obligation to withhold income tax (which should be assessed when the RSU award vests). If Stocks are issued by a foreign company, no withholding obligations should arise in Brazil.

Employer Tax Treatment

Upon the issuance of new shares to employees, the Brazilian Subsidiary may generally deduct any expenses relating to the restricted stock or RSU awards from the profits recorded in the P&L account, in accordance with IFRS accounting rules. The Brazilian Subsidiary may also deduct any costs that it reimburses to the Issuer, provided that the restricted stock or RSUs are offered to all of the Subsidiary's employees located in Brazil. However, this reimbursement will increase the likelihood that the restricted stock or RSUs will be deemed to be regular employment income and will be subject to labour and social security charges. Any amount reimbursed for benefits provided to board members, directors, or administrators is not deductible in Brazil.

Tax Rates

Income tax is charged at rates of up to 27.5%.

Where social taxes arise for the employer, these are generally levied at a rate of 20%. However, additional social security charges may apply at rates that vary depending on the activities being carried out by the employer.

Any gain made on the sale of shares is currently taxed at a flat rate of 15%. Beginning January 2017 however, such gains will be taxed at a progressive rate of between 15% and 22.5%. However, if the gains realised on the sale of shares in any given month do not exceed BRL 20,000 (in respect of shares traded on an exchange) or BRL 35,000 (in all other cases), then no tax will be payable.

STOCK OPTIONS PLANS

STOCK OPTIONS PLANS: EMPLOYMENT

Labor Concerns

To reduce the risk of potential claims from employees that they have entitlements under a Plan, employees should be required to expressly agree in option award agreements that (i) participation in the Plan is discretionary, and that (ii) options result in an investment opportunity subject to the risks inherent in stock investment. While payroll deductions may be problematic, the risk can be reduced by obtaining the written consent of the employee. In addition, if options are granted through cashless transactions, there is a risk that the employee will request the integration of the underlying value of the options in the base calculation for determining all labor and social security rights.

Communications

The translation of Plan documents into Portuguese for employees is recommended, but is not legally required. Government filings must be in Portuguese.

STOCK OPTIONS PLANS: REGULATORY

Securities Compliance

There are no securities compliance issues with regard to the offering of options.

Foreign Exchange

The Brazilian employees or the Brazilian Subsidiary may generally remit funds abroad in order to acquire shares of the Issuer. To do so, the Brazilian Subsidiary must present a letter to the bank in charge of the foreign exchange transaction that includes certain information (e.g. the names of the employees, their individual taxpayer enrolment numbers (CPF) and the amounts remitted per employee). The Subsidiary should confer with its bank regarding the specific supporting documents required. The employee may be subject to minor annual reporting requirements for any rights and/or assets held outside of Brazil.

Data Protection

Although employee consent is not required for the collection, use or transfer of personal data, obtaining consent is nevertheless recommended in light of a constitutional right to privacy. A personal consent provision should be included in the option agreement.

STOCK OPTIONS PLANS: TAX

Employee Tax Treatment

Employees are not subject to income tax at the time of grant or exercise of the option. If the 'cashless exercise method' is adopted, there is a risk of tax authorities treating the income as regular compensation (which is subject to tax at a progressive rate of up to 27.5%). Capital gains tax is imposed upon the subsequent sale of Stock, if total proceeds exceed R$35,000 within any given month.

Social Insurance Contributions

Generally, social insurance contributions are not imposed on options. However, social insurance contributions may apply if grants are made frequently and are subsequently characterized as part of regular employment income, provided that payments are generally made through the payroll.

Tax Favored Program

None.

Withholding and Reporting

Where income taxes arise, the Brazilian employer must withhold tax and is subject to annual reporting obligations. Tax on capital gains is not subject to withholding or reporting obligations.

Employer Tax Treatment

Upon the issuance of new shares to employees, the Brazilian Subsidiary may generally deduct any expenses relating to the Plan from profits recorded on the P&L account, in accordance with IFRS accounting rules. The Brazilian Subsidiary may also deduct any costs that it reimburses to the Issuer in respect of the Plan, provided that the options are offered to all of the Subsidiary's employees that are located in Brazil. However, reimbursement will increase the likelihood that the options will be deemed to be regular employment income and will be subject to labor and social security charges. Any amount reimbursed for benefits provided to board members, directors, or administrators is not deductible in Brazil.

Tax Rates

Income tax is charged at rates of up to 27.5%.

No social taxes are levied unless the local Subsidiary is involved in the grant of the options or the costs are charged back to the local Subsidiary.

Where social taxes arise for the employer, these are generally levied at a rate of 20%. However, additional social security charges may apply at rates that vary depending on the activities being carried out by the company.

Any gain made on the sale of shares is currently taxed at a flat rate of 15%. Beginning January 2017 however, such gains will be taxed at a progressive rate of between 15% and 22.5%. However, if the gains realised on the sale of shares in any given month does not exceed BRL 20,000 (in respect of shares traded on an exchange) or BRL 35,000 (in all other cases), then no tax will be payable.