Marisa

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Corporate Governance Practices and Novo Mercado

In 2000, the BOVESPA introduced three special trading segments, the Nível 1, Nível 2 and the Novo Mercado segments. Companies that register their shares under these segments agree to follow stricter corporate governance rules and abide by additional reporting requirements than those required by the regulation applicable to the registered companies with the BOVESPA and not registered under Nível 1, Nível 2 and the Novo Mercado segments.

The Novo Mercado is a special trading segment of the BOVESPA exclusively intended for companies meeting certain requirements and agreeing to adhere to stricter corporate governance rules. Below is a summary of the key points characterizing the Novo Mercado as they apply to Marisa:

• the capital stock must be exclusively composed of common shares and the issuance or maintenance of so called founder’s shares is prohibited;
• the public float of shares must represent at least 25.0% of the capital stock;
• in the event of transfer of control, even if through a series of successive sales, the transfer must be subject to the minority shareholders being granted the same conditions offered to the controlling shareholder, including the same price (tag along), through a tender offer for the acquisition of shares;
• the board of directors must be composed of at least five members, of which at least 20.0% should be independent directors elected during the shareholders’ meeting for a term of up to one year, with re-election permitted;
• new members of the board of directors and the executive officers must sign an agreement, the Termo de Anuência dos Administradores, before assuming their positions on the board or executive board in which the new directors and executive officers of the company agree to act in accordance with the listing agreement with the Novo Mercado, the Novo Mercado Arbitration Chamber regulations and the Novo Mercado regulations;
• a statement of cash flow (both the company’s and consolidated) must be included in the quarterly financial reports and annual financial statements;
• all financial statements, related notes and management reports, are disclosed in English and prepared according to Brazilian GAAP and accompanied by additional notes demonstrating the reconciliation of the balance sheet and income statement under Brazilian GAAP with IFRS or U.S. GAAP, respectively, outlining the main differences between each of these accounting principles from the point of view of independent auditor. As of the second year after listing the shares on the Novo Mercado, the disclosure of financial statements in English, prepared in accordance with Brazilian GAAP, with a reconciliation note concerning the year-end results and the shareholders’ net equity with U.S. GAAP or IFRS becomes mandatory;
• the schedule of corporate events as well as any related amendments should be disclosed annually to the shareholders, by the end of the month of January;
• delisting from the Novo Mercado, as well as the decision to cancel the registration as a public company, should be subject to the controlling shareholder’s public tender offer for the acquisition of all of the company’s outstanding shares for a price determined in a valuation report prepared by a specialized institution or company with recognized experience and independent from persons with the power to make decisions within a company, such as directors or the controlling shareholder, in addition to meeting the requirements set forth in Article 1, paragraphs 6 and 8 of Brazilian Corporate Law; and
• the company, its controlling shareholder, management and members of the fiscal council should refer to the Novo Mercado Arbitration Chamber to resolve any dispute or controversies that may arise, related to and resulting from the application, validity, effectiveness, interpretation or violation of Brazilian Corporate Law, the Company’s bylaws, the rules and regulations of the CMN, the Central Bank, and the CVM, as well as additional rules and regulations applicable to the capital markets, Novo Mercado regulations, the Novo Mercado Arbitration Chamber regulations and the listing agreement with the Novo Mercado.

Quiet Period

In accordance with best corporate government practices and the stipulations of the Novo Mercado, Marisa has adopted a quiet period for 15 days prior to the public disclosure of its financial statements, during which time privileged information on the Company’s results may not be disclosed to anyone who is not involved in the drafting of the disclosure documents. In order not to jeopardize the monitoring of Marisa’s activities by the market, we will continue disclosing all other routine information during the quiet period.

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Regulation of the Brazilian Securities Market

The Brazilian securities markets are regulated by the CVM, which has regulatory authority over the stock exchanges and securities markets, by the National Monetary Council and by the Central Bank, which has, among other powers, licensing authority over brokerage firms and regulates foreign investment and foreign exchange transactions. The Brazilian securities markets are governed by the principal law governing the Brazilian securities markets, by the Brazilian Corporation Law, and by regulations issued by the CVM, the CMN and the Central Bank. These laws and regulations provide for, among other things, disclosure requirements, restrictions on insider trading and price manipulation and protection of minority shareholders. However, the Brazilian securities markets are not as highly regulated and supervised as U.S. securities markets.

Under the Brazilian Corporation Law, a company is either publicly held and listed, a “companhia aberta”, or privately held and unlisted, a “companhia fechada”. All listed companies are registered with the CVM and are subject to reporting and regulatory requirements. To be listed on the Bovespa, a company must apply for registration with the Bovespa and the CVM and is subject to regulatory requirements and information publishing requirements.

A company registered with the CVM may trade its securities either on the Brazilian exchange markets, including the Bovespa, or in the Brazilian over-the-counter market. Shares of companies listed on the Bovespa may not simultaneously trade on the Brazilian over-the-counter market. The shares of a listed company may also be traded privately, subject to several limitations.

The Brazilian over-the-counter market, whether or not organized, consists of trades between investors through a financial institution registered with the CVM, and authorized to trade in the Brazilian capital market. No special application, other than registration with the CVM, is necessary for securities of a public company to be traded in the non-organized over-the-counter market. The CVM must receive notice of all trades carried out in the Brazilian over-the-counter market by the respective intermediaries.

The trading of securities on the Bovespa may be suspended at the request of a company in anticipation of a material announcement. Trading may also be suspended on the initiative of the Bovespa or the CVM, among other reasons, based on or due to a belief that a company has provided inadequate information regarding a significant event or has provided inadequate responses to inquiries by the CVM or the Bovespa.

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Disclosure and Use of Information

Pursuant to CVM Rule # 358, of January 3, 2002, the CVM revised and consolidated the requirements regarding the disclosure and use of information related to material facts and acts of publicly held companies, including the disclosure of information in the trading and acquisition of securities issued by publicly held companies.

Such requirements include provisions that:

• establish the concept of a material fact that gives rise to reporting requirements. Material facts include decisions made by the controlling shareholders, resolutions of the general meeting of shareholders and of management of the Company, or any other facts related to the Company’s business (whether occurring within the Company or otherwise somehow related thereto) that may influence the price of its publicly traded securities, or the decision of investors to trade such securities or to exercise any of such securities’ underlying rights;
• specify examples of facts that are considered to be material, which include, among others, the execution of shareholders’ agreements providing for the transfer of control, the entry or withdrawal of shareholders that maintain any managing, financial, technological or administrative function with or contribution to the Company, and any corporate restructuring undertaken among related companies;
• oblige the officer of investor relations, controlling shareholders, other executive officers, members of its board of directors, members of the audit committee and other advisory boards to disclose material facts;
• require simultaneous disclosure of material facts to all markets in which the corporation’s securities are admitted for trading;
• require the acquirer of a controlling stake in a corporation to publish material facts, including its intentions as to whether or not to de-list the corporation’s shares, within one year;
• establish rules regarding disclosure requirements in the acquisition and disposal of a material stockholding stake; and
• restrict the use of insider information.

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Investment in Marisa Common Shares by Non-Residents of Brazil

Investors residing outside Brazil, including institutional investors, are authorized to purchase equity instruments, including Marisa’s common shares, on Bovespa provided that they comply with the registration requirements set forth in Resolution No. 2,689 of the National Monetary Council, which the Company refers to as Resolution 2,689, and CVM Instruction No. 325.

With certain limited exceptions, under Resolution 2,689 investors are permitted to carry out any type of transaction in the Brazilian financial capital market involving a security traded on a stock exchange, futures exchange or organized over-the-counter market. Investments and remittances outside Brazil of gains, dividends, profits or other payments under Marisa’s common shares are made through the new unified exchange rate market.

In order to become a Resolution 2,689 investor, an investor residing outside Brazil must:

• appoint a representative in Brazil with powers to take actions relating to the investment;
• appoint an authorized custodian in Brazil for the investments, which must be a financial institution duly authorized by the Central Bank and CVM; and
• through its representative, register itself as a foreign investor with the CVM and the investment with the Central Bank.

Securities and other financial assets held by foreign investors pursuant to Resolution 2,689 must be registered or maintained in deposit accounts or in the custody of an entity duly licensed by the Central Bank or the CVM. In addition, securities trading by foreign investors is generally restricted to transactions involving securities listed on the Brazilian stock exchanges or traded in organized over-the-counter markets licensed by the CVM.

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Rights of Common Shares

Each common share entitles its owner to one vote in Marisa’s general and special shareholders’ meetings.

According to the Company’s bylaws and Brazilian Corporate Law, Marisa’s shareholders have the right to receive dividends and other distributions made in connection with the Company’s common shares in proportion to their ownership interest in its capital stock.

In the event of the Company’s liquidation, Marisa’s shareholders have the right to receive reimbursements proportional to their ownership interest in its capital stock, after the settlement of all of the Company’s obligations.

Owners of Marisa’s common shares have a preemptive right to participate in increases of the Company’s capital stock, proportional to their ownership interest in its capital stock, but they are not obligated to subscribe to new shares in these future increases of the Company’s capital stock.

According to Brazilian Corporate Law, neither the Company’s bylaws nor actions taken at a shareholders’ meeting may deprive a shareholder of the following rights:

• the right to participate in the distribution of profits;
• the right to participate, proportionally to their ownership interest in the Company’s capital stock, in the distribution of any residual assets in the event of the Company’s liquidation;
• the right to inspect, in the manner set forth in Brazilian Corporate Law, the management of corporate businesses;
• preemptive rights related to the subscription of shares, debentures convertible into shares or subscription warrants, except in some specific circumstances set forth in Brazilian Corporate Law; and;
• the right to withdraw from the company in the circumstances defined by Brazilian Corporate Law;

In compliance with the contract entered into by the Company, the Management and Bovespa with respect to the listing of the shares on Novo Mercado, Marisa is expressly prohibited from holding non-voting shares or restricted voting right shares, unless its shares are delisted from the Novo Mercado.