Policies

Lopes was listed in 2006 under the special corporate governance segment of Bovespa known as , the Novo Mercado, as a result of its voluntary commitment of following good practices of corporate governance and better disclosure requirements in addition to those already imposed by Brazilian law. These rules generally increase shareholders’ rights and enhance the quality of information provided to shareholders.

To be listed on the Novo Mercado, in addition to the obligations imposed by current Brazilian law, an issuer must meet all of the following requirements:

• issue only common shares;
• grant tag-along rights to all shareholders in connection with a transfer of control of the company, the acquirer being required to hold a public offer for acquisition of the shares to the other shareholders, at the same price per share paid for the controlling block;
• ensure that shares of the issuer representing at least 25% of its total capital are effectively available for trading;
• adopt offering procedures that favor widespread ownership of shares whenever making a public offering;
• comply with minimum quarterly disclosure standards;
• follow stricter disclosure policies with respect to transactions made by controlling shareholders, directors and officers involving securities issued by the issuer;
• submit any existing shareholders´ agreements and stock option plans to the B3;
• disclose a schedule of corporate events to the shareholders;
• have a board of directors comprised of at least five members with a term limited to two years;
• adhere exclusively to the arbitration rules of the B3, pursuant to which the B3, the company, the controlling shareholder, the management and the members of fiscal council, if any, agree to resolve by arbitration any dispute or controversy related to the Novo Mercado listing rules;
• if a decision to delist from the Novo Mercado is made, the issuer´s controlling shareholder must launch a tender offer for the acquisition of all outstanding shares at a minimum price to be established based on an independent appraisal.

Lopes shares grant their holders the following rights:

• right to vote at the company’s general meetings, with each share corresponding to one vote;
• right to the minimum mandatory dividend, in each fiscal year, not less than 25% of the net income for the respective fiscal year, adjusted in accordance with article 202 of the Brazilian Corporation Law;
• in case of sale, directly or indirectly, for consideration, of the control of Lopes, even through successive operations, the right to sell its shares in a public tender offer to be carried out by the acquirer of control, under the conditions and within the terms provided for in the current legislation and in the Novo Mercado Regulation, in order to guarantee them equal treatment with the transferor of control;
• in the event of cancellation of the Company’s registration as a publicly-held company or cancellation of the Company’s listing on the Novo Mercado of B3, right to sell its shares in an OPA to be carried out by the controlling shareholder or by the Company for, at least, their respective economic value determined through the preparation of an appraisal report by a specialized and independent company of Lopes, its managers and controllers, as well as their decision-making power, with proven experience and chosen by the general meeting of shareholders holding outstanding shares from a triple list presented by the Company’s Board of Directors, pursuant to the Novo Mercado regulations;
• right to recognize full dividends and all other benefits that may be declared by the company as of the liquidation date; and
• all other rights granted to Lopes’ shares under the terms of the Brazilian Corporation Law, the Novo Mercado Regulation and the Company’s Bylaws.

The Shares are listed and traded on B3 under the symbol LPSB3.

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 B3, a company must apply for registration with the B3 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 B3, or in the Brazilian over-the-counter market. Shares of companies listed on the B3 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 B3 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 B3 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 B3.

Brazilian corporation law and our by-laws require that we distribute annually to our shareholders a mandatory minimum distribution, unless our board of directors recommends otherwise, due to our financial condition. Pursuant to our by-laws, our mandatory minimum distribution is equal to 25% of our net income, adjusted in accordance with Brazilian corporation law.

The mandatory minimum distribution may be paid in the form of dividends or interest attributable to shareholders’ equity, in which case the amount, net of income tax payable on that amount by the recipient, may be allocated to the mandatory distribution and deducted from our income and social contribution tax obligations, subject to certain limits.

Upon acquiring our common shares, shareholders will have the right to receive all dividends and other distributions declared by us.

Lopes cannot anticipate or assure that we will be able to distribute dividends or interest attributable to shareholders’ equity to our shareholders in amounts similar to those distributed in the past. In addition, mainly due to our August 2006 corporate restructuring, distribution of dividends or interest attributable to hareholders’ equity in the past may not be indicative of distributions in the future.