Kroton Educacional : Material Fact - Letter to the Board of Directors of Estácio Participações

1e6cab92-7622-4ef0-88f8-9623b744a747.pdf KROTON EDUCACIONAL S.A.

Publicly Held Company

Corporate Taxpayer ID (CNPJ/MF): 02.800.026/0001-40 Company Registry (NIRE): 31.300.025.187

MATERIAL FACT KROTON EDUCACIONAL S.A. (BM&FBovespa: KROT3; OTCQX: KROTY) ("Company" or

"Kroton"), in compliance with Instruction n.º 358/02 issued by the Brazilian Securities and Exchange Commission ("CVM"), and, complementarily, to the Material Fact of June 2nd, 2016 and the Notice to the Market dated June 16th, 2016, present the following information:

Yesterday, the Company sent, to the Chairman of the Board of Directors of Estácio Participações S/A ("Estácio"), the letter, attached hereto, relating to the potential combination of its business and that of Estácio.

Kroton reaffirms its commitment to its obligations, as a public company listed on the Novo Mercado segment of the BM&FBOVESPA, and any and all material information will be disclosed in compliance with the applicable laws.

Belo Horizonte, June 21th, 2016

Carlos Alberto Bolina Lazar Investor Relations Officer Kroton Educacional S.A.

São Paulo, June 20th, 2016.

To

Board of Directors of Estácio Participações S.A.

Attn. Mr. João Cox Neto

Chairman of the Board of Directors

CC: Mr. Guilherme Menge BTG Pactual

Dear Sirs,

Reference is made to the material fact disclosed on June 2nd, 2016 by Kroton Educacional

S.A. ("Kroton") in which Kroton expressed its initial interest in a transaction ("Transaction") involving the combination of its businesses and that of Estácio Participações S.A. ("Estácio" and, jointly with Kroton, the "Companies"). In such material fact, the original proposal comprised in an exchange ratio of 0.977 common shares issued by Kroton for each common share issued by Estácio based on the weighted average price traded on BM&FBovespa for the shares of each company in the 30 trading sessions immediately prior to such material fact ("Material Fact"). Pursuant to such exchange ratio, the Companies' shares, after the issuance to the shareholders of Estácio, would be distributed among the shareholders of Estácio and of Kroton in the proportion of, approximately, 15.7% and 84.3%, respectively.

As you are aware of, Kroton's management is highly engaged in accomplishing the combination of the Companies' activities, upon terms and conditions acceptable to the parties and that are favorable to both companies and to the involved stakeholders.

We highlight that, in our view, the Transaction has a strong strategic rational due to the high geographic complementarity, significant potential for synergies and efficiency gains, and particularly, the strengthening of the investments in the quality of their educational services. We are convinced that this is the best strategic combination possible and that it would create material benefits to the businesses, students, shareholders and other stakeholders of the Companies.

During preliminary negotiations that we have had with members of this Board of Directors and with the financial advisor hired by Estácio, we indicated a substantial improvement in the exchange ratio initially informed in the Material Fact and, we hereby, formally, present our final proposal.

In this regard, we hereby formally express to this Board of Directors, our firm interest in a transaction involving the combination of Estácio and Kroton, in accordance with the terms proposed below. This proposal is binding and consolidates and replaces any communication made by Kroton until this date regarding the Transaction ("Proposal").

In view of our interest and the applicable legal, fiduciary and regulatory requirements, we understand that this letter must be fully disclosed to the market, through a new material fact, which will be promptly disclosed by Kroton.

We believe that the best alternative to carry out the combination of the Companies is through a corporate reorganization (including a merger of shares). Our proposal, presented herein, will result: (a) in the ownership, by Kroton, directly or indirectly, of all the shares issued by Estácio; and (b) in the receipt, for each common share issued by Estácio, of 1.250 common shares issued by Kroton (assuming that, on the date of the Transaction, there will be 307,841,339 shares of Estácio and 1,617,548,842 shares of Kroton, excluding, in both cases, shares held in treasury).

Pursuant to the terms described herein, the exchange ratio represents a premium of 27.9% over the exchange ratio initially informed in the Material Fact. Based on the closing price of Kroton's share on the date hereof, this proposal is equivalent to R$16.41 per share of Estácio, representing a premium of 48.1% over the closing share price of Estácio immediately prior to the Material Fact (i.e. June 1st, 2016).

Based on such exchange ratio, the shares of Kroton, after the issuance to the shareholders of Estácio, would be distributed among the shareholders of Estácio and of Kroton in the proportion of, approximately, 19.2% and 80.8%, respectively. The exchange ratio will be adjusted by: (i) any share split, reverse split, bonus and issuance of shares eventually occurred with regards to the Companies; (ii) any other events out of the ordinary course of business of both Companies as of this date; and (iii) other events to be agreed between the Companies.

The standards indicated above are based solely in our analysis of the public information disclosed by Estácio and this Proposal assumes that, as from this date and until the date of the consummation of the Transaction (i.e. the date the shareholders of Estácio become shareholders of Kroton), Estácio will conduct its activities in its ordinary course of business, as conducted until this date.

The Transaction will be subject to the approval of the board of directors and Shareholders' Meetings of both Companies, regulatory authorities and to usual conditions for similar transactions.

We believe that speed and care are crucial elements for the implementation of the Transaction, making imperative that the conclusion of the negotiations between the Companies occurs as brief as possible, relying on the engagement of the respective managements, their advisors and other professionals that shall participate in the structuring and accomplishment of the Transaction. This Proposal is valid until June 30, 2016, being automatically revoked after such date, unless if expressly extended in writing by Kroton's management.

Yours sincerely,

Rodrigo Galindo Chief Executive Officer of Kroton Educacional S.A.