Board of Director’s Statement on Determination of Salary and Other Remuneration to Executive Management.

6 June 2016

Board of Directors’ Statement on determination of salary and other remuneration to Executive Management for the Financial Year 2016 and until the AGM in 2017

The Board of Directors has established a Statement on determination of salary and other remuneration to Executive Management (“Statement”). The Statement was approved by the Extraordinary General Meeting on 6 June 2016 in accordance with section 6-16a of the Norwegian Public Limited Companies Act. The guidelines on share-based incentive schemes are binding for the Board. The remaining guidelines are non-binding, but the Board will have to state its reasons for deviating in the Board minutes should it choose to deviate from the non-binding guidelines.

The Board of Directors will in the evaluation of remuneration of Executive Management aim to secure a total compensation scheme that will attract and retain a highly qualified Executive Management who will fulfill the strategic objectives of Bionor. The Board will approve the Chief Executive Officer’s salary and other remuneration. The Chief Executive Officer will determine salary and other remuneration for the other Executive Management members within the limits established by these guidelines and possible further detailed guidelines specified by the Board. Remuneration for Executive Management during the period from the AGM in 2016 and until the AGM in 2017 will be based on the following main principles:

Base salary
The determination of base salary of the Executive Management is based on position, level of responsibility, expertise and seniority. The level of pay will be competitive. The base salary is reviewed annually based on individual performance, employee potential and competitiveness of employee’s compensation scheme.

Annual bonus
Executive Management’s bonuses are performance dependent and based on individual operational objectives, which feed into Bionor’s overall strategic goals. The annual bonus will be limited to a maximum of 25% of base salary for the Executive Management. Discretionary bonus for extraordinary performances may be awarded. Whether or not to award the Chief Executive Officer with a bonus and the level of such bonus is at the discretion of the Board of Directors.

Long term and other incentive schemes
Bionor has a share option program to ensure the focus and align the company’s long term performance with shareholder values and interest. The program also serves to retain and attract key management. Certain members of key management have been granted share options upon joining the company. Additional grants have been made to key personnel on a discretionary basis taking into account overall performance, competitiveness of terms, work responsibility, importance of retention, organization level, and position. Share options may also be granted to selected consultants and board members to attract and retain the individuals with the skill, international experience, and industry competence the company requires. Up until end 2014 share options vested over a three-year period and are usually vested according to the following plan; 33 % of the options vest on the first anniversary of the grant date; 33 % at year two and the remaining 33 % of the options vest at year three. Options expire seven years after the grant date. Certain older options do not follow the same principles. From 2015 options vest with 1/4 on the first annual anniversary of grant and thereafter by 1/48 each month for the next 36 months and the former Chief Executive Officer was granted options on these terms at the time of his employment in January 2015. As part of the incentive program leading employees were granted 2,350,000 options in August 2015. All option contracts include regulation that in the case of termination of employment, the employee will not vest further share options beyond notice of termination (with certain provisions of accelerated partial vesting). The exercise price for any new options granted is set at the market price of the shares at the time of grant of the options. Individual option grants are not capped by a maximum size of grant. The Board of Bionor seeks a yearly authorization from shareholders at the Annual General Meeting to issue a maximum number of share options in total for all grants. The long-term cap on the incentive program shall not exceed 5% of outstanding shares and options (fully diluted).

If the employment is terminated by the company all vested but not exercised options will lapse unless exercised during the next three quarterly exercise periods following notice of termination, with a few exceptions. The company’s Board may at any time resolve to terminate the options against payment to the option holder of a NOK amount equaling the value of vested and unvested options calculated as the difference between the market value of the option shares at such time less the exercise price for such option shares.

The options fair value is recognized using the Black & Scholes model. Expected risk free interest rate is equivalent to the government bond interest rate for the length of the options’ vesting period, expected dividend is zero. The volatility is determined based on the historical volatility with a time equivalent to the options vesting period.

Pension schemes
All employees in Bionor Pharma Group, with exception of the CEO, have a defined contribution pension scheme. The pension schemes are in accordance with applicable national legislation.

Benefits in kind
Bionor will not provide any benefits in kind beyond the following: car allowance, telephone and mobile phone use, broadband, daily newspapers, life insurance and other employee insurance schemes.

Period of notice and severance payments
The acting Chief Executive Officer, Unni Hjelmaas is engaged on a consultancy basis until 31 December 2016. Unless the parties agree to extend the contract it will terminate at such time without notice Notice of termination of other members of the Executive Management range from 6-12 months’ notice. One member of the Executive Management has a severance clause in the employment contracts.

Other variable elements in remuneration
Other than the above, the Group will not offer the Management variable elements as part of their remuneration packages or any special payments.

The Group’s remuneration policy and practice for the financial year 2015 and until the AGM in 2016
The remuneration for the Executive Management complied with the remuneration guidelines approved by the AGM on 13 May 2015.

Statement as PDF.