1. Introduction
The Board of Directors has prepared remuneration guidelines for the Executive Management Team’s compensation to be approved at the 2025 Annual General Meeting. The Board aims to ensure that this policy helps attract, engage, and retain key executives in significant markets, supporting ArcticZymes (“AZT”) business strategy and long-term sustainability. As the Company evolves, having executives with relevant professional and international experience is essential to deliver on growth and profitability.
The guidelines require approval by the Annual General Meeting every four years or when there is a material change, as per section 6-16a of the Norwegian Public Limited Liability Companies Act. The Board aims to ensure that Group Executive Management's compensation is competitive and moderate. They believe this remuneration policy aligns with the company's business strategy, long-term interests, sustainability, and stakeholder expectations.
Conflicts of interest
The Company has a two-tier structure consisting of the Board of Directors and the Executive Management Team. The Board of Directors acts independently of the Executive Management Team and has a Remuneration Committee that consists solely of shareholder elected members of the Board of Directors, so no conflicts of interest should arise. No members of the Executive Management Team are present at Remuneration Committee meetings when their own remuneration is discussed.
Subject to the approval of the Annual General Meeting, 27 May 2025, this policy document replaces the previous remuneration policy approved on 20 May 2021.
2. Remuneration policy
Key principles for remuneration practice
The Company’s remuneration guidelines have been developed with the understanding that attracting and retaining individuals who can achieve high-performance targets, outcomes, and results is crucial for generating sustainable growth and maximising shareholder value.
The Company must attract, retain, and reward top talent by fostering a performance-based culture, irrespective of gender. This Remuneration Guideline has been designed to ensure the following:
- Remuneration practices reward outcomes and behaviours that support the delivery of our business strategy and objectives.
- Performance is measured based on the contribution to key strategic goals and targets.
- Behaviours are evaluated in alignment with the Company’s performance culture and core values.
- Remuneration plans and practices will differentiate outcomes based on financial and individual performance.
AZT offers competitive remuneration and employment terms within our marketplace to attract, retain, and reward employees, executive management, and the Group CEO necessary to deliver on business strategy and objectives. Furthermore, remuneration plans and practices will be equitable, and decision-making processes will be transparent.
The Board of Directors is committed to further strengthening the links between strategy, culture, performance, and compensation for all employees within the AZT Group. This philosophy ensures an overall alignment between individual performance and business and shareholder outcomes.
Compensation structure
The key remuneration elements for executives in AZT are:
- Fixed remuneration: Annual base salary
- Variable pay: Short Term Incentive (STI) and Long-Term Incentive Plan (LTI)
- Benefits in kind: Standard employee benefits (pension, insurance, newspaper, phone etc.)
The table below shows the key elements in our executive remuneration policy and a more detailed description of each element.
3. Base Salary
Competitive base salary levels are critical for attracting and retaining people who are skilled and motivated to deliver results and long-term value creation for the Company and its stakeholders. Base salaries are set and adjusted based on the local market and business context, the scope of the role and responsibilities, and the individual’s experience and competence level relevant to the role.
AZT shall from time to time carry out salary surveys and conduct compensation benchmarking to ensure that salary levels are competitive and in line with local market practice Salaries are reviewed on an annual basis, taking the following key considerations into account:
- Business performance and market economic indicators
- Salary level relative to the market (ref. benchmarking)
- The individual’s performance and impact on the business
4. Short-Term Inentive (STI)
The STI Plan is a profit-focused incentive plan designed to motivate all employees, including the Executive Management Team, to drive annual results and corporate strategy. Upon meeting eligibility requirements, all employees can participate in the STI Plan, which is a cash-based plan with payouts determined by the Company’s performance in relation to financial and strategic metrics.
The STI Plan is connected to various key performance indicators (KPIs) and will vary depending on role and responsibility. Individual short-term incentive bonus targets are set at the beginning of each year based on the strategic direction and KPI’s defined by the Board of Directors. The target for each executive is based on the individual's level of responsibility within the organisation, individual contribution, performance versus previous year goals, and relevant market data.
The Company has set the following thresholds for STI based on position
The STI includes a financial component, normally weighted at 50% linked to Sales and EBITDA targets. The last 50% is normally linked to operational goals such as new product introductions, efficiency measures and key project deliveries etc. These KPIs are reviewed annually as part of a group-wide corporate and group goal-setting process with input from the Board of Directors.
Additionally, the Board of Directors may award a discretionary bonus to employees and the Executive Management Team to recognize major changes in the Company’s structure, special strategic initiatives, or impacts from significant extraordinary items.
Incentive claw back
The Company has claw back provisions in relation to the Short-Term Incentive whereby the Company may demand repayment for any performance-related remuneration paid based upon facts that were self-evidently incorrect or as a result of misleading information. Further, if the Board anticipates that the upcoming quarter(s) will result in a negative metric, the plan includes a withholding provision that may be instituted at the Board’s discretion for the financial performance portion of the bonus.
5. Employee Share Purchase Plan
ArcticZymes has implemented an Employee Share Purchase Plan (ESPP) pursuant to which eligible employees are allowed to purchase common shares of the Company at a discount through payroll deductions or direct payment. The ESPP intends to encourage broader share ownership among employees to further increase alignment with shareholders. Under the ESPP, participating employees will have the opportunity purchase AZT stock at 15% discount to the market price at the time of purchase.
The plan sets a maximum number of shares that can be purchased in the offer period
If share price exceeds NOK 50 per share, the board of directors will set new thresholds for shares available.
The Executive Management Team can buy shares on the same terms as regular employees. The ESPP is limited to 100,000 shares annually and will be subject to Annual General Meeting approval for share buy back. Shares will be purchased from the open market and no shares will be issued by AZT; therefore, there will be no dilution of existing shareholders. The shares should be kept for at least 12 months.
Employees and members of the Executive Management Team may participate in the ESPP subject to meeting a short service requirement for eligibility and where allowed in accordance with local law and regulation.
6. Long-Term Incentive
The Executive Management takes part in the general share option incentive scheme which can be rolled out to a wider team of the Group, if the Board of Directors believes this is beneficial for the Company, The number of share options distributed to the Executive Management is listed in the Quarterly financial statements and the Remuneration report annually. The main objectives of the share value-based incentive scheme are to align interests of shareholders and management/employees (value creation and risk taking) and ensure competitive compensation for management/employees and motivation to stay with the Company (retention).
The share option program was originally approved by the General Assembly in May 2021 and the Board has annually been authorized to increase the Group’s share capital in connection with share incentive arrangement that will be exercisable in the next year. The Board will propose that future annual General Meetings pass the resolution that the Board of Directors is authorised to increase the share capital by up any exercisable capital in relation to the share option program.
The Board of Directors will limit the amount of awarded share options to 4% of outstanding shares in the Company.
The share option program has the following key parameters:
- Grant Date:
- Annually
- Strike Price:
- Set at 20% above the average closing share price over the 10 trading days prior to the grant date.
- Vesting Schedule:
- Year 1: 1/3 vests on the first anniversary
- Year 2: 1/3 on the second anniversary
- Year 3: 1/3 on the third anniversary
- Vesting Conditions:
- Continuous employment and good standing.
- Exercise of Vested Options:
- Permitted at 2 predefined annual dates
- All vested options must be exercised no later than the end of Year 4 (i.e., within 12 months after full vesting, or four years from grant date).
- Any vested options not exercised by the end of Year 4 will lapse automatically.
If an option holder resigns or is lawfully dismissed by the Company, all unvested options shall lapse. Options which are vested prior to the date of notice of resignation/dismissal shall be exercised at the earliest exercise opportunity. Not exercised options will lapse.
The Board of Directors may also grant new options which deviate from the duration and vesting schedule described above if it considers an alternative duration or vesting schedule to be more beneficial for the Company. Separate arrangements will be made with the individual employee(s).
The Board of Directors will review the option scheme annually and allocate share options within the framework approved by the General Assembly at any given point in time.
7. Pension
The Executive Management Team participates in the AZT pension plan offered to employees in the local jurisdictions and administered in accordance with local customs and policies. The pension plan is assessed annually based on each geography and no special or additional pension contributions or additional, “top-hat” pension plans or benefits are provided to executives by the Company. AZT will make the following maximum pension contributions (as a percentage of cash compensation) to executives depending on location:
- 7.0% for salary between 0 - 7,1G and 10.0% for salary between 7.1 - 12G (12G cap) pension in Norway; and
- Up to 3,0% contribution in UK
8. Potential Deviations from the Policy
The Public Limited Liability Companies Act allows the Board to temporarily deviate from the policy under special circumstances, provided such deviation is deemed necessary to advance the Company’s long-term interests and overall sustainability, or to ensure its viability. The Compensation Committee will evaluate all deviations from the policy before any decision is made by the Board.
The Board has complete discretion to decide on deviations from the policy after considering all relevant factors, including but not limited to:
- Changes in or amendments to applicable laws, rules or regulations;
- Adjustments to the CEO's remuneration to offer competitive terms;
- Modifications to the Group’s capital structure or ownership (such as mergers, demergers or acquisitions);
- Situations that render the targets or conditions for remuneration inappropriate; and
- Other exceptional circumstances where such deviation may be necessary to serve the Company’s long-term interests, sustainability, or financial viability.
9. Severance and Change-of-Control
In the event of termination of employment by the Company without cause or for good reason, or termination of employment following a change-of-control, the Company will provide for severance pay for members of the Executive Management Team where required by local law and/or the terms of an individual’s employment agreement. In extraordinary situations, it may also be applied to facilitate an agreement to discontinue the employment, where a member of the Executive Management Team gives notice pursuant to a written agreement with the Company.
Current members of the Executive Management Team with employment contracts that include an entitlement to severance pay in the event of termination of employment by the Company without cause or for good reason, or termination of employment following a change-of-control, include the CEO and CFO. In those circumstances, the CEO and CFO are each entitled to severance pay equal to 6 months base salary from the expiration of the notice period. Except in the event of a change-in-control where it is paid as a lump sum, the severance pay will be paid out over normal salary periods. The Company may issue employment contracts to other members of the Executive Management Team that include severance provisions for termination without cause or good reason or in the event of a change-in-control that do not otherwise exceed the aforementioned terms and take into consideration the individual’s role, tenure and contributions to the Company.
An individual’s own resignation generally will not trigger severance payment, and the severance payment will also be forfeited in cases of dismissal from the company for gross breach of duty or other material breach of the employment contract. Any severance pay entitlement is conditional upon waiver of employee protection rights under local law and continued compliance with restrictive covenants. If a non-compete cause or other restriction on termination is enforced against a member of the Executive Management Team, they may be entitled to compensation in accordance with applicable law and/or agreement.