Remuneration Principles for Board Members and ... - Affitech

Introduction
Remuneration Principles for Board Members and Executives in Affitech A/S.
Pursuant to section 139 of the Danish Companies Act and the Rules and Regulations for Shares
listed at NASDAQ OMX, the board of directors of a listed company is required to (a) define
general guidelines for the company’s incentive pay for the board of directors and executive
management before entering into a specific agreement on incentive pay with any member of
the company’s board of directors or executive management and (b) describe the general
principles for remuneration of the board of directors and the executive management of the
company.
These guidelines and principles are designed to attract, retain and motivate the members of the
board of directors and the executive management. The guidelines have been designed to align
the interests of the board members and the executives with those of the shareholders and the
guidelines will be considered and adopted by the company’s shareholders.
1. The Board of Directors
a. Process
The board of directors reviews board fees at regular intervals based on recommendations from
the Chairman. When preparing his recommendation the Chairman will be guided by relevant
benchmarks that include other Danish, Nordic, and International drug discovery companies. The
remuneration of the board members for the past and current year is approved by the Annual
General Meeting as a specific agenda item.
b. Fees and Expenses
Each board member shall receive a fixed fee for work done during the year, which shall be paid
quarterly in arrears. The board may elect to pay fees in cash or in shares or a mixture of the
two. If shares are issued in lieu of cash payment, the number of shares issued shall be
calculated on the basis of the average market price in the 30 day period immediately preceding
the grant.
The fees paid to board members shall be appropriate to the amount of work they undertake on
behalf of the company. Additional fees may be paid for work in relation to specific subcommittees
of the board. Additional fees may be paid to the chairman and the vice‐chairman
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commensurate to the amount of work undertaken by each of them. Individual board members
may take on specific ad hoc tasks outside their normal duties assigned by the board. In each
such case the board shall determine a fixed fee for the work carried out related to those tasks.
Expenses, such as travel and accommodation in relation to board meetings as well as relevant
education, are reimbursed.
Board members may exceptionally be offered stock options, warrants or participation in other
incentive schemes in accordance with the over‐all principles set out below. No other amounts
or benefits are paid to the board members.
2. Executive Management and Other Executive Personnel
a. Process
Executive remuneration is proposed by the Remuneration Committee and subsequently
approved by the board.
b. Remuneration Policy
The company’s executive remuneration policy is based on the principle that remuneration
packages should be broadly comparable to those available to executives of similar experience,
role and responsibility in companies which Affitech regards as its competitors for executive
recruitment. Executive remuneration is evaluated annually against Danish, Nordic and
international benchmarks of similar companies with international activities. The company’s
executive remuneration package normally consists of fixed annual base salary, a variable annual
performance based cash bonus, a longer‐term share‐based incentive, pension contributions
and other benefits.
c. Fixed base salary
The annual base salary is set at a level appropriate for the role and responsibility of each
individual executive manager, irrespective of salary paid to other executives.
d. Incentive programmes
To align the interests between the executive management and the shareholders and to
consider both short‐term and long‐term targets, the annual base salary for executives may be
eligible for incentive based remuneration consisting of:
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(i) Performance based cash bonus
The performance based cash bonus scheme is based on achievement of group or individual
management objectives, set at the beginning of each calendar year and assessed at the end of
each year by the Remuneration Committee. The potential maximum bonus payable is defined
for each executive as a percentage of annual base salary. No bonus paid shall exceed 50% of
annual base salary.
In addition, the board of directors may enter into other kinds of cash bonus plans with the
members of the executive management under which a bonus will be payable upon the
occurrence of a specific event. The cash bonus for each such bonus plan shall not exceed an
amount equivalent to six months’ fixed salary.
(ii) Long‐term Incentive Programmes based on equity participation
Long‐term incentives may involve the issue of one or more grants of warrants to subscribe for
the company’s shares at an exercise price established at the date of grant. Warrant grants are
normally structured to provide an incentive for recruitment, performance and retention. The
initial grant on recruitment may be followed by further grants from time to time. The size and
number of such grants is at the discretion of the board and subject to shareholder approvals. A
provision may be included in the terms of the warrants to the effect that they can be exercised
to subscribe for shares six months after grant, at the earliest, and five years after grant, at the
latest. The exercise price must, as a minimum, be equivalent to the average market price of the
company’s shares on the date of grant, however not less than par. It may be resolved to make
the exercise price subject to annual indexation until exercise takes place.
The board of directors may change or phase out one or more incentive plans introduced
pursuant to these guidelines. In the evaluation of whether this should be done, the criteria that
formed the basis of the establishment of the plan will be taken into account. However, such
changes can only be made within the framework of these guidelines. More extensive changes
must be approved by the shareholders and will be described in an updated version of these
guidelines.
e. Pension
The company’s contribution to pension may vary from 6% to 30% of the fixed base salary.
f. Other benefits
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Executives may receive non‐monetary benefits such as company car, telephone, computer, etc.
Such other benefits are approved by the board by delegation of powers to the Remuneration
Committee. The Remuneration Committee informs the board of the process and outcome. In
addition, executives may participate in customary employee benefit programmes, e.g.
employee share purchase programmes, provided that the executives participation is in
compliance with these guidelines.
Publication
A provision shall be introduced in the company’s Articles of Association stating that the
shareholders have adopted guidelines for incentive pay for members of the board of directors
and executive management pursuant to section 139 of the Danish Companies Act.
Following adoption at the Annual General Meeting held on March 31, 2008, and adoption of
changes at the Extraordinary General Meeting of 25 June, 2010 the guidelines have been
posted on the company’s website (www.Affitech.com) stating the date of adoption of the
guidelines by the shareholders.
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