Borregaard — AGM Information 2015

Mar 25, 2015

Appendix to the Annual General Meeting: Guidelines for Remuneration for Senior Management – Item 3

The requirements of the Norwegian Public Limited Liability Companies Act make it appropriate to divide this point into three sub-points:

• 1. The Board's statement on salary policy
• 1. Advisory vote on salary policy
• 1. Binding vote on share-related remuneration

1. The Board's statement on salary policy

After the IPO in the autumn 2012, a process was initiated to provide new, updated guidelines; these were established in 2013 (see point 2). The guidelines contained guiding principles for regular salaries, pensions, annual bonuses and long-term incentives (LTIs)/options. Comparative salary data from an external company is obtained and used in the assessment of salary levels.

Already issued options are subject to regulations that accompanied the allocation of options in connection with the IPO. For future options, the Board received authorisation from the 2014 AGM for the submitted scheme for share-related long-term incentives.

The Board has, partly through the Compensation Committee, used the guidelines as a basis for the remuneration of senior management and has monitored compliance with the guidelines and criteria.

During 2014, a significant portion of the share options granted in connection with the IPO were exercised. The Board has reviewed the exercising of the options and ensured compliance with restrictions on option profits and the minimum purchase of shares with the profits.

When options were allocated in autumn 2014, the guidelines were further tightened (see point 2) from those approved by the AGM and were thus within the framework provided by the AGM.

The Board declares that the company's salary policy was followed throughout 2014.

The Board's proposals

The AGM takes note of the Board's review of salary policy.

2. Advisory vote on salary policy

The company's overall guiding principles for policies on salaries and pay conditions

• Overall, the conditions must be competitive
• The schemes must be simple, long-term and sufficiently flexible
• The compensation schemes should encourage compatibility between the company's objectives and results and the various elements of the individual terms and conditions

The main elements of the compensation schemes

Fixed salary - The level should be close to the median for comparable positions and companies

Pensions - Should be based on the intention of the established defined contribution schemes that relative pension payments should be independent of income level

Annual bonus scheme -predefined criteria emphasising good results and progress. The criteria include return on capital (ROCE), economic value added (EVA), safety matters and sick leave, as well as personal goals. The annual bonus may be up to a maximum of 50% of an annual salary. The target level for "good results" is about 30%

Long-term incentive scheme - option- or cash-based scheme, linked to movements in the share price. (For further guidelines, see point 3)

The Board's proposals

The AGM recommends the presented guidelines for the determination of salaries for senior management for the financial year 2015.

3. Vote on employee share incentives

The AGM must approve the guidelines for share-related remuneration, which include management in the Shares for Employees scheme.

Guidelines for the Borregaard share-related option scheme

General information about the scheme

Borregaards long-term incentive (LTI) scheme is an option scheme related to the share price and forms part of an overall compensation package for senior management. The option scheme implies that employees in the scheme can obtain share options that entitle them to purchase a defined number of shares at a given value for a fixed period of time. When the options are exercised, their sale will make a profit. In order to ensure that the scheme is proportioned to suit its purpose, a number of restrictions on profit are in place.

The Board will annually consider whether options are to be allocated and can provide recommendations for the allocation in accordance with the framework of these guidelines. The Board can decide whether the options will be physical or synthetic. The Board and Compensation Committee will ensure that the allocation of options and the administration of the scheme comply with the intentions.

The purpose of the scheme

The justification for the scheme emphasises two aspects in particular:

• Enhancement of the ownership perspective in that the value development of the company and investment in shares are the criteria for this form of remuneration.
• Providing managers and key employees with an incentive for a long-term commitment to the company.

Allocation criteria

Options can be allocated to senior employees at certain job levels where there is a particular need for a long-term commitment to the company:

• The CEO and other members of the management team as well as leaders and key personnel/specialists in the business areas and corporate staff based on the following criteria:
• o The employee/position is particularly important/critical for achievement of the company's goals.
• o The employee has shown good results in line with the company's culture and values.
• o The employee is considered difficult to replace, and there may be a risk that he/she will leave the company.
• The scheme/rights are only valid as long as the option holder is employed (has not already resigned) in the Group.

Annual General Meeting 15 April 2015 Guidelines for Remuneration for Senior Management

The scheme does not automatically follow a particular position, and one or more allocations do not entitle the holder to subsequent allocations.

Restrictions on allocations

• The total annual allocation of new options can maximally account for 1% of the company's shares. The total number of outstanding options can maximally equal 2.5% of the company's shares.
• The maximum annual allocation of options on an individual basis is the number of options multiplied by the share price on the date of allocation that corresponds to two annual salaries for the CEO and one annual salary for other staff.

Restrictions on profit

• The option must have a defined strike rate that requires a certain capital appreciation determined on the allocation date, where the interest rate is included in the assessment of how to establish the strike rate.
• For the 2014 allocation, the strike rate was set at 10% of the share price on the allocation date.
• The strike rate is adjusted for dividends and other circumstances relevant to share capital (e.g. buy-backs, write-downs, share issues).
• Overall, the pre-tax profit per calendar year on exercising the option may maximally equal two annual salaries for the CEO and one annual salary for other staff.

Time limits

The options may not be exercised earlier than three years after their allocation, and must be exercised within two years of the first opportunity.

Requirements for the purchase of shares

• Employees must use at least half of the post-tax profit for the purchase of shares in Borregaard, with a lock-in period of three years.
• Senior management staff are expected to build up and hold an inventory of Borregaard shares corresponding to two annual salaries for the CEO and one annual salary for other staff.

Discounted shares for employees

In 2013, Borregaard established a scheme which allowed employees to purchase a limited number of shares at a discount of 30% off the market price with a maximum amount of NOK 28 000 (after the discount). The scheme is available to all Borregaard employees, with the exception of a few countries where practical/legal circumstances make this difficult. Between 200 and 300 employees have participated in the scheme in the past two years. Senior staff are entitled to participate in the scheme. The scheme is also planned for the upcoming AGM period.

The Board's proposals

The Annual General Meeting approves the guidelines for share-related remuneration.