Rules of Procedure for HS Orka's Remuneration Committee
These Rules of Procedure are based on Act no. 2/1995 on Public Limited Companies and on the Corporate Governance Guidelines issued by the Icelandic Chamber of Commerce, SA Business Iceland and Nasdaq OMX Iceland hf.
1. The Committee's role and responsibilities
1.1. The Remuneration Committee ("RC") shall assist the Board in ensuring that compensation
arrangements support the strategic aims of the Company and enable the recruitment,
motivation and retention of senior executives while also complying with legal requirements.
1.2. HS Orka hf.'s ("Company") RC is a sub-committee to the Company's Board of Directors and operates under the authority of the Board. The establishment of a RC does not reduce the responsibilities of the Board or relieve it of any liability. Every Board Member must have an overview over the matters addressed by the Committee.
1.3. The Committee reports and makes recommendations to the Board, which has the deciding power in all matters, unless a special mandate has been given to the Committee.
1.4. The committee shall operate in accordance with Icelandic law and regulations and corporate
governance principles.
2. Composition and Appointment of the Remuneration Committee
2.1. Committee members shall be appointed by the Board of Directors, no later than one month after an Annual General Meeting, for a term of one year.
2.2. The committee shall be made up of 2-3 members.
2.3. The majority of Committee members shall be independent of the company and the
company's management and at least one committee member shall also be independent of large shareholders of the company. A committee member is not considered independent of the Company if:
a) she / he is the CEO or another employee of the Company or its subsidiaries,
b) she / he receives or has received substantial payments (a large percentage of her/his gross income) from the Company, apart from a Director's fee,
c) she / he has in the past year been in significant business with the Company or closely related companies, e.g. as a customer, supplier or partner, whether personally or through another company, d) if she/he is one of the day-to-day managers of another company in which one of the Directors is a day-to-day manager,
d) she/he has close family ties with any of the Company's day-to-day managers or any other
persons mentioned above.
2.4. Committee members shall preferably have experience and knowledge on guidelines and
common practise regarding decisions on executives' terms of employment.
2.5. The RC shall, at its first meeting after the AGM, elect a Chairman. The Chairman directs the Committee's meetings and speaks on behalf of the Committee, unless the Committee decides otherwise. The RC shall also elect a secretary.
2.6. New committee members shall receive guidance and information on the committee's
operations and procedures and shall sign the Rules of Procedures.
2.7. The Committee's remuneration shall be decided by the AGM.
3. The Committee's key activities and tasks
3.1. Remuneration Policy
3.1.1. Prepare and submit a proposal for a Remuneration Policy regarding remuneration to
the Board of Directors, CEO and the executive management, to the Board of Directors,
according to article 79(a) of the Act on Public Limited Companies No. 2/1995 and the
Icelandic Chamber of Commerce' (ICC) guidelines on corporate governance, i.e.:
3.1.2.The Remuneration Policy shall contain the fundamentals regarding the remuneration of Board Members and the Management. It shall also state if and in what circumstance and
within what limits it is permitted to pay Management or Board Members in addition to
fixed salary, i.e. with;
a) delivery of shares
b) performance-linked payments (variable wages)
c) share certificates, purchase and sale rights, priority purchase right and other
kinds of payments which are linked to share certificates in the Company or development of the price of shares in the Company. (Prohibited for Directors.)
d) loan agreements (including special credit terms), if legally permitted.
e) pension agreements
f) retirement agreements
3.1.3. lf provided, the Policy shall contain the main provisions of the remuneration option
listed in clause 3.1.2. a)-f). Main provisions regarding share options include e.g. the total
number of shares in the plan, the maximum length of option agreements, the period in
which employees can exercise such right, criteria for the determination of the purchase
price and terms, and if the Company is part of the financing if legally permitted.
3.1.4.The policy shall ensure that the interests of the BoD and the Management are connected
with the long-term success of the Company. It shall also preventthe remuneration terms
from encouraging excessive risk-taking. This e.g. means that:
a) Directors shall not enjoy shares, options to buy or sell, stock options and other
types of payments linked to shares in the Company or price trends of shares in the
Company.
b) The remuneration of Board Members shall reflect their responsibility, knowledge
and experience and the time that is required from the Board Members.
c) Variable wages shall be a normal proportion of overall wages. The remuneration
policy shall state maximum variable wages.
d) Variable wages shall be linked to pre-determined and clear measurable goals that
reflect the Company's actual growth and actual financial benefits in the long term,
for the Company and its shareholders. The Company's high-level goals shall be
stated in the Policy.
e) Payments on account of variable wages shall be postponed for a suitable period of
time and repayment shall be assumed if payments have been rendered on the
basis of obviously inaccurate data.
f) Payments at termination of employment shall not exceed a previously decided
amount and shall not be based on more than two years' salary. The payments at
termination of employment shall not be rendered if termination of employment
occur on account of unsatisfactory performance.
g) Shares shall not be delivered until at least three years after the party concerned
acquires right thereto. Purchase right may not be used until after a three-year
waiting period. A specific proportion of shares shall be kept until at termination of
employment.
3.1.5.The proposal regarding a remuneration policy shall be presented to the Board in due
time before the AGM, which gives the final approval of the Policy, with or without
amendments.
3.1.6. AII documents which the Remuneration Policy is based on shall be made accessible to
shareholders in due time before the AGM. The documents must be prepared in a
manner so that the shareholders find it easy to form an opinion regarding the Policy.
3.2. Other information and proposals presented to the AGM
3.2.1. The RC shall also collect the following information and present to the AGM, for the
Shareholders to fully understand the structure of the employment terms of the Board
of Directors, the CEO and other Managers:
a) The remuneration of managers and board members, including wages, earned
pension payments, other payments and benefits, as well as any changes to terms
between years
b) The total expenditure of the Company, with regards to the Remuneration Policy
c) Options to thin out shareholders stock through buy option agreements, if applicable
d) Estimated cost of option plans, if applicable
e) The execution of the current Remuneration Policy
3.2.2. The RC shall present to the Board of Directors a draft proposal to the AGM, regarding the remuneration of Board and Committee members and the auditors.
3.3. Surveillance and deviations from the Remuneration Policy
3.3.1. The Remuneration Committee shall monitor whether the Remuneration Policy is being adhered to.
3.3.2.The Remuneration Policy is a guidance for the BoD, unless it has been determined in the Company's Articles of Association that it shall be binding. However, the Policy as binding
as it pertains to limitations to payments at termination of employment and regarding
share certificates, purchase and sale rights, priority purchase right and other kind of
payments which are linked to share certificates in the Company or development of the
price of shares in the Company.
3.3.3. lf the Board deviates from the Remuneration Policy, such deviation must be submitted to the Remuneration Committee for recommendations. Reasoning for such deviation must be entered in the minutes of the Board.
3.4. Contracts with the Management
3.4.1.The RC shall monitor that wages and other employment terms are in accordance with laws, regulations and best practices at any given time. The Remuneration of Board
Members and the executive management shall seek to ensure that the Company has
access to competent persons at an acceptable cost.
3.4.2.The RC shall prepare the Board's decisions regarding salary and other remuneration of the CEO. The CEO may seek the Committee's assistance regarding contracts with other Managers. Legislation and the Company's policy regarding equal pay must be
considered in relation to employment terms and agreements.
3.4.3.The RC shall prepare, or review annually if in place, the Company's bonus scheme and/or stock option plan to determine whether they are achieving their intended purpose and
recommend any appropriate alterations or replacement programs to the Board of
Directors.
3.4.4.The RC shall inform its counterparties of the content of the Remuneration Policy, e.g. to
what extent it is binding.
3.5. Risk management and self-evaluation
3.5.1.The RC shall take an independent stance regarding the effects of wages on the
Company's risk exposure and risk management, in collaboration with the Company's Audit Committee and / or the Company's Risk Committee.
3.5.2.The RC shall oversee the annual self-assessment of the Board and its committees,
including the evaluation of the composition of the Board taking into consideration the
strategic objectives of the Company.
3.5.3.The RC shall annually evaluate its own work according to a predetermined procedure.
3.5.4.The RC shall reassess annually whether its Rules of Procedure are adequate. If the
Committee considers that adjustments need to be made, it shall send a request thereof
to the Board of Directors.
3.6. Other roles
3.6.1. The RC shall annually receive a presentation from Human Resources regarding the Company's adherence to the policy on equal pay and monitor the effectiveness of the
Company's steps towards gender equality, related to remuneration.
3.6.2.The Company's Board can send the Committee any matter for further study or follow-up, related to remuneration matters.
3.6.3.The RC shall annually, before the AGM, provide the Company's Board of Directors with
a report on the activities, findings and recommendations of the Remuneration
Committee.
4. Meetings and legitimacy of decisions
4.1. At the Committee's first meeting, the RC shall establish a meeting schedule for the year.
Electronic meeting invites shall be sent out by the Chairman or the CEO on her/his behalf, in
accordance with the meeting schedule.
4.2. The Chairman of the committee shall call extra meetings at her /his own initiative or at the request of another committee member, or the CEO or the Secretary to the Committee on
her/his behalf.
4.3. Committee members may also communicate electronically. Committee members shall communicate as often as necessary to be able to perform their tasks and duties in an efficient manner.
4.4. The CEO or the Committee Secretary shall co-ordinate the work of the committee and its
meetings, on behalf of the Chairman.
4.5. The consent of the majority of committee members (two) is required to decide on a relevant subject matter. Proposals fail if the votes fall even.
4.6. Notwithstanding clause 4.1. the AC can also take decisions between meetings via email, if the matter has been sufficiently discussed. Such decisions shall be noted in the minutes at the next meeting.
4.7. Meeting material shall be accessible to Committee Members two days before meetings.
4.8. The committee shall keep a record of minutes and the minutes shall be accessible to
members of the Board of Directors, unless a conflict of interest exists.
4.9. The AC shall see to it that at least one committee member is present at shareholder's
meetings, if requested by the shareholders. A member of the Committee shall also be present at the Board's review of remuneration related matters.
5. Authorizations and communication
5.1. If necessary, the RC may seek the assistance of consultants, e.g. regarding market standard terms for comparable companies. Such consultants shall be independent of the Company, its executives and the Board of Directors who are not independent. The committee is responsible for examining the consultant's independence. Purchasing of external consultancy shall be reported to the Chairman of the Board of Directors in a formal manner.
5.2. The RC's communication shall be directed towards the CEO or the HR manager and /or
another employee which has been appointed the secretary for the Committee. All committee
members shall be CC' d in the inquiries and in the replies, unless the Committee has decided
otherwise.
5.3. Clause 5.2. does not undermine the RC's right to contact any other employee in relation to the RC's surveillance role.
5.4. The RC shall have unlimited access to information which is necessary for the RC to fulfil its
functions.
6. Confidentiality
6.1. Members of the RC are bound by a duty of confidentiality regarding the Company's issues
and other aspects that they become aware of in their roles as committee members pursuant
to the Company's articles of association, applicable law and/or general principles, unless the Company's Board of Directors decides to make such issue public or it is required by statutory provision or the Company's articles of association. This duty shall continue following the members' tenure at the committee ceasing.
6.2. A member of the RC shall preserve all data which he / she receives in his or her operations, in a safe and secure manner. Members of the RC shall hand over to the Company all data they may have received in relation to the Company's issues, if the chairman of the committee deems necessary. Members of the RC shall not comment on subject matters in respect of the Company to the media or otherwise to the public.
7. Miscellaneous
7.1. Amendments to these rules of procedures do not enter into force until the Company's Board of Directors has approved such amendments. These rules of procedures shall apply to the members of the Company's RC and the Company's Board of Directors as applicable.
7.2. The original of these rules shall be maintained in the Company's Book of Minutes and a copy shall be accessible to Committee and Board Members.
Thus, approved in a meeting of the Company's Board of Directors on 30 March 2022
Confirmed by Remuneration Committee Members on the 21th of March 2022