Remuneration

The Company is to offer its management competitive levels of compensation to ensure that senior executives can be recruited and retained. These guidelines apply to remuneration payable to the CEO and other members of Q-linea’s senior management from time to time. The guidelines also apply to remuneration to the members of the board, to the extent that such remuneration is paid for work for or provided services to the Company outside the scope of their board assignment.

Guidelines for remuneration to senior executives

Under the Swedish Companies Act, the general meeting is to resolve on remuneration guidelines for the president and other senior executives. The annual general meeting on 26 May 2020 adopted guidelines with essentially the following content.

The guidelines apply to remuneration that is agreed, and to amendments to agreed remuneration that are made, after the guidelines have been adopted by the annual general meeting 2020. Transfers of securities and the right to acquire securities from the Company in the future is considered to be remuneration. The guidelines do not apply to remuneration which is decided or approved by the annual general meeting, such as share-related incentive programs.

The guidelines’ contribution to the Company’s business strategy, long-term interests and sustainability

The remuneration that is paid shall motivate the senior executives to implement the Company’s business strategy and thereby safeguard the Company’s long-term interests in a sustainable way. The variable compensation criteria are designed in such a way that they can be linked to this. The Company’s business strategies are:

Regulatory strategy: conduct necessary regulatory preparations for launch of ASTar and consumables, including conducting clinical studies in Europe and USA. The first product focuses on sepsis diagnostics;

Commercial strategy: Q-linea has signed an agreement with Thermo Fisher Scientific, a worldwide sales partner, who already is established with local sales teams in the markets where Q-linea’s products are to be launched. This is to achieve a broad and rapid market penetration. Both instruments and consumables are to be sold, but the sale of consumables is expected to account for the majority of the possible revenues. The companies will collaborate very close to each other and Q-linea will have access to all parts of the sales process and attend with application specialists as well. The purpose of the collaboration is to enable Q-linea to constantly monitor the development and feedback of customers in order to continue to develop customer-driven products in the best possible way. The collaboration in respect of service entails that Thermo Fisher Scientific will handle all first-hand service and Q-linea will be responsible for the expertise in more difficult issues;

Operational strategy: continued construction of the Company’s infrastructure to ensure its development and production capacity;

Product development strategy: continued development of new applications;

Intellectual Property Strategy: continued development and maintenance of a broad and relevant IP portfolio; and

Service & Support Strategy: continue to build an independent service organization focused on expert service and continue to develop the Company’s application specialists to attend and follow up customer visits.

For further information on the Company’s business strategy, visit https://www.qlinea.com/en/om-oss/business-concept-and-strategy/.

The aim of the remuneration package to the senior executives is to motivate, retain and reward qualified personnel for their contribution to achieving the Company’s business strategy, long-term interests and sustainability.

Incentive programs consisting of share- and share-price-related remuneration are resolved by the annual general meeting and these guidelines do not apply to such incentive programs. However, existing incentive programs are described below to give a complete picture of the Company’s total remuneration package to the senior executives. The existing long-term share-related incentive programs (LTIP 2018 and 2019) contain performance requirements that are linked to the Company’s business strategy.

Types of renumeration

The remuneration offered must be market-based and may consist of fixed salary, variable cash remuneration, pension benefits and other benefits.

Fixed salary shall be individual for each individual senior executive and be based on the executive’s area of responsibility and experience and shall be reviewed annually. The distribution between fixed salary and any variable cash remuneration must be proportionate to the executive’s responsibility and authority.

Variable cash remuneration shall require fulfilment of criteria measured over a period of one year. Variable cash remuneration shall not exceed 40 per cent of the CEO’s and 30 per cent of the other senior executives’ annual fixed salary during the period measured for the fulfillment of the criteria. The variable remuneration shall not qualify for pension benefits, unless otherwise required pursuant to mandatory collective bargaining agreements. The board of directors shall have the possibility to limit or omit to give variable cash remuneration if it is deemed unreasonable or incompatible with the Company’s responsibilities towards the shareholders in the Company, if difficult financial circumstances would prevail. The board shall have the possibility to request, in accordance with law or agreement, that variable remuneration that has been paid on incorrect grounds be repaid to the Company.

Pension benefits shall be defined contribution pension plans after termination of employment. Q-linea shall pay contributions to public or privately administered pension insurance on a mandatory, contractual or voluntary basis for defined contribution pension plans. The Company has different pension levels for different categories of employees and ages. The pension premiums for defined contribution pensions may amount to a maximum of 25 per cent of the executive’s annual fixed salary.

For the operating year 2020, the following pension levels shall apply:

[1] OMG – Operational Management Group, SDG – Strategic Development Group

Other benefits may consist of company healthcare benefits, company group life insurance and health care and health insurance and other similar benefits. These benefits shall correspond to a maximum of 3 per cent of the executive’s annual fixed salary.

In the commercial organization (with main focus on sales), a remuneration structure will be applied with a fixed salary and a commission-based part. CEO shall determine the detailed design of the model/conditions for such renumeration. However, it shall be in accordance with industry standard and be optimized to create good incentives for the relevant employees.

Consultancy fees shall be payable on market terms. To the extent that a board member performs consultancy services for the Company, the board member in question will not be entitled to participate in the board’s (or the remuneration committee’s) handling of remuneration-related matters regarding such consultancy services.

Information on criteria and conditions for distribution of variable remuneration

Short-term incentive program (STI)

The selection of criteria (STI-criteria) for the coming year’s STI, which is the basis of the payment of variable remuneration, shall be determined annually by the board in order to ensure that the criteria are in line with the Company’s business plan. The STI-criteria can be set individually or collectively and shall be designed in such a way that they promote the Company’s business plan. For example, the criteria may be linked to the Company achieving certain goals within the framework of its commercialisation plans, that the Company is initiating or completing a certain step or that the Company is entering into a certain agreement. The assessment of the extent to which the criteria have been met shall be made at the end of the measurement period. The outcome shall be discussed by the board and the CEO (after preparation in the remuneration committee) at the end of the year. The resolution on the outcome shall be taken by the board without the CEO or CFO being present.

Long-term incentive program (LTIP)

LTIP 2018

At the extraordinary general meeting on 12 November 2018, it was resolved to implement a long-term incentive programme in the form of a performance share-based programme (LTIP 2018). The rights to receive performance shares were allotted free of charge in March 2019. The program measures performance over a three-year period starting in March 2019 and the performance criteria are linked to various operational sub-targets during this period. The criteria include product development, product approval and commercialisation being achieved, which is in line with the Company’s business strategies. The performance share rights are vested if the performance criteria are met.

LTIP 2019

At the annual general meeting on 22 May 2019, it was resolved to implement a long-term incentive programme in the form of a performance share-based programme (LTIP 2019). The rights to receive performance shares were allotted free of charge in December 2019. The program measures performance over a three-year period starting in December 2019 and the performance targets are linked to various operational sub-targets during this period. The targets include product development, product approval and commercialisation being achieved, which is in line with the Company’s business strategies. The performance share rights are vested if the performance criteria are met.

Termination and severance pay

The notice period for the CEO and other executives may not exceed six months if the employment is terminated by the Company. The fixed cash salary during the notice period and any severance pay may not, in aggregate, exceed an amount corresponding to the fixed cash salary for one year for the CEO or the executive. The notice period may not exceed six months, without the right to severance pay, in the event of termination by the executive.

In addition, remuneration may be paid for non-compete undertakings. Such compensation should compensate for any loss of income. However, the compensation paid by the Company shall not exceed 80%, for a maximum of six (6) months after termination of employment, of the previous monthly income at the time of termination of employment.

Salary and employment conditions for employees other than the Company’s senior executives

To evaluate the fairness and reasonableness of the proposed renumeration guidelines, the board has as a part of the preparation of this proposal considered the salary and employment conditions for the employees of the Company. In this context, the board has taken into account information regarding the employees’ total income, the components of the remuneration and the increase and growth rate of the remuneration over time. In the remuneration report that will be drafted regarding paid and outstanding remuneration covered by the guidelines, the development of the distance between the remuneration of the senior executives and the remuneration of other employees will be reported.

The decision-making process to determine, review and implement the guidelines

The board has established a remuneration committee and the committee’s mains tasks include preparing the board’s decisions regarding renumeration principles, renumeration and other terms of employment for the senior executives, monitoring and evaluating ongoing and under the year completed programs for variable remuneration for the senior executives and monitoring and evaluating the application of the guidelines for senior executive remuneration which is to be decided by the general meeting, and renumeration structures and levels in the Company.

The board shall prepare a proposal for new guidelines at least every fourth year and submit it to the general meeting. The guidelines shall be in force until new guidelines are adopted by the general meeting.

The CEO and the senior executives will not participate in the board’s processing of and resolutions regarding remuneration-related matters in so far as they are affected by such matters.

Deviations of guidelines for remuneration

The board may decide to temporarily deviate from the guidelines only in individual cases if there are special and considerable reasons for doing so and the deviation is necessary to meet Q-linea’s long-term interests and sustainability or to ensure the Company’s financial viability.

Description of significant changes to the guidelines

These guidelines have been prepared by the board’s remuneration committee in consultation with the Company’s HR function and the proposal has been approved by the board for presentation to the annual general meeting 2020. The proposal is in all material respects corresponding with the guidelines approved at the annual general meeting 2019.