Remuneration Committee

Guidelines for remuneration of senior executives

The AGM held on September 2, 2010 adopted guidelines for remuneration and other employment terms for company management. A description of the principles applied in the 2010 fiscal year is presented in Note 4.

The Board of Directors of Hemtex AB (publ), corp. reg. no. 556132-7056 (“Hemtex”) proposes that the AGM on April 12, 2011 resolve to approve the following guidelines for remuneration and other terms of employment for senior executives.

The guidelines below address salaries and other benefits for the company’s management, including the President and CEO, hereafter called “senior executives”. The guidelines shall be applied to employment agreements entered into after the 2011 AGM as well as changes in current employment agreements made thereafter.

Remuneration Committee

The members of the Board appoint a Remuneration Committee from among their own numbers for each fiscal year. The Remuneration Committee’s tasks include the following:
(i)  preparing Board decisions on issues involving remuneration principles, remuneration and other terms of employment for company management;
(ii) monitoring and evaluating ongoing programs and those concluded during the year for variable remuneration of company management; and
(iii) monitoring and evaluating the application of the guidelines for remuneration of the company’s senior executives, as well as current remuneration structures and pay levels in the company.

Basic principles

The remuneration of senior executives at Hemtex is based on principles involving performance, competitiveness and reasonableness. Various remuneration components are suitable for reflecting these principles to varying degrees. Consequently, a mixture of several components is used to reflect the remuneration principles in a balanced manner.

The total remuneration of senior executives consists of a fixed salary, variable components in the form of annual variable remuneration and long-term variable remuneration, pension and other benefits. These components combine to form an integrated remuneration package.

For every fiscal year, the details of the total remuneration of senior executives are to be described in the annual report for the current fiscal year, including previously approved long-term variable remuneration, which has not yet come due for payment.

The relationship between fixed and variable salary, and linkage between performance and remuneration

Fixed salary is set on the basis that it must be competitive. The absolute level depends on the scope and complexity of the particular position and the senior executives’ annual performance.

Performance is particularly reflected in the variable components, in terms of the annual and long-term variable salary portions. The variable remuneration of senior executives is related to compliance with the budget and achieving the company’s earnings targets. Normally, the variable salary of senior executives must not exceed four months’ salary for the Chief Executive and Chief Financial Officer, and no more than two months’ salary for other members of the company’s executive management.

The relationship between fixed and variable salary must reflect the Board’s assessment of a reasonable balance between fixed and variable remuneration and current market practice for senior executives.

Fixed salary during the period of notice and severance pay may jointly not exceed an amount corresponding to the fixed salary for two years. However, fixed salary and/or severance pay must not be paid if the previous employee returns to or begins a new position during the period that such remuneration is payable. Should such remuneration nonetheless be paid, the previous employee will be subject to a repayment obligation.

Primary terms and conditions underlying the long-term incentive program

The company’s incentive program must primarily be share price-related and encompass senior executives in the company who can impact the company’s earnings and financial position. Any incentive program should contribute to the long-term growth of Hemtex, and ensure that employees and shareholders gain a joint interest in seeing a positive share trend.

The Board will evaluate, on an annual basis, whether or not a long-term incentive program is to be proposed to the General Meeting. A resolution regarding the incentive program is to be made at the AGM. Ahead of the 2011 AGM, the Board has not proposed an incentive program.

Previously approved incentive programs

Share Program 2010

The AGM held on April 12, 2010 resolved to introduce a combined share matching and performance share program (Share Program 2010). The program comprised 12 participants. Share Program 2010 entails, in brief, that the participants actively purchased shares in the company through NASDAQ OMX Stockholm (Savings Shares) during May 2010, and retain these for a minimum three-year period (Vesting Period).

On condition that the participants are still employed and still hold their Savings Shares at the end of the vesting period, each Savings Share held will provide the participant with entitlement free-of-charge to receive one share in Hemtex (Matching Shares) and a maximum of another three shares in Hemtex (Performance Shares). Allocation of Performance Shares is conditional upon Hemtex achieving performance requirements and that the Company’s equity/assets ratio, as per adopted balance sheets for the 2010, 2011 and 2012 fiscal years, does not fall below 25%.

The share program comprises a maximum of 55,000 Savings Shares, 55,000 Matching Shares and 165,000 Performance Shares. The total number of Matching and Performance Shares may not exceed 220,000. The cost of the 2010 Share Program, calculated in accordance with IFRS 2, is SEK 2.3 M and social security fees amount to SEK 1.0 M. The total cost is estimated to be SEK 3.3 M, including social security fees. The cost of the Share Program, in accordance with IFRS 2, is being accrued straight line over three years, adjusted for changes in the anticipated vesting of Matching and Performance Shares. The social security fees are remeasured on a continuous basis in line with the share price.

During May 2010, all participants in Share Program 2010 purchased shares in Hemtex AB. The President and CEO purchased 10,000 Saving Shares and other senior executives purchased a total of 45,000 Saving Shares.

Incentive program 2007–2010

In 2007, the AGM of Hemtex resolved to approve the establishment of an incentive program for the management group of Hemtex, whereby the Company’s senior executives were offered a combination of warrants and employee stock options with a right to acquire shares in Hemtex. In total, seven of the company’s senior executives acquired 120,000 warrants at the market price and 120,000 employee stock options free-of-charge within the scope of the program.

The right to exercise the employee stock options is conditional upon a certain increase in earnings per share in Hemtex during the 2007/2008 and 2009/2010 fiscal years. This target has not been achieved and, consequently, no employee stock options have been exercisable. Because the subscription price of shares subscribed for on the basis of warrants by far exceeded the then prevailing price paid for a Hemtex share, no warrants within the scope of the incentive program were exercised.

Pension

Pension benefits shall be competitive in each country. A supplementary pension premium is paid to executives who, in their employment agreement, have contracted pension benefits that exceed ITP. This premium amounts to a certain percentage based on the fixed monthly salary for the Chief Executive Officer, as well as a certain percentage based on the fixed monthly salary of other senior executives, whose employment contracts includes such benefits. Accordingly, variable remuneration shall not be pensionable.

The retirement age is normally 65, but may vary in individual cases.

Other benefits

The basic rule is that other benefits, such as a company car and healthcare plans, must be competitive in local markets.

Divergence from guidelines

The Board of Directors is entitled to diverge from the guidelines if there are special reasons in individual cases. During 2010, the Board did not deviate from adopted guidelines.

Majority requirement

AGM resolutions concerning guidelines for remuneration of senior executives will only be ratified if they are supported by shareholders representing at least half the number of votes cast or, in the event of a tie, the casting vote of the Chairman.

Information concerning remuneration that has not become due for payment

Two members of the company’s management team ended their employment with Hemtex during 2010, receiving salaries for 12 and 15 months respectively. The cost of this in its entirety was carried during the 2010 fiscal year. No cost for this will be charged to the 2011 fiscal year.