Adtran : Remuneration report 2023

Unlocking the future network

REMUNERATION REPORT 2023

Contents

Remuneration for management board and supervisory board	1
Auditor's Report	17

• Adtran Networks - Annual report 2023

Remuneration report

Remuneration for management board and supervisory board

The present remuneration report prepared by the management board and the supervisory board reports on the compensation of the present and former members of the management board and the supervisory board of Adtran Networks SE in the fiscal year 2023 pursuant to the requirements of Section 162 German Stock Corporation Act (Aktiengesetz, AktG). Granted and owed compensation as well as promised allowances are stated individually for the members of the corporate bodies.

At the beginning of the fiscal year under review, the essential change in the company's structure since the latest resolution of the annual general meeting regarding the management board compensation system required an extensive revision of the system for the compensation of the members of the management board. On July 15, 2022, Adtran Holdings, Inc. ("Adtran Holdings") acquired a controlling interest in our company. On November 30, 2022, the annual general meeting approved a control and profit transfer agreement with Adtran Holdings as the controlling entity and Adtran Networks SE as the dependent entity; with its entry in the commercial register on January 16, 2023, this contract became effective. Due to this control and profit transfer agreement, the incentive effect of several variable compensation components stipulated in the previous compensation system could no longer be achieved. This applied, in particular, to the compensation instruments that are dependent upon the development of the share price of Adtran Networks SE. However, considering the control and profit transfer agreement, even the performance criteria of the short-term variable compensation based on the stand-alone development of Adtran Networks SE turned out to be no longer appropriate. Consequently, in its meeting on March 15, 2023, the supervisory board of Adtran Networks SE resolved to adjust or further develop the system for the compensation of the members of the management board approved by the annual general meeting on May 19, 2021, in accordance with the stipulations of the Act Implementing the Second Shareholders' Rights Directive [Gesetz zur Umsetzung der zweiten Aktionärsrechterichtlinie] (ARUG II) and the German Corporate Governance Code [Deutscher Corporate Governance Kodex - DCGK] as amended on April 28, 2022. The annual general meeting approved this system on May 24, 2023. The annual general meeting approved the new system on May 24, 2023, with an approval rate of 91.30%.

The currently applicable compensation system approved by the annual general meeting on May 24, 2023 is available on the website https://www.adva.com/en/about-us/investors.

On May 24, 2023, the annual general meeting approved the Compensation Report on the individually granted and owed compensation for the members of the management board and the supervisory board of Adtran Networks SE in the fiscal year 2022 with a 98.38% majority.

Due to the high approval rate for both above-mentioned resolutions, it was not necessary to question the compensation system per se, its implementation, or the manner of reporting.

Management board compensation in the fiscal year 2023

This report requires disclosures about the compensation granted and owed to the current and former members of the management board in the fiscal year 2023. In the fiscal year 2023, Thomas Richard Stanton, Dr. Christoph Glingener, Ulrich Dopfer and Scott St. John were members of the management board of the company. Effective as of January 21, 2023, Scott St. John resigned from his position. Brian Protiva, former chairman, had already left the company's management board on August 31, 2022.

Effective as of July 1, 2023, Thomas Richard Stanton was appointed as a member and chairman of the board. The company's management board compensation system stipulates that the supervisory board can arrange for the board activities at the company to be completely or partially uncompensated if a senior manager of the Adtran group, in particular, a member of the board of Directors of Adtran Holdings, held a seat on the management board at Adtran Networks SE at the same time. The supervisory board used this power when it appointed Mr. Stanton. Due to his compensation as CEO and chairman of the board of Adtran Holdings which was already promised to him prior to and independent of his appointment as a member of the board of our company, no compensation was paid at Adtran Networks SE. Nevertheless, this report discloses the compensation granted and owed to him by the group parent in the fiscal year 2023.

Furthermore, variable compensation was paid to the former member of the management board, Brian Protiva, in the fiscal year 2023 due to his former board activities.

Other than those mentioned above, no current or former members of the management board were granted or owed compensation in the fiscal year 2023.

Principles of the compensation system

The management board compensation considers not only the performance of the entire management board but also the economic position of the company and its size and complexity. The management board compensation system of Adtran Networks SE focuses on the sustainable and long-term development of the company. Strategic targeting, responsible action, and sustainable profitable growth including the interests of shareholders, customers, employees, and other stakeholders are promoted as part of the variable compensation. The system is characterized by a pronounced variability dependent on the performance of the entire board and the success of the group.

• Adtran Networks - Remuneration report 2023

Remuneration report

Adequate performance criteria as part of the performance-related variable compensation of the management board ensure that performance and variable compensation are appropriately related and that missed targets are considered accordingly under the pay for performance principle. Therefore, variable compensation components indirectly depend on financial, operational, and strategic targets. Strategic corporate targets and key performance indicators are decisive performance parameters for variable compensation.

Procedure for reviewing compensation

The supervisory board as a whole determines and reviews the management board compensation. According to the rules of procedure of the supervisory board, its Nomination and Compensation Committee prepares these decisions. It is essential that both the compensation structure and its amount are customary in the market and competitive. Regular compensation comparisons with peer groups relevant to Adtran Networks SE ensure this. Furthermore, an appropriate relationship between the management board compensation and the compensation of senior managers as well as employees is guaranteed.

The supervisory board considers relevant peer groups for a horizontal comparison of the specific total target compensation and for reviewing its appropriateness. To this end, 18 enterprises from the company's industry are used as external reference in appropriateness tests which are listed in the management board compensation system published on the company's website. This horizontal comparison serves to ensure that the members of the management board receive compensation that is customary in the market and competitive.

In addition, a vertical comparison reviews the compensation of the members of the management board among each other, as well as compared to the senior management circle and to the total workforce of the company. The external as well as the internal appropriateness are reviewed at regular intervals.

Changes in the compensation system

Based on the proposal by the Nomination and Review Committee, on March 15, 2023, the supervisory board decided on the current system for the compensation of the members of the management board which was then approved by the annual general meeting on May 24, 2023.

The revision was required because due to the control and profit transfer agreement between the company and Adtran Holdings entered into the Commercial Register on January 16, 2023, the variable compensation instruments of the old management board compensation system could no longer achieve an incentive effect. Where individual compensation components deviated from the former compensation system, these only replaced the former compensation instruments after the new compensation system was approved.

• Adtran Networks - Remuneration report 2023

Remuneration report

Complete overview of the components of the management board compensation

The following table shows the basic components of the compensation system and its structure. All components are explained individually below.

Compensation component

Non-performance-related compensation

Base salary

Fringe benefits

Performance-related compensation

Annual Target Incentive Cash Bonus

Annual Restricted Stock Units (annual RSUs)

(Restricted Stock Units are hereinafter also referred to as "RSUs")

Annual Performance Stock Units (annual PSUs)

(Performance Stock Units are hereinafter also referred to as "PSUs")

3-Year Plan Performance Stock Units (Three-Year Plan PSUs)

Calculation basis/parameters

The base salary is paid to the members of the management board as a monthly salary on a prorated basis.

Company car, employer's share of any statutory social security contributions, health insurance, and a standard employer retirement plan

• Performance criteria: Adjusted EBIT of the Adtran Group with the simultaneous achievement of a minimum threshold for the sales of the Adtran Group
• The target amount is set for one year and the targets are set and reviewed regularly quarterly
• Cap: 200% of the target value
• Regular quarterly disbursement at the end of the respective quarter
• For four years, 25% of the allocation will be converted into shares on each respective anniversary of the allocation.
• Requirement: Existing employment relationship on the respective exercise date
• Cap: Exercise restriction in case of a value increase to 300%
• Conversion into Adtran Holdings shares after vesting
• Performance criterion: Development of the Total Shareholder Return ("TSR") of Adtran Holdings compared to the NASDAQ Telecommunications Index
• Assessment period: 3 years
• Cap: Exercise restriction in case of achievement of the maximum 150% target and a share value increase to 200% between allocation and conversion
• Delivery of Adtran Holdings shares and disbursement of dividend credits in money
• Performance criterion: Adjusted EBIT of the Adtran group
• Assessment period: 3 years
• Cap: Exercise restriction in case of a share value increase to 200% of the value at allocation between allocation and conversion
• Delivery of Adtran Holdings shares and disbursement of dividend credits in money

2-Year Integration One-Time Bonus (Integration bonus)

• Performance criteria: Synergy savings, individual targets
• Assessment period: Through the end of 2024
• Cap: Regarding the monetary share of a maximum amount of 66% of the annual salary and regarding the PSU share exercise restriction in case of achievement of the maximum target and share value increase to 200% between allocation and conversion
• Disbursement: Payment in money and delivery of Adtran Holdings shares and disbursement of dividend credits in money

Compensation structure

The management board compensation system approved by the annual general meeting on May 24, 2023, includes non- performance-related (fixed) and performance-related (variable) compensation components and consists of basic compensation, fringe benefits, the Annual Target Incentive Cash Bonus, and long-term variable compensation components (annual RSUs and PSUs, Three-Year Plan PSUs, integration bonus). The long-term variable compensation components have different periods under review, some of which last several years, and can be paid annually. The RSUs and PSUs are based on the development of Adtran Holdings' share price.

In the fiscal year 2023, some members of the management board were still granted compensation from variable compensation instruments that were promised based on the old compensation system before the current compensation system entered into force. These are disbursements from the Short-Term Incentive ("STI1") for the fiscal year 2022 and the disbursement of a long- term variable pay ("LTVP2") for the assessment period 2020 to 2022. Both components are shown below.

The basic compensation of the active board members is between 22-36% and the fringe benefits are around 1-3 % of the total target compensation.

• The short-term incentive (STI) is the annual variable remuneration for the members of the management board as described in the remuneration framework.

• The LTVP is an annual 3-yearlong-term variable remuneration component for the members of the management board and will be replaced by the LTI. It is described in the remuneration framework.

• Adtran Networks - Remuneration report 2023

Remuneration report

Additional elements of the compensation of the active board members are variable components, namely the Annual Target Incentive Cash Bonus at 11-18 %, the annual RSUs at 8-15 %, the annual PSUs at 8-15 %, the Three-Year Plan PSUs at 15-30%, and the integration bonus at 7-10%.

The remuneration system is based on USD values. The annual average exchange rate (EUR/USD 1.08105) was used for the conversion to EUR values in the following tables. Due to rounding, figures in tables may not add up exactly to the totals shown. The percentages shown may not exactly reflect the absolute figures to which they relate.

If 100% of the target is achieved, in the fiscal year 2023, the management board compensation would amount to what is shown in the following table. For the three-year plan PSUs and the integration bonus, the amounts achievable with 100 % target achievement are distributed over the individual years of the term.

																Scott St. John
		Thomas R. Stanton											(until January 21,
		(from July 1, 2023)		Christoph Glingener	Ulrich Dopfer			2023
		Chief executive		Chief technology	Chief financial officer		Chief marketing and
			officer			officer					sales officer
					in % of					in % of			in % of				in % of
					total					total			total				total
					remune-					remune-			remune-				remune-
(in thousands of EUR)		2023			ration		2023			ration		2023		ration		2023		ration
Base salary	845	15 %	310	24 %		330	23 %	253	57 %
Fringe benefits	15			- %	15	1 %		12	1 %	14	3 %
Total fixed compensation	860	15 %	325	25 %		342	24 %	267	60 %
Annual target incentive cash bonus 2023	1,295	23 %	194	15 %		228	16 %		-		- %
Annual RSUs	1,480	26 %	130	10 %		152	11 %		-		- %
Annual PSUs	1,110	19 %	130	10 %		152	11 %		-		- %
3-year plan PSUs	370	6 %	308	24 %		308	22 %		-		- %
2-year integration one-time bonus	611	11 %	214	16 %		251	17 %		-		- %
STI 2023	-			- %		-			- %	-		- %	180	40 %
Total variable compensation	4,866	85 %	976	75 %		1,091	76 %	180	40 %
100 % target compensation total	5,726				1,301					1,433			447

In 2023, the following members of the management board have voluntarily agreed to the following temporary reductions in base salary:

• 50% reduction in base salary for Thomas R. Stanton effective from October 30, 2023 through July 31, 2024
• 25% reduction in base salary for each of Ulrich Dopfer and Christoph Glingener effective from November 1, 2023 through July 31, 2024.

These temporary salary reductions were implemented in connection with the Business Efficiency Program that was developed during the second half of 2023 as a result of ongoing uncertainty around the current macroeconomic environment and its impact on customer spending levels.

Ulrich Dopfer's base salary was increased from USD 266,407 to USD 300,000 on January 1, 2023, and then was increased to USD 410,000 commencing May 1, 2023. The revised remuneration system has been approved by the Adtran Networks shareholders at the Annual Shareholder Meeting on May 24, 2023.

Total compensation granted and owed to the members of the management board in the fiscal year 2023

For the former members of the management board and those active as of December 31, 2023, the following table shows the individual compensation granted and owed for the fiscal year 2023.

Compensation has been granted within the meaning of Section 162 para. 1 sentence 1 AktG if the performance criteria are achieved during the relevant financial year and the remuneration elements have thus been earned. The compensation is owed if it has become due pursuant to the legal definition, but has not been paid, within the fiscal year.

For the compensation system of Adtran Networks SE, this understanding of the terms means that the year in which the member of the management board rendered the performance and the reporting year may not be the same.

Subsequently, the non-performance-related compensation components were both paid and accrued in the fiscal year 2023. For the Annual Target Incentive Cash Bonus, no remuneration was granted or owed in the fiscal year 2023. The RSUs and PSUs are reported with a market value at the date of vesting. No compensation was owed or granted for the annual as well as 3-year plan PSUs and the integration bonus in the 2023 fiscal year. In the case of variable compensation based on the old

• Adtran Networks - Remuneration report 2023

Remuneration report

compensation system for benefits from the period up to the end of 2023, the amounts stated are those that will be due and paid out in the fiscal year 2024 as a result of the determination of earnings.

For the fiscal year 2023, the total compensation of the members of the management board of Adtran Networks SE amounts to EUR 2,410 thousand.

The compensation for active and former members of the management board pursuant to Section 162 para. 1 sentence 2 no. 1 AktG consists of the following:

															Scott St. John
		Thomas R. Stanton											(until January 21,
		(from July 1, 2023)		Christoph Glingener	Ulrich Dopfer			2023
		Chief executive officer		Chief technology	Chief financial officer		Chief marketing and
							officer					sales officer
				in % of					in % of			in % of					in % of
				total					total			total					total
				remune-					remune-			remune-					remune-
(in thousands of EUR)		2023		ration		2023			ration		2023		ration		2023			ration
Base salary	845			310					330			253
Fringe benefits	15			15					12			14
Total fixed compensation	860	66 %	325	100 %		342	100 %	267	60 %
Annual target incentive cash bonus 2023	-				-					-				-
Annual RSUs	436				-					-				-
Annual PSUs	-				-					-				-
3-year plan PSUs	-				-					-				-
2-year integration one-time bonus	-				-					-				-
Stock option plans	-				-					-				-
STI 2023	-				-					-			180
Total variable compensation	436	34 %		-			- %	-		- %	180	40 %
Total compensation	1,296			325					342			447

Effective as of the end of January 21, 2023, Scott St. John resigned from his position as a member of the management board of Adtran Networks SE. In the fiscal year 2023, compensation was not owed or granted to other members of the management board apart from those listed in the table.

Maximum annual compensation

The maximum compensation established by the supervisory board pursuant to Section 87a para. 1 sentence 2 no. 1 AktG for the fiscal year 2023 is EUR 2.9 million for the chairman of the management board and EUR 2.8 million for an ordinary member of the management board.

The maximum compensation is comprised of the basic compensation and the fringe benefits, the variable (i.e., performance- related) compensation components for maximum target achievement and considers applicable caps. If members of the board of Directors or other senior managers of Adtran Holdings also hold a seat on the management board at the company at the same time, any amounts that are not paid by the company or its dependent companies and that are not paid specifically for the service on the management board at the company will not be considered (see Clause 2 of the management board compensation systems of March 15, 2023). For these reasons, the compensation received by Mr. Thomas Richard Stanton as CEO and chairman of the board of the parent company is not being considered when reviewing compliance with the maximum compensation.

In the fiscal year 2023, both the total maximum compensation and the limits for the individual variable compensation components were observed.

Below, the relevant total compensation for 2023 based on the received compensation is compared with the defined maximum compensation:

• Adtran Networks - Remuneration report 2023

Remuneration report
		Thomas R. Stanton		Christoph				Scott St. John		Brian Protiva
		(from July 1, 2023)		Glingener		Ulrich Dopfer		(until Jan. 21, 2023		(until Aug. 31, 2022)
		Chief executive		Chief technology		Chief financial officer		Chief marketing and		Former chief
		officer		officer				sales officer		executive officer
(in thousands of EUR)
Base salary	845	310	330	253		-
Fringe benefits	15	15	12	14		-
Annual target
incentive cash bonus	-		-		-		-		-
2023
Annual RSUs	436		-		-		-		-
Annual PSUs	-		-		-		-		-
3-year plan PSUs	-		-		-		-		-
2-year integration	-		-		-		-		-
one-time bonus
STI 2022	-	147	106	128	207
LTVP 2020-2022	-	190	170	180	268
Stock options	-		-		-	96		-
Total compensation	1,296	662	618	671	671
Maximum	n/a	2,800	2,800	2,800	2,900
compensation

Effective as of the end of August 31, 2022, Brian Protiva resigned from his position as member of the management board and chairman of the board.

Non-performance-related compensation components and fringe benefits

The members of the management board receive an agreed non-performance-related basic compensation each year, which is paid out in equal installments. In an individual agreement from November/December 2023, the members of the management board Christoph Glingener and Ulrich Dopfer waived 25% of their basic compensation for the period from November 1, 2023 to July 31, 2024. The CEO Thomas R. Stanton has waived 50% of his fixed salary granted by the parent company with effect from October 30, 2023 until July 31, 2024.

Compensation in kind and other additional compensation

In addition to cash compensation, the members of the management board employed by the company are granted various fringe benefits, some of which are event-related. They received the usual employer's share of any statutory social security contributions, health insurance, and a standard employer retirement plan (e.g., US 401k). In the fiscal year 2023, a company car for business and private use was available to one member of the management board. Two members of the management board received a corresponding lump-sum payment for a company car.

Furthermore, the members of the management board are included in the coverage provided by a financial loss liability insurance policy (directors & officers insurance), subject to a deductible, taken out by the company. This insurance provides for a statutory deductible for the management board required according to Section 93 para. 2 sentence 3 German Stock Corporation Act (AktG).

Company pension plan

The compensation system does not include any company pension plan for the former and active members of the management board.

Annual Target Incentive Cash Bonus

The Annual Target Incentive Cash Bonus is established by the Variable Incentive Compensation Plan or Variable Incentive Cash Compensation (VICC) of Adtran group. The Annual Target Incentive Cash Bonus rewards the success of the operative development in the respective fiscal year. This ensures that targets are based on demanding financial, operative, and strategic success parameters, and the amount of the actual disbursement depends on their achievement.

At the beginning of a respective fiscal year, the supervisory board establishes an individual target compensation for 100% of the total target achievement for each member of the management board. This amount is calculated by multiplying the fixed annual salary of the members of the management board with the individually set incentive target in percent. Furthermore, performance criteria are established according to the VICC at the beginning of each fiscal year. According to previous and current practice,

• Adtran Networks - Remuneration report 2023

Remuneration report

the Adjusted EBIT3 of the Adtran group and the sales of the Adtran group4 are used as relevant criteria. The Adjusted EBIT is the EBIT shown in the audited financial statements of Adtran Holdings, adjusted by restructuring costs, acquisition-related costs, amortizations of intangible assets, costs for share-based compensation, non-cash changes in the value of investments within the framework of the Deferred Compensation Plan, and other exceptions established in the individual case. However, according to the VICC, other key figures can also be used as performance criteria.

In principle, at the beginning of each quarter, a minimum, target, and maximum amount is established for each performance criterion for the respective quarter. In order to receive the pro rata bonus for the respective quarter, the minimum target has to be achieved for both performance criteria. The member of the management board receives 100 % of the annual target bonus if the target amount is achieved for all four quarters. If the maximum targets are achieved for all four quarters, the member of the management board receives 200 % of the annual target bonus. Values between the thresholds are not calculated by means of linear interpolation. After target achievement has been determined in the respective subsequent quarter, the payments owed for the respective previous quarter become due. The disbursement is made after target achievement has been established for the respective previous quarter.

The annual bonus is paid out by the company with which the management board service agreement exists.

The targets established for the members of the management board were achieved as follows in the fiscal year 2023:

													Goal
Goal													achievement
(in millions of USD)		Goal period		Minimum goal		Target goal		Maximum goal	Actual value		(in %)
		Q1	2023	355.1	365.1	380.1		323.9		- %
Revenue of Adtran
	Q2	2023	350.0	360.0	375.0		327.4		- %
Holdings group
		2nd half of 2023	600.0	650.0	700.0		497.8		- %
		Q1 2023	1.0	20.2	30.2		(5.2)		- %
Adjusted EBIT of Adtran
	Q2 2023	10.0	22.5	32.5		3.6		- %
Holdings group
		2nd half of 2023	1.0	15.0	33.0		(8.3)		- %

Long-term variable compensation components

Based on the current compensation system and within the scope of the incentive plans of the Adtran Group, Adtran Holdings pays the members of the management board time-related RSUs, market-related PSUs, and company-related PSUs as part of a three-year plan. The long-term variable compensation instruments serve to establish the right incentives in order to achieve sustainable corporate development. Adtran bears the costs for the allocations and their management.

Annual Restricted Stock Units

The members of the management board receive a certain sum for the allocation of Restricted Stock Units or RSUs each year. The allocation takes place regularly during the first quarter of the fiscal year. The number of RSUs to be allocated is calculated by dividing this sum by the value of the Adtran Holdings shares according to the NASDAQ closing price on the day when the decision regarding the allocation is made.

As a general rule, the allocations will be converted into Adtran Holdings shares over the course of four years in equal installments (25 % per year) after the time has lapsed (on the respective anniversary of the allocation). Within the four-year vesting period, the members of the management board earn a quarter of the originally allocated RSUs for each full year they have been on the management board of the company since the allocation of the RSUs. In order for the member of the management board to receive the shares on each exchange date, the member must have entered into a current service agreement with the company or any other group company of the Adtran group. The RSUs motivate the members of the management board to maintain the service relationship with the company and to promote the growth of the group.

Aside from general restrictions, such as insider trading rules and "blackout periods" existing pursuant to the guidelines of the Adtran group, there are, in principle, no further disposal restrictions after the acquisition of the shares.

According to the compensation system, the ceiling of a possible conversion of the RSUs in the event of an increase in the value of the shares is defined as 300% between allocation and conversion, considering all RSUs within a tranche (i.e., 100 % of the RSUs allocated for a total of four years). Until this upper limit is reached, the management board member can receive Adtran Holdings shares for the RSUs. Should the ceiling be reached, any RSUs exceeding the ceiling have to be returned.

In the fiscal year 2023, the members of the management board received or exercised the following RSUs.

• Adjusted EBIT is defined as the Adtran Holdings group earnings before interest and tax, determined based on the audited financial results, and adjusted to remove any restructuring expenses; acquisition-related expenses and amortization of intangibles; stock-based compensation expense; the non-cash change in fair value of equity investments held in the deferred compensation plan; and any other non-GAAP exclusions approved by the compensation committee of Adtran Holidngs, Inc..
  4 Sales of the the Adtran Group: Revenues reported in the audited US GAAP consolidated financial statements of Adtran Holdings.

• Adtran Networks - Remuneration report 2023

Remuneration report

The following table shows the development of the portfolio of RSUs held by members of the management board:

		RSUs										RSUs
		outstanding on						Market value at		Forfeited/		outstanding on
		Jan. 1, 2023		Granted RSUs		Vested RSUs		vesting date		expired RSUs		Dec. 31, 2023
								in thousands
		Number		Number		Number		of USD		Number		Number
Thomas R. Stanton	349,282	87,146	(87,049)	471		-	349,379
(since July 1, 2023)
Christoph Glingener	-	7,625		-		-		-	7,625
Ulrich Dopfer	-	8,932		-		-		-	8,932
Total	349,282	103,703	(87,049)	471		-	365,936

The outstanding RSUs of the members of the management board at Adtran on the reporting date are divided between the different issue tranches as follows:

						Market value
						December 31, 2023
		Grant date		Number of outstanding RSUs		(in thousands of USD)
		November 16, 2020	12,563	92
		November 17, 2021	15,127	111
Thomas R. Stanton
	November 17, 2021	30,253	222
(since July 1, 2023)
		July 13, 2022	204,290	1,499
		January 20, 2023	87,146	640
Christoph Glingener		May 24, 2023	7,625	56
Ulrich Dopfer		May 24, 2023	8,932	66
Total			365,936	2,686

Annual Performance Stock Units

A certain sum is established each year for the allocation of market-related Performance Stock Units for the members of the management board. The allocation takes place regularly during the first quarter of the fiscal year. A later allocation is also possible in case of entry during the year, changes in the duties, or for other factual reasons. The number of market-related PSUs to be allocated is calculated by dividing this sum by the value of the Adtran Holdings shares according to the NASDAQ closing price on the day when the decision regarding the allocation is made.

The term of the market-related PSUs is three years. The earnings of the PSUs are determined based on a comparison of the development of the TSR of Adtran Holdings compared to the development of the Total Shareholder Return (TSR) of the NASDAQ Telecommunications Index.

The respective member of the management board earns 0% of the target number of the market-related PSUs if the relative TSR performance of Adtran Holdings does not correspond to at least the 20th percentile of the benchmark index, and up to 150 % of the target number of PSUs if the relative TSR performance of Adtran Holdings corresponds to, or exceeds, the 80th percentile of the benchmark index. If the TSR Performance of Adtran Holdings corresponds to a value in between, the earned market-related PSUs are established based on the company's management board compensation system shown in the following table (which is published in the invitation for the annual general meeting on May 24, 2023, in the German Federal Gazette).

The member of the management board receives a corresponding number of Adtran shares based on the PSUs earned at the end of the three-year period in each case. The member of the management board receives credits in each case for dividends paid on the shares that correspond to the market-related PSUs during the term of the PSUs. The credits are earned and become due together with the PSUs and are paid out in money. Aside from general restrictions, such as insider trading rules and "blackout periods" existing pursuant to the guidelines of the Adtran group, there are, in principle, no further disposal restrictions after the acquisition of the shares.

The market-related PSUs reward, in particular, a better performance of the Adtran Holdings shares compared to the benchmark index and promote long-term development during their multi-year assessment period.

According to the compensation system, the exercise of the PSUs is restricted and only possible until a maximum amount is reached, i.e. when the maximum 150 % TSR target is achieved and the shares additionally increase in value to 200 % between allocation and conversion, considering all PSUs allocated within a tranche. Should the ceiling be reached, any PSUs exceeding the ceiling have to be returned.

• Adtran Networks - Remuneration report 2023