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KRONES AG

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Krones : Remuneration system for the members of the Executive Board

05/18/2021 | 04:55am EDT

krones Aktiengesellschaft, Neutraubling

Annual general meeting (Virtual AGM) of KRONES AG on Monday, 17 May 2021, 2:00 pm,

at the business premises of KRONES AG, Böhmerwaldstrasse 5, 93073 Neutraubling, Germany.

Remuneration system for the members of the Executive Board Description, resolution and vote

AGM 2021 | 2

A.

Description of the remuneration system for the members

of the Executive Board (agenda item 8)

1.

Basic features of the remuneration system

The main business focus of Krones AG (hereinafter "Krones" or the "Com-

pany") is the provision of machinery and systems for bottling and packag-

ing and for beverage production. In addition, Krones offers its customers

innovative digitalisation and intralogistics solutions. Krones is currently

undergoing a structural change aimed at securing the Company's long-

term competitiveness. The Executive Board has decided on comprehensive

measures for this purpose. These include, essentially, expanding the Com-

pany's global footprint in the emerging markets, streamlining the product

portfolio,­ and focussing on growth. Implementing these measures will

strengthen profitability and ensure sustainable income generation - and

thus lay the foundation for the Company's long-term, profitable growth.

The remuneration system for the Executive Board serves as an important

control element with regard to implementation of the Company's business

strategy. It establishes key incentives for profitable growth and for increas-

ing enterprise value in the short and long terms. Moreover, by taking ESG

(Environmental, Social, and Governance) targets into account, it also em-

phasises the sustainability of the Company. The current members of the

Company's Executive Board will receive remuneration based on the new

system effective 1 January 2022 at the latest.

The details of the remuneration system meet the requirements specified under the German Stock Corporation Act (AktG) and the recommendations and suggestions of the German Corporate Governance Code unless noted otherwise. The Supervisory Board has based the features of the remun­ eration system for the Executive Board on the following principles in particular:

Contributes to our business strategy

The remuneration system for the Executive Board, in particular the per­ formance criteria for the variable remuneration, are closely tied to our business strategy and thus establish a purposeful incentive structure.

Clear and understandable

The remuneration system is clear and understandable and can thus be communicated transparently both internally and externally.

Focus on the Company's long-term interests and sustainability

The variable remuneration consists largely of long-term incentive components that promote increasing enterprise value and implementing important sustainability goals.

Performance-based remuneration (pay for performance)

A significant portion of the remuneration of members of the Executive Board is variable and based on the achievement of ambitious targets to ­ensure that remuneration matches performance.

AGM 2021 | 3

Takes shareholder interests into account

The variable remuneration provides a strong incentive to increase the

Company's enterprise value for the long term and therefore links the inter-

ests of the Executive Board with those of shareholders.

Appropriateness

The remuneration of members of the Executive Board is appropriate in ­relation to the members' duties, responsibilities, and personal performance and experience as well as the economic situation, success, and ­expected development of the enterprise.

Consistency

The same logic applies to the remuneration and incentives offered to Executive Board, managers, and employees, thus ensuring that the Company's business strategy and the associated targets are pursued Company-wide.

2. Procedure for determining, implementing, and revising the remuneration system

The Supervisory Board establishes a clear and understandable system of Executive Board remuneration in accordance with Sections 87a (1) and 120a

(1) AktG and submits it to the Annual General Meeting for approval whenever a material change is made or at least every four years. If the Annual General Meeting does not approve a submitted remuneration system, the Supervisory Board must, pursuant to Section 120a (3) AktG, submit a

revised­ remuneration system to the next General Meeting for approval.

The Supervisory Board is responsible for determining, implementing, and revising the remuneration system and the remuneration amounts of the individual members of the Executive Board. To this end, the Standing Committee prepares the Supervisory Board's resolutions relating to remuneration and gives recommendations. When developing and revising the remuneration system, the Supervisory Board or the Standing Committee may seek the assistance of an external remuneration expert. In this case, care is taken to ensure the independence of the remuneration expert from the ­Executive Board and from the Company.

2.1. Appropriateness

The Supervisory Board reviews the appropriateness of the remuneration amounts at regular intervals and as needed. The criteria for assessing the appropriateness of the remuneration include but are not limited to the tasks, responsibilities, personal performance, and experience of the re- spective member of the Executive Board and the economic position, suc- cess, and expected development of the enterprise, taking into account its peer companies.

On the one hand, the Supervisory Board reviews the appropriateness of the remuneration horizontally, by way of external benchmarks as com- pared with executive pay among other companies of similar size. Compa- nies listed on Germany's SDAX share index serve as the comparable market. On the other hand, a vertical, internal comparison is made, which exam- ines the relationship of Executive Board remuneration to the pay of senior management and employees (based on the typical reference wage of a skilled worker).

AGM 2021 | 4

2.2. Conflicts of interest

When determining, implementing, and revising the remuneration system, the Supervisory Board heeds the precepts of the German Stock Corporation Act (AktG) and the German Corporate Governance Code for the handling of conflicts of interest. The principles for handling conflicts of interest are established in the rules of procedure for the Supervisory Board, under which each Supervisory Board member is required to immediately disclose any potential conflicts of interest to the Supervisory Board. Any Supervisory Board member with a material, non-temporary conflict of interest should immediately resign from the board. The Supervisory Board must report to the annual general meeting on any conflicts of interest that arise and their handling.

3. The remuneration system for the Executive Board at a glance

3.1. Components of the remuneration system

The remuneration system for the Executive Board consists of fixed and

variable­ components which together build the total payout for Executive Board members. The fixed components include the base salary, fringe

benefits,­ and post-employment benefits. The variable components break down into short-term and long-term incentives that are each linked to the achievement of different targets. The short-term incentive has a perfor- mance period of one year. The long-term incentive has a performance

period­ of three years.

The table below provides an overview of the structure of the various com- ponents and other provisions of the Executive Board remuneration system:

AGM 2021 | 5

Fixed components

Variable components

Other contractual provisions

Remuneration components

Details

Base salary

Fixed amount stipulated in the members' contracts, paid out in equal monthly amounts

Fringe benefits

Customary insurance premiums, housing expenses, school fees, anniversary bonuses, and the use of a company car

Appointed before 2012 (Legacy benefit Mr. Klenk):

Current benefit:

Type: Defined contribution plan

Post-employment benefits

Type: Defined benefit plan

Amount: Annual contribution of 40% of base salary

Amount: 30% of the last base salary received

Frozen at 2013 level upon current plan's introduction

Plan type: Performance bonus model

Performance period: one year

Short-term incentive

Performance criteria: EBT margin (weighting: 60%) and revenue (weighting: 40%)

Cap: 200% of target amount

Minimum threshold: Paid out only if EBT is positive

Plan type: Performance cash incentive

Performance period: three years

Performance criteria:

Enterprise value on 3-year average (EBT x 9, EBITDA x 7, revenue x 1) for value at start and end date plus net cash

and less pension provisions

Long-term incentive

ESG (2022 tranche): CO2 Scope 1 and 2; (2023 tranche onwards): CO2 Scope 1 and 2, diversity (optional), and another

ESG target (optional)

The ESG targets will be introduced in stages. ESG targets account for 10% of the target amount for the 2022 tranche,

15% for the 2023 tranche, and 20% from the 2024 tranche onwards

Minimum threshold for payment: At least 100% of the starting enterprise value

Cap: 250% of target amount

Maximum remuneration

Chairman of the Executive Board: €2,500,000

pursuant to Section 87a AktG

Regular members of the Executive Board: €2,200,000

In the following cases, the Supervisory Board can reduce or demand partial or full refund of variable remuneration:

Wilful breach of a material duty to exercise due care pursuant to Section 93 of the German Stock Corporation Act (AktG), a

Malus and clawback provisions

material contractual duty, or other material principles of conduct and action of the Company, such as those laid out in the

Code of Conduct or Compliance policies

Determination or payment of variable remuneration based on incorrect consolidated financial statements

This is an excerpt of the original content. To continue reading it, access the original document here.

Disclaimer

Krones AG published this content on 18 May 2021 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 18 May 2021 08:54:02 UTC.


© Publicnow 2021
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Christoph Klenk Chairman-Executive Board & Chief Executive Officer
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