VAT : Explanations on the revision of the articles of association of VAT

EXPLANATIONS OF THE BOARD OF DIRECTORS ON THE REVISION OF THE ARTICLES

OF ASSOCIATION OF VAT GROUP AG

The German version of the Explanations of the Board of Directors on

the revision of the Articles of Association of VAT Group AG is the governing version.

For reasons of better readability, the masculine form of speech is used in these Articles of Association. Female and other gender identities are explicitly included.

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REVISION OF THE ARTICLES OF ASSOCIATION 2023
EXPLANATIONS

Explanations of the Board of Directors on the revision

of the Articles of Association

Information for shareholders on the implementation of the revised share law and the VAT Group AG Annual General Meeting on May 16, 2023

Agenda items 7, 8 and 9

1. Introductory remarks

On June 19, 2020, the Swiss Federal Assembly passed the revision of the Stock Corporation Act in the Swiss Code of Obligations (hereinafter "the revised Stock Corporation Act"). Among other things, this contains an improvement in corporate governance and the protection of minority shareholders, the modernization of the provisions on the conduct of general meetings, and important flexibilizations in the area of capital. In addition, the Ordinance against Excessive Compensation in Listed Stock Corporations, which came into force on Janu- ary 1, 2014, was enshrined in law, with selective amendments to the previous provisions. The Federal Council has set the majority of the new provisions to come into force on January 1, 2023. Stock corporations are granted a transitional period of two years to adapt their articles of association.

In line with the new provisions, the Board of Directors proposes to the Annual General Meeting a revision of the Articles of Association that both implements the requirements of the revised Stock Corporation Act and takes into account current best practices in the field of corporate governance. The Board of Directors also proposes to the shareholders to use the new instrument of the capital band introduced with the revision of the Stock Corporation Law to increase the financial flexibility of the Company and intends to ensure optimal continuity of the organization by extending the maximum possible term of office of the Board of Directors. Finally, the ­language is to be adapted to the new legal terminology and fundamentally clarified.

The proposed amendments to the Articles of Association are structured thematically and will be submitted to the Annual General Meeting for approval under six different agenda items (agenda item 7.1 to 7.6). The amendments to the Articles of Association are explained separately for each agenda item below. Subsequently, each proposed amendment is listed and contrasted with the current provision. Deletions are shown in black and bold strikethrough fontand new additions in black and bold font. References are to the renumbered Articles of Incorporation as proposed by the Board of Directors.

2. Explanations

Agenda item 7.1 - Purpose of the Company (Art. 2)

Sustainability is already an important part of VAT's corporate strategy. In order to express this also in the ­Articles of Association, the Board of Directors proposes to amend the purpose clause in Art. 2 of the Articles of Association accordingly.

Agenda item 7.2 - Shares, capital structure and opting-out (Art. 4, Art. 5 para. 1, Art. 33)

The proposed amendments to Art. 4 and 5 are clarifications resulting either from recent case law of the ­Federal Supreme Court (Art. 4) or from the revised Stock Corporation Act (Art. 5 para. 1).

The opting-out provision of Art. 33 expired on December 31, 2020. It will be deleted in the course of this amendment to the Articles of Association.

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Agenda item 7.3 - General Meeting and Auditors

(Art. 6, Art. 7, Art. 8, Art. 9, Art. 10, Art. 11, Art. 20, Art. 21, Art. 22, Art. 30, Art. 31)

The revision of the law introduces additional non-transferable powers of the General Meeting of Shareholders and thus strengthens shareholders' rights. Thus, the shareholders now also have to decide on the declaration of an interim dividend, the repayment of the statutory capital reserve and the delisting of the company's equity securities. In addition, the shareholders now approve the report on non-financial matters (Art. 6).

The threshold for convening an Extraordinary General Meeting is adapted to the law and reduced from 10% to 5% of the share capital (Art. 7). The other proposed changes in Art. 7 are of a linguistic nature and reflect the wording of the new law.

The revised Stock Corporation Act provides for new requirements for the invitation to the General Meeting. In particular, the items on the agenda, the motions and the associated reasons of the Board of Directors and, if applicable, of the shareholders are to be listed, which is to be reproduced accordingly in Art. 8. In addition, Art. 8 now refers to Art. 31 for the form of the invitation and states, in accordance with the new law, that VAT only has to make all reports available to the shareholders (if necessary also in electronic form on the company's website) and no longer has to make them available at the company's registered office.

Furthermore, Art. 8 is intended to establish and reiterate the possibility, which already exists by law, that

general­ meetings may be held at different locations and as hybrid events (so-called hybrid General Meetings). At a hybrid General Meeting, shareholders who are not present at the venue of the General Meeting may ­exercise all their rights electronically.

The shareholder's right to request that an item be included on the agenda or that a motion relating to an item be included in the invitation to the Annual General Meeting is adapted to the wording of the new law. The threshold for exercising this right is reduced from 5% to 0.5% of the share capital or votes (Art. 9).

The amendment to Art. 10 is an adjustment to the revised wording of the law. Resolutions and election results are now to be made available electronically within 15 days of the General Meeting of Shareholders, stating the exact proportions of votes cast. In addition, any shareholder may request that the complete minutes be made available to him within 30 days of the General Meeting.

The Chairman of the Board of Directors is responsible for the proper invitation to and conduct of the General Meeting. In this capacity, he chairs the meeting. In the event of obvious errors, he may have a resolution or an election repeated. For the sake of clarity, all this is to be enshrined in Art. 11. Furthermore, in accordance with the revised Stock Corporation Act, Art. 11 now refers to the "votes represented" and no longer to the "votes cast". Art. 11 is also otherwise adapted to the new wording of the law.

Under the new law, the General Meeting of Shareholders is no longer permitted to dismiss the auditors at any time during their term of office, but only if there are important reasons for doing so. Art. 20 will be amended accordingly. On this occasion, a linguistic correction should also be made in the heading to Chapter 4 (before Art. 21).

The General Meeting of Shareholders has the option to create voluntary retained earnings. The Board of Directors proposes to the General Meeting of Shareholders that this authority be stipulated in Art. 22 of the Articles of Association. Art. 22 must also be adapted to the wording of the new law in other respects.

The proposed adjustments to Art. 30 are clarifications and alignments with the new law.

It is now possible for Swiss stock corporations to use electronic means of communication for notices and announcements to shareholders. The proposed wording in Art. 31 allows the Board of Directors to choose the most appropriate means of communication for the respective communication to shareholders, be it postal delivery, notification by e-mail or notification on the company's website.

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Agenda item 7.4 - Restrictions on transferability and passing of resolutions (Art. 5 para. 2 and 3, Art. 13)

In order to be able to reduce the improper use of securities lending and similar legal transactions to influence votes and elections at the General Meeting of Shareholders, the Board of Directors proposes to anchor in the Articles of Association (Art. 5 para. 2 and 3) the reason for transferability newly provided for by law in Art. 685d para. 2 CO.

The deletion of the word "absolute" in Art. 13 is a purely formal adjustment to the amended wording of the law. A substantive change is not intended.

Agenda item 7.5 - Virtual General Meeting (Art. 8, last paragraph)

Under the new law, it will be possible to hold a General Meeting of Shareholders without a physical venue exclusively by electronic means (so-called virtual General Meeting of Shareholders) if there is a corresponding basis in the Articles of Association. For a virtual General Meeting, the law stipulates that shareholders must be able to exercise all their rights (in particular the right to speak and the right to information as well as the opportunity to exercise voting and election rights) directly at the General Meeting by electronic means. Even though the Board of Directors does not currently intend to hold virtual General Meetings, in view of future ­developments and changed circumstances (e. g. a pandemic), it considers it sensible to create a corresponding basis in the Articles of Association. This also seems particularly important to the Board of Directors because the COVID-19 Ordinance, which had allowed Swiss companies to hold general meetings without the personal presence of shareholders during the COVID-19 pandemic, expired at the end of 2022 and was not renewed.

Agenda item 7.6 - Board of Directors and remuneration (Art. 12, Art. 16, Art. 17, Art. 18, Art. 19, Art. 23, Art. 29)

The revised Stock Corporation Act extends the catalog of non-transferable and inalienable duties of the Board of Directors. Art. 17 is to be amended accordingly.

Under the new law, the concept of activities of members of the Board of Directors and the Executive Board that are to be permitted under the Articles of Association has been clarified. Art. 23 must be adapted accordingly to the new wording of the law. Mandates now describe comparable functions at other companies with an economic purpose.

The revision of the Stock Corporation Act restricts the possible use of the additional amount of compensation approved by the Annual General Meeting to persons newly joining the Executive Board. Use for promotions within the Executive Committee is no longer permitted. Art. 29 of the Articles of Association will be amended accordingly.

Finally, the Board of Directors proposes some formal amendments, which are partly of a linguistic nature and partly a follow-up to the amended wording of the law (Art. 12, Art. 15, Art. 16, Art. 18, Art. 19, Art. 21).

Agenda item 8 - Introduction of a capital band (Art. 3b)

The revised Stock Corporation Act introduces the instrument of the capital band, which combines the previous authorized capital increase with the new option of an authorized capital reduction. With the introduction of the capital band, shareholders authorize the Board of Directors to increase or decrease the share capital within a certain bandwidth. The range is limited by law to 50% (lower limit) and 150% (upper limit) of the share capital entered in the Commercial Register at the time the capital band is introduced in the Articles of Association. The authorization lasts for a maximum of five years, after which the capital band lapses.

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The introduction of a capital band enables a company to achieve the greatest possible financial flexibility

within­ the limits approved by the Annual General Meeting. This flexibility allows companies to take advantage of market opportunities such as smaller acquisitions efficiently, quickly and cost-effectively. The Board of ­Directors considers the creation of a capital band of -5/+10% of the issued share capital for a period of three years until the Annual General Meeting 2026 to be ideal for VAT Group AG and therefore proposes to the Annual General Meeting the introduction of a corresponding Art. 3b.

Under the proposed capital band, the Board of Directors is authorized for a period of three years to increase the existing share capital within a range by issuing a maximum of 3,000,000 registered shares or to reduce it by cancelling a maximum of 1,500,000 registered shares or by reducing the par value of the existing registered shares. The aforementioned number of shares is based on the existing nominal share value of CHF 0.10. The upper limit of the capital band is therefore CHF 3,300,000 and the lower limit CHF 2,850,000. Within the authorization period, the Board of Directors may also make multiple changes to the capital, even in partial amounts, but always only within the upper and lower limits of the capital band.

The aforementioned nominal limits do not take into account any future capital increases through the issue of employee shares under the existing conditional share capital pursuant to Art. 3a. If the share capital is increased through the issue of employee shares, the upper and lower limits of the capital band are dynamically increased by the same amount. The width of the capital band thus remains unchanged during the authorization period of three years and thus also the scope of action of the Board of Directors.

The introduction of the capital band requires a qualified majority of at least two thirds of the votes represented and an absolute majority of the nominal share value represented.

Agenda item 9 - Term of office of the Board of Directors (Art. 15)

The Board of Directors of VAT Group AG proposes the deletion of the term of office from the Articles of Association. The Term of Office will now be governed in the Organizational Rules of VAT Group AG. At the same time, the Term of Office will be extended from nine to twelve years.

The economic success of the VAT Group AG is largely based on the fact that key positions in the company are held by people who commit themselves over a longer period of time. On the one hand, this ensures continuity in the organization and work, and on the other hand, it also ensures that personnel changes can be planned and implemented in the best possible way. The extension of the term of office of the Board of Directors enables the VAT Group AG, after the transition from a family business to a listed company, to continue to implement the knowledge gained in the process and at the same time to prepare for an optimal and staggered renewal of the Board of Directors.

By deleting the limitation of the term of office in the Articles of Association and introducing it in the Organizational Rules, VAT Group AG is aligning itself with the practice of many Swiss companies that also regulate this in the Organizational Rules.