Remuneration Policy for the Management and Supervisory Bodies of Petrol d.d., Ljubljana

1. TYPES

   This Remuneration Policy regulates total remuneration that can be received by the Management Board members.

   Remuneration for the Management Board members consists of the fixed and the variable parts.

   Benefits in kind are calculated on cash or in-kind payments in accordance with the applicable regulations.

   In addition to the fixed and variable parts, the Management Board members are in certain cases entitled to severance pay and some other benefits or rights.

2. FIXED REMUNERATION
   1. Base salary

      The fixed remuneration represents payment to the Management Board members for the performance of their duties and for their invested efforts and assumed responsibility. It is determined with the aim of ensuring financial stability, compensating the Management Board for their efforts, and it reflects professional experience and loyalty. The fixed remuneration does not depend on the business performance or other unforeseeable factors. The basic guiding principle in determining this component of remuneration is the complexity and responsibility of duties.

      The fixed remuneration is the base salary of the Management Board Members expressed in the gross amount and determined in the Employment Contract. The Management Board members' base salary must be high enough to enable supervision bodies to attract the best and highly motivated experts to the management bodies.

      The Management Board members are not entitled to length-of-service allowances or bonuses for work during less favourable worktime, as these are already included in their base salary.

   2. Criteria to determine base pay

      The base salary is determined primarily based on the work complexity and responsibility level, by taking into consideration the following criteria:

      1. Company size compared to other peer companies in Slovenia, by taking into account the value of assets, the generated net sales revenue, and the average number of employees in the last financial year.
      2. Operational complexity, which includes:

      • organisational complexity based on the number and size of Group subsidiaries, the complexity of regulation, and the risk management complexity;

      • internationalisation of operations based on the number and size of subsidiaries abroad, and the share of revenue generated abroad;

      • complexity of the direct economic environment based on the level of competitiveness in the industry, competitiveness in the most important markets, and the industry development phase;

      • complexity of key products based on the key product development phases, technological complexity, risks, and the sales growth potential;

      • activity regulation based on the regulation level of revenue/expenses.

      The Petrol Group is one of the largest Slovenian companies working actively in Slovenia and the entire region: Croatia, Bosnia and Herzegovina, Serbia, and Montenegro, where it has subsidiaries with a widespread retail network, and in Austria, Italy, and Macedonia.

      The Company is the largest Slovenian energy company, the major Slovenian importer, one of the largest Slovenian companies in terms of revenue, and one of the largest Slovenian commercial companies. Its business activity is sales of petroleum products, gas, other energy commodities and consumer goods. The Petrol Group consists of more than 40 companies, among which the Company has a 100 percent share in strategically important companies such as Petrol d.o.o. Croatia, Petrol Beograd d.o.o., E 3 d.o.o., Geoplin d.o.o., and other important companies.

      The Petrol Group is distinguished by a strong market and financial position and a widespread and modern retail network, which is its absolute competitive advantage. With its business activity of selling petroleum products, gas and other energy commodities, the Petrol Group achieved the leading share in nearly all segments especially in Slovenia and Croatia. It also has an important share in Serbia, Bosnia and Herzegovina and Montenegro.

      Due to the numerous activities, the Company has a widespread organisational structure already at the level of the parent company with many elements of the organisational structure and accurate rules for the inclusion into the Petrol Group's organisational structure with adequate separation of duties and accurately determined procedures and responsibilities for preparing and changing the Petrol Group's organisational structure. The Company has a system of efficient functional responsibility in place. Transparent management with efficient internal controls and a unified system of all corporate processes (central procurement, separation of the sales and procurement function from investments…) and transparent operations (demand management, investment board, risk committees, etc.) are in place in all relevant Group companies.

      In addition to the complexity and responsibility level, the base salary is determined also by comparing salaries in companies of comparable size, activity and comparable economic environment (large enterprises with commercial activity or energy sales activity, partly state-owned companies, operations in the region, as well as competences and expertise of Management Board members.

      The basic part of remuneration in contracts with members of the Management Board is determined by the Supervisory Board based on the above criteria.

      The upper limit for the base part of remuneration is determined in a monthly gross amount from EUR 21,000 to EUR 40,000.

      If necessary and in accordance with the Supervisory Board resolution, the base salary may be periodically aligned with the employment market conditions applicable to managers of comparable companies in comparable economic environments.

3. VARIABLE REMUNERATION

   This Remuneration Policy determines a system of criteria used to measure performance by the Management and the Management Board Members. The right of the Management Board members to the variable remuneration depends on such criteria.

   Variable remuneration is based on the Petrol Group's operational performance and on the operational performance of the Management Board as a whole, based on the transparency, flexibility, and consistency criteria.

   The variable remuneration consists of remuneration based on the fulfilment of the financial and nonfinancial criteria, which contribute to both the short-term and long-term performance of the Company. The variable remuneration is determined based on the criteria to promote the business strategy, long-term development and sustainability of the Company. The criteria for variable remuneration are financial and non-financial. The share of non-financial criteria, compared to the share of financial criteria, accounts for at least one third of the total share.

   The criteria are known in advance and their fulfilment is verified using the methods that are commonly used for such purpose. The fulfilment of financial criteria is established based on accounting methods, whereas the fulfilment of the non-financial criteria is established based on the activities in the context of each criterion and by taking account of the events and circumstances in an individual financial year. The Management Board submits the Report on the Work of the Management Board to the Supervisory Board at the latest upon the endorsement of the audited annual report for the year; in its Report, the Management Board, in accordance with the relevant Rules, provides all necessary bases to enable the Supervisory Board to assess the performance of the Management Board in the financial year and hence determine the corresponding amount of the variable remuneration.

   The variable remuneration based on the financial criteria amounts to a minimum of 50%. Variable remuneration is paid in the form of cash payments.

   1. Financial criteria for performance measurement

      The financial criteria are intended as motivation for the Management Board Members to maximise their success in achieving the operational results of the Company. These criteria are aimed to promote the short-term and the long-term performance of the Management Board members and the Company and are important in implementing the strategy of the Company and the Petrol Group.

      The financial criteria used to determine the performance bonus for the Management Board are:

      1. The Petrol Group's business activity growth: EBITDA.

      2. Increased financial performance of the Petrol Group: EBT (net profit).

      3. Increased operational productivity of the Petrol Group: EBIT.

      4. Improved financial stability of the Petrol Group: net debt/EBITDA.

         The variable remuneration under the financial criteria is determined by applying the following base salary coefficients per Management Board member:

         1. the rating scale to determine the basic salary coefficient is determined for the criteria for which the desired state is above the plan (used for criteria 1, 2, and 3 from the second paragraph of this

            point): it is expressed as the multiple of the gross base salary based on the EBITDA, EBT, and EBIT achievement index compared to the plan for an individual financial period;

         2. the rating scale to determine the basic salary coefficient is determined for criterion 4 from the second paragraph of this point: it is expressed as the multiple of the gross base salary based on achieving the net debt-to-EBITDA criterion.

      The rating scales and other data from the previous paragraph shall be determined by the Supervisory Board in the Rules. The variable remuneration under the financial criteria is calculated for each criterion indicated in the second paragraph of this point by reading out the salary coefficient from the third paragraph and multiplying it by the weight of such criterion as determined by the Supervisory Board in the Rules. The total coefficient is the sum of the weighted coefficients calculated in this way. The variable remuneration under the financial criteria is calculated by multiplying the total coefficient with the amount of the base monthly salary of an individual member of the Management Board.

   2. Non-financial criteria for performance measurement

      Non-financial criteria include those that demonstrate the success in strategy implementation and operational growth, consideration of the interests of Company stakeholders and criteria used to pursue the environmental and social objectives of the Company's operations. The non-financial criteria used to determine the performance bonus for the Management Board are:

      1. Success in business strategy implementation: the strategic project implementation and operations streamlining success is evaluated, by taking into account the development activities, risk management, procurement and logistical process streamlining, innovation, corporate responsibility, support processes and IT upgrade, and similar, with the goal to achieve long-term sustainability of operations and sustainable development of the Company.
      2. Success in ensuring operational growth: the implementation of the projects enabling the Petrol Group to further grow and expand its operations is evaluated, by taking into account the successful implementation of investment projects, takeovers, strategic alliances, strengthening the position in existing markets and entering new markets, with the goal to achieve a long-term operational growth.

      3. Success in human capital development: success in developing sustainability focused HR systems (staffing, HR development, education and training, competence development, rewarding, care for occupational health and safety at work, ensuring inclusion and respecting diversity), and the provision of the proper HR structure (organizational climate, devoted employees, proper educational structure, competent employees) needed for strategy realisation is measured.

      4. Success in ensuring sustainable development: the Petrol Group's gradual transition to minimising carbon footprint and maximising overall energy savings as well as introducing sustainability commitments in the chain of stakeholders with the purpose to enhance corporate responsibility is measured.

         The non-financial criteria are measured descriptively, separately for each year, in accordance with the fourth paragraph of point 3.1.3. herein, as: very successful, successful, relatively successful and unsuccessful; this is the basis for determining the gross salary multiple, which is defined by the Supervisory Board in the Rules.

   3. Changed circumstances

      Notwithstanding the provisions determined in this Remuneration Policy, the Supervisory Board may, in response to the changed circumstances, by a resolution and without amending the Rules and with a validity solely in the relevant financial year, accordingly adjust the ratios and criteria by taking into consideration the market, property, financial and other relevant situation and targets of the Company.

      Based on the operating results and other circumstances, the Supervisory Board may decide to pay a higher or lower remuneration than that calculated based on the provisions 3.1.3.1. and 3.1.3.2. herein, if it believes that this is supported by reasonable grounds.

   4. Method of arranging and assessing the fulfilment of objectives set in the criteria to determine the variable remuneration

      The Supervisory Board adopts detailed variable remuneration criteria after endorsing the annual plan, that is, generally by the end of the calendar year for the next year or it verifies their appropriateness and proposes any change, if necessary. By endorsing the business plan, the Supervisory Board annually approves concrete financial targets necessary for setting the variable remuneration for the Management Board members.

      The Supervisory Board is in charge of establishing the performance of the Management Board and setting the variable remuneration in accordance with the Rules and this Remuneration Policy. Performance by the Management Board shall be established and variable remuneration determined once a year for the previous financial year upon endorsement of the audited annual report by the Supervisory Board. No later than on the endorsement of the audited annual report for the financial year, the Management Board shall submit to the Supervisory Board the Report on the Work of the Management Board which, in line with the Rules and this Remuneration Policy, provides all bases needed by the Supervisory Board to evaluate the performance of the Management Board in the financial year and determine the corresponding amount of the variable remuneration.

   5. Deferral period for variable remuneration

      If the variable remuneration exceeds the total fixed remuneration in the last year, the payment of such part of the variable remuneration is deferred by a period of at least one year.

   6. Clawback

      The Company may demand return of the already paid variable remuneration or a pro rata part thereof if:

      • annual report nullity is established with a final effect, with reasons for nullity referring to items or facts used as the basis to determine the variable remuneration;

      • it finds based on a special auditor's report that the criteria for the determination of the variable remuneration were incorrectly applied or that the decisive accounting, financial and other data and indicators were incorrectly determined or considered.

      The return of the already paid variable remuneration may be claimed within three years from the date when the remuneration or a part thereof is paid. The return of the already paid variable component is generally executed by offsetting the awarded, yet unpaid parts of the variable remuneration, whereby the offset option is also agreed in the employment contract or civil-law contract.

4. FIXED-TO-VARIABLE REMUNERATION RATIO

   The maximum permitted variable remuneration is 100% of the base remuneration paid in the past year.

5. SEVERANCE PAY

   In the case of an early contract termination with a Management Board member, such member shall be entitled to severance pay in the amount as set in the contract. Each Management Board member is entitled to severance pay in the event of:

   • the removal of such Management Board member for economic-business reasons based on the 4th indent of the 2nd paragraph of Article 268 of the Slovenian Companies Act (ZGD-1),

   • the termination of office and employment relationship as a result of retirement, and

   • the removal resulting from long illness or permanent inability to work,

   • the consensual termination of office in the absence of fault-based grounds.

   A Management Board member shall not be entitled to severance pay for early termination of office in the cases such as defined by the Companies Act. Severance pay shall not be paid to a Management Board member in the case of ordinary termination of office. In addition, a member of the Management Board is not entitled to severance pay in the case that such member alone terminates the Employment Contract or in the case of an early termination of the Employment Contract because such member has severely breached their obligations, is not capable of conducting business or because he or she was imposed a no-confidence vote by the General Meeting (unless if such no-confidence vote was based on obviously ungrounded reasons).

   The maximum amount of severance pay is a six-month gross base pay, such as determined in the contract with a member of the Management Board or a nine-month gross base pay in the event termination occurs earlier than halfway through the term of office. In case of early termination of office of a Management Board member whose term of office lasted less than one year, the maximum severance pay amount can be a three-month gross base pay, such as determined in a contract with such member.

   A member of the Management Board who, after early termination of the relevant contract, becomes employed in the company or its subsidiary or another affiliated company, may be entitled to the severance pay in the maximum amount of the difference between the gross base pay under the previous contract and the amount of the gross base pay under the new contract (in the corresponding multiple), but without prejudice to the second or third paragraph of this point.

   In the absence of fault-based grounds for removal, an agreement may be concluded on early termination of office on the initiative of one or another party, provided that this is in the interest of both parties, such as if a Management Board member does not achieve optimal business results, does not have optimal organisational skills or if there is no special trust between a Management Board member and the Supervisory Board. The expected benefits for the Company must be higher than the amount of severance pay and potential other expenditures that need to be paid upon entering into the agreement.

6. OTHER RIGHTS
   1. Benefits

      Management Board Members are further entitled to the following benefits:

      • the right to the payment of premiums for life, accident, disability insurance, voluntary supplementary pension insurance, company or third-party liability insurance, health insurance, under the conditions determined in the Employment Contract, whereby the total annual amount of all premiums may not exceed 1/12 of the beneficiary's annual base remuneration;
      • the right to use a mobile phone for private purposes, including the right to payment of fee or cost for calls or data traffic;

      • the right to use a portable computer and/or tablet for private purposes;

      • the right to use a company car for private purposes (including the right to the payment of fuel for business purposes at home and abroad and for private purposes at home, and the road infrastructure use fee; the Company also pays for registration, maintenance, technical and routine car service and concludes car and casco insurance);

      • the right to reimbursement of all additional training and education costs aimed to

        upgrade function performance effectiveness;
        
        

      • the right to preventive medical examination for managers;

      • the right to use a payment card to pay certain costs, including entertainment, in accordance with the business and financial plan and by ensuring spending traceability;

      • the right to business entertainment costs in accordance with the business and financial plan and by ensuring spending traceability;

      • the right to the reimbursement of membership fees in peer organisations, related to the performance of the function as a member of a management body;

      • the right to the reimbursement of legal protection fees in the case of lawsuits or filed reports in various legal proceedings by third parties in matters related to the performance of function in the Company, except of the content of this right is already reasonably covered in the D&O insurance and except in the case liability is established by final decision;

   2. Special monetary payments

      Each member of the Management Board is entitled to the following monetary payments, under the same conditions and in the same amount as applies to Company employees:

      • holiday allowance,
      • long-service bonuses,
      • the right to the reimbursement of costs necessary for or in relation to the performance of their function: e.g. subsistence costs for business trips, mileage, reimbursement of accommodation costs, reimbursement of commuting expenses, meal allowance,
      • paid leave; e.g. holiday leave, sick leave or another type of legally determined leave which is subject to the payment of compensation;
      • the business performance bonus in accordance with the collective agreement or a general act of the Company, providing that it is paid to all Company employees under the same conditions, achieving a more favourable tax regime for the relevant reward for all Company employees; the business performance bonus is included in the maximum permitted variable component of remuneration of Management Board members for the relevant year;
      • the employer's anniversary bonus: under the conditions and in the amount such as applicable to all other Company employees, in accordance with the business and financial plan;
      • the right to separation allowance: in cases and in the amount such as applicable to all other Company employees.
      • special payments on holidays: under the conditions and in the amount such as applicable to all other Company employees, unless such payments are determined as Company or employee business performance bonus in the collective agreement, general act of the employer or resolution of management body or if this is evident from other circumstances.

      • the right to severance pay upon retirement: the conditions and amount should be subject to the Slovenian Employment Relationships Act (ZDR-1), whereby the parties should not

        refer to potentially more favourable collective agreement or general internal act of the employer;

      • the non-competition clause: Contracts with Management Board members regulate the prohibition on competition even for the time after the end of Management Board members' offices. In case of removal by the Company, the prohibition on competition does not last more than six months and in other cases, it is not shorter than six months and not longer than two years. During the time of the prohibition of competition, Management Board members are entitled to a maximum of 75% of their monthly base part of remuneration. Regardless of whether the prohibition on competition is agreed or not, the Supervisory Board waives the right to invoke the prohibition on competition in the time after the end of office if, taking into account all known circumstances, there is no real threat to the interest of the Company based on not invoking the prohibition on competition for an individual Management Board member.

Remuneration for the Management Board Members is primarily defined in the Employment Contract between them and the Company.

The Management Board Members conclude an Employment Contract with the Company based on Articles 54 and 73 of the Employment Relationship Act (Official Gazette of the RS, No 21/2013; hereinafter: ZDR-1), the Companies Act (Official Gazette of the RS, No 42/2006 with amendments and supplements; ZGD-1), the Articles of Association, and Supervisory Board resolutions.

The Employment Contract sets forth the types of remuneration in accordance with this Policy.

The Employment Contract referred to in the previous paragraph is concluded for the Management

Board members' term of office, that is, five years.

The Employment Contract with a Management Board member terminates if such Management

Board member's term of office ends for any of the following:

• The removal of a Management Board member by the Supervisory Board,

• The end of office of a Management Board member, or

• Other reasons resulting in the termination of office of a Management Board Member in accordance with the legislation.