Paragon Banking : Rules of the Paragon Deferred Share Bonus Plan 2023 for approval at AGM

Paragon Banking

Group plc

Paragon Deferred Share

Bonus Plan 2023

Shareholder approval: [1 March 2023]

Board adoption: [2 March 2023]

Plan expires: [28 February 2033]

PricewaterhouseCoopers LLP, 1 Embankment Place, London, WC2N 6RH

T: [phone], F: [phone], www.pwc.co.uk

PricewaterhouseCoopers LLP is a limited liability partnership registered in England with registered number OC303525. The registered office of PricewaterhouseCoopers LLP is 1 Embankment Place, London WC2N 6RH.PricewaterhouseCoopers LLP is authorised and regulated by theFinancial Conduct Authority for designated investment business.

Table of contents

1.	Grant of Awards	1
2.	Plan limits	3
3.	Exercise Price	4
4.	Malus and clawback	4
5.	Vesting of Awards (and exercise of Options)	4
6.	Holding Period	7
7.	Vesting of Awards (and exercise of Options) in special circumstances	8
8.	Takeover and other corporate events	9
9.	Exchange of Awards	11
10.	Lapse of Awards	12
11.	Adjustment of Awards on Reorganisation	12
12.	Tax and social security withholding	13
13.	Rights and listing of Shares	13
14.	Relationship of the Plan to contract of employment	13
15.	Administration of the Plan	14
16.	Amendment of the Plan	15
17.	Notices	15
18.	Governing law and jurisdiction	16
19.	Interpretation	16

1. Grant of Awards

Determination of participation and Market Value

Subject to the Rules, the Board will in its absolute discretion decide whether the Plan shall be operated for any particular Financial Year, the identity of any Award Holder and the terms of their participation.

The Board shall, in its absolute discretion, determine the percentage (which may be nil) of an Eligible Employee's Bonus which will be paid in cash and the percentage which will be delivered in the form of an Award.

As soon as practicable after the end of the performance period to which a Bonus relates, the Board will determine the number of Shares over which an Award shall be made. The maximum number of Shares subject to an Eligible Employee's Award shall be calculated by dividing the amount of their Bonus to be delivered in the form of an Award by the average Market Value over the five Dealing Days ending on the Award Date (unless the Board determines Market Value should be assessed on some other basis). The number of Shares shall be rounded down to the nearest whole Share.

Procedure for grant of Awards and Award Date

An Award shall be granted by the Board passing a resolution. The Award Date shall be the date on which the Board passes the resolution or any later date specified in the resolution and allowed by Rule 1.4. The grant of an Award shall be evidenced by a deed executed by or on behalf of the Company.

Where the Company has in place a Directors' Remuneration Policy approved by the Company in general meeting, the terms of an Award to be granted to an Eligible Employee who is a director of the Company must fall within the scope of the Directors' Remuneration Policy most recently approved by the Company in a general meeting.

An Award Certificate or a Forfeitable Share Agreement (as applicable) shall be issued to each Award Holder as soon as reasonably practicable following the grant of the Award setting out details of the Award determined in accordance with Rule 1.3 and, where applicable, Rule 1.11.

Terms and conditions set at grant

The Board shall, at the time of grant, determine:

1. whether the Award comprises an Option, a Conditional Award or Forfeitable Shares;
2. the Award Date;
3. the number of Shares subject to the Award or the basis on which the number of Shares will be calculated;
4. the Exercise Price (if any);
5. the date or dates on which the Award will normally Vest (which may be the same date as the Award Date);
6. whether or not any dividend equivalents will be payable under Rule 5.10 and, if so, the basis on which they will be payable;
7. in the case of an Option, the Exercise Period;
8. any Holding Period(s) (and the proportion of the Award to which any Holding Period applies, if not 100 per cent);
9. whether Rule 4 (Malus and clawback) shall apply to the Award;
10. any other conditions of the Award; and
11. where the Award comprises Forfeitable Shares, any provisions which must be determined under Rule 1.11.

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The Board may grant an Award in any number of tranches, where the terms (as referred to in this Rule) are different. In these circumstances, the Rules will be interpreted as if each tranche was a standalone Award.

When Awards may be granted

Subject to Rule 1.5, the Board may grant Awards only during the 42 days beginning on:

1. the date of shareholder approval of the Plan;
2. the day after the announcement of the Company's results, including a preliminary announcement, for any period through a Regulatory Information Service;
3. any day on which the Board determines that circumstances are sufficiently exceptional to justify the grant of the Award at that time; or
4. the day after the lifting of any Dealing Restrictions which prevented the grant of Awards during any of the times described above.

When Awards may not be granted

Awards may not be granted:

1. when prevented by any Dealing Restrictions; or
2. after the 10th anniversary of shareholder approval of the Plan.

Who can be granted Awards

An Award may only be granted to an individual who is an Eligible Employee at the Award Date.

Unless the Board decides otherwise, an Award will not be granted to an Eligible Employee who on or before the Award Date has given or received notice of termination of employment (whether or not lawful).

Confirmation of acceptance of Award

The Board may require an Eligible Employee who is (or is to be) granted an Award to confirm their acceptance of the Rules and the terms of any Award granted to them by a specified date. Such confirmation will be in a form set by the Board (which may require the Eligible Employee to confirm acceptance on a portal or execute a document). The Board may provide that the Award will lapse (and as a result be treated as never having been granted) if the confirmation of acceptance is not provided by the specified date or provide that the Award will not Vest until they do so agree in writing.

Right to refuse Award

An Award Holder may by notice in writing to the Company within 60 days after the Award Date say they do not want their Award in whole or part. In such a case, the Award shall to that extent be treated as never having been granted.

No payment for an Award

An Award Holder shall not be required to make payment for the grant of an Award unless the Board determines otherwise. Where an Award Holder refuses their Award, no payment in connection with the refusal is required from the Award Holder or the Company.

Awards non-transferable

An Award shall be personal to the Award Holder and, except in the case of the death of an Award Holder, an Award shall not be capable of being transferred, charged or otherwise alienated and shall lapse immediately if the Award Holder purports to transfer, charge or otherwise alienate the Award.

Awards which are Forfeitable Shares

This Rule 1.11 sets out specific provisions in relation to Forfeitable Shares.

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1. An Eligible Employee who is to be granted Forfeitable Shares must enter into a Forfeitable Share Agreement with the Company providing that to the extent the Award lapses, the Forfeitable Shares are forfeited and the Forfeitable Shares will immediately be transferred for no (or nominal) consideration to any person specified by the Board. The Forfeitable Share Agreement will also provide that, except for transfer on death of the Award Holder to their personal representatives or to the extent agreed by the Board (and subject to such conditions as it may decide), the Award Holder will not transfer, give security over or assign the Forfeitable Shares subject to their Award during the Vesting Period.
2. The Award Holder must sign any document (including a blank stock transfer form) requested by the Board relating to the Forfeitable Shares. The Board may provide that the Award will lapse if any such document is not signed within any specified period.
3. On or as soon as practicable after the Award Date of Forfeitable Shares the Board will procure that the relevant number of Forfeitable Shares are issued or transferred (including out of treasury or otherwise) to the Award Holder or another person to be held for the benefit of the Award Holder.
4. Except to the extent set out in the Forfeitable Share Agreement, the Award Holder shall have all the rights in respect of Forfeitable Shares from the date of transfer until any date on which the Award comprising the Forfeitable Shares lapses (whether in whole or in part).

2. Plan limits

General

The aggregate number of Shares over which Awards may be granted shall be limited as set out in this Rule 2. In the event of any conflict between the limits in this Rule 2, the lower limit shall prevail.

10 per cent in 10 years

An Award may not be granted if the result of granting the Award would be that the aggregate number of Shares issued or committed to be issued in the preceding 10 year period under:

1. Awards under the Plan; or
2. options or awards granted under any other Employees' Share Scheme (whether or not discretionary) operated by the Group,

would exceed 10 per cent of the Company's issued ordinary share capital at that time.

5 per cent in 10 years

An Award may not be granted if the result of granting the Award would be that the aggregate number of Shares issued or committed to be issued in the preceding 10 year period under:

1. Awards under the Plan; or
2. options or awards granted under any other discretionary Employees' Share Scheme adopted by the Group,

would exceed 5 per cent of the Company's issued ordinary share capital at that time.

Calculation

For the purpose of the limits contained in this Rule 2:

1. for as long as required by The Investment Association Principles of Remuneration treasury shares shall be included in the limit as if they were new issue shares;
2. there shall be disregarded any Shares where the right to acquire the Shares has lapsed or been renounced;
3. there shall be disregarded any Shares which the Trustees have purchased, or determined that they will purchase, in order to satisfy an Award or the exercise of an option or the vesting of other rights of an employee under any other Employees' Share Scheme operated by the Group; and

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