Invitation to the ordinary Annual General Meeting 04 Wednesday, 7 May 04, at 4.00 p.m. Culture and Convention Center Lucerne, Luzerner Saal, Wing B, Europaplatz, 6005 Lucerne Doors open.00 p.m. The way to make it
Dear shareholders, We can look back on a year that proved to be both challenging and successful. Komax Wire was again able to build on the good results of the previous year, while Komax Medtech and Komax Solar recorded a pleasingly strong improvement in their operating results. In addition, we have set the future course of our business on a new path through our decision to sell the Solar business and focus the Group more strongly on the high-income business of Komax Wire. Against this backdrop, Komax shares performed very strongly, closing the year more than 90% up. The Komax Group s consolidated sales increased to CHF 4.7 million in 0 (0: CHF 88. million). Internal growth amounted to +.4%. The operating profit (EBIT) increased by an impressive 44.0% to CHF. million (0: CHF.6 million). Corporate costs declined by CHF.9 million, primarily as a result of lower pension obligations under IAS 9. On the other hand, the operating result was impaired by significant writedowns on customer receivables as well as expenditure in connection with the sale of the Solar segment amounting to around CHF 4.5 million. Nonetheless, the EBIT margin reached 9.7% (0: 4.7%). Group profit after taxes (EAT) rose by 66.6% to CHF 5. million (0: CHF 9.4 million). Basic earnings per share therefore increased to CHF 7. (0: CHF.8). The Komax Group has a very strong financial footing. On the balance sheet date, shareholders equity amounted to CHF 64.0 million (0: CHF 6. million) while the equity ratio stood at 7.8% (0: 65.7%). Free cash flow came in at CHF 4.5 million (0: CHF 7.6 million) while net cash increased to CHF.6 million (0: CHF 0.9 million). The necessary adjustments to the company s Articles of Association the result of the Minder Initiative accepted by the Swiss electorate in March 0 and the subsequent Ordinance against Excessive Remuneration in Listed Companies will be put to a vote at this Annual General Meeting. We are endeavouring to implement these requirements in a pragmatic way that takes account of the interests of our shareholders, does not diminish the attractiveness of the company, and guarantees the company s legal security. We believe we have a comprehensible compensation system that is conducive to appropriate yet attractive remuneration in line with the market. Shareholders will be able to vote on compensation for the first time at the 05 Annual General Meeting. Please find enclosed our short report on the 0 financial year, which contains information on business development. The detailed Annual Report can be ordered using the enclosed registration slip for the Annual General Meeting. We would be pleased to welcome you at the Annual General Meeting on 7 May 04 at the Culture and Convention Center Lucerne. Komax Holding AG On behalf of the Board of Directors Leo Steiner Chairman Dierikon, 6 March 04 Enclosures Agenda for the AGM Reply coupon with instruction sheet on the reverse Reply envelope Short report for the 0 financial year The detailed Annual Report with Review of 0 0 Financial Statements of Komax Holding AG with Auditors Report and recommendations 0 Consolidated Financial Statements with Auditors Report and recommendations can be ordered using the enclosed registration slip.
Agenda and proposals of the Board of Directors. Approval of the Annual Report, Financial Statements of Komax Holding AG and Consolidated Financial Statements for the 0 financial year The Board of Directors proposes that the abovementioned documents be approved. The comprehensive reports of the Board of Directors and Executive Committee concerning the last financial year are contained in the 0 Annual Report and 0 Financial Statements. These also contain detailed reports in accordance with the Corporate Governance Directive of SIX Swiss Exchange AG. These reports may be obtained from the company at any time or viewed online at www.komaxgroup.com. The Komax Group generated revenues of CHF 4.7 million in the year under review. With an operating profit (EBIT) of CHF. million, profit after taxes (EAT) amounted to CHF 5. million. The balance sheet total stood at CHF 57.6 million, and the equity ratio at 7.8%. Komax Holding AG reported a total income of CHF. million and profit after taxes of CHF 4.7 million. The balance sheet total amounted to CHF 4.6 million, with a share capital of CHF 0.4 million (rounded figure). As auditor to Komax Holding AG, PricewaterhouseCoopers AG recommends in its reports to the Annual General Meeting that the Consolidated Financial Statements and Annual Financial Statements of Komax Holding AG be approved without reservation.. Discharge of the Board of Directors and Executive Committee The Board of Directors proposes that the activities of its members and the activities of the members of the Executive Committee in the 0 financial year be approved.. Appropriation of profit for the 0 financial year and distribution (not subject to withholding tax) from the capital contribution reserves The Board of Directors proposes to the Annual General Meeting the following appropriation of profit and distribution for 0: Balance carried forward from the previous year CHF 8 59 Profit after taxes CHF 4 7 67 Transfer from capital contribution reserves CHF 5 857 00 Total available for distribution CHF 40 75 Payout from capital contribution reserves of CHF 4.50 per registered share which is not subject to withholding tax ) CHF 5 857 00 Allocation to free reserves CHF 4 700 000 Profit carried forward CHF 95 Total CHF 40 75 ) Calculated on the basis of the number of registered shares issued as at December 0. Registered shares issued after January 04 due to the exercise of option rights are also entitled to receive dividends. In consequence, the total dividend amount reported here may change accordingly. If the proposal is accepted, a distribution of CHF 4.50 per dividend-bearing share will be paid out on 5 May 04. 4. Elections 4. Re-elections to the Board of Directors, election of the Chairman of the Board of Directors The Board of Directors proposes individual votes for the re-election of: Leo Steiner as Chairman of the Board of Directors Prof. Hans Caspar von der Crone as member of the Board of Directors Daniel Hirschi as member of the Board of Directors Kurt Haerri as member of the Board of Directors Prof. Roland Siegwart as member of the Board of Directors for a term of office extending until the conclusion of the next ordinary Annual General Meeting. Leo Steiner has been a Member of the Board of Directors since 997 and Chairman since 007. Prof. Hans Caspar von der Crone has been a member of the Board of Directors since 997, Daniel Hirschi since 005, Kurt Haerri since 0 and Prof. Roland Siegwart since 0. According to the Ordinance against Excessive Remuneration in Listed Companies, each member of the Board of Directors and the Chairman of the Board of Directors must be elected individually by the Annual General Meeting. The term of office must end with the conclusion of the next Annual General Meeting, although re-election is possible.
4. New election to the Board of Directors The Board of Directors proposes the first-time election of David Dean as a member of the Board of Directors. The generational change on the Board of Directors will continue at the 04 Annual General Meeting. Max Koch is not standing for re-election. The Board would like to offer him its sincere gratitude and acknowledgement for the extremely valuable contributions he has made over many years. The Board of Directors proposes appointing David Dean, born 959, as a new member of the Board of Directors until the conclusion of the next Annual General Meeting. David Dean has been CEO of the Bossard Group since 005. He has proven experience in the management of a listed company. Furthermore, he possesses comprehensive expertise in accounting, acquired as an expert in accounting and controlling with the corresponding federal diploma, and as a certified auditor. 4. Elections to the Remuneration Committee The Board of Directors proposes the individual election of Leo Steiner Daniel Hirschi Prof. Roland Siegwart to the Remuneration Committee for a term of office extending until the conclusion of the next Annual General Meeting. Messrs Leo Steiner, Max Koch and Daniel Hirschi have so far comprised the Remuneration/Nomination Committee. Max Koch is not standing for re-election. Prof. Roland Siegwart is being proposed for election in his place. The tasks of the Remuneration/Nomination Committee will now be exercised by the Remuneration Committee. According to the Ordinance against Excessive Remuneration in Listed Companies, the Annual General Meeting must elect each member of the Remuneration Committee individually. The term of office must end with the conclusion of the next Annual General Meeting, although re-election is possible. 4.4 Election of the independent proxy The Board of Directors proposes that Thomas Tschümperlin, lawyer and notary, Lucerne, be elected independent proxy until the conclusion of the next Annual General Meeting. Thomas Tschümperlin, born 956, has been a partner of the law firm of Fellmann Tschümperlin Lötscher AG in Lucerne since 985. He advises clients primarily on legal issues related to inheritance law, commercial and company law, real estate transactions, and brand and copyright law. Neither Thomas Tschümperlin nor his law/notary offices maintain any close relationships with management bodies or significant shareholders of Komax Holding AG. They also do not cultivate any significant commercial relationships with Komax Holding AG. According to the Ordinance against Excessive Remuneration in Listed Companies, the Annual General Meeting must elect the independent proxy. The term of office must end with the conclusion of the next Annual General Meeting, although re-election is possible. 4.5 Re-election of the external auditors The Board of Directors proposes that PricewaterhouseCoopers AG, Basel, be appointed auditors for a term of one year. PricewaterhouseCoopers AG, Basel, have been statutory auditors to Komax Holding AG and auditors of the Komax Group s consolidated financial statements since 994. PriceWaterhouseCoopers AG, Basel, has confirmed to the Board of Directors of Komax Holding AG that it has the required independence to carry out such a mandate.
5. Amendments to the Articles of Association 5. Request of zcapital AG, Zug abolition of registration and voting rights restrictions of 5% in each case zcapital AG, Zug, is requesting the deletion of Art. 6 Para. 4 and Art. 0 Paras. and 4 of the Articles of Association of 6 March 04, on the grounds that these provisions stand in the way of shareholder democracy and contradict the basic principle of one share, one vote. of the Board of Directors The Board of Directors recommends rejection of this request. B. Opinion of the Board of Directors The Board of Directors regards a stable, diversified and balanced shareholder base as well as the broadest possible base for the passing of resolutions at the Annual General Meeting as key factors in the implementation of long-term corporate strategy and the success of the company. The shareholder base of the Komax Group currently consists of some 00 shareholders in the share register, who account for some 60% of votes and are all eligible to vote at the Annual General Meeting. The average voting participation rate at Komax amounted to some 9% over the last five years. Without registration and voting right restrictions of 5%, a small minority of shareholders could exercise control over the company without the other shareholders being compensated in any way for the de facto assumption of control. The registration and voting rights restriction of 5% therefore acts above all as a form of protection for the great majority of our shareholders and strengthens their interests. Art. 0 Para. 4, which the proposal of zcapital AG is likewise designed to abolish, is inadmissible in any case following the introduction of the Ordinance against Excessive Remuneration in Listed Companies and will be deleted without replacement as part of the proposed amendment of the Articles of Association set out under 5. below. 5. Amendment of the Articles of Association in line with the Ordinance against Excessive Remuneration in Listed Companies The Board of Directors proposes that the company s Articles of Association of 6 March 04 be amended and supplemented in line with the Ordinance against Excessive Remuneration in Listed Companies as follows: Article 8, Paragraph Authority/meetings Article 0, Paragraphs 4 Voting rights and representation Article, Paragraph Passing of resolutions Article (new) Voting on remuneration Article, Paragraphs and Composition, term of office (Board of Directors) (now Article 4) Article 4 (now Article 5) Constitution (Board of Directors) Article 8, Title and Tasks and authority (Board of Directors) Paragraph (now Article 9) Article 9 (now Article 0) Delegation of authority Article 0, Paragraphs and 4 Rights and obligations of Board of Directors (now Article ) Article (new) Remuneration Committee Article 5 (new) Compensation Article 6 (new) Executive Committee A detailed overview of the individual amendments to the Articles of Association can be found in the Appendix, which forms an integral part of this invitation. 6. Conditional capital increase The Board of Directors proposes the creation of conditional capital for employee share ownership schemes in the maximum amount of CHF 0 000.00 and thus the amendment of Art.. of the Articles of Association: Through the exercising of option or subscription rights which are issued as part of the Executive and Employee Participation Programme of Komax Holding AG, the share capital of the company may increase by a maximum of CHF 6 6.00 as a result of the issue of up to 66 0 registered shares each with a par value of CHF 0.0, to be fully paid in. The subscription and advance subscription rights of shareholders in the company are excluded. The newly issued shares are subject to the limitations set out in Art. 6. The issue of shares or associated subscription rights to executives, members of the Board of Directors or employees shall
take place in accordance with one or more regulations to be set out by the Board of Directors with due consideration given to functions and levels of responsibility. Shares or subscription rights may be issued to executives, members of the Board of Directors or employees at a price which is lower than the share price. The Board of Directors shall be entitled to use any option or subscription rights which have been issued but have since expired for the purpose of new option programmes which are based on the same principles as those which have expired. Komax Holding AG creates conditional share capital at regular intervals to allow the Board of Directors, Group Management, middle management and employees a reasonable degree of participation in the company s profit. This represents an extremely effective liquidity-preserving measure for the company. In addition, reserves from capital contributions are accumulated that can in turn be distributed to shareholders free of tax as part of the appropriation of profits. The new wording of the provisions in the Articles of Association is essentially consistent with the existing version. To date, conditional share capital amounted to a maximum of CHF 6.00 (issue of no more than 6 0 registered shares at CHF 0.0 each). The amendment to Art.. of the Articles of Association will increase the conditional capital by a maximum of CHF 0 000.00 through the creation of an additional 00 000 registered shares at CHF 0.0 each, to be fully paid in. Additional information Documents The 0 Annual Report and Auditors Report, the minutes of the last Annual General Meeting and the proposals of the Board of Directors will be available for inspection by shareholders at the registered office of the company in Dierikon from 6 March 04. Any shareholder may request the forwarding of these documents. A short version of the Annual Report will be sent with the invitation to the Annual General Meeting to all holders of registered shares who were entered in the share register on 8 March 04. The full version can be ordered using the enclosed registration slip. The current Articles of Association dated 6 March 04 are available at www.komaxgroup.com. Voting entitlement and admission tickets All shareholders entered in the share register on 5 May 04 are entitled to vote in respect of the number of shares registered in their name on that date. Shareholders who were entered in the share register on 8 March 04 will be sent the registration and subscription slip for admission tickets; they are asked to sign the registration form and return it by 5 May 04 at the latest. The admission ticket and ballot documentation will be forwarded by mail following completion of the registration process (dispatched from April 04). Shareholders who acquire shares later and whose registration application is received at the Komax Holding AG share register no later than 5 May 04 will receive the invitation at that time, or ballot materials will be waiting for them at the front desk of the Annual General Meeting. Shareholders who dispose of their shares before the Annual General Meeting are no longer entitled to vote. In the event of a partial sale or purchase of additio - nal shares, the entry ticket received should be exchanged at the front desk on the day of the Annual General Meeting. Representation and power of attorney Shareholders who wish to be represented at the meeting are requested to sign the power of attorney on the registration slip and return it. The representative may be another holder of registered shares or an individual who is independent of the company. Based on Art. 0 Para. of the Ordinance against Excessive Remuneration in Listed Companies, the Board of Directors has appointed the lawyer Thomas Tschümperlin, Fellmann Tschümperlin Lötscher AG, Zinggentorstrasse 4, P.O. Box, 6006 Lucerne, as that independent person. Shareholders may issue their proxy with voting instructions. If no instructions are issued with respect to the proposals contained in the invitation and/or no general instructions are issued, the independent proxy will exercise the relevant votes on the corresponding resolution in favour of the proposal of the Board of Directors. The previous possibility of representation by corporate bodies or depository proxies pursuant to Art. 689c and Art. 689d SCO is now inadmissible under Art. of the Ordinance against Excessive Remuneration in Listed Companies. This invitation to the ordinary Annual General Meeting of 7 May 04 is also available in German. The original German version is prevailing.
Appendix to the invitation to the Annual General Meeting of Komax Holding AG, headquartered in Dierikon, of 7 May 04 Detailed overview of the individual amendment to the Articles of Association as per item 5. of the invitation Current provision of the Articles of Association as at 6 March 04 The authority of the Annual General Meeting includes the treatment of all matters assigned to it by legislation or by the Articles of Association which do not have to be dealt with by other bodies of the company according to statutory requirements. These include in particular: a) enacting and amending of the Articles of Association; b) electing and dismissing the members of the Board of Directors and the auditors; c) approving the Annual Report and the consolidated financial statements; d) approving the annual financial statements and passing resolutions of the appropriation of retained earnings, particularly the setting of dividends and directors bonuses; e) discharging the members of the Board of Directors and the external auditors; f) passing resolutions on matters which are reserved for the Annual General Meeting by law or the Articles of Association, or which have been presented to it by the Board of Directors. Shareholders may be represented at the Annual General Meeting by other shareholders subject to the issuance of written power of attorney. When exercising voting rights, no single shareholder may exercise the rights associated with more than 5% of the total number of shares recorded in the Commercial Register for their own registered shares and shares they are representing by written power of attorney. Legal entities and groups with joint legal status which are connected through capital, voting Proposed amendment of the Board of Directors The authority of the Annual General Meeting includes the treatment of all matters assigned to it by legislation or by the Articles of Association which do not have to be dealt with by other bodies of the company according to statutory requirements. These include in particular: a) enacting and amending of the Articles of Association; b) electing and dismissing the Chairman of the Board of Directors, the individual members of the Board of Directors, the individual members of the Remuneration Committee, an independent proxy, and the external auditors; c) approving the Annual Report and the consolidated financial statements; d) approving the annual financial statements and passing resolutions of the appropriation of retained earnings, particularly the setting of dividends and directors bonuses; e) the separate approval of the overall amounts of compensation payable to the Board of Directors and the Executive Committee; f) discharging the members of the Board of Directors and the external auditors; g) passing resolutions on matters which are reserved for the general meeting by law or the Articles of Association, or which have been presented to it by the Board of Directors. Shareholders may be represented at the Annual General Meeting by another shareholder with voting rights on the basis of a written power of attorney, or by the independent proxy on the basis of electronic or written power of attorney. The Chair of the Annual General Meeting shall decide on the permissibility of representation. When exercising voting rights, no single shareholder may exercise the rights associated with more than 5% of the total number of shares recorded in the Commercial Register for their own registered shares and shares they are representing by written power of attorney. Legal entities and groups with joint legal status which are connected through capital, voting 8. Authority/ meetings Paragraph 0. Voting rights and represen tation Paragraphs 4
0. Voting rights and represen tation Paragraphs 4 continued. Passing of resolutions Paragraph. Voting on remuneration (new) 4. Composition, term of office (previously Article ) Paragraphs and Current provision of the Articles of Association as at 6 March 04 rights, management or in some other manner, along with all natural persons, legal entities and groups with joint legal status which act in concert by virtue of agreement, syndicate or in some other manner, are regarded as one person for the purposes of this provision. The Board of Directors may issue special rules for exercising voting rights of deposited shares by proxy or for any other well-founded reason. 4 The representation by depository proxies, corporate bodies, or independent proxies as defined by Art. 689c and 689d SCO remains reserved. Elections and the passing of resolutions are typically conducted by open ballot. However, the Annual General Meeting may resolve for secret ballots to take place on individual matters subject to a proposal to this effect being made. The term of office shall not exceed years. A year is understood to mean the period of time that elapses between two Annual General Meetings. The term of office is determined for each member at the time of election. Individual terms should be staggered so that roughly one-third of all Board members, but no more than three, are elected each year. Re-election is admissible. If a member departs prior to the completion of his/ her term of office, the member elected in his/her place shall serve the remaining period of office. Proposed amendment of the Board of Directors rights, management or in some other manner, along with all natural persons, legal entities and groups with joint legal status which act in concert by virtue of agreement, syndicate or in some other manner, are regarded as one person for the purposes of this provision. Representation by the independent proxy remains reserved. The Board of Directors may additionally issue special regulations for good cause. Elections and the passing of resolutions are typically conducted by electronic voting. In individual cases, the Chairman may order voting to take place by open ballot or in writing. The Annual General Meeting holds a separate vote each year to decide on the overall amount of compensation payable to the Board of Directors and the Executive Committee. This vote shall be binding. The vote in question relates to the coming financial year. In the event of compensation proposals being rejected by the Annual General Meeting, the Board of Directors may put forward new proposals for compensation at the same Annual General Meeting, whereby this resolution must be adopted subject to an absolute majority of votes cast. Abstentions do not count as votes cast. Alternatively, the Board of Directors may convene an Extraordinary General Meeting for the purposes of approving previously rejected and newly revised compensation for the Board of Directors and/or the Executive Committee. The additional amount for the compensation of members of the Executive Committee who are appointed after the vote on compensation of the General Assembly shall not exceed 0% of the overall amount of compensation for the Executive Committee as per Paragraph. The term of office ends with the conclusion of the next Annual General Meeting. Re-election is permissible.
Current provision of the Articles of Association as at 6 March 04 If the Board of Directors consists of several members, it shall organize itself. It elects its Chairman and a Secretary. The Secretary does not need to be a member of the Board of Directors. 8. Tasks and authority The authority of the Board of Directors includes all matters not otherwise reserved for another body by law, the Articles of Association, or other regulations. In particular, the Board of Directors is responsible for the following tasks: a) Determining the principles of accounting, financial controlling and financial planning, insofar as this is necessary for the management of the company b) Appointing and dismissing the persons entrusted with managing and/or representing the company and the manner of their authority to sign c) Ultimate supervision of the persons entrusted with managing the company, specifically with respect to prevailing legislation, the Articles of Association, regulations and directives d) Producing the Annual Report, making preparations for the Annual General Meeting and executing the resolutions passed by the Annual General Meeting e) Notification of the judge in the event of excessive indebtedness f) Passing resolutions on supplementary contributions for shares not fully paid in g) Resolutions for the declaration of capital increases and the resulting amendments to the Articles of Association The Board of Directors may delegate management in whole or part to a committee, to individual members (delegates) or to third parties, who need not be shareholders (Executive Committee), reserving such duties as may not be delegated or withdrawn (Art. 8). In this case, it shall issue organizational regulations which cover the delegated tasks, the bodies responsible, and the required reporting. Proposed amendment of the Board of Directors With the exception of the Chairman, who is elected by the Annual General Meeting subject to the regulation contained under Paragraph, the Board of Dir ectors organizes itself. In particular, it elects a Secretary. The Secretary does not need to be a member of the Board of Directors. If the office of Chairman becomes vacant during the term of office (as a result of retirement, death, etc.), the Board of Directors will nominate a new Chairman for the remaining period of office, whereby this person must be an existing member of the Board of Directors. 9. Tasks The authority of the Board of Directors includes all matters not otherwise reserved for another body by law, the Articles of Association, or other regulations. In particular, the Board of Directors is responsible for the following tasks: a) determining the principles of accounting, financial controlling and financial planning, insofar as this is necessary for the management of the company; b) appointing and dismissing the persons entrusted with managing and/or representing the company and the manner of their authority to sign; c) ultimate supervision of the persons entrusted with managing the company, specifically with respect to prevailing legislation, the Articles of Association, regulations and directives; d) producing the Annual Report, making preparations for the Annual General Meeting and executing the resolutions passed by the Annual General Meeting; e) drawing up the Compensation Report; f) notification of the judge in the event of excessive indebtedness; g) passing resolutions on supplementary contributions for shares not fully paid in; h) resolutions for the declaration of capital increases and the resulting amendments to the Articles of Association. The Board of Directors may delegate management in whole or part to a committee, to individual members (delegates) or to other natural persons who need not be shareholders (Executive Committee), reserving such duties as may not be delegated or withdrawn (Art. 9). In this case, it shall issue organizational regulations which cover the delegated tasks, the bodies responsible and the required reporting. The number of permissible mandates of members of the Board of Directors in the highest management or administrative bodies of legal entities which are obliged to have themselves entered in the Commercial Register or in a corresponding foreign register and which are not controlled by the company or do 5. Constitu - tion of Board of Directors (previously Article 4) 9. Tasks (previously Article 8) Title and Paragraph 0. Delegation of authority (previously Article 9). Rights and obligations of Board of Directors (previously Article 0) Paragraphs and 4
. Rights and obligations of Board of Directors (previously Article 0) Paragraphs and 4 continued. The Remuneration Committee (new) 5. Compensation (new) Current provision of the Articles of Association as at 6 March 04 Proposed amendment of the Board of Directors not control the company shall be 4 additional mandates for listed companies, 5 additional mandates for non-listed companies, and 5 additional mandates for charitable organizations, as long as this does not involve any breach of statutory provisions and in particular the due diligence obligations of the Board of Directors. Mandates with different companies that belong to the same corporate group count as a single mandate. Mandates undertaken by a member of the Board of Directors at the behest of a Group company or to exercise an office under public law are not covered by the additional mandate restrictions of this Article. The assumption of mandates other than those stipulated above is permissible without numeric al restriction, as long as these mandates are unremunerated and do not interfere with the Board member s fulfilment of his/her obligations vis-à-vis the company. The reimbursement of expenses does not count as compensation. 4 Members of the Board of Directors do not have any employment agreements with the company. The Remuneration Committee consists of a maximum of three non-executive members. Only members of the Board of Directors are eligible for election. The term of office ends with the conclusion of the next Annual General Meeting. Re-election is permissible. If a member leaves prior to completing his term of office, the Board of Directors will appoint a replacement from among its number for the remaining period of office. 4 The Remuneration Committee draws up its proposal for the compensation of the Board of Directors and Executive Committee with a view to ensuring the sustainable management of the company and in keeping with statutory principles. It subjects this proposal to the Board of Directors for approval. 5 The Remuneration Committee is responsible for preparing the annual written Compensation Report. 6 The Board of Directors may assign the Remuneration Committee special tasks in keeping with Paragraph 4 of this Article. It sets out the organization, working methods and reporting duties of the Remuneration Committee in a set of regulations. A. Board of Directors Members of the Board of Directors receive fixed compensation in cash as well as shares and/or options under the company s employee participation programme. When allocating shares and/or options, the following principles are applied: The number of allocated shares and/or options is determined by the Board of Directors following the proposal of the Remuneration Committee.
Current provision of the Articles of Association as at 6 March 04 Proposed amendment of the Board of Directors The calculated value of the shares and/or options at the time of allocation may not exceed the amount of compensation paid in cash. The basis for determining the value of shares and/ or options is the corresponding fair market value. The Board of Directors sets the relevant lock-up periods (at least three years), whereby these may lapse in the event of a change in control or liquidation of the company, as well as in the event of the invalidity or death of the beneficiary. Shares entitle the holder to vote and to receive dividends from the time of allocation. Share and option plans may be covered by conditional capital or own shares. B. Executive Committee Members of the Executive Committee receive fixed compensation in cash and performance-related cash compensation as well as shares and/or options under the company s employee participation programme. The Board of Directors sets the performance-related compensation of Executive Committee members according to the following principles: The performance bonus is dependent on the Group s performance and the attainment of personal performance targets. The Board of Directors sets the figures for determining the Group s performance. The Board of Directors agrees personal performance targets with the Executive Committee on an annual basis. These may include strategic, financial, operating and individual objectives. The Board of Directors approves the attainment of targets following the end of the financial year. The Board of Directors stipulates the target amount for the performance-related compensation contractually. The target amount may not exceed 50% of the annual fixed compensation. If targets are not attained, the performance-related compensation may fall to zero. If targets are signifi cantly exceeded, it may amount to a maximum of 00% of the annual fixed compensation. The Board of Directors determines the number of allocated shares and/or options under the employee participation programme according to the following principles: The calculated value of the shares and/or options at the time of allocation may not exceed 00% of the annual fixed compensation. The basis for determining the value of shares and options is the corresponding fair market value. 5. Compensation (new) continued
5. Compensation (new) continued 6. Executive Committee (new) Current provision of the Articles of Association as at 6 March 04 Proposed amendment of the Board of Directors The Board of Directors sets the relevant lock-up periods (at least three years), whereby these may lapse in the event of a change in control or liquidation of the company, as well as in the event of the invalidity or death of the beneficiary. Shares entitle the holder to vote and to receive dividends from the time of allocation. Share and option plans may be covered by contingent capital or own shares. The Board of Directors may decide to adopt another instrument in the place of the issuance of shares and/or options, specifically if the allocation of shares and/or options is prohibited or complicated by applicable statutory provisions. C. Pension benefits The pension benefits of members of the Executive Committee are only paid in the context of domestic and foreign pension plans and comparable plans of the company or its Group companies. The benefits for insured persons and the employer contributions result from the above-mentioned plans or corresponding regulations. The number of permissible mandates of members of the Executive Committee in the highest management or administrative bodies of legal entities which are obliged to have themselves entered in the Commercial Register or in a corresponding foreign register and which are not controlled by the company or do not control the company shall be additional mandates for listed companies, additional mandates for non-listed companies, and 5 additional mandates for charitable organizations, as long as this does not involve any breach of statutory provisions and in particular the applicable due diligence obligations and the duty of loyalty. Mandates with different companies that belong to the same corporate group count as a single mandate. Mandates undertaken by a member of the Executive Committee at the behest of a Group company are not covered by the additional mandate restrictions of this Article. Executive Committee members may not accept any of the above-mentioned mandates without the prior written approval of the Board of Directors. The assumption of mandates other than those stipulated above is permissible without numerical restriction, as long as these mandates are unremunerated and do not interfere with the Executive Committee member s fulfilment of his obligations vis-à-vis the company. The reimbursement of expenses does not count as compensation. The duration of contracts that form the basis for compensation for members of the Executive Committee shall amount to a maximum of months for open-ended contracts. There are no contracts of fixed duration.