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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: December 15, 1999
SAP AKTIENGESELLSCHAFT
SYSTEME, ANWENDUNGEN, PRODUKTE IN DER DATENVERARBEITUNG
(Exact name of registrant as specified in its charter)
SAP CORPORATION
SYSTEMS, APPLICATIONS AND PRODUCTS IN DATA PROCESSING
(Translation of registrant's name into English)
Neurottstrasse 16
69190 Walldorf
Federal Republic of Germany
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82-_______.
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SAP AKTIENGESELLSCHAFT
SYSTEME, ANWENDUNGEN, PRODUKTE IN DER DATENVERARBEITUNG
FORM 6-K
The following material is being distributed to holders of American Depositary
Receipts representing the preference shares of SAP Aktiengesellschaft Systeme,
Anwendungen, Produkte in der Datenverarbeitung, a stock corporation organized
under the laws of the Federal Republic of Germany (the "Company"):
(i) Press Release, dated December 9, 1999, relating to the Company's 2000
Long Term Incentive Plan, attached as Exhibit 99.1 hereto and
incorporated by reference herein;
(ii) Invitation to Extraordinary General Meeting of the Company to be held
on January 18, 2000, attached as Exhibit 99.2 hereto and incorporated
by reference herein; and
(iii) Invitation to Special Meeting of Preference Shareholders to be held on
January 18, 2000, attached as Exhibit 99.3 hereto and incorporated by
reference herein.
Any statements contained in the Exhibits hereto that are not historical facts
are forward-looking statements as defined in the U.S. Private Securities
Litigation Reform Act of 1995. Words such as "believe," "estimate," "intend,"
"may," "will," "expect," and "project" and similar expressions as they relate to
the Company are intended to identify such forward-looking statements. The
Company undertakes no obligation to publicly update or revise any
forward-looking statements. All forward-looking statements are subject to
various risks and uncertainties that could cause actual results to differ
materially from expectations. The factors that could affect the Company's future
financial results are discussed more fully in the Company's filings with the
U.S. Securities and Exchange Commission (the "SEC"), including the Company's
Annual Report on Form 20-F for 1998 filed with the SEC on May 18, 1999. Readers
are cautioned not to place undue reliance on these forward-looking statements,
which speak only as of their dates.
1
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EXHIBITS
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
99.1 Press Release, dated December 9, 1999
99.2 Invitation to Extraordinary General Meeting of the
Company to be held on January 18, 2000
99.3 Invitation to Special Meeting of Preference
Shareholders to be held on January 18, 2000
</TABLE>
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
SAP AKTIENGESELLSCHAFT SYSTEME,
ANWENDUNGEN, PRODUKTE IN DER
DATENVERARBEITUNG
(Registrant)
By: /s/ Henning Kagermann
__________________________________
Name: Prof. Dr. Henning Kagermann
Title: Co-Chairman & CEO
By: /s/ Michael Junge
__________________________________
Name: Michael Junge
Title: Head of Legal Dept.
Date: December 15, 1999 3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Exhibit
- ----------- -------
<S> <C>
99.1 Press Release, dated December 9, 1999
99.2 Invitation to Extraordinary General Meeting of the
Company to be held on January 18, 2000
99.3 Invitation to Special Meeting of Preference
Shareholders to be held on January 18, 2000
</TABLE>
4
<PAGE> 1
EXHIBIT 99.1
FOR IMMEDIATE RELEASE
Contact: Kevin S. McKay
SAP America
610-661-2733
-or-
Gundolf Moritz
SAP AG
011-49-6227-74-4872
-or-
James P. Prout
Taylor Rafferty Associates
212-889-4350
SAP TO INTRODUCE A STOCK OPTION PROGRAM
Walldorf, Germany -- December 9, 1999 -- SAP AG (NYSE: SAP), the leading
provider of inter-enterprise solutions, today announced its plans to introduce a
stock option and convertible bond program in the first quarter of 2000. The
program, named the SAP AG 2000 Long Term Incentive Plan (LTI Plan), will augment
SAP's existing stock-based compensation package to attract, retain and motivate
senior managers and top performers to grow the value of the enterprise and to
secure their commitment to the company. The LTI plan requires approval from SAP
AG's ordinary and preference shareholders; accordingly, SAP will hold an
extraordinary general meeting in Mannheim on January 18, 2000 to pass a
resolution on the establishment of the plan.
The LTI plan consists of two key programs, stock options and convertible bonds,
that are competitive in the United States marketplace and are in compliance with
the German legislation on corporate control and disclosure (KonTraG). The stock
option program includes a performance hurdle on the value of the stock options
whereby the stock options only have value provided the growth in the SAP
preference share price surpasses the performance of a reference index within a
defined period. The reference index will be the Goldman Sachs Software Index, a
subindex included in Goldman Sachs Technology Index (GSTI(TM)). The index is
calculated by Goldman, Sachs & Co.
The second program of the LTI Plan involves the issuance of convertible bonds,
which can be converted to SAP AG preference shares within a defined period. The
total number of shares of SAP AG Preference shares underlying the stock options
and convertible bonds to be issued to participants by SAP may not exceed 6.25
million.
Dietmar Hopp, Co-Founder and Supervisory Board Chairman of SAP AG
commented, "The Supervisory and Executive Boards have drawn up a competitive and
well-balanced stock-based incentive program that will help SAP to maintain its
leading edge in the market for Internet-based business applications on a
long-term basis. This new compensation package will enable SAP to attract top
managers and retain its already world-class employee base."
4 YEAR VESTING PERIOD
The stock options and convertible bonds will be issued in no fewer than three
annual tranches, with no single tranche including more than 50% of the total
quantity included under the program. Exercising of the stock options and
conversion of the bonds are subject to certain vesting requirements. Vesting
occurs from the time of bond issuance or stock option granting as follows: 33%
after two years, 33% after three years and the remaining balance after four
years. These vesting periods also help SAP achieve its aim of securing the
long-term commitment of the participants. To avoid potential insider trading
issues, convertible bonds and stock options may not be issued or exercised
during certain black-out periods.
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LTI PLAN PARTICIPANTS
The participants include members of the SAP AG Executive Board, members of the
executive boards of SAP AG affiliates, and selected senior managers and top
performers of SAP AG and its affiliates. For each of these four groups, the plan
states a maximum amount of stock options and convertible bonds that can be
issued. To provide transparency, the appendix of the annual report and the
Company's Form 20-F will include the number of options granted and bonds issued
to each member of the SAP AG Executive Board. The disclosure will include
details about Executive Board member activities such as the number of options
exercised and bonds converted, the amounts paid to the Company, and the bonds
and options still outstanding at the end of the year.
REPURCHASE OF OWN SHARES AND CREATION OF CONTINGENT CAPITAL OF
APPROXIMATELY Euro 16 MILLION.
The proposed resolution for the extraordinary general shareholders meeting
includes authorization for SAP AG to buy back its own preference shares from the
market. These will be the shares used upon exercise of stock options and
conversion of the bonds. Alternatively, SAP AG can issue additional shares to
provide the preference shares required under the LTI Plan. Therefore, a
resolution will be proposed at the extraordinary general meeting to create
contingent capital of approximately Euro 16 million.
ENHANCING THE CURRENT STOCK-BASED INCENTIVE PROGRAM
This LTI Plan is designed to enhance the current stock-based compensation and
incentive programs offered by SAP. The current programs include the virtual
stock option program - the Stock Appreciation Rights Program (STAR) - which will
continue to run in modified form, and the Employee Discount Stock Purchase Plan
that allows SAP employees to purchase a certain amount of SAP AG shares at a
discount subsidized by the Company.
The invitation to the Extraordinary General Shareholders Meeting on January 18,
2000, including the Executive Board's report, is published in full in today's
issue of the German "Bundesanzeiger". The invitation can also be viewed on the
Internet at www.sap.com/investor.
Any statements contained in this document that are not historical facts are
forward-looking statements as defined in the U.S. Private Securities Litigation
Reform Act of 1995. Words such as "believe," "estimate," "intend," "may,"
"will," "expect," and "project" and similar expressions as they relate to the
Company are intended to identify such forward-looking statements. The Company
undertakes no obligation to publicly update or revise any forward-looking
statements. All forward-looking statements are subject to various risks and
uncertainties that could cause actual results to differ materially from
expectations. The factors that could affect the Company's future financial
results are discussed more fully in the Company's filings with the U.S.
Securities and Exchange Commission (the "SEC"), including the Company's Annual
Report on Form 20-F for 1998 filed with the SEC on May 18, 1999. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of their dates.
SAP AG preference and common shares are listed on the Frankfurt Stock Exchange
as well as a number of other exchanges. In the US, SAP's American Depositary
Receipts (ADRs), each worth one-twelfth of a preference share, trade on the New
York Stock Exchange under the symbol `SAP'. SAP is a component of the DAX, the
index of 30 German blue chip companies.
Information on the SAP AG preference shares is available on Bloomberg under the
symbol SAP3 GR, on Reuters under SAPG_p.F or DE and on Quotron under SAGVD.EU.
Information on the SAP common shares is available on Bloomberg under the symbol
SAP GR, on Reuters under SAPG.F and on Quotron under SAGR.EU. Additional
information is available on SAP AG's home page: http://www.sap.com.
# # #
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EXHIBIT 99.2
SAP AKTIENGESELLSCHAFT
SYSTEME, ANWENDUNGEN, PRODUKTE IN DER DATENVERARBEITUNG
SECURITY IDENTIFICATION NUMBERS:
ORDINARY SHARES: 716460 AND 716461
PREFERENCE SHARES: 716463 AND 716464
Shareholders in our Company are invited to attend an
EXTRAORDINARY GENERAL MEETING
at Rosengarten Congress Center, Rosengartenplatz 2, 68161 Mannheim, Germany,
TUESDAY, JANUARY 18, 2000 AT 10 A.M.
AGENDA
ITEM 1
AUTHORIZATION TO ESTABLISH THE SAP AG 2000 LONG TERM INCENTIVE PLAN BY ISSUING
CONVERTIBLE BONDS AND/OR STOCK OPTIONS TO THE EXECUTIVE BOARD AND SELECTED
MANAGERS AND TOP PERFORMERS, THE CREATION OF CONTINGENT CAPITAL, AND AMENDMENT
TO THE ARTICLES OF INCORPORATION.
The Executive and Supervisory Boards propose that the Company approve the
establishment of the SAP AG 2000 Long Term Incentive Plan, as set forth in more
detail below, allowing members of the SAP AG Executive Board, members of the
executive boards of SAP Group Companies, and selected SAP AG and SAP group
company managers and top performers, to acquire, at their option, bonds carrying
rights to convert to SAP AG preference shares ("convertible bonds"), and/or SAP
AG stock options carrying rights to convert to SAP AG preference shares ("stock
options"). For these purposes, resolutions authorizing the issue of the
convertible bonds (I) and the stock options (II) carrying the right to convert
to preference shares are required to be adopted.
The Executive and Supervisory Boards propose that the Company adopt the
following resolutions:
(I)
a) Subject to the approval of the Supervisory Board, the Executive Board is
authorized to issue not more than 5,000,000 convertible bonds at a par
value of euro 3 not later than December 31, 2004 for the SAP AG 2000 Long
Term Incentive Plan, provided always that the number of such convertible
bonds issued multiplied by 1.25 does not, when added to the number of stock
options issued pursuant to the authorization set forth under (II), exceed
6,250,000. The convertible bonds shall not bear interest. Their term shall
not exceed ten years.
Each convertible bond having a par value of euro 3 with rights to convert
to SAP AG preference shares may carry the right to convert to one SAP AG
preference share. The convertible bonds may be issued only to members of
the SAP AG Executive Board and selected SAP AG managers and top performers,
and to members of the executive boards of SAP Group Companies, and selected
SAP Group Company managers and top performers if such SAP Group Companies
are affiliated companies (verbundene Unternehmen) of SAP AG within the
meaning of article 15 of the German Stock Corporation Act ("Group
Companies"). The authorization to issue convertible bonds to members of the
SAP AG Executive Board is granted solely to the Supervisory Board. The
convertible bonds may also be transferred to a credit institution subject
to a duty to transfer them at the instruction of SAP AG to beneficiaries as
contemplated under (b)(1) below, who alone are entitled to exercise the
conversion rights.
The statutory preemption rights of the shareholders are excluded.
b) The following conditions apply to the issue of convertible bonds for the
SAP AG 2000 Long Term Incentive Plan:
(1) Beneficiaries
The convertible bonds for the SAP AG 2000 Long Term Incentive Plan may
be issued only to members of the SAP AG Executive Board and selected
SAP AG managers and top performers, and to members of the executive
boards of SAP Group Companies, and selected SAP Group
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Company managers and top performers. The SAP AG Executive Board will
determine the individual beneficiaries and the number of convertible
bonds to be offered to each. Where the beneficiaries are members of
the SAP AG Executive Board, the SAP AG Supervisory Board alone will
determine the individual beneficiaries and the number of convertible
bonds to be offered to each and will issue the convertible bonds.
The quantities of convertible bonds that may be issued are limited as
follows:
aa) To all members of the SAP AG Executive Board, in total not more
than 225,000 convertible bonds, provided always that the number
of such convertible bonds issued multiplied by 1.25 does not,
when added to the number of stock options issued to members of
the SAP AG Executive Board pursuant to the authorization set
forth under (II), exceed 281,250.
bb) To all members of executive boards of SAP Group Companies in
total not more than 850,000 convertible bonds, provided always
that the number of such convertible bonds issued multiplied by
1.25 does not, when added to the number of stock options issued
to members of the SAP Group Company executive boards pursuant to
the authorization set forth under (II), exceed 1,062,500.
cc) To all selected SAP AG managers and top performers, in total not
more than 2,125,000 convertible bonds, provided always that the
number of such convertible bonds issued multiplied by 1.25 does
not, when added to the number of stock options issued to selected
SAP AG managers and top performers pursuant to the authorization
set forth under (II), exceed 2,656,250.
dd) To all selected SAP Group Company managers and top performers, in
total not more than 1,800,000 convertible bonds, provided always
that the number of such convertible bonds issued multiplied by
1.25 does not, when added to the number of stock options issued
to selected SAP Group Company managers and top performers
pursuant to the authorization set forth under (II), exceed
2,250,000.
The issue of convertible bonds to members of the Executive Board will
be disclosed each year in the Notes to the Financial Statements in the
Annual Report, and the disclosures will include the quantities of
convertible bonds issued and the names of the beneficiary members of
the Executive Board. The quantities of conversion rights exercised by
members of the Executive Board during the fiscal year, together with
the conversion prices paid, and the quantities of convertible bonds
held by members of the Executive Board at year-end, will similarly be
disclosed.
(2) Conversion rights
The holders of convertible bonds are entitled to exchange their bonds
for non-voting bearer SAP AG preference shares. These shares carry the
same rights under the Articles of Incorporation as other preference
shares previously issued. Each convertible bond having a par value of
euro 3 entitles its holder to purchase one SAP AG preference share.
The new preference shares are eligible for dividends from the
beginning of the first fiscal year for which no General Meeting
resolution for the appropriation of retained earnings had been adopted
before the time at which the conversion right was exercised. The
conditions of the conversion program may provide that the Company, at
its option, may elect to satisfy the beneficiary's conversion right by
issuing to the beneficiary shares acquired by the Company rather than
new shares pursuant to the Contingent Capital. All decisions
concerning the issue of shares acquired by the Company to
beneficiaries who are members of the SAP AG Executive Board will be
made solely by the Supervisory Board.
(3) Times of issue
The convertible bonds will be issued in not fewer than three annual
tranches, and not more than 50% of the total quantity to be issued
will be included in any single tranche. Convertible bonds will not be
issued between the sixteenth day of the last month of a fiscal quarter
and the day on which SAP announces the provisional results for that
quarter (inclusive), nor will they be issued between March 16 in any
year and the
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day of the SAP Annual General Meeting (inclusive). The day of issue is
the day on which SAP AG or the credit institution managing the issue
for SAP AG accepts the beneficiary's subscription.
(4) Conversion times
Beneficiaries may not convert their bonds until a freeze period has
elapsed. The freeze period for 33% of a beneficiary's conversion
rights ends two years after issue of the bonds (i.e. the day on which
SAP AG or the credit institution managing the issue for SAP AG accepts
the beneficiary's subscription.). The freeze period for the next 33%
ends three years after issue of the bonds, and the freeze period for
the balance ends four years after issue of the bonds. Conversion
rights cannot be exercised between the sixteenth day of the last month
of a fiscal quarter and the day on which SAP announces the provisional
results for that quarter (inclusive), nor can they be exercised
between March 16 in any year and the day of the SAP Annual General
Meeting (inclusive).
(5) Conversion price and additional cash payment
The conversion price for an SAP AG preference share shall equal the
closing price of the SAP AG preference share quoted on the Frankfurt
Stock Exchange in the XETRA trading system (or successor system) on
the last day of trading prior to issue of the convertible bond (the
day on which SAP AG or the credit institution managing the issue for
SAP AG accepts the beneficiary's subscription). When beneficiaries
exercise their conversion rights, they will make an additional payment
for each share equal to the amount by which the conversion price of
the share exceeds the par value of the converted convertible bond. The
conversion price will be not less than the lowest issue price within
the meaning of article 9 (1) of the German Stock Corporation Act.
The conditions of the conversion program may provide that if, during
the term of the convertible bonds, the capital stock of SAP AG is
increased by the issue of new shares or sale of shares owned by the
Company, and holders of preference shares are granted subscription
rights with respect thereto, or bonds with conversion rights or
options for SAP AG shares are issued, then the conversion price shall
be reduced in proportion as the price of the preference shareholders'
subscription rights averaged over all the days on which the
subscription rights were traded on the Frankfurt Stock Exchange stands
in relation to the SAP AG preference share closing price in the
Frankfurt Stock Exchange XETRA trading system (or its successor
system) on the last trading day before the issue of the shares on
exercise of the subscription right. Such a reduction will not be
applied if the holders of the convertible bonds are afforded
subscription rights that are equivalent to the subscription rights of
the preference shareholders.
(6) Nonnegotiability
The convertible bonds are not negotiable. Holders of the associated
conversion rights may only exercise those rights while they are
employees of SAP AG or an SAP Group Company and termination notice has
not been given with respect to their employment. Notwithstanding the
foregoing provision, holders of conversion rights for which the freeze
period set forth in (4) has expired at the time when employment
termination notice is served or at the time when the employment ends
if it is not terminated by notice may exercise their conversion rights
within a grace period of three months after employment termination
notice is served or the employment ends, subject to the provisions in
(4) concerning times when conversion rights cannot be exercised. If
these conversion rights are not exercised within the grace period,
they shall lapse at the end thereof. Conversion rights for which the
freeze period set forth in (4) has not expired shall lapse at the time
when employment termination notice is served or at the time when the
employment ends if it is not terminated by notice. Special provision
may be made for cases of death, retirement, mutually agreed
termination, and hardship. This also applies for cases where SAP AG
transfers its participation in Group Companies to third parties.
(7) Other provisions
The Executive Board is authorized to adopt additional terms of the
conditions of the conversion program and detail conditions relating to
the issue and structure of the convertible bonds, subject to approval
by the Supervisory Board. The Supervisory Board shall adopt additional
terms of the conditions of the conversion program as well as terms
relating to the issue and structure of the convertible bonds where the
beneficiaries are Executive Board members.
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(II)
a) Subject to the approval of the Supervisory Board, the Executive Board is
authorized to issue not more than 6,250,000 stock options bearing
subscription rights to SAP AG preference shares not later than December 31,
2004 for the SAP AG 2000 Long Term Incentive Plan, provided always that the
number of such stock options issued does not, when added to the number of
convertible bonds issued pursuant to the authorization set forth under (I)
multiplied by 1.25, exceed 6,250,000. Each stock option with SAP AG
preference share subscription rights may carry the right to subscribe to
one SAP AG preference share. The stock options may be issued only to
members of the SAP AG Executive Board and selected SAP AG managers and top
performers, and to members of the executive boards of SAP Group Companies,
and selected SAP Group Company managers and top performers where such SAP
Group Companies are affiliated companies (verbundene Unternehmen) of SAP AG
within the meaning of article 15 of the German Stock Corporation Act. The
authorization to issue stock options to members of the SAP AG Executive
Board is granted to the Supervisory Board only. The stock options may also
be transferred to a credit institution subject to a duty to transfer them
at the instruction of SAP AG to beneficiaries as contemplated under (b)(1)
below, who alone are entitled to exercise the subscription rights.
Shareholders shall not have preemptive rights.
b) The following conditions apply to the issue of stock options for the SAP AG
2000 Long Term Incentive Plan:
(1) Beneficiaries
The stock options for the SAP AG 2000 Long Term Incentive Plan may be
issued only to members of the SAP AG Executive Board and selected SAP
AG managers and top performers, and to members of the executive boards
of SAP Group Companies, and selected SAP Group Company managers and
top performers. The SAP AG Executive Board will determine the
individual beneficiaries and the number of stock options to be offered
to each. Where the beneficiaries are members of the SAP AG Executive
Board, the SAP AG Supervisory Board alone will determine the
individual beneficiaries and the number of stock options to be offered
to each and will issue the stock options.
The quantities of stock options that may be issued are limited as
follows:
aa) To all members of the SAP AG Executive Board, in total not more
than 281,250 stock options, provided always that the number of
such stock options issued does not, when added to the number of
convertible bonds issued to members of the SAP AG Executive Board
pursuant to the authorization set forth under (I) multiplied by
1.25, exceed 281,250.
bb) To all members of the SAP Group Company executive boards, in
total not more than 1,062,500 stock options, provided always that
the number of such stock options issued does not, when added to
the number of convertible bonds issued to members of the SAP
Group Company executive boards pursuant to the authorization set
forth under (I) multiplied by 1.25, exceed 1,062,500.
cc) To all selected SAP AG managers and top performers, in total not
more than 2,656,250 stock options, provided always that the
number of such stock options issued does not, when added to the
number of convertible bonds issued to selected SAP AG managers
and top performers pursuant to the authorization set forth under
(I) multiplied by 1.25, exceed 2,656,250.
dd) To all selected SAP Group Company managers and top performers, in
total not more than 2,250,000 stock options, provided always that
the number of such stock options issued does not, when added to
the number of convertible bonds issued to selected SAP Group
Company managers and top performers pursuant to the authorization
set forth under (I) multiplied by 1.25, exceed 2,250,000.
The issue of stock options to members of the Executive Board will be
disclosed each year in the Notes to the Financial Statements in the
Annual Report, and the disclosures will include the quantities of
stock options issued and the names of the beneficiary members of the
Executive Board. The quantities of subscription rights exercised by
members of the Executive Board during the fiscal year, together with
the exercise prices paid, and the quantities of stock options held by
members of the Executive Board at year-end, will similarly be
disclosed.
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(2) Subscription rights
The holders of stock options are entitled to subscribe to non-voting
bearer SAP AG preference shares. These shares carry the same rights
under the Articles of Incorporation as other preference shares
previously issued. Each stock option entitles its holder to purchase
one SAP AG preference share in consideration of payment of the
exercise price as envisioned in (5). The new preference shares are
eligible for dividends from the beginning of the first fiscal year for
which no General Meeting resolution for the appropriation of retained
earnings had been adopted before the time at which the subscription
right was exercised. The conditions of the conversion program may
provide that the Company, at its option, may elect to satisfy the
beneficiary's conversion right by issuing to the beneficiary shares
acquired by the Company rather than new shares pursuant to the
Contingent Capital. All decisions concerning the issue of the
Company's own shares to beneficiaries who are members of the SAP AG
Executive Board will be made by the Supervisory Board alone.
(3) Times of issue
The convertible bonds will be issued in not fewer than three annual
tranches, and not more than 50% of the total quantity to be issued
will be included in any single tranche. Stock options will not be
issued between the sixteenth day of the last month of a fiscal quarter
and the day on which SAP announces the provisional results for that
quarter (inclusive), nor will they be issued between March 16 in any
year and the day of the SAP Annual General Meeting (inclusive). The
day of issue is the day on which SAP AG or the credit institution
managing the issue for SAP AG accepts the beneficiary's subscription.
(4) Conversion times
Beneficiaries may not exercise the subscription rights attaching to
their stock options until a freeze period has elapsed. The freeze
period for 33% of a beneficiary's subscription rights ends two years
after issue of the stock options (i.e. the day on which SAP AG or the
credit institution managing the issue for SAP AG accepts the
beneficiary's subscription). The freeze period for the next 33% ends
three years after issue of the stock options, and the freeze period
for the balance ends four years after issue of the stock options.
Subscription rights cannot be exercised between the sixteenth day of
the last month of a fiscal quarter and the day on which SAP announces
the provisional results for that quarter (inclusive), nor can they be
exercised between March 16 in any year and the day of the SAP Annual
General Meeting (inclusive).
(5) Threshold for exercise of rights
Subscription rights attaching to stock options can be exercised only
if the performance of the SAP AG preference share value over the
period commencing upon issue of the stock option concerned ("initial
value") and the last trading day on the Frankfurt Stock Exchange
before exercise of the subscription rights attaching to the stock
options ("final value") exceeds the performance of the reference index
over the same period.
The reference index is the GSTI(TM) Software index of the Goldman,
Sachs & Co. investment bank. If Goldman, Sachs & Co. discontinues the
GSTI Software index, another index will be used instead that
substantially plots the performance of software manufacturers and
whose development showed a strong correlation with that of the GSTI
Software index during the GSTI Software index's last year. If no such
other index is available, then the GSTI Software index will be
updated. Any decision concerning the use of another index or rules for
updating the GSTI index will be made by the SAP AG Supervisory Board.
The initial value for determining the performance of the SAP AG
preference share is the closing price of the SAP AG preference share
quoted on the Frankfurt Stock Exchange in the XETRA trading system (or
successor system) on the last day of trading prior to issue of the
stock option (the day on which SAP AG or the credit institution
managing the
- -------------------------------
(TM) GSTI is a trademark of Goldman, Sachs & Co.
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issue for SAP AG accepts the beneficiary's subscription). The initial
value for determining the performance of the reference index is the
last value recorded for the reference index on the same trading day on
the Chicago Board Options Exchange. The final value for determining
the performance of the SAP AG preference share is the closing price of
the SAP AG preference share quoted on the Frankfurt Stock Exchange in
the XETRA trading system (or successor system) on the last day of
trading prior to exercise of the subscription right attached to the
stock option. The final value for determining the performance of the
reference index is the last value recorded for the reference index on
the same trading day on the Chicago Board Options Exchange. The
initial value and the final value of the reference index will be
translated from U.S. dollars to euros using the spot mid cash-paper
range rate on the Frankfurt interbank market.
Performance is the increase measured between the initial value and the
final value, expressed as percentage points. In calculating the
performance of the SAP preference share, the same adjustment rules for
dividend payments, subscription rights, and other special rights are
applied to the stock exchange prices used as are applied in
determining the reference index.
(6) Exercise price
The exercise price for one SAP AG preference share is calculated by
reference to the outperformance. The outperformance is the percentage
points by which the performance of the SAP AG preference share
determined in accordance with (5) exceeds the performance of the
reference index determined in accordance with (5), as follows:
The exercise price is the final value determined in accordance with
(5) less the product of the initial value determined in accordance
with (5) and the outperformance. Example:
Initial value = euro 400
Final value = euro 600
Performance of the SAP preference share = 50%
Performance of the reference index = 20%
Exercise price = euro 600 minus (30% of euro 400) = euro 480
The conditions of the option program may provide that if, during the
term of the stock options, the capital stock of SAP AG is increased by
the issue of new shares or sale of shares owned by the Company, and
holders of preference shares are granted preemptive rights, or
convertible bonds are issued carrying conversion rights or options for
SAP AG shares, then the exercise price is reduced in proportion as the
price of the preference shareholders' preemptive rights averaged over
all the days on which the preemptive rights were traded on the
Frankfurt Stock Exchange stands in relation to the SAP AG preference
share closing price in the Frankfurt Stock Exchange XETRA trading
system (or its successor system) on the last trading day before the
issue of the shares on exercise of the preemptive right. Such a
reduction will not be applied if the holders of the stock options are
afforded subscription rights that are equivalent to the preemptive
rights enjoyed by the preference shareholders.
These provisions notwithstanding, the minimum exercise price is the
smallest issue sum envisioned in the German Stock Corporation Act,
article 9 (1).
(7) Nonnegotiability
The stock options are not negotiable. Holders of the associated
subscription rights may only exercise those rights while they are
employees of SAP AG or an SAP Group Company and termination notice has
not been given with respect to their employment. Notwithstanding the
foregoing provision, holders of subscription rights for which the
freeze period laid down in (4) has expired at the time when employment
termination notice is served or at the time when the employment ends
if it is not terminated by notice may exercise their conversion rights
within a grace period of three months after employment termination
notice is served or the employment ends, subject to the
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provisions in (4) concerning times when conversion rights cannot be
exercised. If these subscription rights are not exercised within the
grace period they lapse at the end of it. Subscription rights for
which the freeze period set forth in (4) has not expired shall lapse
at the time when employment termination notice is served or at the
time when the employment ends if it is not terminated by notice.
Special provision may be made for cases of death, retirement,
resignation on friendly terms, and hardship. This also applies for
cases where SAP AG transfers its participation in Group Companies to
third parties.
(8) Other provisions
The Executive Board is authorized to adopt additional terms of the
conditions of the option program and details relating to the issue and
structure of the stock options, subject to approval by the Supervisory
Board. The Supervisory Board shall adopt additional terms of the
option program and terms relating to the issue and structure of the
stock options where the beneficiaries are members of the Executive
Board.
(III)
The Company's capital stock will be subject to a contingent increase of euro
15,977,871.29 by the issue of up to 6,250,000 bearer preference shares that
carry the same rights under the Articles of Incorporation as previously issued
preference shares (Contingent Capital III). Contingent Capital III secures the
conversion rights attaching to convertible bonds and the subscription rights
attaching to stock options issued before December 31, 2004 pursuant to the
authorization granted by the SAP AG General Meeting of January 18, 2000 in
connection with the SAP AG 2000 Long Term Incentive Plan in accordance with the
provisions of (I) and (II) herein. The contingent capital increase will be
effected only to the extent that convertible bonds and stock options are issued
and the holders thereof exercise their conversion or subscription rights, as the
case may be, to exchange them for shares and the Company does not satisfy the
conversion and subscription rights from shares owned by the Company. Shares will
be issued from Contingent Capital III to satisfy conversion rights attaching to
convertible bonds at the conversion price determined in accordance with
(I)(b)(5) and to satisfy subscription rights attaching to stock options at the
exercise price determined in accordance with (II)(b)(5). The new shares are
eligible for dividends from the beginning of the first fiscal year for which no
General Meeting resolution for the appropriation of retained earnings had been
adopted before the time at which the conversion or subscription right was
exercised.
Article 4 of the Articles of Incorporation is amended by the addition of the
following section 7:
"(7) The Company's capital stock is subject to a contingent increase of
euro 15,977,871.29 by the issue of up to 6,250,000 nonvoting bearer
preference shares that rank equally with the previously issued
preference shares (Contingent Capital III). The contingent capital
increase will be effected only to the extent that holders of
convertible bonds and stock options, issued before December 31, 2004
pursuant to the authorization granted by the General Meeting of
January 18, 2000 in connection with the SAP AG 2000 Long Term
Incentive Plan, exercise their conversion and subscription rights and
the Company does not satisfy the conversion and subscription rights,
as the case may be, from shares owned by the Company. The new shares
issued in connection with the exercise of these rights are eligible
for dividends from the beginning of the first fiscal year for which no
General Meeting resolution for the appropriation of retained earnings
had been adopted before the time at which the conversion or
subscription right was exercised."
ITEM 2
AUTHORIZATION TO ACQUIRE OWN SHARES
The Executive and Supervisory Boards propose that the Company resolve as
follows:
The Company is hereby authorized to purchase on the stock market up to 6,250,000
no-par SAP AG preference shares currently representing up to euro 15,977,871.29
as a proportion of the capital stock. The purchase price (without incidental
purchase costs) paid by the Company for each SAP AG preference share shall not
be more than 10% below or 10% above the average price of the preference share on
the Stock Market over the five trading days before purchase, being the
arithmetic mean of the SAP AG preference share closing prices in the Frankfurt
Stock Exchange XETRA trading system (or its successor system) for those days.
This authorization may be exercised in whole or in parts. This authorization
expires on June 30, 2001.
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The Executive Board is authorized to dispose of any or all of the Company's own
SAP AG shares purchased under the authorization herein on the stock market or to
satisfy conversion and subscription rights attaching to convertible bonds and
stock options, respectively, in connection with the SAP AG 2000 Long Term
Incentive Plan pursuant to the authorization granted by the General Meeting of
January 18, 2000, and to transfer such shares to the holders of those rights. To
this extent, shareholders' preemptive rights to the Company's own shares are
excluded. All decisions concerning the transfer of the Company's own shares to
beneficiaries who are members of the SAP AG Executive Board will be made by the
Supervisory Board alone.
The Executive Board is further authorized to dispose of, without prejudice to
the shareholders' preemptive rights, the Company's own shares purchased under
the authorization herein in whole or in part by way of a rights offering.
Finally, the Executive Board is authorized to redeem the Company's own shares
purchased under the authorizations herein in whole or in part. No further
General Meeting resolution is required to implement such redemption.
REPORT OF THE EXECUTIVE BOARD ON THE SAP AG 2000 LONG TERM INCENTIVE PLAN, BEING
ALSO THE REPORT OF THE EXECUTIVE BOARD ON THE EXCLUSION OF PREEMPTIVE RIGHTS IN
CONNECTION WITH THE ISSUE OF CONVERTIBLE BONDS UNDER AGENDA ITEM 1 FOR THE
PURPOSES OF ARTICLE 221 (4)(2) IN CONNECTION WITH ARTICLE 186 (4)(2) OF THE
GERMAN STOCK CORPORATION ACT
The Executive and Supervisory Boards propose to the shareholders that they
authorize the Executive Board, with the consent of the Supervisory Board, to
implement a Long Term Incentive Plan for members of the executive boards and
selected managers and top performers of SAP AG and SAP Group Companies, by
December 31, 2004. As a global high-tech company in the software and Internet
industry, SAP AG is facing increasingly intense competition for management and
specialists. Particularly in the core market of this industry, namely the United
States, stock option programs are a widespread, popular, and indispensable
component of modern compensation systems. To offer competitive, attractive
conditions and targeted incentives for managers and top performers, SAP must be
able to include stock subscription rights in its compensation package. It is an
aim of the SAP AG 2000 Long Term Incentive Plan to motivate Executive Board
members and selected managers and top performers to commit themselves on a
long-term basis to growing the value of our enterprise. Subscription rights to
SAP stock will serve to harmonize the interests of those managers and top
performers more closely with the interests of the Company's owners. This is good
for the shareholders and for the employees, and it helps straighter SAP's
leading position in its core markets.
1. THE CURRENT COMPENSATION SYSTEM AND THE NEED TO ENHANCE IT
Components of SAP AG's current compensation system include fixed pay,
variable target-related bonuses, and a saving for stock program. In 1994,
there was an employee participation program that issued convertible bonds
bearing rights to 4,000,000 preference shares. Conversion rights for
approximately 500,000 shares remain to be exercised at this time. In 1998
and 1999, the members of the Executive Board and the employees were also
invited to take part in a stock appreciation rights (STAR) program. The
STAR program is a virtual stock option program that delivers for each STAR
allocated to the person concerned an additional payment, reflecting SAP
preference share performance within a predefined timeframe. During the term
of the STAR program, U.S. GAAP group accounting rules require that the
expenses are recognized, which decreases earnings. This means the STAR
program causes substantial additional personnel costs. The STAR program has
not been effective enough to allow SAP AG to compete from a position of
maximum strength for managers and top performers in the key markets - the
United States in particular, but also Europe. There have been particular
drawbacks: individual tax disadvantages, employer and employee liability
for social insurance contributions, the absence of a way of turning the
virtual rights into real stock ownership, and the prescriptive measurement
of share performance across relatively short-terms perspectives of one,
two, or three years. This tends to distract the focus away from sustained,
permanent growth of the value of the enterprise. The STAR program does not
offer long-term participation in the success of the Company.
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Having closely analyzed the practical experience gained from the STAR
program, the Executive and Supervisory Boards believe that in order to
maintain SAP's competitiveness, an additional compensation component should
be created for managers and other selected top performers, with real
subscription rights to SAP stock. The proposed resolutions are intended to
remove SAP AG's present competitive disadvantage as quickly as possible and
to have the SAP AG 2000 Long Term Incentive Plan available when bonus plans
and targets are agreed for the new year, fiscal 2000.
2. ALTERNATIVE APPROACHES
The Executive Board has considered issuing stock options, on the one hand,
and a new issuance of convertible bonds, on the other hand.
Article 193 (2)(4) of the German Stock Corporation Act, requires that
authorization to issue stock options be conditional upon the establishment
of performance targets. The U.S. market expects compensation to have a
stock-based component, and this expectation cannot be met on that basis.
Outperformance hurdles to the exercise of options are not customary in the
United States. Also, in group accounting under the U.S. GAAP applied the by
the SAP group, setting outperformance hurdles creates a so called variable
plan within the effect that the amount by which the conversion price
differs from the current market value of the stock has to be disclosed as
an expense in the consolidated income statement. SAP's competitors in the
United States, which are not subject to the German Stock Corporation Act,
can avoid this by not imposing a hurdle to the exercise of stock options
they issue. For this reason, the Executive and Supervisory Boards propose
that an authorization be granted to issue convertible bonds, the
exercisability of which is not conditional upon the achievement of hurdles.
On the other hand, the Executive and Supervisory Boards are not insensitive
to the arguments made in favor of exercise hurdles as targets in connection
with the issue of stock options in the debate on companies legislation
changes in the German Supervision and Transparency in the Area of
Enterprise Act. In particular, the Executive and Supervisory Boards are
confident that optimizing SAP's position in relation to competing
enterprises will assure sustained growth in the value of the Company. For
this reason, an alternative offering is proposed in the form of an option
oriented to outperforming a benchmark index of the sector and competitors,
which will especially motivate beneficiaries to compete against SAP
competitors on performance.
The Executive and Supervisory Boards have therefore decided to propose to
the General Meeting an incentive plan with two elements. The proposed
resolutions envision the authorization to issue convertible bonds carrying
rights of conversion to SAP AG preference shares and the authorization to
issue stock options carrying subscription rights to SAP AG preference
shares.
3. THE PROPOSED OFFER: A CHOICE BETWEEN PERFORMANCE-RELATED STOCK OPTIONS AND
CONVERTIBLE BONDS.
The proposed SAP AG 2000 Long Term Incentive Plan allows members of the SAP
AG Executive Board and selected SAP AG managers and top performers, and
members of the executive boards of SAP Group Companies, and selected SAP
group company managers and top performers to acquire, at their option,
bonds carrying rights to convert to SAP AG preference shares (convertible
bonds) or SAP AG preference share options (stock options). The total
quantity of preference shares to which beneficiaries could acquire rights
is limited to 6,250,000 shares, and that total could only be reached if all
Plan members chose stock options only. The SAP AG 2000 Long Term Incentive
Plan would invite each member to acquire, as he or she might choose, either
a certain quantity of convertible bonds or a certain quantity of stock
options, or half (by value of the rights) convertible bonds and half stock
options, for each new tranche issued. The exercisability, and the exercise
price, of the stock options would depend on the SAP preference share's
outperforming a market index (see 6.6), so at the time of issue the market
value of a stock option is lower than that of a convertible bond. This
difference between the values was found to be a factor of 1.25. This means
that if a beneficiary chose one or the other exclusively, he or she would
be entitled to 1.25 times more stock options than convertible bonds. This
is why the proposed resolution envisions both a maximum quantity of not
more than 5,000,000 convertible bonds and a maximum quantity of not more
than 6,250,000 stock options. The maximum numbers of rights that can be
offered to each of the various categories of Plan members also reflects
this factor of 1.25.
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4. GRANT OF POWERS TO ISSUE CONVERTIBLE BONDS FOR THE SAP AG 2000 LONG TERM
INCENTIVE PLAN
Part (I) of the Executive and Supervisory Boards' proposal provides for
Plan members to be able to choose stock rights under convertible bonds.
Upon issue of convertible bonds (but not stock options), the beneficiary
makes a financial contribution of his or her own by paying the par value of
the bonds. The Company can utilize these funds during the term of the bond
until the beneficiary exercises his or her conversion rights, at which time
the payment is credited toward the conversion price. Under the proposal,
the bond would be non-interest bearing, so the Company would have
interest-free funds, the par value of the convertible bonds issued, at its
disposal during the term of the convertible bonds until the beneficiaries
exercise their rights.
Moreover, granting share subscription rights by issuing convertible bonds
would allow SAP to align the "Long Term Incentive Plan SAP AG 2000" more
closely with the stock option programs of its principal competitors in the
software industry, and to meet the expectations of managers and top
performers in the United States in particular. The proposal provides that
the conversion price for an SAP AG preference share at the time the
conversion right is exercised should equal the closing price for SAP
preference shares in the XETRA trading system on the Frankfurt Stock
Exchange on the last day of trading before issue of the conversion rights.
Thus no special threshold would be created with regard to exercising
conversion rights. Even without a threshold, conversion rights provide a
strong incentive to contribute to the sustained enhancement of the
company's value. As the conversion price is fixed at the price of the share
when the bond is issued, the managers and top performers in the Plan
participate directly in any increase in the value of SAP shares during the
term of the convertible bonds. Both the enterprise and its shareholders
benefit from this incentive. Participation in the program ties the selected
managers and top performers to the Company for a considerable period,
because conversion rights to SAP preference shares cannot be exercised for
an average of three years (freeze period) and then only if the beneficiary
is still a member of the Executive Board or an employee of SAP AG or an SAP
group company and termination notice has not been given with respect to his
or her employment (for information about the three-month grace period, see
6.7). The Executive and Supervisory Boards believe that all these
considerations, the possibility of dilution, and the value of the
convertible bonds to be issued justify the exclusion of the shareholders'
preemptive rights for the purposes of the German Companies Act, article 221
(4) with article 186.
5. GRANT OF POWERS TO ISSUE STOCK OPTIONS FOR THE SAP AG 2000 LONG TERM
INCENTIVE PLAN
Rights under stock options (but not under convertible bonds) would be
subject to performance against an index. It would only be possible to
exercise subscription rights attaching to stock options if the SAP
preference shares outperform a reference index, the Software subindex of
the Goldman Sachs Technology Index (GSTI), during the time between issue
and exercise of the stock option. Moreover, the execution price would be
determined by the level of the SAP preference shares' outperformance of the
GSTI Software Index. The GSTI Software index is continuously measured and
published by the Goldman, Sachs & Co., New York. The index sample includes
various software equities, including the main SAP competitors such as
Oracle, PeopleSoft, Siebel, J.D. Edwards, and Baan. The GSTI Software index
is thus more suitable as a benchmark than, for example, the DAX or the DOW
JONES EURO STOXX 50, which also include many blue chips from outside the
Company's sector. For information about the derivation of the exercise
price, see 6.6.
6. DETAILS OF THE PLAN
Details of the proposed SAP AG 2000 Long Term Incentive Plan are as
follows:
(1) The SAP AG 2000 Long Term Incentive Plan would be set up to issue up
to 6,250,000 rights to SAP preference shares. To the extent these are
issued as convertible bonds within the meaning of article 221 (1) of
the German Stock Corporation Act, the issue is limited to 5,000,000
ten-year no-interest bonds with a par value of euro 3 each. They can
carry conversion rights for up to 5,000,000 SAP AG preference shares.
To the extent these are issued as stock options within the meaning of
article 192 (2)(3) of the German Stock Corporation Act, the
subscription rights issued would be limited to 6,250,000 shares. The
difference between the
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two limits reflects the difference in value between the convertible
bonds and the stock options, a factor of 1.25. The total number of
rights issued is limited so that the number of convertible bonds
issued multiplied by 1.25, plus the number of stock options issued,
cannot exceed 6,250,000. The shareholders' statutory preemption rights
would be excluded for the convertible bonds. There is no statutory
subscription right with respect to the issue of stock options.
(2) Only selected managers and top performers in SAP AG and SAP Group
Companies would qualify for the convertible bonds and stock options.
They include the members of the executive boards, and selected
managers and top performers, of SAP AG and SAP Group Companies. The
people who benefit will be managers and top performers whose decisions
and achievements make major contributions to the success of SAP AG and
represent fundamental contributions to the sustained grow of the value
of the Company. In the proposal, the total numbers of convertible
bonds and stock options that can be issued to members of the SAP AG
Executive Board, and to each of the other categories of members of the
SAP AG 2000 Long Term Incentive Plan, are limited.
Only the Supervisory Board can issue convertible bonds and for stock
options to members of the SAP AG Executive Board, and only the
Supervisory Board decides the particular details of their issue and
conditions. Otherwise, the SAP AG Executive Board will determine the
Plan members and the number of bonds to be offered to each as well as
particulars of the issue and details relating to the issue and
conditions of the convertible bonds and stock options. In determining
Plan allocations, which would be components in the beneficiaries'
total compensation, the executive and Supervisory Boards will have
regard only to a beneficiary's individual achievement and achievement
potential; in determining Plan allocations for members of the
Executive Board, the Supervisory Board will also have proper regard to
the provisions of article 87 of the German Stock Corporation Act.
It is currently anticipated for the purposes of the issue of the total
quantity in three tranches that the percentage of all employees that
will be in membership of the SAP AG 2000 Long Term Incentive Plan will
develop as follows (approximate figures): 2000 5%, 2001 7%, 2002 8%.
The set of beneficiaries may change when there are new appointments
and replacements and when companies are added to and retired from the
SAP group.
To achieve the highest possible level of transparency, the issue of
convertible bonds and stock options to members of the Executive Board
will be disclosed each year in the Notes to the Financial Statements
in the Annual Report, and the disclosures will include the quantities
of convertible bonds issued and the names of the beneficiary members
of the Executive Board The quantities of conversion rights and
subscription rights exercised by members of the Executive Board,
together with the conversion and execution prices paid, and the
quantities of convertible bonds and stock options held by members of
the Executive Board at year-end will similarly be disclosed. To reduce
the technical administrative work, there would also be a discretion to
transfer the convertible bonds and stock options to a credit
institution subject to a duty to transfer them at the instruction of
the Company to beneficiaries who alone are entitled to exercise the
subscription right, as for indirect subscription rights under article
186 (5) of the German Stock Corporation Act.
(3) The authorization to issue convertible bonds and stock options would
expire December 31, 2004. The maximum quantity of rights issued would
be 5,000,000 convertible bonds bearing conversion rights for up to
5,000,000 SAP AG preference shares, or stock options bearing
subscription rights for up to 6,250,000 SAP AG preference shares. The
maximum numbers of convertible bonds and stock options still available
is reduced to the extent SAP AG 2000 Long Term Incentive Plan members
exercise their choice in favor of either, applying the value
difference factor of 1.25. This means the maximum number of
convertible bonds available would be limited so that the number of
convertible bonds issued multiplied by 1.25, added to the number of
stock options issued, could not exceed 6,250,000 in total, and the
maximum number of stock options available would be accordingly
limited. The same rule applies in determining the maximum quantities
of rights available for allocation to the four categories of members
of the SAP AG 2000 Long Term Incentive Plan. The rights would be
issued in
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not fewer than three annual tranches, and not more than 50% of the
total quantity to be issued would be in any single tranche. It is
anticipated that the first tranche will be issued in 2000, the second
tranche in 2001, and the third tranche in 2002. In the interest of
maximum flexibility, it is not proposed that specific dates be set for
issuing convertible bonds during the year, except that there would be
periods during the year when rights could not be issued (see the
proposed resolution, parts (I)(b)(3) and (II)(b)(3)). It is, however,
probable that the vast majority of the convertible bonds will be
issued in late January in connection with the beneficiaries'
target-setting reviews.
(4) To secure the conversion rights attaching to convertible bonds and to
secure subscription rights attaching to stock options, contingent
capital totalling euro 15,977,871.29 would be created, divided into a
maximum of 6,250,000 preference shares. Alternatively, the proposed
resolution envisions conditions for the convertible bond and stock
option programs that allow the Company to satisfy beneficiaries'
conversion and subscription rights by proffering the Company's own
shares. The proposal provides that, subject to the appropriate
approval of the General Meeting, the Company would be able to
repurchase its own shares to offer to beneficiaries. This would enable
the Company to counteract any dilution of the equity from the
utilization of the contingent capital. The Executive and Supervisory
Boards therefore propose in agenda Item 2 that the authority be
granted to repurchase up to 6,250,000 of the Company's own preference
shares. The contingent capital will remain unutilized to the extent
the Company makes use of its powers to proffer its own shares to
beneficiaries. The amount of contingent capital, euro 15,977,871.29,
corresponds to just under 6% of the current capital stock. The
Executive and Supervisory Boards consider this percentage appropriate
in view of the number of potential beneficiaries, the term of the Long
Term Incentive Plan, and the positive benefits the Plan would bring.
Theoretical fair values for the convertible bonds and stock options at
the time of issue can be determined using the Black-Scholes formula.
The following calculations assume that the price of the SAP preference
share at the time the rights are issued is euro 400 and that on
average the rights are exercised five years after they issued. These
are the values:
CONVERTIBLE BONDS:
Average period held: 5 years
Theoretical value of one bond euro 173
for 5 million bonds euro 865 million
for information:
Premium (% of base value) 43.25%
Price factors for calculation:
Volatility: 44%
Interest rate (EUR SWAP rate): 4.77%
STOCK OPTIONS:
Average period held: 5 years
Theoretical value of one option euro 138.40
for 6.25 million options euro 865 million
for information:
Premium (% of base value) 34.60%
Price factors for calculation:
Volatility: 26%
Interest rate (EUR SWAP rate): 4.77%
(5) Each conversion right attaching to a convertible bond and each
subscription right attaching to a stock option entitles the holder to
subscribe to one non-voting bearer SAP AG preference share carrying
the same rights under the Articles of Incorporation as other
preference shares previously issued. These shares are eligible for
dividends from the beginning of the first fiscal year for which no
General Meeting resolution for the appropriation of retained earnings
had been adopted before the time at which the right was exercised.
The conversion and subscription rights cannot be exercised until the
end of a freeze period. The freeze period for 33% of a beneficiary's
convertible bonds and stock options ends two years after their issue;
the freeze period for the next 33% ends three years after issue, and
the freeze period for the balance ends four years after issue, so that
the average freeze period length is three years. The conversion and
subscription rights are exercisable up to ten years after their day of
issue. To forestall insider
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dealing problems, conversion and subscription rights cannot be
exercised between the sixteenth day of the last month of a fiscal
quarter or year and the day on which SAP announces the provisional
results for that quarter or year. Nor can they be exercised between
March 16 in any year and the day of the Annual General Meeting.
Additionally, beneficiaries are bound by the provisions of the law
restricting the exercise of conversion rights and dealings in
subscription shares, and in particular the insider dealing provisions
of the German Securities Trade Act.
(6) Each conversion right attaching to a convertible bond entitles the
holder to one preference share in consideration for payment of the
conversion price. The conversion price is the same as the closing
price of the SAP AG preference share quoted on the Frankfurt Stock
Exchange in the XETRA trading system (or subsequent system) on the
last day of trading prior to issue of the convertible bond. The
conditions for the convertible bonds will provide for adjustment of
the conversion price in the event of corporate action during the term
of the rights, such as the splitting or amalgamation of shares,
increase in capital stock from corporate funds, or capital reduction.
The conditions for the convertible bond program may also provide for
protection against dilution if subscription rights are granted to SAP
AG preference shareholders. When beneficiaries convert their bonds
they will render an additional payment for each share equal to the
amount by which the conversion price of the share exceeds the par
value of the converted bond. The exercise price cannot be less than
the amount represented in the capital stock by one share, as
envisioned in the German Companies Act, article 9 (1).
Each subscription right attaching to a stock option entitles the
holder to one SAP AG preference share in consideration for payment of
the exercise price. The execution price would depend on the extent to
which the SAP preference share outperformed a reference index between
issue and exercise of the stock option. The markdown on the current
market price to determine the exercise price increases with greater
outperformance: The proposed resolution provides at (II)(b)(6) that
the exercise price is the price of the SAP preference share at the
time the subscription right is exercised less the product of the
outperformance and the price of the SAP preference share at the time
the stock option was issued.
(7) The convertible bonds and stock options are nonnegotiable. The
conversion and subscription rights can only be exercised if the
beneficiary is still an employee of SAP AG or an SAP group company and
termination notice has not been given with respect to his or her
employment. Holders of conversion and subscription rights for which
the freeze period has expired at the time when employment termination
notice is served or the employment ends may exercise their rights
within a grace period of three months after employment termination
notice is served or the employment ends. The conditions of the
convertible bond and stock option programs may allow special
provisions for cases of death, retirement, resignation on friendly
terms, and hardship. This also applies for cases where SAP AG
transfers its stake in Group Companies to third parties.
(8) The Executive Board takes powers to determine the further detail
conditions of the convertible bond and stock option programs and
details relating to the issue and structure of the convertible bonds
and stock options, and corresponding powers are taken by the
Supervisory Board in respect of the issue of rights to members of the
Executive Board.
The Executive Board and the Supervisory Board share the opinion that
granting powers, as proposed, to set up the SAP AG 2000 Long Term Incentive
Plan is a particularly appropriate way to create a long term incentive for
selected managers and top performers in SAP AG and SAP Group Companies, and
make, in the interest of the Company and its shareholders, a contribution
toward sustained, permanent growth of the value of the company.
Walldorf, December 1999
The Executive Board
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REPORT, IN ACCORDANCE WITH ARTICLE 186 (4)(2) IN CONNECTION WITH ARTICLE 71
(1)(8) OF THE GERMAN STOCK CORPORATION ACT, OF THE EXECUTIVE BOARD ON THE
EXCLUSION OF PREEMPTIVE RIGHTS IN CONNECTION WITH THE SALE OF THE COMPANY'S OWN
SHARES UNDER AGENDA ITEM 2
The Annual General Meeting on May 7, 1998 resolved to grant authority to
repurchase the Company's own shares. The authority expired October 31, 1999. In
agenda Item 2 the Executive and Supervisory Boards now propose a resolution to
grant new powers to repurchase the Company's own shares. The authority, which
would extend to June 30, 2001, would enable the Company to purchase up to
6,250,000 SAP AG preference shares. The Executive Board would be granted powers
to dispose of the Company's own shares by recalling them (for which no new
General Meeting resolution would be required), by selling them on the stock
market, or by using them to satisfy conversion and subscription rights attaching
to convertible bonds and stock options, respectively, issued for the SAP AG 2000
Long Term Incentive Plan under agenda Item 1, and transferring such shares to
the holders of those rights. The proposed resolution provides that shareholders'
rights of subscription to the Company's own shares are excluded. See also the
separate report of the reasons for setting up the SAP AG 2000 Long Term
Incentive Plan and the details of its conditions prepared by the Executive Board
and included in full in the announcement of the January 18, 2000 General
Meeting. The purchase of the Company's own shares and their issue to
beneficiaries of convertible bonds and stock options in satisfaction of the
rights attaching to them is a suitable tool for counteracting any dilution of
the equity that may otherwise occur when the rights are satisfied. The Executive
Board would decide whether and to what extent use is made of the powers to
repurchase the Company's own shares, and would do so having regard only to the
interests of the shareholders and the Company. The Executive Board would also
decide whether and when to recall the acquired Company shares, to sell them on
the stock market, or to use them to satisfy share rights under the SAP AG 2000
Long Term Incentive Plan, and in making these decisions the Executive Board
would have regard only to the interests of the shareholders and the Company. All
decisions concerning the transfer of the Company's own shares to holders of
conversion and subscription rights who are members of the SAP AG Executive Board
will be made by the Supervisory Board alone. Purchases of the Company's own
shares and their disposal will be reported to the Annual General Meeting. Once a
plan has been established to repurchase more than 100,000 of the Company's own
shares within a one-month period, the Company will make a public announcement
with respect to the price limit and quantity of shares to be purchased on the
stock market within the specified time period. Moreover, the Company will make a
public announcement whenever the quantity of its own shares that it is proposing
to purchase is likely to influence the development of the SAP preference share
price on the stock market.
Walldorf, December 1999
The Executive Board
The reports will be available at the General Meeting. They will also be
available at the offices of the Company from the day the General Meeting is
announced. The reports will be sent to any shareholder on request.
* * *
For holders of preference shares and ordinary shares to be entitled to
participate in the Extraordinary General Meeting, and for holders of ordinary
shares to be entitled to exercise voting rights, they must deposit their shares
no later than Tuesday January 11, 2000 during customary business hours at the
Company or at a branch in the Federal Republic of Germany of the financial
institutions listed below, until the end of the Extraordinary General Meeting:
DG BANK Deutsche Genossenschaftsbank
Deutsche Bank Aktiengesellschaft
Dresdner Bank Aktiengesellschaft
Bayerische Hypo- und Vereinsbank Aktiengesellschaft
BHF-BANK Aktiengesellschaft
Commerzbank Aktiengesellschaft
SGZ-Bank Sudwestdeutsche Genossenschafts-Zentralbank AG
In addition, the deposit shall be deemed to have been properly made if, with the
consent and on behalf of a depository institution, the shares are deposited with
another financial institution and blocked until the end of the General Meeting.
<PAGE> 15
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The shares may also be deposited with a German notary public or a securities
clearing and deposit bank. In this case, we request that a certificate issued by
the notary public or the securities clearing and deposit bank be submitted to
our Company no later than one day after the last possible day for deposits.
The admission tickets issued on the basis of the deposit serve the holders of
ordinary shares as identification for the exercise of their voting rights.
Holders of preference shares do not have voting rights at the Extraordinary
General Meeting.
Shareholders may appoint a proxy, for example, their deposit bank, a
shareholders' association, or a private individual.
Walldorf, December 1999
SAP Aktiengesellschaft
Systeme, Anwendungen, Produkte in der Datenverarbeitung
The Executive Board
<PAGE> 1
EXHIBIT 99.3
SAP AKTIENGESELLSCHAFT
SYSTEME, ANWENDUNGEN, PRODUKTE IN DER DATENVERARBEITUNG
SECURITY IDENTIFICATION NUMBERS:
PREFERENCE SHARES: 716463 AND 716464
Preference shareholders in our Company are invited to attend a
SPECIAL MEETING OF PREFERENCE SHAREHOLDERS
at Rosengarten Congress Center, Rosengartenplatz 2, 68161 Mannheim, Germany,
TUESDAY, JANUARY 18, 2000 AFTER THE EXTRAORDINARY GENERAL MEETING OF THE
COMPANY BUT NOT EARLIER THAN 11 A.M.
AGENDA
1. APPROVAL OF THE RESOLUTION OF THE EXTRAORDINARY GENERAL MEETING, JANUARY
18, 2000, AUTHORIZING THE ESTABLISHMENT OF THE SAP AG 2000 LONG TERM
INCENTIVE PLAN BY ISSUING CONVERTIBLE BONDS AND/OR STOCK OPTIONS TO THE
EXECUTIVE BOARD AND SELECTED MANAGERS AND TOP PERFORMERS, CREATING
CONTINGENT CAPITAL AND AMENDING THE ARTICLES OF INCORPORATION.
The Executive and Supervisory Boards propose that the following resolution
be adopted:
The preference shareholders in a special meeting hereby approve, pursuant
to special resolution, the following resolution of the Company's
General Meeting of January 18, 2000:
(I)
a) Subject to the approval of the Supervisory Board, the Executive Board is
authorized to issue not more than 5,000,000 convertible bonds at a par
value of euro 3 not later than December 31, 2004 for the SAP AG 2000 Long
Term Incentive Plan, provided always that the number of such convertible
bonds issued multiplied by 1.25 does not, when added to the number of stock
options issued pursuant to the authorization set forth under (II), exceed
6,250,000. The convertible bonds shall not bear interest. Their term shall
not exceed ten years. Each convertible bond having a par value of euro 3
with rights to convert to SAP AG preference shares may carry the right to
convert to one SAP AG preference share. The convertible bonds may be issued
only to members of the SAP AG Executive Board and selected SAP AG managers
and top performers, and to members of the executive boards of SAP Group
Companies, and selected SAP Group Company managers and top performers if
such SAP Group Companies are affiliated companies (verbundene Unternehmen)
of SAP AG within the meaning of article 15 of the German Stock Corporation
Act ("Group Companies"). The authorization to issue convertible bonds to
members of the SAP AG Executive Board is granted solely to the Supervisory
Board. The convertible bonds may also be transferred to a credit
institution subject to a duty to transfer them at the instruction of SAP AG
to beneficiaries as contemplated under (b)(1) below, who alone are entitled
to exercise the conversion rights.
The statutory preemption rights of the shareholders are excluded.
b) The following conditions apply to the issue of convertible bonds for the
SAP AG 2000 Long Term Incentive Plan:
(1) Beneficiaries
The convertible bonds for the SAP AG 2000 Long Term Incentive Plan may
be issued only to members of the SAP AG Executive Board and selected
SAP AG managers and top performers, and to members of the executive
boards of SAP Group Companies, and selected SAP Group Company managers
and top performers. The SAP AG Executive Board will determine the
individual beneficiaries and the number of convertible bonds to be
offered to each. Where the beneficiaries are members of the SAP AG
Executive Board, the SAP AG Supervisory Board alone will determine the
individual beneficiaries and the number of convertible bonds to be
offered to each and will issue the convertible bonds.
<PAGE> 2
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The quantities of convertible bonds that may be issued are limited as
follows:
aa) To all members of the SAP AG Executive Board, in total not more
than 225,000 convertible bonds, provided always that the number
of such convertible bonds issued multiplied by 1.25 does not,
when added to the number of stock options issued to members of
the SAP AG Executive Board pursuant to the authorization set
forth under (II), exceed 281,250.
bb) To all members of executive boards of SAP Group Companies in
total not more than 850,000 convertible bonds, provided always
that the number of such convertible bonds issued multiplied by
1.25 does not, when added to the number of stock options issued
to members of the SAP Group Company executive boards pursuant to
the authorization set forth under (II), exceed 1,062,500.
cc) To all selected SAP AG managers and top performers, in total not
more than 2,125,000 convertible bonds, provided always that the
number of such convertible bonds issued multiplied by 1.25 does
not, when added to the number of stock options issued to selected
SAP AG managers and top performers pursuant to the authorization
set forth under (II), exceed 2,656,250.
dd) To all selected SAP Group Company managers and top performers, in
total not more than 1,800,000 convertible bonds, provided always
that the number of such convertible bonds issued multiplied by
1.25 does not, when added to the number of stock options issued
to selected SAP Group Company managers and top performers
pursuant to the authorization set forth under (II), exceed
2,250,000.
The issue of convertible bonds to members of the Executive Board will
be disclosed each year in the Notes to the Financial Statements in the
Annual Report, and the disclosures will include the quantities of
convertible bonds issued and the names of the beneficiary members of
the Executive Board. The quantities of conversion rights exercised by
members of the Executive Board during the fiscal year, together with
the conversion prices paid, and the quantities of convertible bonds
held by members of the Executive Board at year-end, will similarly be
disclosed.
(2) Conversion rights
The holders of convertible bonds are entitled to exchange their bonds
for non-voting bearer SAP AG preference shares. These shares carry the
same rights under the Articles of Incorporation as other preference
shares previously issued. Each convertible bond having a par value of
euro 3 entitles its holder to purchase one SAP AG preference share.
The new preference shares are eligible for dividends from the
beginning of the first fiscal year for which no General Meeting
resolution for the appropriation of retained earnings had been adopted
before the time at which the conversion right was exercised. The
conditions of the conversion program may provide that the Company, at
its option, may elect to satisfy the beneficiary's conversion right by
issuing to the beneficiary shares acquired by the Company rather than
new shares pursuant to the Contingent Capital. All decisions
concerning the issue of shares acquired by the Company to
beneficiaries who are members of the SAP AG Executive Board will be
made solely by the Supervisory Board.
(3) Times of issue
The convertible bonds will be issued in not fewer than three annual
tranches, and not more than 50% of the total quantity to be issued
will be included in any single tranche. Convertible bonds will not be
issued between the sixteenth day of the last month of a fiscal quarter
and the day on which SAP announces the provisional results for that
quarter (inclusive), nor will they be issued between March 16 in any
year and the day of the SAP Annual General Meeting (inclusive). The
day of issue is the day on which SAP AG or the credit institution
managing the issue for SAP AG accepts the beneficiary's subscription.
<PAGE> 3
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(4) Conversion times
Beneficiaries may not convert their bonds until a freeze period has
elapsed. The freeze period for 33% of a beneficiary's conversion
rights ends two years after issue of the bonds (i.e. the day on which
SAP AG or the credit institution managing the issue for SAP AG accepts
the beneficiary's subscription.). The freeze period for the next 33%
ends three years after issue of the bonds, and the freeze period for
the balance ends four years after issue of the bonds. Conversion
rights cannot be exercised between the sixteenth day of the last month
of a fiscal quarter and the day on which SAP announces the provisional
results for that quarter (inclusive), nor can they be exercised
between March 16 in any year and the day of the SAP Annual General
Meeting (inclusive).
(5) Conversion price and additional cash payment
The conversion price for an SAP AG preference share shall equal the
closing price of the SAP AG preference share quoted on the Frankfurt
Stock Exchange in the XETRA trading system (or successor system) on
the last day of trading prior to issue of the convertible bond (the
day on which SAP AG or the credit institution managing the issue for
SAP AG accepts the beneficiary's subscription). When beneficiaries
exercise their conversion rights, they will make an additional payment
for each share equal to the amount by which the conversion price of
the share exceeds the par value of the converted convertible bond. The
conversion price will be not less than the lowest issue price within
the meaning of article 9 (1) of the German Stock Corporation Act.
The conditions of the conversion program may provide that if, during
the term of the convertible bonds, the capital stock of SAP AG is
increased by the issue of new shares or sale of shares owned by the
Company, and holders of preference shares are granted subscription
rights with respect thereto, or bonds with conversion rights or
options for SAP AG shares are issued, then the conversion price shall
be reduced in proportion as the price of the preference shareholders'
subscription rights averaged over all the days on which the
subscription rights were traded on the Frankfurt Stock Exchange stands
in relation to the SAP AG preference share closing price in the
Frankfurt Stock Exchange XETRA trading system (or its successor
system) on the last trading day before the issue of the shares on
exercise of the subscription right. Such a reduction will not be
applied if the holders of the convertible bonds are afforded
subscription rights that are equivalent to the subscription rights of
the preference shareholders.
(6) Nonnegotiability
The convertible bonds are not negotiable. Holders of the associated
conversion rights may only exercise those rights while they are
employees of SAP AG or an SAP Group Company and termination notice has
not been given with respect to their employment. Notwithstanding the
foregoing provision, holders of conversion rights for which the freeze
period set forth in (4) has expired at the time when employment
termination notice is served or at the time when the employment ends
if it is not terminated by notice may exercise their conversion rights
within a grace period of three months after employment termination
notice is served or the employment ends, subject to the provisions in
(4) concerning times when conversion rights cannot be exercised. If
these conversion rights are not exercised within the grace period,
they shall lapse at the end thereof. Conversion rights for which the
freeze period set forth in (4) has not expired shall lapse at the time
when employment termination notice is served or at the time when the
employment ends if it is not terminated by notice. Special provision
may be made for cases of death, retirement, mutually agreed
termination, and hardship. This also applies for cases where SAP AG
transfers its participation in Group Companies to third parties.
<PAGE> 4
- 4 -
(7) Other provisions
The Executive Board is authorized to adopt additional terms of the
conditions of the conversion program and detail conditions relating to
the issue and structure of the convertible bonds, subject to approval
by the Supervisory Board. The Supervisory Board shall adopt additional
terms of the conditions of the conversion program as well as terms
relating to the issue and structure of the convertible bonds where the
beneficiaries are Executive Board members.
(II)
a) Subject to the approval of the Supervisory Board, the Executive Board is
authorized to issue not more than 6,250,000 stock options bearing
subscription rights to SAP AG preference shares not later than December 31,
2004 for the SAP AG 2000 Long Term Incentive Plan, provided always that the
number of such stock options issued does not, when added to the number of
convertible bonds issued pursuant to the authorization set forth under (I)
multiplied by 1.25, exceed 6,250,000. Each stock option with SAP AG
preference share subscription rights may carry the right to subscribe to
one SAP AG preference share. The stock options may be issued only to
members of the SAP AG Executive Board and selected SAP AG managers and top
performers, and to members of the executive boards of SAP Group Companies,
and selected SAP Group Company managers and top performers where such SAP
Group Companies are affiliated companies (verbundene Unternehmen) of SAP AG
within the meaning of article 15 of the German Stock Corporation Act. The
authorization to issue stock options to members of the SAP AG Executive
Board is granted to the Supervisory Board only. The stock options may also
be transferred to a credit institution subject to a duty to transfer them
at the instruction of SAP AG to beneficiaries as contemplated under (b)(1)
below, who alone are entitled to exercise the subscription rights.
Shareholders shall not have preemptive rights.
b) The following conditions apply to the issue of stock options for the SAP AG
2000 Long Term Incentive Plan:
(1) Beneficiaries
The stock options for the SAP AG 2000 Long Term Incentive Plan may be
issued only to members of the SAP AG Executive Board and selected SAP
AG managers and top performers, and to members of the executive boards
of SAP Group Companies, and selected SAP Group Company managers and
top performers. The SAP AG Executive Board will determine the
individual beneficiaries and the number of stock options to be offered
to each. Where the beneficiaries are members of the SAP AG Executive
Board, the SAP AG Supervisory Board alone will determine the
individual beneficiaries and the number of stock options to be offered
to each and will issue the stock options.
The quantities of stock options that may be issued are limited as
follows:
aa) To all members of the SAP AG Executive Board, in total not more
than 281,250 stock options, provided always that the number of
such stock options issued does not, when added to the number of
convertible bonds issued to members of the SAP AG Executive Board
pursuant to the authorization set forth under (I) multiplied by
1.25, exceed 281,250.
bb) To all members of the SAP Group Company executive boards, in
total not more than 1,062,500 stock options, provided always that
the number of such stock options issued does not, when added to
the number of convertible bonds issued to members of the SAP
Group Company executive boards pursuant to the authorization set
forth under (I) multiplied by 1.25, exceed 1,062,500.
cc) To all selected SAP AG managers and top performers, in total not
more than 2,656,250 stock options, provided always that the
number of such stock options issued does not, when added to the
number of convertible bonds issued to selected SAP AG managers
and top performers pursuant to the authorization set forth under
(I) multiplied by 1.25, exceed 2,656,250.
<PAGE> 5
- 5 -
dd) To all selected SAP Group Company managers and top performers, in
total not more than 2,250,000 stock options, provided always that
the number of such stock options issued does not, when added to
the number of convertible bonds issued to selected SAP Group
Company managers and top performers pursuant to the authorization
set forth under (I) multiplied by 1.25, exceed 2,250,000.
The issue of stock options to members of the Executive Board will be
disclosed each year in the Notes to the Financial Statements in the
Annual Report, and the disclosures will include the quantities of
stock options issued and the names of the beneficiary members of the
Executive Board. The quantities of subscription rights exercised by
members of the Executive Board during the fiscal year, together with
the exercise prices paid, and the quantities of stock options held by
members of the Executive Board at year-end, will similarly be
disclosed.
(2) Subscription rights
The holders of stock options are entitled to subscribe to non-voting
bearer SAP AG preference shares. These shares carry the same rights
under the Articles of Incorporation as other preference shares
previously issued. Each stock option entitles its holder to purchase
one SAP AG preference share in consideration of payment of the
exercise price as envisioned in (5). The new preference shares are
eligible for dividends from the beginning of the first fiscal year for
which no General Meeting resolution for the appropriation of retained
earnings had been adopted before the time at which the subscription
right was exercised. The conditions of the conversion program may
provide that the Company, at its option, may elect to satisfy the
beneficiary's conversion right by issuing to the beneficiary shares
acquired by the Company rather than new shares pursuant to the
Contingent Capital. All decisions concerning the issue of the
Company's own shares to beneficiaries who are members of the SAP AG
Executive Board will be made by the Supervisory Board alone.
(3) Times of issue
The convertible bonds will be issued in not fewer than three annual
tranches, and not more than 50% of the total quantity to be issued
will be included in any single tranche. Stock options will not be
issued between the sixteenth day of the last month of a fiscal quarter
and the day on which SAP announces the provisional results for that
quarter (inclusive), nor will they be issued between March 16 in any
year and the day of the SAP Annual General Meeting (inclusive). The
day of issue is the day on which SAP AG or the credit institution
managing the issue for SAP AG accepts the beneficiary's subscription.
(4) Conversion times
Beneficiaries may not exercise the subscription rights attaching to
their stock options until a freeze period has elapsed. The freeze
period for 33% of a beneficiary's subscription rights ends two years
after issue of the stock options (i.e. the day on which SAP AG or the
credit institution managing the issue for SAP AG accepts the
beneficiary's subscription). The freeze period for the next 33% ends
three years after issue of the stock options, and the freeze period
for the balance ends four years after issue of the stock options.
Subscription rights cannot be exercised between the sixteenth day of
the last month of a fiscal quarter and the day on which SAP announces
the provisional results for that quarter (inclusive), nor can they be
exercised between March 16 in any year and the day of the SAP Annual
General Meeting (inclusive).
(5) Threshold for exercise of rights
Subscription rights attaching to stock options can be exercised only
if the performance of the SAP AG preference share value over the
period commencing upon issue of the stock option concerned ("initial
value") and the last trading day on the Frankfurt Stock Exchange
before exercise of the subscription rights attaching to the stock
options ("final value") exceeds the performance of the reference index
over the same period.
<PAGE> 6
- 6 -
The reference index is the GSTI(TM) Software index of the Goldman,
Sachs & Co. investment bank. If Goldman, Sachs & Co. discontinues the
GSTI Software index, another index will be used instead that
substantially plots the performance of software manufacturers and
whose development showed a strong correlation with that of the GSTI
Software index during the GSTI Software index's last year. If no such
other index is available, then the GSTI Software index will be
updated. Any decision concerning the use of another index or rules for
updating the GSTI index will be made by the SAP AG Supervisory Board.
The initial value for determining the performance of the SAP AG
preference share is the closing price of the SAP AG preference share
quoted on the Frankfurt Stock Exchange in the XETRA trading system (or
successor system) on the last day of trading prior to issue of the
stock option (the day on which SAP AG or the credit institution
managing the issue for SAP AG accepts the beneficiary's subscription).
The initial value for determining the performance of the reference
index is the last value recorded for the reference index on the same
trading day on the Chicago Board Options Exchange. The final value for
determining the performance of the SAP AG preference share is the
closing price of the SAP AG preference share quoted on the Frankfurt
Stock Exchange in the XETRA trading system (or successor system) on
the last day of trading prior to exercise of the subscription right
attached to the stock option. The final value for determining the
performance of the reference index is the last value recorded for the
reference index on the same trading day on the Chicago Board Options
Exchange. The initial value and the final value of the reference index
will be translated from U.S. dollars to euros using the spot mid
cash-paper range rate on the Frankfurt interbank market.
Performance is the increase measured between the initial value and the
final value, expressed as percentage points. In calculating the
performance of the SAP preference share, the same adjustment rules for
dividend payments, subscription rights, and other special rights are
applied to the stock exchange prices used as are applied in
determining the reference index.
(6) Exercise price
The exercise price for one SAP AG preference share is calculated by
reference to the outperformance. The outperformance is the percentage
points by which the performance of the SAP AG preference share
determined in accordance with (5) exceeds the performance of the
reference index determined in accordance with (5), as follows:
The exercise price is the final value determined in accordance with
(5) less the product of the initial value determined in accordance
with (5) and the outperformance. Example:
Initial value = euro 400
Final value = euro 600
Performance of the SAP preference share = 50%
Performance of the reference index = 20%
Exercise price = euro 600 minus (30% of euro 400) = euro 480
The conditions of the option program may provide that if, during the
term of the stock options, the capital stock of SAP AG is increased by
the issue of new shares or sale of shares owned by the Company, and
holders of preference shares are granted preemptive rights, or
convertible bonds are issued carrying conversion rights or options for
SAP AG shares, then the exercise price is reduced in proportion as the
price of the preference shareholders' preemptive rights averaged over
all the days on which the preemptive rights were traded on the
Frankfurt Stock Exchange stands in relation to the SAP AG preference
share closing price in the Frankfurt Stock Exchange XETRA trading
system (or its successor system) on the last trading day before the
issue of the shares on exercise of the preemptive right. Such a
reduction will not be applied if the holders of the stock options are
afforded subscription rights that are equivalent to the preemptive
rights enjoyed by the preference shareholders.
These provisions notwithstanding, the minimum exercise price is the
smallest issue sum envisioned in the German Stock Corporation Act,
article 9 (1).
- --------------------------------
(TM) GSTI is a trademark of Goldman, Sachs & Co.
<PAGE> 7
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(7) Nonnegotiability
The stock options are not negotiable. Holders of the associated
subscription rights may only exercise those rights while they are
employees of SAP AG or an SAP Group Company and termination notice has
not been given with respect to their employment. Notwithstanding the
foregoing provision, holders of subscription rights for which the
freeze period laid down in (4) has expired at the time when employment
termination notice is served or at the time when the employment ends
if it is not terminated by notice may exercise their conversion rights
within a grace period of three months after employment termination
notice is served or the employment ends, subject to the provisions in
(4) concerning times when conversion rights cannot be exercised. If
these subscription rights are not exercised within the grace period
they lapse at the end of it. Subscription rights for which the freeze
period set forth in (4) has not expired shall lapse at the time when
employment termination notice is served or at the time when the
employment ends if it is not terminated by notice. Special provision
may be made for cases of death, retirement, resignation on friendly
terms, and hardship. This also applies for cases where SAP AG
transfers its participation in Group Companies to third parties.
(8) Other provisions
The Executive Board is authorized to adopt additional terms of the
conditions of the option program and details relating to the issue and
structure of the stock options, subject to approval by the Supervisory
Board. The Supervisory Board shall adopt additional terms of the
option program and terms relating to the issue and structure of the
stock options where the beneficiaries are members of the Executive
Board.
(III)
The Company's capital stock will be subject to a contingent increase of euro
15,977,871.29 by the issue of up to 6,250,000 bearer preference shares that
carry the same rights under the Articles of Incorporation as previously issued
preference shares (Contingent Capital III). Contingent Capital III secures the
conversion rights attaching to convertible bonds and the subscription rights
attaching to stock options issued before December 31, 2004 pursuant to the
authorization granted by the SAP AG General Meeting of January 18, 2000 in
connection with the SAP AG 2000 Long Term Incentive Plan in accordance with the
provisions of (I) and (II) herein. The contingent capital increase will be
effected only to the extent that convertible bonds and stock options are issued
and the holders thereof exercise their conversion or subscription rights, as the
case may be, to exchange them for shares and the Company does not satisfy the
conversion and subscription rights from shares owned by the Company. Shares will
be issued from Contingent Capital III to satisfy conversion rights attaching to
convertible bonds at the conversion price determined in accordance with
(I)(b)(5) and to satisfy subscription rights attaching to stock options at the
exercise price determined in accordance with (II)(b)(5). The new shares are
eligible for dividends from the beginning of the first fiscal year for which no
General Meeting resolution for the appropriation of retained earnings had been
adopted before the time at which the conversion or subscription right was
exercised.
Article 4 of the Articles of Incorporation is amended by the addition of the
following section 7:
"(7) The Company's capital stock is subject to a contingent increase
of euro 15,977,871.29 by the issue of up to 6,250,000 nonvoting
bearer preference shares that rank equally with the previously
issued preference shares (Contingent Capital III). The contingent
capital increase will be effected only to the extent that holders
of convertible bonds and stock options, issued before December
31, 2004 pursuant to the authorization granted by the General
Meeting of January 18, 2000 in connection with the SAP AG 2000
Long Term Incentive Plan, exercise their conversion and
subscription rights and the Company does not satisfy the
conversion and subscription rights, as the case may be, from
shares owned by the Company. The new shares issued in connection
with the exercise of these rights are eligible for dividends from
the beginning of the first fiscal year for which no General
Meeting resolution for the appropriation of retained earnings had
been adopted before the time at which the conversion or
subscription right was exercised."
<PAGE> 8
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2. APPROVAL OF THE RESOLUTION OF THE EXTRAORDINARY GENERAL MEETING,
JANUARY 18, 2000, AUTHORIZING THE COMPANY TO REPURCHASE ITS OWN SHARES
The Executive and Supervisory Boards propose that the following resolution
be adopted:
The preference shareholders in a special meeting hereby approve, pursuant
to special resolution, the following resolution of the Company's General
Meeting of January 18, 2000:
The Company is hereby authorized to purchase on the stock market up to
6,250,000 no-par SAP AG preference shares currently representing up to euro
15,977,871.29 as a proportion of the capital stock. The purchase price
(without incidental purchase costs) paid by the Company for each SAP AG
preference share shall not be more than 10% below or 10% above the average
price of the preference share on the Stock Market over the five trading
days before purchase, being the arithmetic mean of the SAP AG preference
share closing prices in the Frankfurt Stock Exchange XETRA trading system
(or its successor system) for those days.
This authorization may be exercised in whole or in parts. This
authorization expires on June 30, 2001.
The Executive Board is authorized to dispose of any or all of the Company's
own SAP AG shares purchased under the authorization herein on the stock
market or to satisfy conversion and subscription rights attaching to
convertible bonds and stock options, respectively, in connection with the
SAP AG 2000 Long Term Incentive Plan pursuant to the authorization granted
by the General Meeting of January 18, 2000, and to transfer such shares to
the holders of those rights. To this extent, shareholders' preemptive
rights to the Company's own shares are excluded. All decisions concerning
the transfer of the Company's own shares to beneficiaries who are members
of the SAP AG Executive Board will be made by the Supervisory Board alone.
The Executive Board is further authorized to dispose of, without prejudice
to the shareholders' preemptive rights, the Company's own shares purchased
under the authorization herein in whole or in part by way of a rights
offering.
Finally, the Executive Board is authorized to redeem the Company's own
shares purchased under the authorization herein in whole or in part. No
further General Meeting resolution is required to implement such
redemption.
The Executive Board is required to issue reports, pursuant to article 221 (4) in
connection with article 186 (4)(2) and article 71 (1)(8) in connection with
article 186 (4)(2) of the German Stock Corporation Act, to the Extraordinary
General Meeting of January 18, 2000 concerning the resolutions in agenda Items 1
and 2. The reports were published in their entirety together with the invitation
to the Extraordinary General Meeting of January 18, 2000 in German Federal
Gazette no. 233 of December 9, 1999. The reports will be available at the
General Meeting and the special meeting of preference shareholders. They will
also be available at the offices of the Company from the day the General Meeting
is announced. The reports will be sent to any shareholder on request.
* * *
Only holders of preference shares who deposit their shares no later than Tuesday
January 11, 2000 during customary business hours at the Company or at a branch
in the Federal Republic of Germany of the financial institutions listed below,
until the end of the Extraordinary General Meeting, are entitled to participate
in the special meeting for preference shareholders and to exercise voting rights
in accordance with article 18 of the Articles of Incorporation:
DG BANK Deutsche Genossenschaftsbank
Deutsche Bank Aktiengesellschaft
Dresdner Bank Aktiengesellschaft
Bayerische Hypo- und Vereinsbank Aktiengesellschaft
BHF-BANK Aktiengesellschaft
Commerzbank Aktiengesellschaft
SGZ-Bank Sudwestdeutsche Genossenschafts-Zentralbank AG
In addition, the deposit shall be deemed to have been properly made if, with the
consent and on behalf of a depository institution, the shares are deposited with
another financial institution and blocked until the end of the special meeting.
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The shares may also be deposited with a German notary public or a securities
clearing and deposit bank. In this case, we request that a certificate issued by
the notary public or the securities clearing and deposit bank be submitted to
our Company no later than one day after the last possible day for deposits.
The admission tickets issued on the basis of the deposit serve the holders of
preference shares as identification for the exercise of their voting rights.
Article 19 (1)(2) of the Articles of Incorporation accords each preference share
one vote at the special meeting for preference shareholders. Ordinary
shareholders are not entitled to participate or vote in the special meeting of
preference shareholders.
Preference shareholders may appoint a proxy for the special meeting, for
example, their deposit bank, a shareholders' association, or a private
individual.
Walldorf, December 1999
SAP Aktiengesellschaft
Systeme, Anwendungen, Produkte in der Datenverarbeitung
The Executive Board
