Siemens 2007 Annual Report Download - page 193

Management’s discussion and analysis 193
Management’s discussion and analysis
holder acquiring the minority interest formerly held by Siemens AG. From the
transaction, Siemens AG would receive income that basically corresponds to the
fair market price of the equity interest at the time of exercising the right. On the
other hand, Siemens AG would no longer be entitled to receive a share in the net
income derived from the entity’s nuclear power business.
Siemens AG maintains lines of credit in an aggregate amount of U.S.$9 billion
which provide its lenders with a right of termination in the event that (i) Siemens
AG becomes a subsidiary of another company or (ii) an individual or a group of
individuals acting in concert acquires effective control over Siemens AG by being
able to exercise signifi cant infl uence over its activities. In addition, Siemens AG
has a credit line at its disposal in the amount of €450 million which may be termi-
nated by the lender if major changes in Siemens AG’s corporate legal situation
occur that jeopardize the orderly repayment of the credit.
Agreements concluded by Siemens AG under the International Swaps and
Derivatives Association Inc. framework (“ISDA agreements”) each give Siemens
AG’s contractual party a right of termination if (i) Siemens AG is merged into a
third party, or (ii) all or substantially all of the assets of Siemens AG are trans-
ferred to a third party. In the event that the third party does not assume the obli-
gations of Siemens AG, all outstanding transactions under the respective agree-
ments may be terminated. If the third party chooses to assume the obligations of
Siemens AG under such agreement and its creditworthiness is materially weaker
than that of Siemens AG, the affected transactions under the respective agree-
ments may be terminated. In either situation, the outstanding payment claims
under such agreement are to be netted.
(9) Compensation agreements with members of the Managing Board or
employees in the event of a takeover bid
In the event of a change of control – i.e. if one or several shareholders acting
jointly or in concert acquire a majority of the voting rights in Siemens AG and
exercise a controlling infl uence, or if Siemens AG becomes a dependent enterprise
as a result of entering into an enterprise contract within the meaning of §291 of
the German Stock Corporation Act, or if Siemens AG is to be merged into another
company – any member of the Managing Board has the right to terminate the con-
tract of employment if such change of control results in a substantial change in
position (e.g. due to a change in corporate strategy or a change in the Managing
Board member’s duties and responsibilities). If this right of termination is exer-
cised, the Managing Board member will receive a severance payment which
amounts to the target annual compensation applicable at the time of contract ter-
mination for the remaining contractual term of offi ce, but at least for a period of
three years. In addition, non-monetary benefi ts are settled by a cash payment
equal to fi ve percent of the severance payment. No severance payments are made
if the Managing Board member receives benefi ts from third parties in connection
with a change of control. A right of termination does not exist if the change of con-
trol occurs within a period of twelve (12) months prior to a Managing Board mem-
ber’s retirement.