1 EXECUTIVE BOARD

1.1 EXECUTIVE BOARD COMPENSATION

The Executive Board compensation package is defined by the Compensation Committee of the Supervisory Board, of which the current members are Supervisory Board Chairperson Prof. Dr. h. c. mult. Hasso Plattner, Prof. Dr. Wilhelm Haarmann, and Dr. Gerhard Maier.

Executive Board members’ compensation is intended to reflect the Company’s size and global presence as well as its economic and financial standing. The level is intended to be internationally competitive to reward committed, successful work in a dynamic environment.

The compensation of the Executive Board as a body is performance-based. It has three elements: a fixed element, a variable directors’ profit-sharing bonus, and a stock-based element. A compensation target is set for the total of fixed and directors’ profit-sharing elements. The Company reviews the compensation target every year in the light of SAP’s business and directors’ compensation at comparable companies on the international stage.

Criteria applying to the elements of Executive Board compensation:

• The fixed element is paid as a monthly salary.
• The directors’ profit-sharing element depends on the SAP Group’s success in achieving its target for operating income before stock-based compensation expenses and acquisition-related charges and on software revenue growth. On February 9, 2005, the Supervisory Board’s Compensation Committee assessed the Company’s performance against the agreed target and determined how much directors’ profitsharing was payable. The Company will make the payment after the Annual General Shareholders’ Meeting in May.
• Stock-based compensation takes the form of share options issued under SAP SOP 2002, a plan that the SAP Annual General Shareholders’ Meeting approved on May 3, 2002. Details of the plan and the terms of options under it are set out in Note 23 to the Consolidated Financial Statements. For options granted to members of the Executive Board in and from February 2004, the SAP SOP 2002 plan conditions provide for a potential limitation on the subscription rights to the extent that the Supervisory Board determines that, by exercising the rights, the option holder would make a profit that would be characterized as a windfall by, combined with the profit from earlier exercises of subscription rights issued to the option holder at the same issuing date, exceeding twice the product of (i) the number of subscription rights received by the option holder and (ii) the exercise price. Such profit is determined as the total of the differences, calculated individually for each exercised subscription right, between the closing price of the share on the exercise day and the exercise price. SAP AG undertakes to pay back to the option holders any expenses they may incur through fees, taxes, or deductions related to the limit on achievable income. The subscription rights shall only be limited if the Supervisory Board determines that the windfall results from significant extraordinary, unforeseeable developments that the Executive Board is not responsible for.
  The number of stock options to be issued to each individual member of the Executive Board was decided by the Compensation Committee at its meeting on February 17, 2004, and reflected the fair value of the options.

Executive Board members’ compensation in fiscal year 2004:

¹⁾ Payout pension contributions, insurance contributions, non-cash benefits (company cars).

For all members, in 2004 fixed salaries totaled €3,078 thousand (2003: €3,371 thousand) and variable components totaled €12,102 thousand (2003: €14,555 thousand). For members who joined or left the Executive Board during the fiscal year, the table shows only compensation for their time in membership.

Another factor was the reduction in the number of members from eight to seven in 2003.

In addition to the compensation above, in 2004 Shai Agassi received €704 thousand (2003: €860 thousand) in cash from stock-based compensation entitlements that he received as a member of the management of TopTier Software, Inc. prior to the acquisition of TopTier by SAP. When it acquired TopTier in 2001, SAP agreed to pay these entitlements to all former employees and managers of TopTier who were still SAP employees after a certain period.

During 2004, members of the Executive Board received the following stock options under SAP SOP 2002:

At grant, the fair value of the stock options granted to the Executive Board members under SAP SOP 2002 was €43.61 per option. The term of the options is five years.

Retirement pension plan
On January 1, 2000, SAP AG introduced a contributory retirement pension plan. At that time the performance-based retirement plan was discontinued for Executive Board members. Entitlements accrued up to December 31, 1999, were unaffected.

In 2004, pension benefits of €247 thousand (2003: nil) were paid to former Executive Board members. As of December 31, 2004, the projected benefit obligation for former Executive Board members was €10,819 thousand (2003: €10,255 thousand).