Annual Report 2005/06 THE WORLD OF SOUND - Sonova

Highest total compensationThe highest total compensation paid to a member of theBoard of Directors in the financial year 2005/06 was to AndyRihs, Chairman. This compensation consisted of a fixed paymentof CHF 152,451 (previous year CHF 172,908) and 12,000 options(previous year 12,000 options). These options provide the rightto purchase one Phonak share at a strike price of CHF 63.25between February 1, 2007 and January 31, 2011.The highest total compensation paid to a member of theManagement Board in the financial year 2005/06 was toValentin Chapero Rueda, CEO. This compensation consisted of abasic salary (incl. employer’s contribution) of CHF 1,186,739(previous year CHF 1,158,792) as well as a performance-relatedbonus (incl. employer’s contribution) of CHF 736,755 (previousyear CHF 684,040). In the financial year 2005/06 no options weregranted to Valentin Chapero Rueda (previous year 400,000options in the course of the renewal of the long-term employmentcontract).Shareholders’ Participation RightsVoting rights restriction and representationTo be recognized as a shareholder with comprehensiverights, the acquirer of shares must place an application for entryin the share register. The registration in the share register asa shareholder with voting rights is limited to 5% of the sharecapital (Art. 6 par. 2 of the Articles of Association). Linkedparties are considered as one person. To abolish this regulation,the absolute majority of the votes represented at the AnnualGeneral Shareholders’ Meeting is sufficient.In exercising their voting rights, no shareholder may unite,by a combination of own and represented shares together, morethan 10% of the shares of the company (Art. 12 par. 2 of theArticles of Association).The restrictions on the voting and representation rights donot apply to the founding shareholders. The Board of Directorsmay approve further exceptions with good reason and no specialquorum is required for such decisions. During the reportingperiod, no exceptions to the above listed rules were granted.Right to request items on the Annual GeneralShareholders’ Meeting agendaShareholders entitled to vote who represent at least 5% ofthe share capital may request items to be added to the agendaby indicating the relevant proposals. Such requests must beaddressed in writing to the Chairman of the Board of Directorsno later than 60 days before the meeting.Registering deadlinesThe share register will be closed for about five days beforethe Annual General Shareholders’ Meeting for administrativereasons. During this period, an admission card, with correspondingvoting papers, will be sent to shareholders. In case of apartial sale within this time, the confirming documents must beexchanged on the day of the Annual General Shareholders’Meeting at the information desk. The shares can be traded atany time and are not blocked.Changes of Control and Defense MeasuresPublic purchase offerA purchaser of shares is obliged to make a public purchaseoffer when he has more than 49% of the voting rights at hisdisposal (“opting up”, as per Art. 8 of the Articles of Association).Clauses on changes of controlThere are no agreements in place that, in the event of achange of control, provide members of the Board of Directors orthe Management Board with abnormally high severance paymentsor other lucrative benefits.In 2005, a member of the Management Board, CEO ValentinChapero Rueda, signed a long-term employment contractrunning until 2010. Under a change of control provision, he isentitled to his full salary and part of the bonus payments incase the employment is terminated due to a change of control.Corporate Governance31