Stock Option Plan

Infineon Technologies Stock Option Plan 2006
Plan Description and Option Terms

With the resolution dated 16 February 2006 the Infineon Technologies AG annual general shareholders’ meeting authorized the introduction of the new Infineon Technologies Stock Option Plan 2006. Under this plan, Infineon can issue up to 13 million stock options in annual tranches over a maximum period of three years.

Mission of the Stock Option Plan 2006

At Infineon Technologies AG, we are committed to attracting and rewarding key employees. By granting stock options under the Infineon Technologies Stock Option Plan 2006 (SOP 2006), we offer a selected group of executives and key personnel the opportunity to participate in the long-term success of the company to honor their contribution to the profitable growth of Infineon Technologies AG and its group companies.

Participants
Eligible to participate in the Infineon Technologies Stock Option Plan are

• members of the Management Board of Infineon,

• members of the management boards of Infineon group companies,

• other executives with a Global Grade 16 or higher,

• equivalent positions on the Technical Ladder, such as Fellows and Senior Principals.

Basics about Stock Options
A stock option is the right, but not the obligation, to purchase a company's stock at a fixed exercise price.

The recipient of the option, also called optionee, can exercise his options over the exercise period, i.e. between the vesting and the expiration date of the option. In general, no upfront payments are due at the time the company grants and the participant accepts stock options.

When exercising options, the optionee pays the exercise price and receives in return a stock of the company he can either continue to hold or immediately sell on the stock market. In most countries, this is also the time when taxes and, if applicable, social security contributions are incurred.


The Terms of the SOP 2006

Life of the Plan
The SOP 2006 is a three year plan. Options can be granted in three annual tranches. No grants are allowed after September 2009.

Grant of Options
Only one grant can be made during a fiscal year, the grant date is the same worldwide.

Options may be granted by a formal decision of the Management Board (and Supervisory Board, where applicable) either

• within 45 days after annual results;

• or within 45 days after the results of the first or second quarter

have been published, but in each case no later than two weeks before the end of the quarter.

Exercise Price
The exercise price of an option is 120% of the average opening prices on the five trading days before the grant date.

Minimum Waiting Period
Options granted under the SOP 2006 are subject to an initial waiting period of three years before they can be exercised.

Exercising Stock Options
Options can be exercised once the initial waiting period of three years is over, given that the performance targets have been reached.

Options expire six years from their grant date.

 
Performance Targets
The German Corporate Governance Codex explicitly asks for the “setting of demanding per-formance targets“ and our shareholders expect us to fully comply with the Codex. Options granted under the SOP 2006 are subject to an absolute as well as a relative performance target.

Absolute Performance Target
The Infineon share price in the XETRA trading system must equal or exceed the exercise price of the option on at least one trading day during the option life.

Relative Performance Target
The Infineon share price must exceed the performance of a comparative index “Philadelphia Semiconductor Sector” (SOX) for at least three consecutive days.

The purpose of the relative hurdle is to compare the company‘s stock performance to the relevant competitors stock performance, represented by an index. In order to make the two figures comparable, they are normalized at the grant date of the option. If the Infineon share performs better than the SOX, we have outperformed the market index. If that has been the case for three consecutive days, the relative hurdle has been reached.

Administrative Details
Termination of Employment  

Tax Treatment
All taxes, employee social security contributions or similar obligations resulting from the grant or exercise of options or the sale of the shares acquired on exercise of options must be borne by the participant. In most countries, the taxable event occurs at the time of the exer-cise of an option. The individual tax treatment of options might differ considerably due to per-sonal circumstances or changes in applicable tax rules.

Insider Trading
Due to insider regulations, options may not be exercised two weeks before the end of each quarter until the end of one trading day after the respective financial results have been pub-lished.

Exercising Stock Options
We have selected UBS AG (Union Bank of Switzerland) as our Service Provider to support participants in all administrative matters of the SOP 2006.

Option Terms and Plan Rules
Please refer to the option, which are binding for all participants who have accepted options granted under the SOP 2006.

Plan Authority
The Infineon Technologies AG Management Board together with the Supervisory Board is authorized to create, alter and amend the rules of the SOP 2006, including the administration processes and other technicalities regarding the exercise of options. The participants in the SOP 2006 have the obligation to inform themselves prior to exercising options about the ap-plicable rules.

Data Transfer and Protection
For the purpose of the administration of the SOP 2006, Infineon Technologies may store, process, transfer and use personal data of participants to third parties, such as the service provider chosen to handle the exercise of options or external counsel, employed to adminis-ter or to assist with the administration and implementation of the SOP 2006. All service pro-viders are carefully selected and must comply with “state of the art” data protection standards and technology.