Report in accordance with section 315 (4) of the German Commercial Code (HGB)
The following information is provided in accordance with section 315 (4) of the German Commercial Code and the explanatory report pursuant to section 176 (1) sentence 1 of the German Stock Corporation Act (AktG).
As of the balance sheet date, the company’s subscribed capital is divided into 129,242,251 no-par value bearer shares plus one registered share. Each share therefore corresponds to € 1.30 of the share capital. The holder of the registered share is E. Merck Beteiligungen KG. It is entitled and obliged to appoint one-third of the members of the Supervisory Board representing the limited liability shareholders. If the holder of the registered share is a general partner, he or she has no such right of appointment. The transfer of the registered share requires the company’s approval. The approval is granted at the sole discretion of the personally liable general partner with an equity interest, namely E. Merck KG.
Pursuant to the information on voting rights submitted to us in accordance with the German Securities Trading Act (WpHG), on December 31, 2016 no shareholders owned direct or indirect investments exceeding more than 10% of the voting rights.
According to the Articles of Association of Merck, the general partners not holding an equity interest who form the Executive Board are admitted by E. Merck KG with the consent of a simple majority of the other general partners. A person may only be a general partner not holding an equity interest if he or she is also a general partner of E. Merck KG. In addition, at the proposal of E. Merck KG and with the approval of all general partners not holding an equity interest, further persons who are not general partners not holding an equity interest may be appointed to the Executive Board.
The Articles of Association can be amended by a resolution by the Annual Meeting that requires the approval of the general partners. The resolutions of the General Meeting are, not withstanding any statutory provisions to the contrary, adopted by a simple majority of the votes cast. Where the law requires a capital majority in addition to the voting majority, resolutions are adopted by a simple majority of the share capital represented in the vote. The Articles of Association of the company specify the authorized share capital.
The Executive Board is authorized, with the approval of the Supervisory Board and of E. Merck KG, to increase the share capital on one or several occasions until April 26, 2018 by up to a total of € 56,521,124.19 by issuing new shares against cash and / or contributions in kind (Authorized Capital).
The Executive Board is authorized to exclude, with the approval of the Supervisory Board, the statutory subscription right of the limited liability shareholders in the case of capital increases against cash contributions if the issue price of the new shares is not significantly lower than the stock exchange price of already listed shares carrying the same rights, as defined in section 203 (1) and (2) and section 186 (3) sentence 4 of the German Stock Corporation Act (AktG), at the time when the Executive Board finally fixes the issue price, and if the proportion of the share capital represented by the new shares for which the subscription right is excluded does not exceed 10% of the share capital available at the time of the resolution of the Annual General Meeting or – if this amount is lower – of the share capital available at the time of exercising this authorization. This upper limit (10% of the share capital) shall be reduced by the prorated amount of shares that are sold during the term of the authorized capital under exclusion of shareholders’ subscription rights pursuant to section 71 (1) no. 8 sentence 5 and section 186 (3) sentence 4 of the German Stock Corporation Act, as well as shares that must be issued to redeem option or convertible bonds, as long as the bonds have been issued during the term of this authorization under exclusion of subscription rights. In addition, with the approval of the Supervisory Board, the subscription right of the shareholders can be excluded in order to enable E. Merck KG to exercise its right pursuant to Article 32 (3) of the Articles of Association to participate in a capital increase by issuing shares or freely transferable share subscription rights and to enable E. Merck KG to exercise its right pursuant to Article 33 of the Articles of Association to convert its equity interest into share capital. Moreover, with the approval of the Supervisory Board, the subscription right of the shareholders can be excluded as far as this is necessary, in order to grant subscription rights for new shares to holders of warrants and convertible bonds issued by the company or its subsidiaries, to the extent to which they would be entitled after exercising their option and conversion rights or fulfilling their option and conversion obligations. Lastly, with the approval of the Supervisory Board, the subscription right of the shareholders can be excluded in order to exclude fractional amounts from the subscription right.
The Articles of Association also encompass contingent capital. The share capital is contingently increased by up to € 66,406,298.40 divided into 51,081,768 shares (Contingent Capital I). The contingent capital increase serves to grant exchange rights to E. Merck KG in accordance with Article 33 of the Articles of Association to enable the conversion of its equity interest. The shares carry dividend rights from the beginning of the fiscal year following the year in which the conversion option is exercised. Moreover, the share capital is contingently increased by up to € 16,801,491.20 composed of up to 12,924,224 no par value bearer shares (Contingent Capital II).
This increase in contingent capital is only to be implemented insofar as the bearers or creditors of option or conversion rights or the conversion obligations on warrant bonds, option participation certificates, option participation bonds, convertible bonds, convertible participation certificates or convertible participation bonds issued against contributions that are issued or guaranteed by the company or a subordinate Group company on the basis of the authorization resolution of the Annual General Meeting of May 9, 2014 to May 8, 2019, utilize their option or conversion rights or, to fulfill their conversion obligation insofar as they are obliged to fulfill their conversion obligation, or insofar as the company exercises an option, wholly or in part, of granting shares in the company instead of paying the sum of money due and to the extent that in each case a cash settlement is not granted, or own shares or other forms of fulfillment are used.
Each issue of new shares shall take place at the determined option or conversion price, pursuant to the aforementioned authorization resolution. The new shares participate in the profit from the beginning of the fiscal year in which they are created; insofar as this is legally permissible, the Executive Board may, with the approval of the Supervisory Board, and in deviation from section 60 (2) AktG, stipulate that the new shares also participate in the profit for a past fiscal year. The Executive Board is authorized, with the approval of the Supervisory Board and of E. Merck, to stipulate the further details of the implementation of the increase in contingent capital.
The company is not authorized to acquire its own shares. The company has not entered into any material agreements subject to a change of control pursuant to a takeover offer nor has it entered into any compensation agreements with the members of the Executive Board or employees in the event of a takeover offer.