Joint Report on the Spin-Off of the GEHE Aktiengesellschaft Mail Order Division and Transfer to TAKKT AG

ANNUAL GENERAL MEETING 2 JUNE 1999

Joint Report on the Spin-off of the GEHE Aktiengesellschaft Mail Order Division and Transfer to TAKKT AG

Aktiengesellschaft I. INTRODUCTION ...... 1 1.7 Effect of Spin-off on the Employees and their Representatives (§ 7) ...... 22 II. CURRENT SITUATION ...... 2 1.8 Expenses (§ 8) ...... 22 1.9 Conditions (§ 9) ...... 23 1 GEHE ...... 2 1.10 Legal Transfer of Assets and 1.1 Overview ...... 2 Liabilities (§ 10) ...... 23 1.2 Development of the GEHE Group ...... 2 1.3 Shareholder Structure ...... 3 2 Explanation of the Statutes of TAKKT ...... 24 1.4 Turnover, Results and Key Figures ...... 3 2.1 Company Name, Registered Office (§ 1) ...... 24 1.5 Employees ...... 3 2.2 Company Objects (§ 2) ...... 24 2.3 Announcements (§ 3) ...... 24 2 The Mail Order Division ...... 4 2.4 Amount and Allocation of Authorised Capital, 2.1 Overview ...... 4 Shares (§ 4) ...... 24 2.2 Historical Development ...... 5 2.5 Recall of GEHE Shares by TAKKT (§ 5) ...... 24 2.3 Development of Equity ...... 6 2.6 Composition of the Management Board (§ 6) . . 25 2.4 Development of Turnover and Profits ...... 6 2.7 Representation (§ 7) ...... 25 2.4.1 Turnover ...... 6 2.8 Composition and Term of Office For Investor Information 2.4.2 Profits ...... 6 of the Supervisory Board (§ 8) ...... 25 Please Contact: 2.5 Management ...... 7 2.9 Chairperson and Deputy (§ 9) ...... 26 2.6 Employees ...... 7 2.10 Management Rules, Calling of Meetings, Amendments (§ 10) ...... 26 Georg W. Mehring-Schlegel 3 TAKKT ...... 7 2.11 Remuneration of the Supervisory Director of Investor Relations and Finance 3.1 Overview ...... 7 Board (§ 11) ...... 26 Telephone +49 (0) 711 5001–546 3.2 Management Board ...... 7 2.12 Location, Calling of Meetings and Telefax +49 (0) 711 5001–736 Attendance at AGM (§§ 12, 13) ...... 26 E-mail: [email protected] III. REASONS FOR 2.13 Chairperson of the AGM (§ 14) ...... 27 THE MAIL ORDER DIVISION 2.14 Resolutions (§15) ...... 27 BECOMING INDEPENDENT ...... 8 2.15 Business Year, Reserves, Appropriation of Profits (§§ 16, 17) ...... 27 IV. COMMERCIAL COMMENTARY AND 2.16 Formation Expenses (§ 18) ...... 27 REASONS FOR SPIN-OFF ...... 10 3 Explanation of the Effects of Spin-off ...... 27 1 Overview ...... 10 3.1 Issue Ratio ...... 27 3.2 No negative Effect on Legal Status 2 Why Spin-off? ...... 10 of Shareholders ...... 27 2.1 Direct Participation of Shareholders 3.3 Effective Spin-off Date ...... 27 in the Success of Mail Order Division ...... 10 3.4 No Evaluation Problems ...... 28 2.2 Alternatives ...... 11 3.5 Advice in Accordance with § 142 Sub-section2 UmwG; Post-deadline Formation ...... 28 3 Why Spin-off to Transfer? ...... 12 3.5.1 Audit of Asset Transfer to TAKKT ...... 28 3.5.2 Post-deadline Formation ...... 28 4 Preparatory Restructuring within the Mail Order Division and VI. STOCK EXCHANGE ...... 29 the Tax-related Effects ...... 12 4.1 Overview ...... 12 1 Stock Market Quotation ...... 29 4.2 Details on Intra-Group Transfers ...... 13 4.3 Tax Effects on Purchase Agreements 2 Stock Market Price ...... 29 Subject to AGM Confirmation ...... 14 ANNEXES ...... 31 5 Effect on Taxation of Shareholders ...... 15 A. Pro forma Financial Statements and Profit GEHE Aktiengesellschaft 6 Effect on Balance Sheet Accounting ...... 16 and Loss Sheet for the Mail Order Division Neckartalstraße 155 6.1 GEHE ...... 16 1996, 1997, 1998 ...... 32 6.2 TAKKT ...... 17 D-70376 Stuttgart B. Spin-off Agreement ...... 34 Telephone +49(0)711 5001–00 7 Financial Effects caused by the Spin-off . . . . . 19 Telefax +49(0)711 5001–400 7.1 GEHE ...... 19 C. Statutes of TAKKT AG ...... 40 Internet www.gehe.de 7.2 TAKKT ...... 19 D. Explanation of the Evaluation Methods in 8 Effects of Spin-off on the Employees ...... 19 Establishing the Purchase Price in Connection TAKKT AG with the Preparatory Transfers Processes . . . 44 Neckartalstraße 155 V. LEGAL POSITION ...... 20 D-70376 Stuttgart E. Reports of Spin-off Auditors ...... 47 Telephone +49(0)711 5001–99 1 Explanation of Spin-off Agreement ...... 20 Telefax +49(0)711 5001–214 1.1 Transfer of Assets (§1) ...... 20 F. Abbreviations ...... 68 1.2 Subject of Spin-off (§ 2) ...... 20 1.3 Consideration (§3) ...... 21 IntraService The German version 1.4 Special Privileges and Rights (§ 4) ...... 22 Klassische und Digitale of this joint report is 1.5 Trustees (§ 5) ...... 22 Kommunikation authoritative 1.6 Change of Deadline (§ 6) ...... 22 Frankfurt/Main I. INTRODUCTION

The Management Board of GEHE Aktiengesellschaft (“GEHE”) is proposing to the Annual General Meeting that the Mail Order Division for office, warehouse and works equipment should be split off from GEHE and ﬂoated on the stock exchange as a new independent company. This should be done by splitting it off into TAKKT AG (“TAKKT”), which has been formed by GEHE for this purpose. In this way the two companies both become focussed on their own core competences, or so-called “pure plays”. During the spin-off the shareholders of GEHE will also be shareholders of TAKKT. The shareholders will receive one TAKKT share in addition to each GEHE share. It will be ensured that directly after the spin-off each GEHE shareholder will have the same shareholding in TAKKT he had in GEHE. The pre-requisite for the spin-off to come into force is the agreement of the shareholders within the framework of the Annual General Meeting. The General Meeting’s decision legally requires a three-quarters majority of the share capital to be present when the resolution is passed. The following joint report is from the Management Board of GEHE and TAKKT to the shareholders according to §127 of the Umwandlungsgesetz (“UmwG”) German Transformation Act about the details of the spin-off including the underlying motives as well as the consequences which are associated with this measure.

INTRODUCTION 1 II. CURRENT SITUATION Mail Order for office, warehouse and The Mail Order Division for office, ware- 1.4 Turnover, Results and Key Figures works equipment. house and works equipment (“Mail Order The turnover of GEHE group amounted to Division”) was founded by the acquisition of 25.4 bn DM (13 bn Euro) in 1998. The results Since the transfer of the German pharma- Kaiser + Kraft GmbH in 1985, in accordance from the usual business activities before ceutical wholesale business operations into with the strategy of diversification at the income, profit and asset taxes amounted to GEHE Pharma Handel GmbH, GEHE oper- time. Since then this new division has been 504 million DM (258 million Euro). Due to ates exclusively as the holding company. expanded strongly through acquisition and the expansion of the core businesses in the organic growth (including newly formed most important European markets since 1993 1.2 Development of the GEHE Group companies). the foreign share in the important company GEHE was founded in 1835 by the busi- key figures has grown steadily. The foreign nessman Franz Ludwig Gehe in Dresden. It 1.3 Shareholder Structure portion of the group turnover amounted to has been a public company since 1903. GEHE’s majority shareholder is Franz circa 77% in 1998 and accounted for 74% of 1GEHE Haniel & Cie. GmbH, Duisburg-Ruhrort the profits from normal activities before GEHE has experienced an impressive (“Haniel”), with a shareholding of circa income, profit and asset taxes. 1.1 Overview growth in the last two decades through 50.1% in the stock. 10% of the shares are GEHE is a public company registered in acquisition and organic growth. Within the held indirectly by AXA Colonia Konzern AG, The Mail Order Division was able to further Stuttgart. Its stock totalling 364,5 million DM framework of the internationalisation of the Cologne (“AXA Colonia”). Just under 40% of increase its turnover and profit in 1998. In is divided into 72.9 million shares at a par company it acquired a majority shareholding the shares are held by several of private 1998 the turnover overstepped the billion mark value of DM 5. The consolidated equity of in the number 1 in the French pharmaceuti- investors (of which circa 1.1% are employee for the first time and reached 1.05 bn DM the GEHE group at 31. 12. 1998 amounted to cal wholesale market, Office Commercial shareholders) as well as domestic and inter- (537 million Euro). The profit from normal circa 2.26 bn DM (1.16 bn Euro). Pharmaceutique, OCP S.A.; GEHE became national institutional investors. activities before income, profit and asset the biggest European pharmaceutical whole- taxes totalled 112 million DM (57 million The GEHE group is divided into four divi- saler. In Great Britain GEHE successfully In 1998 AXA Colonia successfully placed Euro). The continued expansion of the Mail sions: acquired AAH plc. in 1995, followed by the a convertible loan on part of its GEHE shares Order Division in Europe and USA has acquisition of Lloyds Chemists plc. in 1997. amounting to over 518 million DM (265 mil- resulted in a foreign contribution to the Pharmaceutical Wholesale (market leader Due to the focus of both companies on phar- lion Euro) through a Luxembourg subsidiary. division’s turnover of 63% in 1998. in Europe), maceutical wholesale and retail, GEHE was After the possible conversion of the loan, able to further extend its leading position in which can happen by 2003 at the latest, the 1.5 Employees Pharmaceutical Retail in Great Britain pharmaceutical wholesale in Europe and at circle of GEHE shareholders will widen On 31. 12. 1998 the GEHE group employed (largest chain of pharmacies in Europe), the same to open up the new division Phar- to include the converting private and institu- 23,033 staff, converted into full time equiva- macy Retail. Also the Healthcare Services tional holders of the loan when the AXA lents. Of those about 15% were employed in Healthcare Services (largest centrally con- Division was able to achieve a European key Colonia shareholding is reduced. Germany and about 85% abroad. GEHE is trolled supplier of technical rehabilitation position as the largest centrally-controlled subject to corporate employee participation aids in Germany and France), supplier of technical rehabilitation aids in according to the Corporate Employee Partici- Germany and France. pation Law 1976. Thus, there is a Supervisory Board which is composed equally of shareholder and employee representatives.

2 CURRENT SITUATION 3 2The Mail Order Division Gaerner Group 2.2 Historical Development The Gaerner group offers a similar prod- Kaiser + Kraft was founded in 1945 by 2.1 Overview uct range to the Kaiser + Kraft group. It Helmut Kraft and Walter Kaiser in Stuttgart- The Mail Order Division consists of the includes Gaerner GmbH & Co. KG, Duisburg, Untertürkheim. In 1949 the mail order con- following: and companies in the Netherlands, Austria cept was introduced. The basic idea consist- and Switzerland. ed of offering technical products to industry Kaiser + Kraft Group through catalogues and brochures and sell- The Kaiser + Kraft group includes Kaiser + Gerdmans Group ing them by mail order. Kraft GmbH („Kaiser + Kraft“) which oper- The Gerdmans group supplies office, ates in Germany as well as companies in a warehouse and works equipment to the Once the mail order trade had established further eleven European countries. It sup- Scandinavian market. It is directed by the itself as a widely accepted method of pur- plies appliances and equipment for the Swedish company Gerdmans Inredningar chasing at the beginning of the 1950s, office, warehouse and works sectors, which AB, Markaryd. This company is also opera- Kaiser + Kraft was able to expand its range are partly self-produced but for the main tionally active and has additional subsid- swiftly according to requirements. In order part are sourced from outside suppliers. iaries in Denmark, Finland and Norway. to react better to special customer require- Self-produced products are assembled in ments, it began producing transport equip- Haan near Düsseldorf. The Kaiser + Kraft Topdeq Group ment itself in 1957. In 1967 the first foreign group’s central warehouses are situated in The Topdeq companies supply design- company was acquired, and by 1983 five Kamp-Lintfort and Haan. orientated office furniture, office fittings, further foreign companies were founded. In office equipment and accessories. They 1985 GEHE acquired Kaiser + Kraft from its offer a 24-hour delivery service. The Topdeq founder Helmut Kraft. group’s operating companies in Germany, the Netherlands and Switzerland are direct- Kaiser + Kraft has expanded strongly at ed by Topdeq Holding GmbH, Pfungstadt. home and abroad as follows:

K + K America Group Expansion in Europe On the North American market transport In 1987 a subsidiary was founded in Entering the Market in Scandinavia and equipment, works equipment, packaging Italy, the ﬁrst central warehouse in Europe moving into the Work Safety Product Mail material and work safety products are sold was opened in Weiterstadt and the Gaerner Order Business by two US companies and one Canadian group was acquired, which had been In 1998 Kaiser + Kraft took over the Scan- company. These are subsidiaries of K + K Kaiser + Kraft’s main competitors in its main dinavian Gerdmans group as well as the America Corporation, with administrative markets. Conney Safety Products business in the US. headquarters in Milwaukee, Wisconsin, USA, which acts purely as a holding company. Expansion in North America The maps on this and the preceeding In 1988 the step was taken to enter page show the locations of the Mail Order North America, where C&H Distributors Inc., Division today. Milwaukee/Wisconsin, USA, was taken over as well as four further competitors between 1990 and 1996.

Starting Up in Eastern Europe and the Acquisition of Topdeq and Powell Also in 1990 Kaiser+ Kraft commenced trading in the New Federal States of Ger- many. In the same year a subsidiary was founded in Hungary. In 1992/1993 new companies were founded in Poland and the Czech Republic. In 1994 the Topdeq group was acquired. In 1996 Powell Mail Order Ltd., Llanelli, Great Britain, was added, which led to an expansion of the mail order business in Great Britain.

4 CURRENT SITUATION 5 2.3 Development of Equity 2.5 Management 3.TAKKT The consolidated equity of the companies With effect from 01. 01. 1999 the manage- of the Mail Order Division has developed as ment of Kaiser + Kraft, the holding company 3.1 Overview shown in the chart over the last ten years. of the Mail Order Division, has been made TAKKT was founded on 01. 03. 1999 by up as follows: GEHE for the purposes of the spin-off. The share capital amounts to 50,000.00 Euro. The Chief Executive Officer is Georg The company is located in Stuttgart and is Gayer, who succeeded Horst F. Peer, who registered at the Stuttgart Register of Com- retired after seventeen years service with panies no HRB 19962. TAKKT is to acquire the group. Further members of the manage- the Mail Order Division within the frame- ment are Alfred Milanello, Franz Vogel and work of the spin-off. Dr Felix A. Zimmermann. 3.2 Management Board 2.6 Employees The board members of TAKKT are the On 31. 12. 1998 1,465 people (converted to current members of the Kaiser + Kraft man- 2.4 Development of Turnover and Profits full time equivalents) were employed world- agement: wide in the Mail Order Division, of which 2.4.1 Turnover 585 are employed domestically and 880 Georg Gayer, 52, Chairman of the Board, Since Kaiser + Kraft was taken over by abroad. There is no employee participation has been with Kaiser + Kraft in various GEHE in 1985 the turnover of the Mail Order on the Supervisory Board as the statutory functions since 1978. In 1985 he became Division has experienced an average pre-requisites for the creation of a Supervi- director with responsibility for finance, increase of 15% p.a. and surpassed the bil- sory Board with employee participation have logistics and production areas. As from lion mark in 1998 for the first time. not been met. 01. 01. 1999 he became Chief Executive Officer of Kaiser + Kraft and at the same This growth in turnover is a result of time board member of GEHE. organic growth as well as founding new companies and acquisitions. Over the last The board member for information technol- ten years the turnover has developed as ogy and organisation is Alfred Milanello, shown in the chart. 57. He has been with Kaiser + Kraft since 1987 and has been Director of Informa- tion Technology there since 1988.

2.4.2 Profits Franz Vogel, 50, was appointed a board Also the results of the Mail Order Divisi- member with responsibility for sales. He on have developed in a very positive way has been working in the Mail Order Divi- since the GEHE takeover. The profits from sion since 1985, first as Manager in Swit- normal activities before income, profit and zerland and since 1990 as Regional Sales asset taxes amounted to 112 million DM Manager in South and Eastern Europe. (57 million Euro) in 1998. These are shown Since 01. 01. 1999 Mr Vogel has been a in the chart. Director of Kaiser + Kraft.

The board member for controlling and ﬁnance is Dr Felix A. Zimmermann, 32. Since 01. 01. 1999 he has been a Director of Kaiser + Kraft. Before this he was working for the Finance Department at Franz Haniel & Cie. GmbH.

1 Incl. sales with group companies.

6 CURRENT SITUATION 7 III. REASONS FOR There are no synergies between the Gaining independence through the spin- health-related divisions and the mail order off and subsequent quotation has powerful THE MAIL ORDER DIVISION business because there are no similarities advantages: BECOMING INDEPENDENT between the products supplied, either on the procurement side or on the sales side. The The GEHE shareholders will become logistics are also different. Whereas in shareholders of TAKKT in the ratio of 1 : 1. pharmaceutical wholesale 35,000 chemists The shareholders then have two shares across Europe are supplied several times a which can be traded independently of day at a few hours’ notice with for the most each other: a share in GEHE, Europe’s part small products out of a range of market leader in pharmaceutical whole- 100,000, which are mainly automatically sale and retail, and a share in TAKKT, picked, the mail order business supplies a Europe’s No 1 in mail order for Kaiser + Kraft was acquired in 1985 as few thousand large products which have office, warehouse and works equipment. part of GEHE’s diversification strategy at the been ordered via catalogue. This results in time. In the market segment which Kaiser + totally different warehousing and transport By creating two “pure plays” the share- Kraft occupied the GEHE board saw good conditions. GEHE’s health-related divisions holder value concept is honoured. The potential for growth, and the acquired com- and the Mail Order Division therefore have market evaluation of the GEHE and pany promised to have a very good return neither common warehousing nor shared TAKKT shares will become more market potential due to its excellent market orienta- logistics. specific. The GEHE Mail Order Division, tion. This potential for a high rate of return which until now has hardly been noticed, was to assist GEHE in improving access to The Management Boards of GEHE and will become more transparent and its the capital market to finance the planned TAKKT are convinced that making the Mail value easier to identify. growth in pharmaceutical wholesale. Order Division independent and the resulting stronger focus on the core competences Finally the Management Boards of GEHE Today GEHE is Europe’s market leader in of the specific fields of business, will further and TAKKT are convinced that this is an out- pharmaceutical wholesale and retail with a increase the positive development of each standing opportunity to float the Mail Order turnover of 24.3 bn DM (12.4 bn Euro) in the division. Division after separation from the GEHE health-related divisions and also Europe’s group and to enable the GEHE shareholders No 1 in mail order office, warehouse and Furthermore companies which are con- to participate in the excellent perspectives works equipment with a turnover of around centrated on transparent, clearly defined and the success of two independent public 1.1 bn DM (0.54 bn Euro). The health-related core areas, the so-called “pure plays”, are companies. In this way the shareholders will divisions and the Mail Order Division are regularly favoured by the capital markets. in future be able to follow a differentiated extremely successful. The companies are investment strategy and at the same time be active in markets which demonstrate excel- For GEHE, as a company which is commit- in a position to have shares in both compa- lent growth perspectives for the future. ted to the concept of shareholder value, once nies. the decision concerning the best strategy for the future of the division had been made, it was a natural choice to list the Mail Order Division on the stock exchange.

8 REASONS FOR THE MAIL ORDER DIVISION 9 BECOMING INDEPENDENT IV. COMMERCIAL COMMENTARY In return for the assets which have been the Mail Order Division. The new organisa- transferred, the GEHE shareholders will tional structure which was created before AND REASONS FOR SPIN-OFF receive new TAKKT shares in addition to and during the spin-off, will in fact lead to their GEHE shares, namely for one GEHE an even stronger management focus on each share in a nominal amount of DM 5 one core competence area which will more than share in TAKKT. Should the spin-off take compensate for this negligible extra place after the planned conversion of the expense. GEHE shares to no par value shares, the GEHE shareholders will receive one no par The spin-off of the Mail Order Division value TAKKT share for every no par value with its subsequent flotation is a solution share in GEHE. The shareholder structure that gives all GEHE shareholders equal before and after the spin-off is shown on opportunity in achieving the target objec- 1 Overview page 11. tives mentioned above. In particular, it facilitates a further-reaching shareholder par- The Mail Order Division will become inde- 2 Why Spin-off? ticipation in the success of the Mail Order pendent by being spun-off and transferred to Division and gives the shareholders more a new company. With the spin-off three 2.1 Direct Participation of Shareholders flexibility in their individual portfolio 100% GEHE subsidiaries, in which all assets in the Success of Mail Order Division management. and liabilities of the Mail Order Division are GEHE views itself as a company which is accumulated, will be transferred to TAKKT strongly committed to the concept of share- 2.2 Alternatives in one single step. holder value. For this reason, GEHE strives From GEHE’s point of view, a sale of the which generally speak against a sale how- to create the maximum value for their share- division could be considered as an alterna- ever, also apply without restriction of this holders in corporate investment and dis- tive. However, this would prevent our share- kind for a sale on the stock exchange. An investment decisions. GEHE is likewise com- holders of their opportunity to have a share equal share ratio in both companies for the mitted to this goal, where structural decisions in a division with high expectations for GEHE shareholders would have been impos- are met such as the Mail Order Division returns. Furthermore, a sale would have sible. Issuing new shares would also have becoming independent. Therefore, the Mail resulted in a higher tax burden because of meant, that the GEHE shareholders would Order Division is to become legally indepen- the disclosure of hidden reserves, which have had to invest additional capital, in order dent by way of a spin-off into TAKKT and is would have greatly reduced the indirect to continue participating in the success of to be floated on the stock exchange as an proceeds for the GEHE shareholders. Within the Mail Order Division as before. This is not independent entity. In this way, the GEHE the framework of the spin-off, the hidden in the interests of the GEHE shareholders, shareholders, who up until now have partici- reserves will in fact arise, leading to a sub- particularly due to the fact that with the pated indirectly in the success of the Mail stantial tax burden for GEHE. On the other spin-off, a solution is available which Order Division, will share in the success of hand, there are possibilities for tax deduc- embraces the advantages of a flotation with- this business area in the future in a more tion for TAKKT, from which the shareholders out the disadvantages of having to invest intensive and direct manner. will profit. Additionally, the Management additional capital. Boards of GEHE and TAKKT are convinced The spin-off allows more flexibility in the that in total, the residual tax burden will be decision-making for investors determining over compensated by the advantages, which their portfolios. In the future, they will be will result from the spin-off and the subse- free to decide to what extent they want to quent flotation of TAKKT, for both compa- participate in the success of the two companies and above all, for the shareholders. nies and thereby in different sectors. The spin-off however, does not lead to a greater The possibility of floating the Mail Order diversity in the portfolio of the shareholders. Division after transforming it into a public By creating two publicly-quoted stock com- company without splitting it off, was also panies, both concentrating on their core considered. In this case newly created shares competence areas, the shareholders’ ability of a mail order public company within the to be involved in the Mail Order Division framework of a capital increase would have will be strengthened. Becoming independent had to be issued or GEHE shares in this as a result of the spin-off will not lead to any company would have had to have been sold noteworthy increase in administration for via the stock exchange. The tax disadvantages

10 COMMERCIAL COMMENTARY AND 11 REASONS FOR SPIN-OFF 3Why Spin-off to Transfer? be a shareholder in TAKKT after the spin-off: activities – have been amalgamated under profits were also subject to preferential tax Thanks to this structure, the spin-off of the Kaiser + Kraft Europa GmbH. K + K America status according to § 8 b sub-section 2 Corpo- The spin-off of the Mail Order Division Mail Order Division to TAKKT will maintain Corporation remains the intermediary hold- ration Law (KStG). will be transferred into TAKKT, which was the same proportions as would a spin-off for ing for all US and Canadian companies founded by GEHE on 01. 03. 1999 with the the purposes of new formation; a dilution of in the Mail Order Division as before. Finally, Furthermore, Kaiser + Kraft Europa GmbH minimum statutory capital of 50,000.00 Euro, the shares of individual shareholders can be all the Topdeq activities have been amalga- acquires itself or through its subsidiaries, as the receiving company (Spin-off to Trans- ruled out. Once the spin-off is valid, each mated under Topdeq Holding GmbH. all domestic mail order activities with the fer, § 123 sub-section 2 no 1 UmwG German shareholder will have the same proportional exception of the Topdeq group. These dispo- Transformation Act). The assets to be trans- share in TAKKT as in GEHE. Individual transfer processes, which sals will also be completed at the business ferred will therefore be split off and trans- mainly concerned foreign companies and value determined by Dr. Ebner, Dr.Stolz & ferred to a company already in existence in a 4 Preparatory Restructuring which for this reason were generally made Partner GmbH, Steuerberatungsgesellschaft, different way than is the case if the company within the Mail Order Division and as neutral as possible in terms of taxation, Wirtschaftsprüfungsgesellschaft, Stuttgart. were to be split off to form a new corporate its Tax-related Effects took place through sale on 31. 12. 1998. The They are subject to the condition that the entity. This course of action was chosen remaining transfers which mainly concern spin-off agreement receives approval by the mainly because of the planned subsequent 4.1 Overview the German companies and causes taxation GEHE AGM. flotation after the spin-off. This enables a Since GEHE acquired Kaiser + Kraft in in Germany, should be executed through separation of the incorporation and spin-off 1985, the structure of the Mail Order Division agreements, subject to a condition. This The reason for the condition is that the procedures. Furthermore, there is an active had not been changed substantially. Kaiser + condition is subject to the approval of the profit arising on disposal of the assets of the company in the form of the company TAKKT Kraft had a dual function: as a holding com- spin-off agreement at the GEHE AGM. German companies is subject to tax, which AG before the spin-off is registered in the pany for all domestic and foreign mail order is not the case for the shares in the foreign register of companies. activities, and secondly as an operative unit 4.2 Details on Intra-Group Transfers subsidiaries. Therefore, the sale will only in the German market itself. In order to During the intra-group reorganisation of become effective when the GEHE AGM The statutes of TAKKT contain the direc- create a structure corresponding to the the Mail Order Division, the following trans- has agreed to the spin-off of the Mail Order tive for the compulsory recall2 of all TAKKT requirements of the market for the Mail actions took place: Division. “foundation shares” held by GEHE immedi- Order Division, the organically developed ately after the spin-off has taken place. This structure of the Mail Order Division has K +K America Corporation was sold by not only ensures that all GEHE shareholders been replaced, through a succession of Kaiser + Kraft to GEHE. For this transaction, will have the same shareholding in GEHE as corporate internal transfers, before the spin- the hidden reserves contained in the share in TAKKT, but also that GEHE will no longer off, by a clear separation into three divisions book value were disclosed on the basis of each with its own intermediary holding the business value3 of each transferred company. asset component in the expert’s report of Dr. Ebner, Dr. Stolz & Partner GmbH, Steuer- This structure is to be transferred to beratungsgesellschaft, Wirtschaftsprüfungs- TAKKT during the spin-off process. TAKKT gesellschaft, Stuttgart. As the transfer of will function as the management holding foreign shares is tax privileged according to company. Three intermediary holdings § 8 b sub-section 2 Corporation Tax Law together (Kaiser + Kraft Europa GmbH, (“KStG”), the disposal profits arising were K + K America Corporation and Topdeq not subject to tax. Holding GmbH) are to form the individual operating units underneath. The three inter- The entire shareholdings of Kaiser + Kraft mediary holdings are 100% subsidiaries in foreign companies of the Mail Order Divi- of GEHE prior to the spin-off. Only GEHE’s sion were disposed of to Kaiser + Kraft Euro- share in the three intermediary holding pa GmbH, a 100% subsidiary of GEHE, with companies is subject to the spin-off. effect from 31. 12. 1998, in so far as they did not relate to the North American business or The transfer procedures being put in Topdeq. These disposals took place by dis- place prior to spin-off are intended to assign closing the hidden reserves at the book value the individual operative units in their of the shares, which were determined by “rightful” intermediary holding. The Euro- Dr. Ebner, Dr. Stolz & Partner GmbH, Steuer- pean mail order activities of the Mail Order beratungsgesellschaft, Wirtschaftsprüfungs- Division – with the exception of the Topdeq gesellschaft, Stuttgart. The resulting disposal

2 See V. Legal Explanation 2.5 Compulsory Recall of TAKKT Shares (page 24f). 3 The methods of valuation are explained in annex D.

12 COMMERCIAL COMMENTARY AND 13 REASONS FOR SPIN-OFF For tax reasons, the form of the sale of 4.3 Tax Effects on Purchase Agreements 5 Effect on Taxation of with § 17 EStG, the spin-off will affect the shareholdings (so-called share deals) was Subject to AGM Confirmation Shareholders speculation period for these shares. It is the in general not chosen for the sale of the The purchase agreements concluded sub- opinion of the German taxation authorities, domestic mail order activities. The entire ject to confirmation will come into effect The following description of the tax that the spin-off will in this case initiate a assets and liabilities of the previous opera- upon the GEHE AGM agreeing the spin-off effects of the spin-off for individual share- new speculation period for both the GEHE tive companies (so-called asset deals) were agreement. This leads to a disclosure of the holders only serves to provide an overview and the TAKKT shares. disposed of. hidden reserves, which have accrued in the and does not take the circumstances of the individual assets of the domestic companies individual shareholder into account. More- If a person subject to taxation in a coun- Topdeq Ltd., Watford, Great Britain, of the Mail Order Division and which will be over, it is limited to the spin-off’s tax effects try other than Germany, or a person entitled Topdeq AG, Hünenberg, Switzerland, and subject to tax. These hidden reserves were under German legislation. This description to limited tax exemption is holding GEHE Topdeq B.V., Mijdrecht, the Netherlands, were valued at 232 million DM within the frame- cannot replace a tax consultation taking into shares, the spin-off will entail no conse- also transferred with effect from 31. 12. 1998 work of the above mentioned corporate valua- consideration the personal circumstances of quences for him according to German tax to Topdeq Holding GmbH, a company newly tions. The release of hidden reserves results each individual shareholder. It is not certain, legislation. If the said shares are part of formed by GEHE. in a tax liability of circa 103 million DM. whether tax-related estimates by GEHE will domestic business assets or represent a sub- be endorsed by the tax authorities. It is stantial interest, then the above explanations These disposals also took place by dis- The taxation of these reserves is more therefore recommended to all shareholders shall apply accordingly. closing the hidden reserves in the book value advantageous for the GEHE shareholders to seek independent tax advice. This applies of the shares as determined by Dr. Ebner, than a straight forward sale of the companies in particular to shareholders, who are liable Dr. Stolz & Partner GmbH, Steuerberatungs- in question and transfer to TAKKT. In a dis- to taxation in a country other than Germany, gesellschaft Wirtschaftsprüfungsgesell- posal situation, domestic assets rated at a or who are liable to taxation under other schaft, Stuttgart. As Topdeq GmbH, which higher value can – as a consequence of dis- criteria of foreign taxation. operates the Topdeq domestic business, is a closed hidden reserves – largely be deducted 100% subsidiary of Topdeq Ltd., the transfer by the acquiring companies for corporation In our opinion, the issue of TAKKT shares of the holding in Topdeq Ltd. also included tax and trade tax. Nominal tax relief from does not entail taxable profit for GEHE the Topdeq’s German business. additional write-offs amounts to around shareholders, since the spun-off investments 121 million DM; under current legal circum- represent a sub-operation in accordance The central service functions of the stances, the cash value of the tax relief to with § 15 sub-section 1 no 1 of the Transfor- Topdeq division were also sold to Topdeq be expected from the write-offs will amount mation Tax Act (“UmwStG”). This has been Service GmbH, a 100% subsidiary of Topdeq to approx. 83 million DM, at a discount rate confirmed to GEHE by the German tax Holding GmbH, using asset deals at a busi- of 6%. authorities. As far as the GEHE shares are ness value determined by the experts report taxable business assets, the former taxable of Dr.Ebner, Dr.Stolz & PartnerGmbH, Steuer- In the event of a straight forward spin-off book values of the GEHE shares shall be beratungsgesellschaft, Wirtschaftsprüfungs- of the domestic companies however, the allocated to the shares in GEHE and TAKKT gesellschaft, Stuttgart, subject to disclosure disclosed hidden reserves would be subject after the spin-off. The TAKKT shares shall of the hidden reserves of Topdeq Interna- to full trade and corporation tax; an effec- then be deemed to have been acquired at tional GmbH, subsidiary of Kaiser + Kraft. As tive write-off of goodwill would have not their portion of share value. there were no significant tax effects result- been possible. From a net present value ing from this disposal, they were done point of view, the net balance arising from As far as the GEHE shares are part of without the condition to receive approval at taxation on the sale of the domestic busi- taxable private assets and (i) represent a GEHE’s AGM. ness and tax relief from future tax-effective substantial interest in accordance with § 17 write-offs of goodwill amounts to around of the Income Tax Act (“EStG”), or (ii) if the 20 million DM. one-year speculation period of § 23 EStG has not yet elapsed, the original cost for the GEHE shares shall be allocated to the GEHE and TAKKT shares after the spin-off. The TAKKT shares shall then be deemed as acquired at their allocated share of the original cost.

If a shareholder retains his GEHE shares within his private assets, and if these do not represent substantial interest in accordance

14 COMMERCIAL COMMENTARY AND 15 REASONS FOR SPIN-OFF 6Effect on Balance Sheet Effects on Accounts for Taxation Purposes 6.2 TAKKT Effects on Consolidated Balance Sheet Accounting For taxation purposes the spin-off of the The values disclosed in the GEHE consoli- Mail Order Division represents for GEHE Effects on Individual Company Accounts dated balance sheet for the transferred com- 6.1 GEHE partial value (§§ 15, 11 sub-section 2 The spin-off of TAKKT will become effec- panies at 30. 06. 1999 will be the basis for UmwStG). For this reason, GEHE has valued tive as of 01. 07. 1999 (spin-off deadline). At the consolidated balance sheet of TAKKT. Effect on Holding Company’s Accounts the assets to be spun off in the transforma- the spin-off date, the GEHE shareholdings in Since this balance sheet is not yet available GEHE will draw up the legally required tion accounts at 30. 06. 1999 (spin-off dead- the three intermediary holding companies at the time of writing, the following extrapo- transformation accounts (final accounts) at line for tax reasons) at its partial value. Due Kaiser + Kraft Europa GmbH, K + K America lation will be based on the certified GEHE 30.06.1999, which will form the basis for the to the previous intra-group transfers pro- Corporation and Topdeq Holding GmbH and 1998 consolidated financial statements (pro spin-off. In this transformation balance sheet, cesses, the partial value of the companies their subsidiaries which constitute the previ- forma consolidated balance sheet for Mail the assets to be transferred, i.e. the 100% belonging to the Mail Order Division also ous Mail Order Division, will be transferred Order Division). The accounting effects of shareholdings of GEHE in Kaiser + Kraft corresponds to the taxable book value. The to TAKKT. The transfer of the three share- the spin-off are shown in the pro forma Europa GmbH, K + K America Corporation spin-off therefore has no effect for GEHE on holdings will be deemed an addition by consolidated balance sheet of TAKKT as of and Topdeq Holding GmbH, are shown at taxable income. TAKKT. The book values shown in the final 01. 07. 1999. The following pro forma consoli- market value. Together, they amount to accounts of GEHE at 30.06.1999 (§24 UmwG) dated balance sheet shows the anticipated 550 million DM (281 million Euro) and Effects on Group Accounts will be transferred as original cost. consolidated balance sheet structure of the correspond with the book values of these For the purposes of GEHE’s consolidated TAKKT group as of 01. 07. 1999. The previous assets. The pro-forma balance sheet below balance sheet – the assets and liabilities cor- valuation and consolidation methods have shows the anticipated GEHE balance sheet responding to the shareholdings to be spun been retained. at 30. 06. 1999. off must be eliminated against consolidated equity, values spin-off date. Consequently, The spin-off will result in a balance GEHE’s balance sheet will be reduced by the sheet reduction for GEHE. The investments value of the spun off assets and liabilities of to be spun off, with a total book value of the Mail Order Division. 550 million DM (281 million Euro), will be taken off the balance sheet assets of GEHE. The reduction in assets will be offset against the equity position retained profit. The spin- off results in a reduction of the balance sheet for GEHE. The profit brought forward in the transformation accounts at 30. 06. 1999, of 550 million DM (281 million Euro) corresponds with the amount submitted to the GEHE AGM on 02. 06. 1999 by the Manage- ment and Supervisory Boards for the resolution on the appropriation of profits.

Pro forma Balance Sheet of GEHE at 30. 06. 1999

Assets 30.06.1999 Effect of spin-off 01. 07.1999 DM m DM m DM m

Fixed assets 2,197 – 550 1,647 Current assets 1,579 0 1,579 3,776 – 550 3,226

Equity and liabilities 30.06.1999 Effect of spin-off 01. 07.1999 DM m DM m DM m

Equity 2,436 – 550 1,886 Accruals 88 0 88 Liabilities 1,252 0 1,252 3,776 – 550 3,226

16 COMMERCIAL COMMENTARY AND 17 REASONS FOR SPIN-OFF Mail Order Division Pro forma Consolidated Balance Sheet as of 30. 06. 1999 and Effects on Balance Sheet for Taxation Dividend Coverage TAKKT Pro forma Consolidated Balance Sheet as of 01. 07. 1999 Purposes TAKKT’s earnings capacity will cover Assets Mail Order Effect of TAKKT Taxwise TAKKT must carry forward future dividends. On account of the depreci- 30.06.1999 spin-off 01. 07.1999 the values of the transferred assets disclosed ation of goodwill and interest covered by the DM m DM m DM m in the GEHE transformation accounts at spinn-off, TAKKT will initially fund its divi- Intangible assets 183 232 415 30. 06.1999 (final accounts). The spin-off has dend with dividends from its foreign subsid- Tangible assets 53 0 53 no tax-related effects for the acquiring iaries. At least the first dividend will include Fixed assets 236 232 468 TAKKT, as it represents an equity increase. a corporation tax credit, since – due to the The spin-off will cause a minor payment of spin-off – TAKKT will receive a part of the Stocks 86 0 86 land transfer tax. This land transfer tax rep- GEHE equity available for distribution, Trade and other debtors 139 0 139 resents a deductible operating expense. which was subject to corporation tax of 45% Cash and bank 5 0 5 (EK 45). This taxed equity secures the tax Current assets 230 0 230 7 Financial Effects caused by credit for the first dividend payment by Prepayments 3 0 3 the Spin-off TAKKT. 469 232 701 7.1 GEHE 8 Effects of Spin-off on the Employees Liabilities Mail Order Effect of TAKKT Effect on Earnings Performance 30.06.1999 spin-off 01. 07.1999 With the spin-off, GEHE relinquishes its The effects of the spin-off on the employ- DM m DM m DM m right to the profits of the Mail Order Divisi- ees are detailed in § 7 of the spin-off agree- Issued share capital 100 43 143 on. In the last two years, the profits of the ment attached to this report as annex B (see Reserves 145 – 130 15 Mail Order Division in the group profits page 36 ff). To summarise, no negative con- Equity 245 – 87 158 were as follows: sequences will arise for the employees as a result of the spin-off. Provisions 47 0 47 GEHE thereof: group Mail Order Division in DM m in DM m in % Liabilities to banks 113 319 432 1997 472 88 18.6 Liabilities to group companies 20 0 20 1998 504 112 22.2 Sundry liabilities 44 0 44 Total liabilities 177 319 496 469 232 701 Effect on Ability to pay Dividend The earnings ability of the core divisions Instead of the previous consolidated disclosure of hidden reserves in the respec- of GEHE is strong enough to cover adequate equity of the Mail Order Division, being tive individual financial statements. The dividends even after spin-off. Dividends paid the subscribed capital of Kaiser +Kraft, i.e. resulting goodwill in the amount of 232 mil- out by GEHE will continue to include the 100 million DM (51 million Euro) and lion DM (119 million Euro) will be depreciat- corporation tax credit. reserves, TAKKT will have an authorised ed tax effectively over a period of 15 years. capital of 72.9 million Euro (143 million DM) Furthermore there is an interest expense 7.2 TAKKT and reserves. The intra-group transfers of due to additional finance of about 319 mil- the foreign subsidiaries shareholdings have lion DM (163 million Euro), resulting from Earnings Performance released hidden reserves in their book values. the intra-group transfers less the new equity The spin-off does not affect the operative These hidden reserves will be offset against of TAKKT. earnings capacity of the mail order compa- the transferred equity at the time of spin-off, nies. TAKKT’s results will be subject to in order to carry forward the previous values depreciation on goodwill but this will have of the assets and liabilities. This results no effect on cash flow. There is also interest in shareholders’ equity of 158 million DM expense arising from the additional financ- (81 million Euro). ing requirements.

In the case of the domestic companies, business operations instead of the shares are being sold. This leads to a tax-related

18 COMMERCIAL COMMENTARY AND 19 REASONS FOR SPIN-OFF V. LEGAL POSITION All transactions of the period from Kaiser + Kraft Europa GmbH has a 100% Topdeq Holding GmbH has a 100% 01. 07.1999 up until the effective date of the interest in: interest in: spin-off, affecting the transferred assets – i.e. the shareholdings representing the pre- Kaiser + Kraft Deutschland GmbH, Topdeq Ltd., registered office in London, vious Mail Order Division of GEHE – will registered office in Stuttgart, Germany; Great Britain; accordingly have been taken into account in Kaiser + Kraft Ges.m.b.H, registered office Topdeq Service GmbH, registered office in the financial statement of TAKKT as of in Hallwang, Austria; Pfungstadt, Germany; 31. 12. 1999. Referrals back to 01. 07.1999 Frankel Industrie S.A., registered office in Topdeq B.V., registered office in Mijdrecht, shall apply only, however, if the spin-off is Morangis, France; the Netherlands, and entered in GEHE’s register of companies in Kaiser + Kraft Ltd., registered office in Topdeq AG, registered office in Hünenberg, 1999. Otherwise, the deadlines shall be Watford, Great Britain; Switzerland. delayed in accordance with § 6 of the spin- Powell Mail Order Ltd., registered office 1 Explanation of Spin-off off contract (see 1.6 below, page 22). TAKKT in Llanelli, Great Britain; Topdeq Ltd. holds all shares in Topdeq Agreement 4 will carry forward, in its accounts, the val- Kaiser + Kraft AG, registered office in GmbH, Pfungstadt. ues determined in the GEHE transformation Cham, Switzerland; 1.1 Transfer of Assets (§ 1) accounts for the transferred assets and Kaiser + Kraft s.r.o., registered office in 1.3 Consideration (§ 3) With the spin-off, GEHE is transferring liabilities. Prague, Czech Republic; With effect from the spin-off, TAKKT shall part of its assets, i.e. three shareholdings, Kaiser + Kraft S.A., registered office in issue, without charge, one TAKKT bearer whose assets and liabilities represent the 1.2 Subject of Spin-off (§ 2) Barcelona, Spain; share of no par value for each GEHE share of Mail Order Division, with all rights and Subject of the spin-off, i.e. fully trans- Kaiser + Kraft KFt., registered office in 5 DM nominal value to the shareholders of duties, by way of a (partial) legal transfer to ferred items of the assets and liabilities of Budaörs, Hungary; GEHE. Should the spin-off take place after TAKKT which was founded by GEHE on GEHE, are 100% of the shares in the follow- Kaiser + Kraft S.p.A., registered office in the planned conversion of the GEHE shares 01. 03. 1999 (spin-off for transfer § 123 sub- ing shareholdings of GEHE: Como, Italy; to no par value shares, the GEHE sharehold- section 2 no 1 UmwG). The transfer is effect- Kaiser + Kraft Sp. z o.o., registered office ers will receive one no par value share ed by the granting of TAKKT shares to the Kaiser +Kraft Europa GmbH, in Warsaw, Poland; TAKKT share for every no par value share of shareholders of GEHE. The consequences of registered office in Stuttgart, entered Hoffmann Beteiligungs- and Verwaltungs- GEHE. The new TAKKT shares will partake the spin-off shall become effective with the in the register of companies of the GmbH (in future Gaerner GmbH), in profits from 01. 07.1999. In the event of a entry in the GEHE’s register of companies. district court Stuttgart, Germany, under registered office in Duisburg, Germany; deadline delay in accordance with § 6 of the HRB 18864, Gaerner Ges.m.b.H, registered office in spin-off agreement, the entitlement to profit Basis of the spin-off shall be the transfor- K+ K America Corporation, Bergheim, Austria; sharing shall change accordingly. mation accounts of GEHE at 30. 06. 1999 statutory registered office in Corporation Gaerner AG, registered office in as the final accounts in accordance with Trust Center, 1209 Orange Street, Kilchberg, Switzerland; The allocation of TAKKT shares granted §§ 125 section 1, 17 sub-section 2 UmwG, City of Wilmington, County of Newcastle, Hoffmann Bedrijfsuitrusting B.V., in return to GEHE shareholders shall be car- audited by PwC Deutsche Revision Aktienge- Delaware 19801, USA, and administrative registered office in Zeist, the Netherlands; ried out in accordance with the ratio of the sellschaft, Wirtschaftsprüfungsgesellschaft, head office in 770 South 70th St., Gerdmans Inredningar AB, registered respective shareholding of the shareholders Munich. From 01. 07.1999 (spin-off date in Milwaukee, Wisconsin 53214, USA, office in Markaryd, Sweden. in GEHE. The issue ratio is 1 : 1. No addition- accordance with § 126 sub-section 1 no 6 Topdeq Holding GmbH, al cash payments will be made. The TAKKT UmwG) all decisions and operations by registered office in Pfungstadt, Germany, It is also the major shareholder in shares granted in return shall be created GEHE affecting the assets transferred after entered in the register of companies Kaiser + Kraft N.V., registered office in entirely by means of a capital increase of the spin-off contract, shall be accounted for of the district court Darmstadt under Diegem, Belgium, and in J.P. Vink en Zonen TAKKT from previously 50,000.00 Euro by by TAKKT. This means, that the effects of HRB 7294, B.V., registered office in Lisse, the Nether- 72,900,000.00 Euro to 72,950,000.00 Euro. the spin-off will become effective internally – lands. According to § 9 no 2, the spin-off agreement i.e. between GEHE and TAKKT – with effect including any related legal rights. is therefore subject to the condition, that from 01. 07.1999. K +K America Corporation has a 100% GEHE – currently being TAKKT’s only share- This includes in particular the share- interest in: holder – passes a resolution on the capital holdings of the above named companies in increase in order to complete the spin-off. the following subsidiaries: C & H Distributors Inc., registered office in Milwaukee, USA; Conney Safety Products LLC, registered office in Madison, USA, and Avenue Industrial Supply Company Ltd., registered office in Toronto, Canada.

4 Please see annex B (page 34 ff) for the spin-off agreement. Please see annex E (page 47 ff) for the reports of the spin-off auditors.

20 LEGAL POSITION 21 1.4 Special Privileges and Rights (§4) 1.6 Change of Deadline (§ 6) 1.9 Conditions (§ 9) effective. § 10 sub-section 6 of the spin-off In return for the transfer of assets of In the event that the entry of the spin-off In order to become effective, the spin-off agreement therefore entitles GEHE to GEHE, TAKKT shall give no preferential in the register of companies is delayed agreement requires approval of the AGMs of exemption, if it is made liable for a liability treatment to GEHE shareholders. Individual beyond the 31. 12. 1999, § 6 provides for a GEHE and TAKKT with a respective majority due to a joint liability in accordance with shareholders shall not be given special privi- delay of the spin-off deadline in accordance of three quarters of the authorised capital § 133 sub-section 1 UmwG, which is incurred leges or rights. Shareholders with special with § 1 sub-section 3 of the spin-off con- represented during the taking of the decision by TAKKT according to the spin-off agree- rights (holders of warrants or convertible tract, to 31. 12. 1999. An according delay of (§§ 125 sections 1,13 sub-section 1, 65 sub- ment. Likewise, § 10 sub-section 6 provides bonds) do not exist. the spin-off deadline shall ensue in the section 1 UmwG). Both AGMs shall deliber- for an according entitlement for TAKKT event of a delay beyond the 31. 12. of any ate on the approval on 02. 06. 1999. The con- should the case be reversed. In accordance It is known, that AXA Colonia Group following year. The same shall apply for the dition in § 9 no 1 of the spin-off agreement with § 133 sub-section 3 UmwG, liability is Finance (Luxembourg) S.A. has issued a con- deadline of the transformation accounts of clarifies again, that the spin-off agreement limited to a period of five years, as far as vertible bond for the GEHE shares as held by GEHE, the profit-sharing entitlement of the shall only become valid after approval by liabilities are concerned that have not been Pluto AG & Co. KG. However, since this bond new shares and any change in accounting in both AGMs. allocated to the respective legal entities in was not issued by GEHE or on its behalf, it accordance with § 1 sub-section 4 of the the spin-off agreement. does not represent an entitlement in accor- spin-off contract. The spin-off can only ensue if new dance with § 126 sub-section 1 no 7 UmwG, TAKKT shares have been created by way of a or, privilege in accordance with §§ 125 sec- 1.7 Effect of Spin-off on the Employees capital increase. For this reason, the spin-off tion 1, 23 UmwG. Within the spin-off, Pluto and their Representatives (§ 7) agreement in § 9 no 2 is subject to the sus- AG & Co. KG (AXA Colonia) will therefore §7 details the employment consequences pensive condition, that the shareholders of receive – like any other GEHE shareholder – of the spin-off which entail for the employ- TAKKT – apart from approving the spin-off one additional TAKKT share for each of their ees and their representatives. This provision contract for TAKKT – agree the capital GEHE shares. does not contain any contractual agreements increase in order to carry out the spin-off. between the parties of the spin-off agree- Notwithstanding the above, the spin-off Neither will members of the Management ment, but the description of the conse- according to the § 131 UmwG shall only or Supervisory Boards, or the auditors of the quences of the spin-off for the employees become effective upon entry in the GEHE financial statements of GEHE and TAKKT be and their representations required by § 126 register of companies. The latter requires, granted any privileges within the context of sub-section 1 no 11 UmwG. that both the increase of the authorised the spin-off, such as the promise of employ- capital for TAKKT (§§ 125, 66 UmwG) and ment or payment. Neither will the spin-off 1.8 Expenses (§ 8) the spin-off have been entered in the TAKKT auditors be awarded any particular privilege The expenses caused by the spin-off register of companies (§ 130 UmwG). beyond the payment of an appropriate remu- shall be borne equally, by both contractual neration for his services. partners, incl. the expenses of the trustee; 1.10 Legal Transfer of Assets and but, excluding the expenses for the AGMs Liabilities (§ 10) 1.5 Trustees (§ 5) determining on the spin-off. This expense The rules in § 10 sub-section 1–5 have Dresdner Bank AG in Frankfurt/Main has arrangement shall also apply should the been made solely as a precautionary assumed trusteeship in accordance with spin-off not become effective. Under all measure in the event that should problems §§ 125 section 1, 71 UmwG for the receipt of circumstances, the expenses incurred by arise with the transfer of the holding shares the shares granted to the GEHE sharehold- any one contractual party in the preparation during the spin-off. In order to achieve the ers by TAKKT. The TAKKT shares of no par of contract, such as consultation expenses, required allocation to TAKKT, it has been value shall be vested in a global document shall be assumed by that party only. planned to transfer legally such assets to which shall be handed over to the trustee which the partial legal succession does not before the entry of the spin-off into the reg- apply. ister of companies of TAKKT. With the entry of the spin-off in the GEHE register of com- The exemption arrangement in § 10 sub- panies, the GEHE shareholders then become section 6 shall apply if one of the contractual shareholders of TAKKT. At the time of the partners is made jointly liable for a liability spin-off, the trustee shall hand over to the incurred by the other contractual partner GEHE shareholders any TAKKT shares they respectively, according to the spin-off agree- are entitled to, against proof of their share- ment. In accordance with § 133 sub-section 1 holder position. Procedural details are listed UmwG, both contractual partners, party to the in chapter VI. Stock Exchange (page 29) of spin-off, shall be jointly liable for the liabil- this report. ities incurred before the spin-off becomes

22 LEGAL POSITION 23 2Explanation of the Statutes of taken up to issue bearer shares with no par 72,950,000.00 Euro has been entered in Supervisory Board has the opportunity to TAKKT value instead of shares with a nominal their register of companies, and the spin-off effectively monitor substantial or risky oper- value. The notional value of a share in the has been entered in the register of compa- ations of the company and the group. If the The statutes of TAKKT 5 are – as opposed authorised capital of TAKKT is (1) one Euro. nies of TAKKT and GEHE. In return for the Supervisory Board issues management to a spin-off for the purposes of new forma- recalled “founder shares”, the issue price rules, the Management Board is no longer tion (cf §§ 125 section1, 73, 37 UmwG) – not In § 4 sub-section 2, the option offered by agreed upon foundation, in the amount of able to issue its own management rules. part of the spin-off agreement, since TAKKT § 10 sub-section 5 AktG is taken to exclude 50,000.00 Euro, shall be returned to GEHE. was founded prior to the spin-off. However, the entitlement of the shareholders to In this instance, the regulations on the cor- 2.7 Representation (§ 7) the formation was carried out in preparation the documentation of their shareholdings. rect reduction of capital (§§ 222 ff AktG) The legal representation of the company for the envisaged spin-off. For this reason, With this, the Company avoids substantial must be observed. This means in particular – by two members of the Management Board, the statutes are explained below. Since the expenses for printing and administering the for creditor protection (§ 225 sub-section 2 or, one member of the Management Board statutes of TAKKT largely reflect the statutes shares. The respective exclusion clause has AktG) – that this issue price may only be together with an authorised signatory, corre- of GEHE, the differences between the two been included in the statutes of many public refunded after an elapsed period of six sponds with the provision in the statutes of will be explained. limited companies since the new version of months. GEHE. The principle of representation by § 10 sub-section 5 AktG was introduced by two persons is extended in § 7 sub-section 2 2.1 Company Name, Registered Office (§1) the Public Companies’ Transparency Act The expenses entailed by the recall of to the legal representation of the company The company name is TAKKT AG. (“KonTraG”) on 27. 04. 1998. the “founder shares” will be borne by the (authorised signatories, etc). Registered office of the company is – as it is company. These are mainly expenses in- for GEHE and Kaiser + Kraft – Stuttgart, The ruling in § 4 sub-section 3 corre- curred for the registry court. In accordance 2.8 Composition and Term of Office Germany. sponds with the statutes of GEHE (§3 with § 10 sub-section 3 of the statutes, the of the Supervisory Board (§ 8) sub-section 3) and allows the company to company’s Supervisory Board is generally The number of members on the Supervi- 2.2 Company Objects (§ 2) determine the type of profit distribution entitled to effect changes in the statutes, sory Board of a public quoted company and The company’s objects show, that TAKKT when increasing the authorised capital – as far as they concern their version only its composition depend on the authorised will take over the entire Mail Order Division as opposed to the provisions in § 60 sub- (§ 179 sub-section 1 section 2 AktG). § 5 capital and the number of employees. Unlike of GEHE and assume the task of the holding section 2 AktG. sub-section 3 gives further details for the GEHE, all members of the TAKKT Superviso- company within the new group. The busi- changes necessary in the statutes upon ry Board must be elected by the AGM, in ness activities of the new group correspond 2.5 Recall of GEHE Shares implementation of the required compulsory accordance with § 101 sub-section 1 AktG, with the previous activities of the Mail by TAKKT (§ 5) recall. since the company is neither subject to Order Division of GEHE. The spin-off agreement provides for an the Act on Co-determination from 1976, issue ratio of 1 : 1. GEHE shareholders shall 2.6 Composition of the Management nor to the amended Act on Co-determination, 2.3 Announcements (§ 3) receive shares in the same proportion as Board (§ 6) the co-determination rulings for the mining Announcements made by the company they are currently held in GEHE. Upholding The number of the members of the industry or the Business Constitution Act shall appear – as in the case of GEHE this ratio would be – if only minimally – Management Board of TAKKT shall be deter- of 1952. (cf § 12 of GEHE’s statutes) – exclusively in diluted, if GEHE, which founded TAKKT, had mined by the Supervisory Board. The stat- the Federal Gazette. a permanent shareholding. For this reason, utes merely set a lower limit, according to The statutes provide, that the Supervisory TAKKT’s statutes foresee, that all of GEHE’s which the company must have a minimum of Board consists of the legally required 2.4 Amount and Allocation of Authorised “founder shares” are recalled and thereby two members. This provision corresponds in minimum number of three members (§ 95 Capital, Shares (§ 4) cancelled immediately after the spin-off has the common practice with large public limit- section 1 AktG). However, even before the The authorised capital of the company taken effect. GEHE will then no longer be a ed companies. Further provision has been spin-off becomes effective, the number of currently amounts to 50,000.00 Euro. In shareholder in TAKKT. It is the GEHE share- made – as with GEHE – for the appointment Supervisory Board members shall be order to effect the spin-off, this will be holders, who will have an interest in TAKKT of deputy members of the Management increased to six in order to account for the increased by 72,900,000.00 Euro to – which will be the case immediately after Board. future significance of the company as a hold- 72,950,000.00 Euro. This shall be immedi- spin-off and in the same proportion. ing company of the TAKKT group. Term of ately followed by a regulatory decrease to The Supervisory Board can issue binding office for Supervisory Board members is 72,900,000.00 Euro, which is required in The recall shall ensue by way of the required management rules for the Management Board, about five years, i.e. from the end of the accordance with § 5 of the statutes. The compulsory recall, in accordance with § 237 which may also pre-empt legal decisions and AGM during which the Supervisory Board authorised capital is divided into 50,000.00 sub-section1 and 6 AktG, by resolution of the operations that may only be effected with members have been elected by the share- (later 72,900,000.00) bearer shares. By this, Management Board. This must be carried the approval of the Supervisory Board. By holders, up until the end of the AGM decid- the option offered in accordance with § 8 of out as soon as the increase of the authorised drawing up a list of instances requiring ing on the approval on the actions of the the German Companies Act (“AktG”) was capital of TAKKT by 72,900,000.00 Euro to approval within the management rules, the Supervisory Board, for the fourth business

5 Please see annex C (page 40 ff).

24 LEGAL POSITION 25 year following the beginning of the term of 2.11 Remuneration of the Supervisory 2.13 Chairperson of the AGM (§ 14) 3 Explanation of the Effects of office; this does not account for the business Board (§ 11) §14 sub-section1 stipulates, that the AGM Spin-off year during which the term of office begins. Following the respective clause in the is generally chaired by the chairperson of statutes of GEHE (§ 5 sub-section 11), the the Supervisory Board, who may, however, 3.1 Issue Ratio The successor of a member retiring before members of the Supervisory Board of the delegate this function to another member of On completion of the spin-off, GEHE the end of his/her term of office shall be company shall be remunerated by a combi- the Supervisory Board. In the event that the shareholders shall receive for each bearer elected for the remaining term of office of nation of a fixed amount and a dividend- chairperson of the Supervisory Board is share of DM 5 par value one bearer share of the retired member in order to ensure, that based and thereby performance-related unable to attend, § 14 sub-section 1 enables no par value in TAKKT as consideration for the term of office of all Supervisory Board bonus. In this case, the amounts previously the Supervisory Board to elect a chairperson the assets transferred. In so far as the spin- members terminates at the same time. The applicable for GEHE – converted in Euro, from among its members. As with § 14 sub- off is completed after the conversion of the members of a Supervisory Board have the though – shall be almost entirely adopted. section 2, the respective provision of § 8 of GEHE shares into shares of no par value, right to resign from office by giving of one The envisaged multipliers for the chairper- the statutes of GEHE has likewise been each bearer share of no par value in GEHE month’s notice in writing to the Management son and the deputy chairperson are in line adopted. Furthermore the chairperson may qualifies for one bearer share of no par value Board; resignations without notice are pos- with the clause applied at GEHE and the also determine the order of requests to speak in TAKKT. sible under exceptional circumstances. practice within the majority of German pub- during the AGM. lic and limited companies. The same applies The issue ratio is therefore 1 : 1. The fact, 2.9 Chairperson and Deputy (§ 9) for the reimbursement of the VAT payable on 2.14 Resolutions (§ 15) that the statutes of TAKKT (§ 5) require the The regulations in § 9 sub-section 1 and 2 both types of remuneration. In addition to The legally applicable majority require- compulsory recall of the shares transferred largely correspond with the regulations in the statutes of GEHE, § 11 sub-section 2 ments shall apply for the resolutions passed to GEHE upon foundation of TAKKT (§§ 237 § 5 sub-section 4 of the statutes of GEHE. section 3 contains a clarification, that the at the AGM. Each share has one vote. sub-section 1 and 6 AktG), ensures, that not The same applies for § 9 sub-section 3 with remuneration shall be reduced accordingly, only the shareholder structure of GEHE regard to § 5 sub-section 9 of the statutes of if a member has been part of the Superviso- 2.15 Business Year, Reserves, Appropria- remains unchanged by the spin-off, but that GEHE. ry Board for a limited time only during the tion of Profits (§§16, 17) the composition of GEHE shareholders shall business year. These regulations are in line with the remain identical in TAKKT directly after the 2.10 Management Rules, Calling of provisions of GEHE (§§ 10, 11 of statutes). spin-off. The previous share structure is Meetings, Amendments (§ 10) 2.12 Location, Calling of Meetings and Since the business year corresponds with therefore maintained. The spin-off to TAKKT The provision in § 10 sub-section 1, Attendance at AGM (§§ 12, 13) the calendar year and TAKKT had been maintains the same proportions as if the according to which the Supervisory Board of §§12 and 13 stipulate the details of loca- founded during the year 1999, an additional spin-off as of new formation had occurred the company agrees its own management tion, the calling of meetings and the atten- provision was required for the first account- (§ 123 sub-section 2 no 2 UmwG). rules, is based on those set out in the stat- dance at the AGM. They therefore comply ing period of the company. utes of GEHE (§ 5 sub-section 5). The Super- with the respective regulations of the 3.2 No negative Effect on Legal Status of visory Board of the company shall determine German Companies Act. This facilitates the 2.16 Formation Expenses (§ 18) Shareholders the exact details of the management rules. correct calling of meetings and attendance at § 26 AktG stipulates, that formation Since the new TAKKT shares are – as The provision in § 10 sub-section 2 on the the AGM. Since the right of the shareholders expenses – i.e. the total expenses granted are the GEHE shares – made out as bearer calling of meetings of the Supervisory Boards on a vesting of shares has been excluded, to shareholders or other persons as remu- shares and are not subject to any particular is in accordance with the legal requirements the statutes only provides for a deposit with neration or reward for the formation or its disposal restrictions, there is no necessity on the procedures to call meetings and the deposit facilities or a securities deposit preparation, and charged to the accounts of for an compensation offer in accordance thereby facilitates correct calling of meetings bank specified within the calling of the the company – must be specified separately with §§ 125 section1, 29 UmwG. Conse- of the Supervisory Board. The rule is in line meeting. In the event, that the company in the statutes. Accordingly, § 18 of the stat- quently the legal status of the shareholders with §5 sub-section6 of the statutes of GEHE. issues share certificates despite the exclusion utes stipulates that the formation expenses with regard to type and quality of their The same applies for §10 sub-section3, which of the right for documentation, provisions have been estimated at 2,500 Euro. shares does not deteriorate. allows amendments to the statutes to be have been made, that the deposit of the made by the Supervisory Board (cf § 5 sub- share certificates can also be undertaken 3.3 Effective Spin-off Date section 10 of the articles of association of with the company accountant or a German Upon authentication by a public notary, GEHE). public notary. Apart from the above, the the spin-off agreement shall be audited for provisions of §§ 12 and 13 correspond, in GEHE by PwC Deutsche Revision Aktienge- the main, with the regulations in the statutes sellschaft Wirtschaftsprüfungsgesellschaft, of GEHE (§§6, 7). Munich, and for TAKKT by Dr. Ebner, Dr. Stolz & Partner GmbH, Wirtschaftsprü- fungsgesellschaft Steuerberatungsgesell- schaft, Stuttgart, in their function as spin-off auditors.6

6 Please see annex E (page 47 ff).

26 LEGAL POSITION 27 The spin-off agreement shall become 3.5 Advice in Accordance with §142 1 Stock Market Quotation VI. STOCK EXCHANGE binding, if the AGMs of GEHE and TAKKT Sub-section 2 UmwG; both confirm it with the legally required Post-deadline Formation On account of the spin-off of the Mail majority. The spin-off itself shall become Order Division in the ratio of 1 : 1, each effective with the entry in the GEHE register 3.5.1 Audit of Asset Transfer to TAKKT shareholder of GEHE shall receive, directly of companies as the transferee (§131 UmwG). In accordance with §§ 142 sub-section 1, after the entry of the spin-off in the register This is dependent upon the prior entry of 69 sub-section 1 UmwG, the capital increase of companies of GEHE, the entitlement to the capital increase in TAKKT (§§ 125 sec- effected at TAKKT for the purposes of spin- one bearer no par value share of TAKKT for tion1, 66 UmwG) and the spin-off for TAKKT off requires an audit, to be carried out by a each of his shares. The entitlement must be in the register of companies (§ 130 UmwG). legally appointed auditor, of the assets trans- confirmed by providing proof of being a The entry of the spin-off in the register of ferred under § 183 sub-section 3 AktG, with shareholder, or by means of the profit share companies of GEHE shall have the following regard to the actual value. The audit report certificate no 55 of the GEHE share for effects in accordance with § 131 UmwG: on these transferred assets shall be submit- actual securities. have banks as administrators within the ted to the district court/court of record XETRA trading system on the Frankfurt The assets specified in § 2 of the spin-off “Amtsgericht – Registergericht – Stuttgart”, The technical execution of the spin-off, i.e. stock exchange. The XETRA administrator’s agreement shall be transferred in their responsible for TAKKT, in accordance with the issue of the new TAKKT shares, is com- task lies mainly in the provision of liquidity entirety to TAKKT without any further act §§ 183 sub-section 3, 34 sub-section 3 pleted automatically by the bank for those for both shares. of transfer; section 1 AktG. It can be seen by any mem- GEHE shareholders who deposit their GEHE ber of the public (§§ 183 sub-section 1, 34 shares with a bank in giro-transferable 2 Stock Market Price the GEHE shareholders become share- sub-section 3 section 2 AktG). deposit, effected by the bank. Due to the holders of TAKKT at in the same propor- exclusion of share documents in TAKKT, per The stock exchange price for the GEHE tion as their shareholding in GEHE. 3.5.2 Post-deadline Formation the statutes, those shareholders of GEHE, and TAKKT shares following the commence- Since TAKKT has been entered in the reg- who retain their GEHE shares as actual ment of trading of the TAKKT shares cannot 3.4 No Evaluation Problems ister of companies for less than two years at securities, or, with a bank in an individual be predicted. The current capital market The issue ratio of 1 : 1 and the increase of the time of conclusion of the spin-off agree- deposit, can only receive a credit for their situation and the different expectations of 72.9 million Euro in the authorised capital of ment, the post-deadline formation provisions TAKKT shares on giro-transferable deposit. investors are reflected in the establishment TAKKT allows the issue to the shareholders of §52 sub-section 3, 4, 7–9 AktG shall apply of stock market prices. of GEHE within the spin-off of one no par accordingly for the spin-off agreement in For stock market procedural reasons, the value share of TAKKT for each GEHE share. accordance with §§ 125 section 1, 67 UmwG. admission for quotation of the TAKKT GEHE’s dividend ability shall remain The spin-off together with the compulsory The Supervisory Board of TAKKT shall shares will not commence immediately after unaffected by the spin-off. Furthermore the recall of the “founder shares” (§ 5 of the examine the spin-off agreement and draw up the entry of the spin-off in the register of spin-off will secure the dividend ability of statutes of TAKKT) results in identical share- a written post-deadline formation report. companies. However, it is possible on the TAKKT. GEHE’s authorised capital will holdings and thereby upholds the status This shall be followed by a post-deadline for- days between register of companies entry remain unchanged; whereas its assets will quo. The issue ratio 1:1 does not require any mation audit to be carried out by a legally and the admission for quotation of the be reduced by the spin-off. For this reason, a corporate evaluations, since the spin-off appointed post-deadline formation auditor, TAKKT shares, to arrange for an off-market minor reduction must be expected for the shall maintain the current share ownership who must examine the findings of the Super- balance of supply and demand for “entitle- price of GEHE shares. However, the Manage- ratio and all shares of the legal entity TAKKT visory Board of TAKKT in the post-deadline ments to TAKKT shares”, instead of trading ment Boards of GEHE and TAKKT expect taking over are granted solely to the share- formation report and confirm, in particular, in listed TAKKT shares. This period normal- this to be more than offset by the price of holders of the transferring legal entity GEHE that the value of the assets transferred by ly takes a few trading days. the TAKKT shares. – as it would be the case in the event of a GEHE is at least the issue price of the spin-off for new formation. Since the issue TAKKT shares issued in return. The post- From the trading day following the ratio has not been established on the basis deadline formation report and audit report entry and the effective date of spin-off, the of corporate evaluations, there are no shall be submitted together with the regis- GEHE shares shall be traded “ex entitlement “particular difficulties in the evaluation of tration of the spin-off with to register of on TAKKT shares” for a few days. This shall the legal entities” in accordance with §§ 127 companies of TAKKT. apply up until the actual admission for section 2, 8 sub-section 1 section 2 UmwG. quotation of the TAKKT shares on the stock exchange. After that, the GEHE and TAKKT shares shall be listed separately. TAKKT shares shall be listed in the official trading on the Frankfurt and Stuttgart stock exchanges. These are also the trading locations where the GEHE shares are listed. Both securities

28 S T OCK EXCHANGE 29 ANNEXES

Stuttgart, 19 April 1999 A. Pro forma Financial Statements and Proﬁt and Loss Sheet for the Mail Order Division 1996, 1997, 1998 GEHE Aktiengesellschaft TAKKT AG Management Board Management Board B. Spin-off Agreement

signed Dr Fritz Oesterle signed Georg Gayer C. Statutes of TAKKT AG signed Jacques Ambonville signed Alfred Milanello signed Georg Gayer signed Franz Vogel D. Explanation of the Evaluation Methods in signed Stefan Meister signed Dr Felix A. Zimmermann Establishing the Purchase Price in Connection with signed Jürgen Ossenberg-Engels the Preparatory Transfers Processes signed Michael A.Ward signed Andreas Zimmer E. Reports of Spin-off Auditors

F. Abbreviations

30 ANNEXES 31 A. MAIL ORDER DIVISION A. MAIL ORDER DIVISION PRO FORMA FINANCIAL PRO FORMA STATEMENTS PROFIT AND LOSS SHEET

Assets 31. 12.1996 31. 12. 1997 31. 12. 1998 1996 1997 1998 DM ’000 % DM ’000 % DM ’000 % DM ’000 % DM ’000 % DM ’000 %

Concessions, industrial and Turnover 770,795 100.0 918,358 100.0 1,054,677 100.0 similar rights 21,932 7.0 27,972 8.8 106,493 23.1 Cost of materials 470,856 61.1 568,582 61.9 648,007 61.5 Goodwill arising on Gross profit 299,939 38.9 349,776 38.1 406,670 38.5 consolidation 60,393 19.3 51,362 16.3 84,553 18.4 Personnel expenses 89,021 11.5 99,520 10.8 111,165 10.5 Intangible assets 82,325 26.3 79,334 25.1 191,046 41.5 Depreciations 9,394 1.2 11,360 1.2 12,525 1.2 Tangible assets 44,826 14.3 40,729 12.9 51,112 11.1 Operating taxes 633 0.1 959 0.1 916 0.1 Financial assets 171 0.1 187 0.1 189 0.0 Other operating expenses 123,605 16.1 147,588 16.2 167,043 15.8 Fixed assets 127,322 40.7 120,250 38.1 242,347 52.6 Operating result 77,286 10.0 90,349 9.8 115,021 10.9 Stocks 59,714 19.1 67,351 21.3 80,064 17.4 Interest result – 1,148 – 0.1 – 1,306 – 0.1 – 2,044 – 0.2 Trade and other debtors 113,859 36.4 117,199 37.2 129,689 28.1 Profit before taxes 76,138 9.9 89,043 9.7 112,977 10.7 Bank and cash balances 7,041 2.3 6,750 2.1 5,227 1.1 Taxes on income and Current assets 180,614 57.8 191,300 60.6 214,980 46.6 capital levy 35,735 4.7 39,976 4.4 55,301 5.2 Prepayments 4,576 1.5 3,958 1.3 3,568 0.8 Profit for the year 40,403 5.2 49,067 5.3 57,676 5.5 Total assets 312,512 100.0 315,508 100.0 460,895 100.0

Equity and liabilities 31. 12.1996 31. 12. 1997 31. 12. 1998 Note to accounts: The accounts of K+K America Corporation DM ’000 % DM ’000 % DM ’000 % A group company was disposed of in 1999 have been included under US-GAAP accoun- Issued capital 100,000 32.0 100,000 31.7 100,000 21.7 and consequently the prior year ﬁgures has ting principles (as amended for German General reserves 64,739 20.7 91,631 29.0 96,143 20.9 been amended accordingly. accounting rules). Minority interest in equity 6,916 2.2 7,572 2.4 8,290 1.8 Shareholders’ equity 171,655 54.9 199,203 63.1 204,433 44.4 Provisions for pensions 8,314 2.7 8,780 2.8 9,991 2.2 Other provisions 24,661 7.9 26,628 8.4 37,304 8.1 Provisions 32,975 10.6 35,408 11.2 47,295 10.3 Liabilities to banks 33,866 10.8 20,843 6.6 112,730 24.4 Liabilities to affiliated companies 34,476 11.0 18,234 5.8 52,372 11.4 Trade creditors 25,131 8.1 28,752 9.1 26,913 5.8 Other liabilities 14,406 4.6 13,064 4.2 17,148 3.7 Liabilities 107,879 34.5 80,893 25.7 209,163 45.3 Deferred income 3 0.0 4 0.0 4 0.0 Total equity and liabilities 312,512 100.0 315,508 100.0 460,895 100.0

32 ANNEXES 33 B. SPIN-OFF AGREEMENT § 2 Subject of Spin-off § 3 Consideration shares to the shareholders of GEHE AG after The assets of GEHE transferred in their (1) In return for the transfer of the assets entry of the spin-off in the register of compa- entirety comprise the shares in the following listed in § 2, TAKKT AG shall issue to the nies of GEHE AG. 100% shareholdings of GEHE AG: shareholders of GEHE AG, one bearer no par value share of TAKKT AG for each of § 6 Change of Deadline a) In Kaiser + Kraft Europa GmbH registered their bearer 5.00 DM par value shares of In the event that the entry of the spin-off office in Stuttgart, entered in the register GEHE AG. Should the spin-off be completed in the register of companies of GEHE AG is of companies of the district court “Amts- after the conversion of the GEHE shares into delayed beyond 31. 12. 1999, the latter date gericht Stuttgart”, under HRB 18864; shares of no par value each holder of one shall apply as the date of the final accounts bearer no par value share in GEHE receives of GEHE AG contrary to § 1 sub-section 3, b) in K + K America Corporation, statutory one bearer no par value share of TAKKT. The and expiring of 31. 12. 1999 and the begin- registered office in Corporation Trust shares will be issued without charge and ning of 01. 01. 2000 shall be the date for the Spin-off agreement between Center, 1209 Orange Street, City of shall be entitled to profits from 01. 07. 1999. transfer of the assets of GEHE AG listed in GEHE Aktiengesellschaft, Wilmington, County of Newcastle, No additional cash payments are required. § 2 (spin-off date), the change in accounting Neckartalstraße 155, Delaware 19801, USA, and administrative and the beginning of profit-sharing rights in 70376 Stuttgart, and head office in 770 South 70th St., (2) The conversion ratio shall be 1 : 1. accordance with §3 sub-section1, contrary to TAKKT AG, Neckartalstraße 155, Milwaukee, Wisconsin 53214, USA; The allocation of the shares shall be in line §1 sub-section3. Any further delay beyond 70376 Stuttgart with the shareholding ratios of interest of 31. 12. of the following year shall delay the c) in Topdeq Holding GmbH registered office the shareholders in GEHE AG. dates by a further year respectively. § 1 Transfer of Assets in Pfungstadt, Germany, entered in the (1) GEHE Aktiengesellschaft (“GEHE AG”), register of companies of the district court (3) In order to execute the spin-off, registered office in Stuttgart, hereby trans- “Amtsgericht Darmstadt”, under HRB TAKKT AG shall increase its authorised fers the assets detailed in § 2 below (“Mail 7294, capital from currently 50,000.00 Euro by Order Division”) in their entirety, by way of 72,900,000.00 Euro to 72,950,000.00 Euro spin-off for transfer (§123 sub-section 2 no 1 including any related legal rights. by issuing 72,900,0000 bearer no par value UmwG) to TAKKT AG, registered office in shares with entitlement to profits from Stuttgart, against the granting of shares in 01. 07. 1999. TAKKT AG to the shareholders of GEHE AG. § 4 Special Privileges and Rights (2) The spin-off shall be based on (1) No rights shall be granted to individu- the transformation accounts of GEHE AG al shareholders, or for holders of special at 30. 06. 1999 as the final accounts in rights in accordance with § 126 sub-section 1 accordance with §§ 125 section 1, 17 sub- no 7 UmwG. Neither have measures in accor- section 2 section 1 UmwG, as audited by dance with § 126 sub-section 1 no 7 UmwG PwC Deutsche Revision Aktiengesellschaft been provided for such persons. Wirtschaftsprüfungsgesellschaft, Munich. (2) No privileges in accordance with § 126 (3) The transfer of the GEHE AG assets sub-section 1 no 8 UmwG shall be granted listed in § 2 to TAKKT AG shall ensue on to a member of the Management or Supervi- an intra-group basis, with effect from 24:00 sory Boards of the participating companies, hours on 30. 06. 1999. From 01. 07. 1999 or to auditors of the statutory accounts or 00:00 hours (spin-off date), all decisions the spin-off. and operations of GEHE AG concerning the transferred assets, shall be accounted for § 5 Trustees by TAKKT AG. GEHE AG shall appoint Dresdner Bank AG in Frankfurt/Main as trustee for the receipt (4) TAKKT AG shall carry forward in its of the shares of TAKKT AG to be granted, accounts the values of the assets and liabil- and their distribution to the shareholders of ities transferred in accordance with § 2, as GEHE AG. TAKKT AG will pass the shares determined in the final accounts of GEHE AG over to the trustee before entry of the spin- at 30. 06. 1999. off in the register of companies of TAKKT AG and instruct the trustee to distribute the

34 ANNEXES 35 §7 Effect of Spin-off on the Employees b) Kaiser +Kraft Europa GmbH will acquire c) Topdeq Service GmbH has acquired all the (4) Where employee representatives have and their Representatives the shares in Hoffmann Beteiligungs- und assets from Topdeq International GmbH, been established with foreign businesses of (1) The spin-off shall leave the current Verwaltungs-GmbH (“Hoffmann”) from providing services for the Topdeq group. Kaiser + Kraft Europa GmbH, K + K America employment conditions at Kaiser + Kraft VHI Gesellschaft für Beteiligungsbesitz All employment arrangements hereby Corporation or Topdeq Holding GmbH, or Europa GmbH, K + K America Corporation Internationale Versandhandel-Beteiligungs- affected have been transferred to Topdeq one of their affiliated companies, these shall and Topdeq Holding GmbH, or any of their gesellschaft mbH (“VHI”). Furthermore, Service GmbH, including all rights and remain in office unaffected by the spin-off. affiliated companies unchanged. This is not Hoffmann will acquire the limited partner- duties, incl. the transfer of undertakings a transfer of operations in accordance with ship interest in Gaerner GmbH & Co. KG for employees in accordance with § 613 a (5) The responsibility of the European § 613 a BGB (German Civil Code). (“Gaerner”) from VHI. This means, that BGB. For those employees, whose employ- works council of GEHE AG for the employees the entire assets of Gaerner GmbH & Co. ment has been transferred, the period of of Kaiser + Kraft Europa GmbH and Topdeq (2) In order to optimise the structure of KG shall pass to Hoffmann, which will service served and acknowledged with Holding GmbH, as well as those of their the mail order business and to establish the trade in future as Gaerner GmbH. All Topdeq International GmbH shall be affiliated companies, shall end with effect of target structure for the TAKKT group, intra- employment arrangements existing with deemed served for Topdeq Service GmbH. the spin-off. TAKKT AG is not obliged to group company purchase agreements have Gaerner GmbH & Co. KG shall continue Existing undertakings for employees establish a European works council. been concluded in the run-up to the spin-off. with Hoffmann, without there being a (current pensions and unchallengeable These sales listed below under a) and b) are transfer of operations in accordance with claims) shall remain with Topdeq Interna- (6) All existing wage agreements shall subject to the condition that the AGM of §613 a BGB. Hoffmann shall assume all tional GmbH, notwithstanding other remain unchanged. TAKKT AG, Kaiser+Kraft GEHE AG approves this spin-off agreement rights and duties from existing employ- internal agreements. Europa GmbH and Topdeq Holding GmbH, and shall then become effective at 23:59 ment arrangements including the transfer as well as any of their affiliated companies, hours on 30.06.1999. The agreement detailed of pension undertakings for employees (3) The existing businesses Kaiser +Kraft are – like GEHE AG and Kaiser + Kraft GmbH below under c) has already become effective. (current pensions and unchallengeable Europa GmbH, K + K America Corporation and their affiliated companies of the claims). and Topdeq Holding GmbH, or any of their Mail Order Division – not member of any a) The previous businesses of Kaiser + Kraft affiliated companies, shall remain unaffect- employers’ association. There is therefore still GmbH, KK-Werbe GmbH Agentur für ed by the spin-off. As far as parts of one no commitment to any tariff agreements. Media- und Marketing Service and VH business are being acquired by different Einkaufs-Beratungsgesellschaft für Büro- companies, by means of intra-group compa- und Betriebseinrichtungen mbH will be ny purchase agreements in accordance sold to two entirely new legal entities, i.e. with section 2, these shall continue as joint Kaiser + Kraft Europa GmbH and its sub- businesses on the basis of an agreement sidiary Kaiser + Kraft Deutschland GmbH. between these companies. Existing works councils, corporate works councils or eco- The employment arrangements hereby nomic committees shall retain their office. affected shall be transferred to the pur- The spin-off is not linked with any change in chaser with all related rights and duties, business that might possibly entail disadvan- incl. the transfer of undertakings for tages for the staff. This has been conﬁrmed employees in accordance with §613 a BGB. of agreements with the existing employee For those employees, whose employment representatives. is transferred, the period of service served and acknowledged shall be deemed as served for the purchaser. Existing rights within the transfer of undertakings for employees (current pensions and unchallengeable claims) shall remain with the seller, notwithstanding other internal agreements.

36 ANNEXES 37 (7) Upon completion of the spin-off co- § 8 Expenses § 10 Legal Transfer of Assets and (4) The contractual partners shall – where determination on the Supervisory Board of The expenses incurred by the conclusion Liabilities required – jointly endeavour to obtain the GEHE AG in accordance with the Act on of this agreement and its execution – (1) Where individual assets and liabil- approval of third parties for the transfer of Co-determination of 1976 shall end for the including the expenses for the Trustee – but, ities, which are not part of the assets listed said assets and liabilities. If approval on the employees of Kaiser + Kraft Europa GmbH excluding the expenses of the AGMs deter- in § 2, are not legally transferred to TAKKT transfer of an asset or a liability is refused, or and Topdeq Holding GmbH, or any of their mining the spin-off – shall be borne equally AG, GEHE AG shall transfer these assets and can only be obtained at excessive expense, affiliated companies. by GEHE AG and TAKKT AG, even if the liabilities directly to TAKKT AG. TAKKT AG the contractual partners make provision spin-off should not become effective. Each shall accept any such transfer. The contrac- internally, as if the approval required for The statutory regulations on the co-deter- contractual partner is solely responsible for tual parties agree, that the ownership of correct transfer had been granted. mination of employees in the Supervisory the expenses occurred by him in the prepar- the assets transferred in accordance with Board shall not apply to TAKKT AG. ation of the agreement. section 1 shall be transferred to TAKKT AG. (5) Rights and liabilities from contracts, Where assets are not in directly owned by shareholdings, memberships and private Prior to completion of the spin-off, the § 9 Conditions GEHE AG, GEHE AG shall cede its claims to and statutory legal status of any kind, shall number of Supervisory Board members of The spin-off agreement is subject to the these assets to TAKKT AG. TAKKT AG shall be regarded as assets and liabilities in accor- TAKKT AG shall be increased from three following conditions: accept any such ceded rights. dance with sections 1 to 4. to six, in order to account for the future signiﬁcance of the company as the holding 1. The formal approval of the AGMs of (2) The transfer of the assets and liabil- (6) If GEHE AG or TAKKT AG are made company of the TAKKT group. GEHE AG, as both companies has been obtained by ities listed in section 1 shall be effective on liable as joint and several debtor for a shareholder of TAKKT AG, has announced to 30.06. 1999, and expiring 30. 06. 1999. § 6 applies according- liability (§ 133 sub-section 1 UmwG), which the employee representatives of the Mail ly. The transfer shall become effective as relates to the other company respectively, Order Division, that they intend to purpose 2. the shareholders of TAKKT AG pass a soon as the spin-off has been completed as following this spin-off agreement, the other and elect two employee representatives resolution to increase the share capital in foreseen in this document. company shall be obliged to relieve the during the election of the other members of order to complete the spin-off. company from this liability. the ﬁrst Supervisory Board of TAKKT AG. (3) Where further prerequisites must be The corporate works council of Kaiser + Kraft met or official authorisation must be sought, GmbH can make recommendations in this the contractual partners are obliged to instance. undertake all required declarations and actions. (8) Like GEHE AG, TAKKT AG is part of the Franz Haniel & Cie. GmbH group. Franz Haniel & Cie. GmbH is subject to co-determination on the Supervisory Board in accordance with the Act on Co-determination of 1976.

(9) Wage agreements to regulate all job-related aspects affected by the spin-off have been made by including all domestic employee representatives of the Mail Order Division of GEHE AG. In order to prepare for these, the employee representatives have been given comprehensive information and access to all relevant documentation.

38 ANNEXES 39 C. STATUTES OF TAKKT AG II. Share Capital and Shares (3) The Supervisory Board is authorised, acts of the Supervisory Board for the 4th on completion of the compulsory redemption financial year after commencement of their § 4 Amount and Division of of shares as set forth in the above section term of office. The financial year during Share Capital, Shares (1), to amend the wording of the statutes which the term of office begins shall not be (1) The share capital of the company (Amount and Division of Share Capital, included when calculating that period. amounts to Euro 50,000.00 (fifty thousand Shares) in accordance with the extent of the Euro). It is divided into 50,000 bearer shares capital decrease executed, to delete § 5 of the (3) If a member of the Supervisory Board of no par value. statutes completely and to alter the number- is elected in place of a member who retires ing of the following clauses accordingly. prematurely from the board, his term of (2) The form of any share certificates, office shall run for the remaining term of profit shares and renewal coupons shall be III. Management Board office of the retiring member. determined by the Management Board. sha- I. General Provisions reholders are not entitled to documentation § 6 Composition (4) Each member of the Supervisory of their shares. (1) The Supervisory Board shall deter- Board shall be entitled to resign from office § 1 Name of the Company, mine the number of members of the Mana- subject to one month’s notice, to be given in Registered Office (3) In the case of an increase in share gement Board. The Management Board shall writing to the Management Board. Resigna- (1) The name of the company is: capital, shareholders’ profit share may be comprise at least two persons. The appoint- tion from office with immediate effect shall TAKKT AG. determined otherwise than set forth in § 60, ment of deputy members to the Management be permissible with the consent of the sub-section 2 AktG. Board is permissible. Supervisory Board. The above provisions (2) The company’s registered office is in shall not affect the member’s right to resign Stuttgart. § 5 Redemption of GEHE AG Shares (2) The Supervisory Board shall be enti- from office under exceptional circumstances. (1) During the spin-off, essential assets of tled to issue rules of procedure which are § 2 Objects of the Company GEHE AG, Stuttgart are to be transferred to binding upon the Management Board. The § 9 Chairman and Deputy (1) The object of the company is the man- the company as the absorbing entity. On rules of procedure may specify legal acts (1) The Supervisory Board shall elect ufacture of and trade, particularly mail order, completion of the spin-off, GEHE AG is no and transactions which may be effected only from amongst its members a chairman and a in transport equipment, storage and operat- longer to be a shareholder of the company. with the consent of the Supervisory Board. deputy for the duration of their term of office ing equipment, office supplies of all kinds The 50,000 no par value shares issued to The consent of the Supervisory Board may in the course of a meeting for which no sep- and similar goods, together with the provi- GEHE AG on foundation of the company are take the form of a general power of attorney arate invitation need be issued. The above sion of all services in connection with the therefore to be compulsorily redeemed by for a group of specified transactions. meeting shall be held after the annual gener- above or with mail order trade in general. the Management Board, after the increase al meeting on conclusion of which the term in the company’s share capital by Euro § 7 Representation of office begins for the Supervisory Board (2) The company is entitled to effect all 72,900.000 to Euro 72,950,000 and the (1) The company is legally represented by members elected by the general meeting. transactions and other measures in connec- relevant spin-off has been entered in the two members of the Management Board or tion with the activities set forth in the above commercial register of the company (ordered by one member of the Management Board (2) Should the chairman of the Supervi- section (1) or which are suitable for promot- compulsory redemption). together with an executive holding power of sory Board or his deputy retire from office ing these activities. For that purpose, the attorney. prematurely for any reason whatsoever, a company shall be entitled in particular to (2) In return for the redeemed shares, Supervisory Board meeting shall be con- participate in other companies. GEHE AG shall be refunded the issue sum (2) General powers of attorney to represent vened immediately and a new chairman or paid by GEHE AG, amounting to Euro the company in legal transactions (proxy, deputy elected prior to the passing of any (3) The company is also entitled to have 50,000. The regulations pertaining to the authorisation) may be granted only in such a other resolutions. all the above activities performed by affiliat- due and proper capital reduction must be way that the company is represented by two ed companies as defined in §§15 ff AktG observed. The Management Board is persons. (3) Unless a resolution to the contrary (Germany Companies Act governing public authorised to stipulate the further details of is passed by the Supervisory Board, any limited companies), in particular to have its redemption. The costs of this shall be borne IV. Supervisory Board declarations of intent on the part of the business operations fully or partly out- by the company. Supervisory Board shall be issued on behalf sourced to affiliated companies and/or to set § 8 Composition and Term of Office of the board by the chairman or, in his up branches for that purpose. (1) The Supervisory Board comprises absence, by the deputy. three members. § 3 Announcements Company announcements shall be pub- (2) The term of office of members of the lished solely in the official Federal Gazette. Supervisory Board shall end on conclusion of the general meeting which approves the

40 ANNEXES 41 § 10 Rules of Procedure, Convening V. Annual General Meeting notary public in addition to the depositories VI. Financial Year, Reserves, Meetings, Amendment of Articles stated in the above section (1). Appropriation of Balance Sheet Profit (1) The Supervisory Board shall be enti- § 12 Venue and Convening tled to issue rules of procedure within the (1) The annual general meeting shall be (4) If the shares are deposited with a Ger- § 16 Financial Year scope of the mandatory statutory provisions held at the company’s registered office or in man notary or a securities deposit bank, the The financial year shall be the calendar and the provisions of these statutes. a city which is the location of a German appropriate confirmation of deposit must be year. The first financial year shall be an stock exchange. It may however also be held submitted to the company no later than on accounting period, beginning on registration (2) The meetings of the Supervisory within a 50-kilometre radius of the the first working day, with the exception of of the company in the commercial register Board shall be convened by the chairman company’s registered office or of a city Saturday, after expiry of the deposit period. and ending on the following 31 December. or, in his absence, by his deputy. Meetings which is the location of a German stock may be convened in writing, orally or by exchange. § 14 Chairperson at the Annual General § 17 Reserves means of telecommunication. A meeting Meeting (1) On adoption of the annual accounts by must be convened immediately and held no (2) The annual general meeting shall be (1) The annual general meeting shall be the annual general meeting, half the net later than within two weeks of convening convened by Management Board or by the convened by the chairman of the Supervi- earnings for the year shall be allocated to (§ 110 AktG) if a member of the Supervisory Supervisory Board. sory Board or another member of the Super- other retained earnings. Any sums to be allo- Board or the Management Board submits a visory Board appointed by the chairman or, cated to the legal reserves or losses brought request for a meeting stating the purpose and (3) Notice of the annual general meeting in his absence, appointed by the Supervi- forward shall first be deducted from the net reasons. shall be published in the official Federal sory Board. In the event that neither the earnings for the year. Gazette, stating the information prescribed chairman nor a member of the Supervisory (3) The Supervisory Board shall be enti- by law, so that there is a period of one Board appointed by the Supervisory Board (2) On adoption of the annual accounts tled to amend the statutes provided such month between the date of publication and assumes the chair, the chairman shall be by the Management Board and Supervisory amendments affect the wording only. the last deposit date in accordance with § 13, elected by the annual general meeting. Boards, sums amounting to up to half the net section 2 of these statutes, not counting earnings for the year may be allocated to § 11 Emoluments of the Supervisory these two days. (2) The chairman shall convene the other retained earnings. Provided that these Board meeting. He shall determine the order of the other reserves do not exceed half the share (1) In addition to reimbursement of § 13 Participating Rights items on the agenda and the order of speak- capital and provided they would not exceed their expenses, members of the Supervisory (1) Only those shareholders who have ers, also the manner and order of voting, that amount after allocation, the Manage- Board shall receive deposited their shares with the depository and shall be entitled to diverge from the ment and Supervisory Boards shall further stipulated in the invitation to the meeting or announced agenda in that respect. be entitled to allocate up to 66.67% of the a) a fixed remuneration of Euro 5,000.00 per at a securities deposit bank no later than on net earnings for the year to other retained annum, payable on expiry of the financial the seventh day before the annual general § 15 Resolutions earnings. sub-section 1, section 2 shall apply year, meeting and who leave them there until (1) Each share shall grant one vote at the accordingly. conclusion of the annual general meeting annual general meeting. b) a bonus of Euro 1,500.00 for each percent- shall be entitled to participate in the annual VII. Closing Provisions age point by which the dividend distribut- general meeting and exercise their voting (2) Unless otherwise prescribed by these ed to the shareholders for the past finan- rights. In respect of due deposit of the statutes or by law, resolutions by the annual § 18 Formation Expenses cial year exceeds 4% of the share capital shares, it shall suffice if the shares are held general meeting shall require a simple The costs and expenses (notary’s fees, entitled to dividends. in a blocked depot at a bank on behalf of one majority of the votes cast and, in cases where registration fees, publications, general of the depositories stated in the invitation to a majority of the capital is prescribed by law meeting, consulting etc) of forming the (2) The chairman of the Supervisory the meeting and with the consent of that in addition to a majority of the votes, with a company and its registration in the commer- Board shall receive double the sum of the depository until conclusion of the annual simple majority of the share capital repre- cial register shall be borne by the company. above two emolument payments, his deputy general meeting. sented at the meeting. The formation expenses are estimated at one and a half times that sum. The value Euro 2,500.00. added tax payable on the two emoluments (2) If the last deposit date falls on a shall be reimbursed to the members of the Sunday, a Saturday or other state-recognised Supervisory Board by the company. In the general public holiday at the depository event that a member belongs to the Supervi- venue, the shares must be deposited no later sory Board only for part of any one financial than on the preceding working day. year, the two emoluments shall be reduced accordingly. (3) If the company has issued share certificates, the shares may be deposited with the company’s cash office or with a German

42 ANNEXES 43 D. EXPLANATION OF THE The annual profits before tax have been For those companies preparing their Risk mark up: taken as the basis, in order to establish sus- financial statements in foreign currencies, Experience shows that capital investment EVALUATION METHODS IN tainable viable returns. The following values the years 1996 and 1997 converted into DM in companies is subject to greater risk than ESTABLISHING THE PURCHASE have been taken: using actual year-end exchange rates at investments in fixed-interest securities. It is 31. 12. 1996 and 1997, while projected, or true, that the company’s chances and risks PRICE IN CONNECTION WITH 1996 actual values planned figures for the years 1998 to 2000 are equally taken into consideration and THE PREPARATORY TRANSFERS 1997 actual values have been converted using prognose or compared within the earning projection, 1998 projected values budget exchange rates. however, the fact must be taken into account, PROCESSES 1999 planned values that a company may be affected by extraordi- 2000 planned values In order to establish the value of the nary events, which cannot be foreseen in the companies within the Mail Order Division, a earnings projection. Effects arising from the spin-off process calculatory interest rate of 8.0% was assumed. In preparation for the spin-off, the compa- and the subsequent stock market listing The calculatory interest rate is calculated Examples for extraordinary events could nies of the Mail Order Division, in which have not been included in the planned from the current base rate of 6.0% plus a be operational disruptions due to acts of Kaiser + Kraft had a direct and indirect inter- values that were used as the basis of the risk made up of 3.5%, less an inflation allow- God, loss of assets due to business shut- est until 31. 12. 1998, have been transferred valuation. ance of 1.5%. down, expenses for restructuring measures, to the future intermediary holdings at their insolvency of major customers, changes in market value. A continued positive economic develop- Derivation of the Base Rate: staff composition etc. Furthermore, a compa- ment was assumed in establishing the In order to establish the earning value of ny interest is constantly fraught with the In order to be able to quantify hidden planned values for the years 1999 and 2000. a company, the capital investment “compa- latent threat of total loss due to bankruptcy. reserves being disclosed in this process, ny” is compared with other suitable invest- There are no equal opportunities to offset company valuations have been carried out, The years 1996 and 1997 have been ment opportunities. According to HFA these risks. The anticipated, yet uncertain that also take into account tax requirements. included instead of risk deductions. 2/1983 and the predominant view of the future earnings of the company can there- The objectives of the company valuations literature on business administration, the fore not be capitalised with the secure inter- were to establish a realistic company value Conney Safety Products, newly acquired country-specific interest rate, based on the est earnings from public bonds. It is rather in accordance with the statement HFA in 1998, and the Gerdmans group also interest rate for long-term public bonds, is that the capitalisation interest rate is higher 2/1983 “Principles on the Execution of Com- acquired in the same year, have been valued adopted as the base rate in order to obtain a than the yield earnings of fixed-interest pany Evaluations” by the German Institute at original cost. more realistic value. According to a publica- securities, due to the general entrepreneuri- of Auditors (Institut der Wirtschaftsprüfer in tion by the Deutsche Bundesbank (monthly al risk, which has not been taken into con- Deutschland e. V.). The valuation of the companies was report October 1998), the yield of public sideration in the establishment of earnings. based on sustainable target returns of each bonds was, on average, about 6.0% in the All those companies of the Mail Order company, while applying identical weighting period from 1992 until September 1998. In Under consideration of these circum- Division have been evaluated in so far as they of the annual results. It was assumed, that the appraisal, this average interest rate is stances, a risk allowance of 3.5% on top of are affected by the restructuring process. each company is economically independent taken as a prediction for the long-term the base rate, is deemed appropriate. 31. 12. 1998 has been uniformly chosen as but continues to profit from group services viable, country-specific interest rate and the valuation date, although the evaluations such as cheaper catalogue production, thereby regarded as an alternative capital took place before this date. centralised purchasing, centralised ware- investment. housing, finance, etc. For the German companies selling their Inflation allowance: domestic operations in preparation for the Many plausibility tests based on deviation Since it can be assumed, that the spin-off, only their own direct operations analyses were applied to check the viability company is at least partially able to offset have been valued without including their of the time frame applied in the valuation. effects caused by inflation by means of price subsidiaries which have valued separately. There was no need for adjustment. increases, the interest rate is suitable to balance inflationary losses by its inherent surcharge. On the basis of an average inflation (price index for living expenses of all private households in Germany) for the years 1992 until September 1998 of about 2.7%, an allowance of 1.5% on the base rate is regarded as appropriate.

44 ANNEXES 45 Proﬁts adjustments: E. REPORTS 0F The proﬁts before tax have been adjusted as follows: SPIN-OFF AUDITORS

Addback/deduction of materially signiﬁ- cant single and prior year items of income and expense while accounting for according taxes.

Deduction of income from subsidiaries.

Addback trade capital and tax net worth for the years 1996/1997 for the domestic PWC DEUTSCHE REVISION ...... 48

companies. EBNER, STOLZ & PARTNER ...... 58

Deduction of trade tax for domestic companies and corporation tax for foreign companies, since these are deﬁnitive charges in both cases. A decuction for of the corporation tax was not required for domestic companies due to the tax credit system. The tax situation as at the valuation date has been assumed.

As a rule, profits taxes payable by the company owners, which are linked to the ownership in the company, must be taken into consideration in the company valuation. In this case, though, this was not required, since the financial surplus of the alternative investment entails, at any given time, the same profits tax payment as does the company’s anticipated financial surplus.

Deferred taxes were estimated for companies with losses brought forward.

Apart from the deﬁnitive payments of the respectively applicable proﬁts taxes for the foreign companies, a 5% withholding tax deduction was taken off the respective results – where required – on the basis of the hypothesis of full distribution.

46 ANNEXES 47 Report on the Audit of the Spin-off in accordance with A. Assignment and Execution 5. In accordance with § 125 section 1, §§ 125 section 1, 9 of the German Transformation Act of and § 60 sub-section 1 UmwG, the spin-off part of the Assets of GEHE Aktiengesellschaft, 1. GEHE Aktiengesellschaft, Stuttgart, agreement must be audited according to Stuttgart, and transfer to TAKKT AG, Stuttgart (henceforth called “GEHE AG”) intends to provisions of §§ 9–12 UmwG. The spin-off transfer part of their assets to TAKKT AG, agreement is attached in annex B of the Stuttgart, by way of a spin-off in accordance spin-off report. with § 123 sub-section 2 no 1 of the German Transformation Act (UmwG, spin-off for 6. The spin-off report jointly drawn up by transfer). This shall take place by way of a the Management Boards of both companies spin-off retaining the original shareholding (§ 127 UmwG), explains the legal back- ratios. The spin-off comprises the Mail ground and the economic rationale for the Order Division for office, warehouse and spin-off. The spin-off report is not subject to A. Assignment and Execution business equipment, being the companies compulsory audit.

B. Type and Scope of Spin-off Audit Kaiser + Kraft Europa GmbH, Stuttgart, K + K America Corporation, Milwaukee, 7. In accordance with § 125 section 1, and C. Audit of the Spin-off Agreement Wisconsin/USA, and Topdeq Holding GmbH, §§ 60 sub-section 2, 10 UmwG, the Manage- I. Company Names and Registered Offices of the Participating Legal Entities Pfungstadt. It is planned to ﬂoat the newly ment Board of GEHE AG has commissioned II. Agreement on the Transfer of Assets created group of companies on the Stock us to carry out the audit of the spin-off. III. Issue Ratio Exchange in 1999. IV. Details on the Transfer of Shares V. Initial Proﬁt-Sharing of the New Shares 8. We have carried out the spin-off audit VI. Spin-off Deadline 2. The details of the spin-off are gov- in accordance with §§9–12 UmwG, which VII. Granting of Special Privileges for Individual erned by the spin-off agreement, as authen- must be applied to the spin-off in accordance Shareholders or Holders of Special Rights VIII. Granting of Special Privileges ticated by public notary on 13 April 1999 with § 125 section 1, and § 60 UmwG. Sub- IX. Division of Assets (document no191/1999S, public notary ject of audit was the spin-off agreement of X. Division of Shares Hans-Jörg Schröder, Stuttgart). In accor- 13 April 1999. XI. Consequences for the Employees and their Repre- sentatives dance with § 125 section 1 UmwG, and §§ 65 sub-section1,13 UmwG, the spin-off agree- 9. The audit of the spin-off agreement D. Results of Audit and Final Declaration on the ment shall be submitted for approval at the was mainly based on the following documen- Suitability of the Issue Ratio in accordance with § 12 sub-section2 German Transformation Act ordinary AGM of GEHE AG on 2 June 1999. tation: (UmwG) The AGM of TAKKT AG to adopt the spin-off

The German version of this joint report is authoritative agreement is also planned to take place on spin-off agreement of 13 April 1999, as 2 June 1999. certiﬁed by a public notary,

3. The spin-off agreement is conditional joint spin-off report of the Management upon formal approval of the agreement by Boards of GEHE AG and TAKKT AG, the AGMs of both companies being completed by 30 June 1999 and that the shareholders statutes of GEHE AG and TAKKT AG, of TAKKT AG agree the capital increase required to carry out the spin-off. report by C & L Deutsche Revision Aktiengesellschaft Wirtschaftsprüfungs- 4. The spin-off agreement stipulates, that gesellschaft, Munich, on the audit of the the assets of the Mail Order Division detailed Financial Statement of GEHE AG as of in § 2 shall be transferred, in their entirety, 31 December 1998. The 1998 Financial within a spin-off for transfer to TAKKT AG, Statements of GEHE AG have an unlimited against the granting of shares of TAKKT AG audit report and were accepted by the to the shareholders of GEHE AG. Supervisory Board on 12 April 1999.

48 ANNEXES 49 10. In our audit, we have taken into con- B. Type and Scope of Spin-off Audit 18. Since this procedure does not entail a (5) time of initial entitlement to profit-shar- sideration the statement issued 6/1988 by conversion of interests, the general opinion ing of these shares, and all special con- the Executive Committee of the Institute of 14. In accordance with § 125 section 1, is that a conversion ratio as such does not ditions with regard to this entitlement, Auditors “On Fusion Audits in accordance and §§ 60 sub-section 1, 9–12 UmwG, the need to be established. The share interests with §340 b sub-section4 AktG”, which is to spin-off audit applies to the investigation of in GEHE AG shall not change because of the (6) deadline, following which the decisions be applied likewise in the event of a spin-off. the completeness and correctness of the spin-off. New, additionally issued shares, at and operations of the transferring legal information given in the spin-off agreement, the ratio of 1 : 1, shall be granted to the entity shall be accounted for by the 11. Our assignment was performed in and, as to whether the planned conversion shareholders of GEHE AG for the assets receiving legal entity (spin-off dead- April 1999, at the offices of GEHE AG in ratio of the shares, the amount of the addi- transferred to TAKKT AG. line), Stuttgart. All requested information and tional cash payment – where applicable, and authentication was supplied to us by the the membership in the receiving legal entity 19. Therefore, no company evaluation is (7) rights, granted by the receiving legal Management Board, or their designated per- represents a respective equivalent value. required to establish the conversion ratio. entity to individual shareholders and sons. The Management Board has confirmed For this reason, no particular problems can holders of special rights, such as non- to us in separate declaration, that all rele- 15. A written audit report must be drawn occur in the assessment of the respective voting shares, preferential shares, mul- vant information and documents have been up on the results of the audit. Specifically, a legal entity in accordance with § 12 sub- tiple-voting shares, bonds and bonus made available to us. declaration on the Suitability of the Conver- section 2 no 3 UmwG. rights, or measures provided for such sion ratios must be included in the audit persons, 12. Type and scope of our audit activities report, together with a statement, according 20. Since the legal term of Suitability of have been recorded in our working docu- to which methods the suggested conversion the Conversion Ratio is based on the relation (8) each special privilege granted to a mentation. Our audit results are based on ratio has been established. It must also state, of the comparative company values – which member of a representative board or a our own findings within the audit, informa- for which reasons the application of these need not be established in this case – and Supervisory Board of the legal entities tion given by Members of the Management methods is deemed suitable, and which since, moreover, no shares are converted in participating in the spin-off, an auditing Board and the employees of GEHE AG conversion ratio or which equivalent value this case, but additional shares of TAKKT AG certified public accountant or an audi- involved in the spin-off, and the findings and would result in application of different are issued to the shareholders of GEHE AG, tor of the spin-off, evidence supplied by other external advisors methods, where several have been applied the term “issue ratio” shall be used below consulted by the Management Board of (§ 12 UmwG). instead of “conversion ratio”. (9) exact designation and division of the GEHE AG for the spin-off project. items of the assets and liabilities trans- 16. German law does not contain any spe- 21. The legal requirements for the com- ferred to the receiving legal entity and 13. The General Conditions for Assign- cific rules as to how to establish the conver- pleteness and correctness of the spin-off the transferred businesses and opera- ment for Certified Public Accountants and sion ratio. Principally, the provisions in § 8 agreement are detailed in §126 sub-section1 tions, Accounting Companies, and our Special Con- sub-section 1 and § 12 sub-section 2 UmwG UmwG. According to this provision, the ditions for the increased Liabilities Insurance assume, that a company evaluation must be spin-off agreement must contain at least the (10) division of the shares of each of the par- Cover – each in their version of 1 January carried out in such cases. following information (§ 126 sub-section 1 ticipating legal entities to the share- 1999 – attached at annex, have been agreed no 1–11 UmwG): holders of the transferring legal entity for the execution of our assignment and our 17. The spin-off of the Mail Order Division and scale of this division, responsibility, which shall likewise apply for office, warehouse and business equip- (1) Company name and registered office of when applied to third parties. ment occurs by granting shares in TAKKT the legal entities participating in the (11) consequences of spin-off for the AG to the shareholders of GEHE AG. For this spin-off, employees and their representatives, purpose, the authorised capital of TAKKT and any measures provided with regard AG shall be increased. The new shares shall (2) agreement on the transfer of part of the to this issue. be issued solely to the shareholders of GEHE assets by the transferring legal entity, AG, in accordance with the existing share in their entirety, against the granting of interests. Following the spin-off and the shares in the receiving legal entity, compulsory recall of the “founder shares” required in the statutes of TAKKT AG, all (3) issue ratio of the shares and – where shares of TAKKT AG shall be granted to the applicable – the amount of the addition- shareholders of GEHE AG, while retaining al cash payment, the existing shareholdings (spin-off retaining the share ratio). (4) details for the transfer of shares in the receiving legal entity,

50 ANNEXES 51 22. The spin-off report, jointly submitted II. Agreement on the Transfer of Assets According to these statements, the issue IV. Details on the Transfer of the Shares by the Management Boards of GEHE AG and (§126 sub-section 1 no 2 UmwG) ratio is 1 : 1. In return for the transfer of the (§ 126 sub-section 1 no 4 UmwG) of TAKKT AG, which contains legal explana- 26. In accordance with § 2 of the spin-off assets listed in § 2 of the spin-off agreement, 31. § 5 of the spin-off agreement lists the tions and the economic rationale for the agreement, GEHE AG transfers part of their TAKKT AG shall grant to the shareholders of details for the transfer of the shares of spin-off, the spin-off agreement and the assets with all rights and duties, in their GEHE AG one bearer no par value share of TAKKT AG. Accordingly, GEHE AG shall issue ratio of the shares, is not subject of a entirety, to TAKKT AG. In return, the share- TAKKT AG for each bearer share of GEHE appoint Dresdner Bank AG, Frankfurt/Main, legally required spin-off audit. Neither is the holders of GEHE AG receive shares in AG with a par value of DM 5.00. Should the as the trustee for the receipt of the shares to assessment of the economic viability of the TAKKT AG, in the same ratio as their previ- spin-off only become effective after the be granted by TAKKT AG. TAKKT AG shall spin-off the subject of the audit. ous shareholdings in GEHE AG (spin-off for planned conversion of the authorised capital hand over the shares to the trustee before transfer to retain existing share ratio). of GEHE AG to no par value shares has been entry of the spin-off in the trade register of C. Audit of the Spin-off Agreement Subject of spin-off are the assets of the Mail entered in the trade register, one bearer TAKKT AG, and instruct the trustee to dis- Order Division for office, warehouse and no par value share of TAKKT AG shall be tribute the shares to the shareholders of 23. We have investigated the spin-off business equipment. According to §2 of the granted for each bearer no par value share GEHE AG, after the spin-off has been agreement for completeness and correctness spin-off agreement, these comprise the 100% of GEHE AG. entered in the trade register of GEHE AG. No with regard to the statements required in share interests of GEHE AG in: expenses shall be incurred for the share- § 126 sub-section 1 no 1–11 UmwG. The 30. The spin-off of the Mail Order Division holders by the issue of the shares (§ 3 sub- according explanations in the joint spin-off Kaiser +Kraft Europa GmbH, Stuttgart shall be effected by the transfer to TAKKTAG, section 1 of the spin-off agreement). report by the Management Boards of which was formed on 1 March 1999 by GEHE AG and of TAKKT AG have also been K+ K America Corporation, Milwaukee, GEHE AG and has an authorised share capi- 32. In accordance with § 71 UmwG, a taken into consideration for this purpose. Wisconsin/USA tal of EUR 50,000. A dilution of the interest trustee must be appointed. The spin-off shall ratio of the individual shareholders is only be entered in the trade register after The result of the findings established Topdeq Holding GmbH, Pfungstadt excluded, since § 5 of the statutes of the trustee has reported to the court that he within our audit is, that the spin-off agree- TAKKT AG requires a compulsory recall of retains control of the shares (§ 71 sub-sec- ment contains all full and correct statements 27. The capital increase planned by all “founder shares” of TAKKT AG held by tion 1 section 2 UmwG). required, and thereby meets the legal TAKKT AG, required in order to carry out GEHE AG, immediately after the spin-off has requirements. According to the findings the spin-off, is explained in detail in § 3 sub- become effective. The compulsory recall 33. Within the spin-off agreement, the of our audit, no objections need be made section 3 of the spin-off agreement. ensues in accordance with § 237 sub-section shareholders are made no cash offer for against any of the further contractual pro- 1 and 6 AktG, by decision of the Manage- redemption in accordance with § 125, and visions. III. Issue Ratio ment Board. The decision must ensue imme- § 29 UmwG. According to § 29 sub-section 1 (§126 sub-section 1 no 3 UmwG) diately after the increase in the authorised section 2 UmwG, the receiving legal entity 24. In accordance with § 126 sub-section 1 28. As explained above, a conversion ratio capital of TAKKT AG has been entered in the (TAKKT AG) is obliged to offer every share- no 1–11 UmwG, the following statements does not have to be established in the event trade register of TAKKT AG, and the spin-off holder, who may file recourse against the have been made on the individual informa- of a spin-off for transfer which retains the has been entered in the trade registers of decision of the AGM, an adequate compensation given: existing share ratio, since there is no conver- TAKKT AG and of GEHE AG. tion in the spin-off agreement, if the shares sion of shares. All shares of the receiving in the receiving legal entity are subject to I. Company Name and Registered Office legal entity (TAKKT AG) shall be granted Following the recall of the shares,GEHEAG a restriction for disposal required by the of the Participating Legal Entities exclusively to the shareholders of the trans- is effectively no longer a shareholder of statutes. (§ 126 sub-section 1 no 1 UmwG) ferring legal entity (GEHE AG). For this rea- TAKKT AG. This ensures, that all sharehold- 25. The company name and registered son, the statement in spin-off agreement, ers of GEHE AG receive shares in TAKKT AG Since the new shares of TAKKT AG – as office of the participating companies are that all shares shall be granted to the share- corresponding to their previous sharehold- are the shares of GEHE AG – are made out detailed in § 1 sub-section 1 of the spin-off holders of GEHE AG, is sufficient. The spin- ings in GEHE AG. as bearer shares and are not subject to any agreement and correspond with the statutes off agreement is therefore complete. restriction for disposal as prescribed by the of the companies and the entries in the statutes, a cash redemption offer is not trade register of the district court “Amtsge- 29. The required information on the divi- required. The legal status of the shareholders richt Stuttgart”. sion of the shares in the receiving legal will therefore not change with regard to the entity (TAKKT AG) is listed in § 3 sub- type and quality of their interest. section 1 and 2 of the spin-off agreement.

52 ANNEXES 53 V. Initial Profit-Sharing in the New Shares VII. Granting of Special Privileges to Indi- VIII. Granting of Special Privileges TAKKT AG shall assume internally, that the (§ 126 sub-section 1 no 5 UmwG) vidual Shareholders or Holders of Special (§126 sub-section 1 no 8 UmwG) transfer becomes effective externally as of 34. According to § 3 sub-section 3 of the Rights (§ 126 sub-section 1 no 7 UmwG) 41. In accordance with §4 sub-section 2 of the spin-off deadline (§10 sub-section4 of spin-off agreement, the shares to be granted 38. In accordance with § 4 sub-section 1 of the spin-off agreement, neither are the the spin-off agreement). by TAKKT AG are entitled to profit-sharing the spin-off agreement, no special privileges members of the Management or Supervisory from 1 July 1999. will be granted to individual shareholders or Boards, the auditing certified public accoun- X. Division of Shares holders of special rights. Neither are any tants of the participating companies or the (§ 126 sub-section 1 no 10 UmwG) 35. If the spin-off has not been entered in measures planned for the benefit of any such auditors of the spin-off granted any special 45. In accordance with § 3 sub-section 1 the trade register of GEHE AG by midnight persons. Within our audit, there has been no privileges. Within our audit, there has been of the spin-off agreement, TAKKT AG shall of 31 December 1999, the shares granted evidence as to the granting of special privi- no evidence as to the granting of special grant the shareholders of GEHE AG one in return shall be entitled to profit-sharing leges to any such persons. privileges to any such persons. bearer share of no par value in TAKKT AG only from 1 January 2000 (§ 6 of the spin-off for each bearer share of DM 5.00 in GEHE AG. agreement). Any further delay of entry 39. According to the information given to 42. We hereby declare accordingly, that In the event, that the spin-off only becomes beyond the 31 December of any subsequent us and the findings of our audit, there are no we – being the auditing certified public effective after the planned conversion of the year shall delay the beginning of the entitle- holders of special rights (preferential shares, accountants of the final accounts and the authorised capital of GEHE AG to shares of ment to profit-sharing by an additional year multiple-voting shares, non-voting shares, spin-off – have not received any special no par value has been entered in the trade respectively. bonds or bonus rights) in accordance with privilege. register, each shareholder of GEHE AG shall § 126 sub-section 1 no 7 UmwG. receive one bearer share of no par value in VI. Spin-off Deadline IX. Division of Assets TAKKT AG for each bearer share of no par (§ 126 sub-section 1 no 6 UmwG) 40. The convertible bond issued by AXA (§126 sub-section 1 no 9 UmwG) value of GEHE AG. By defining the issue 36. In accordance with § 1 sub-section 3 of Colonia Konzern Finance (Luxembourg) S.A. 43. §2 of the spin-off agreement details ratio at 1 : 1 – which shall be retained for the spin-off agreement, the spin-off of part does not represent a special privilege in the assets and liabilities of GEHE AG to be GEHE AG after the conversion to shares of of the assets of GEHE AG to TAKKT AG shall accordance with § 126 sub-section 1 no 7 transferred in their entirety. These comprise no par value – and due to the compulsory ensue internally, with effect from 30 June UmwG, or special right in accordance with the shares in three companies, which have recall of the “founder shares” of TAKKT AG, 1999 24:00 hours. From 1 July 1999 00:00 §§ 125 section 1, 23 UmwG, since this bond been listed and exactly identified under their the shareholdings will remain identical. hours (spin-off deadline) all decisions and was not issued by GEHE AG or on their company name and registered office, as operations by GEHE AG concerning the behalf. well as the type and amount of the interest XI. Consequences for the Employees and transferred assets, shall be accounted for by (cf. section 26). The transfer of these assets their Representatives (§ 126 sub-section 1 TAKKT AG. According to § 25 and § 17 sub- shall ensue including any related legal no 11 UmwG) section 2 UmwG, the spin-off shall be based interests. 46. The consequences of the spin-off for on the audited final accounts of GEHE AG as the employees and their representatives, as of 30 June 1999 (§ 1 sub-section 2 of the 44. With effect of spin-off, all shares of well as any related measures, are governed spin-off agreement). the companies to be transferred are being by § 7 of the spin-off agreement. transferred without requiring any further 37. In the event, that the spin-off has not procedures. If individual assets and liabil- Consequences for Employees been entered in the trade register of GEHE AG ities belonging to the transferred assets, are 47. In accordance with § 7 sub-section 1 of on 31 December 1999, the spin-off of the not legally transferred to TAKKT AG, the the spin-off agreement, the spin-off shall assets of GEHE AG to TAKKT AG shall ensue provisions in § 10 sub-section 1–5 of the have no effect on the existing employment with effect on 1 January 2000 00:00 hours spin-off agreement have been included as a structures at Kaiser + Kraft Europa GmbH, according to § 6 of the spin-off agreement. In precautionary measure, according to which K + K America Corporation and Topdeq Hold- the event of a further delay of the entry GEHE AG will transfer these assets and ing GmbH, or any of their affiliated compa- beyond the 31 December of any subsequent liabilities by way of legal act, either as of nies. A transfer of operations in accordance year, the deadlines shall be delayed by an 30 June 1999 or at a later date in accordance with § 613 a BGB is not being carried out additional year in accordance with the provi- with § 6 of the spin-off agreement (§ 10 sub- and all existing operative agreements shall sions detailed above. section 1 and 2 of the spin-off agreement). continue to apply. In cases, where additional transfer action is required, GEHE AG and TAKKT AG are required in accordance with § 10 sub- section3 of the spin-off agreement, to initiate the required action. In the meantime, and in the event, that a transfer may not be possible, or only at excessive expense, GEHE AG and

54 ANNEXES 55 48. Principally, neither will the intra- 51. The prerequisites of the legal provi- C. Results of Audit and Final The transferred assets and liabilities have group company transfers carried out in sions on co-determination of employees in Declaration on the Suitability of been detailed correctly in the spin-off agree- accordance with § 7 sub-section 2 of the the Supervisory Board do not apply to the Issue Ratios in accordance ment. spin-off agreement, in the run-up to the TAKKT AG. However, GEHE AG being the with § 12 sub-section 2 UmwG spin-off – which are partially subject to the shareholder in TAKKT AG, has declared to Since all shares of TAKKT AG, Stuttgart, suspensive condition of approval of the spin- the employee representatives of the Mail 54. Following the final results of our audit are issued by way of a spin-off and transfer off by the AGM of GEHE AG – have any nega- Order Division, to suggest and elect two assignment, we, the auditing certified public in accordance with §123 sub-section 2 no 1 tive consequences for employees concerned. employee representatives during the elec- accountants of the spin-off agreement, UmwG – to retain the ratio of 1 :1 – to the tion of further members of the first Supervi- which was concluded on the spin-off of the shareholders of GEHE AG, Stuttgart, there Consequences for the Employees’ sory Board of TAKKT AG. The corporate Mail Order Division for office, warehouse is no requirement for a company evaluation Representatives works council of Kaiser + Kraft GmbH can and business equipment of GEHE AG – the in order to establish the issue ratio. This 49. Works councils, corporate works make recommendations in this respect. latter being the transferring legal entity – to having been provided, we can confirm, councils or business committees existing TAKKT AG being the receiving legal entity, that the issue ratio, according to which the with the operations of Kaiser + Kraft Europa 52. TAKKT AG is part of the Franz Haniel shall make the following final declaration: shareholders of GEHE AG shall receive one GmbH, K + K America Corporation and Top- & Cie. GmbH group, Duisburg, which is sub- bearer no par value share of TAKKT AG for deq Holding GmbH, or any of their affiliated ject to co-determination on the Supervisory “The spin-off agreement of 13 April 1999 each bearer share of GEHE AG, is legally companies, shall remain in office. The spin- Board, in accordance with the Act on Co- contains all complete and correct statements suitable.” off will not lead to any changes in operations determination of 1976. required in accordance with § 126 UmwG. (§ 7 sub-section 3 of the spin-off agreement). Current agreements with the existing 53. According to the findings of our audit, employee representatives have been made the consequences of the spin-off for the available to us. employees and their representatives, have thereby been fully and correctly explained. Munich, 21 April 1999 50. The responsibility of the European PwC Deutsche Revision works council of GEHE AG for the employees Aktiengesellschaft of Kaiser + Kraft Europa GmbH and Topdeq Wirtschaftsprüfungsgesellschaft Holding GmbH, as well as those of their affiliated companies, shall end with effect of spin-off. TAKKT AG itself is not obliged to establish a European works council. * Eisold Küpfer * Wirtschaftsprüfer Wirtschaftsprüfer

56 ANNEXES 57 A. Assignment and Execution 4 We have been appointed as auditors of Report on the Audit of the Spin-off in accordance with this spin-off report by the Management §§ 125 section 1, 9 of the German Transformation Act of 1 The Management Board of GEHE Board of TAKKT in accordance with § 125 part of the Assets of GEHE Aktiengesellschaft, Aktiengesellschaft (“GEHE”) intends to sep- section 1 and §§ 10 and 60 UmwG. Our Stuttgart, and transfer to TAKKT AG, Stuttgart arate the Mail Order Division for office, report was completed in April 1999. warehouse and business equipment from GEHE. This shall ensue by way of spin-off 5 The regulations of §§ 9–12 UmwG, into TAKKT AG (“TAKKT”), a company which – due to the absence of speciﬁc regu- formed by GEHE for this purpose. With this lations on the audit in the 3rd book of the spin-off and transfer to TAKKT AG in accor- UmwG – have been applied respectively to dance with § 123 sub-section 2 no 1 UmwG, the spin-off in accordance with § 125 sec- which retains the same share ratio, two com- tion 1 and § 60 UmwG, and have been taken

A. Assignment and Execution panies focusing on their respective core into account in this report. competences are to be created. The new com- B. Basis for the Spin-off Audit pany is to be ﬂoated on the Stock Exchange 6 Subject of this audit report was the C. Audit of Spin-off Agreement in 1999. spin-off agreement of 13 April 1999. 1. Designation of the Legal Entities Participating in the Spin-off 2 In the notarial deed of 13 April 1999, 7 With the spin-off agreement, the assets 2. Agreement on Transfer of Assets 3. Conversion Ratio of Shares issued by the public notary Hans-Jörg of the Mail Order Division, as detailed in § 2 4. Details on the Transfer of Shares Schröder, registered office in Stuttgart, the of the spin-off contract, are to be transferred 5. Initial Proﬁt-Sharing of the New Shares spin-off agreement attached in annex B, for in their entirety by way of spin-off for trans- 6. Spin-off Deadline 7. Granting of Special Rights to Individual the joint spin-off report of the Management fer to TAKKT, against the granting of TAKKT Shareholders Boards of GEHE and TAKKT respectively, shares to the shareholders of GEHE. 8. Granting of Special Privileges was concluded between GEHE as the trans- 9. Division of Assets 10. Division of Shares ferring legal entity and TAKKT as the receiv- 8 The Management Boards of GEHE and 11. Consequences for the Employees ing legal entity. TAKKT have submitted a joint spin-off report 12. Other Arrangements in the Spin-off Agreement in accordance with §127 UmwG on the D. Results of Audit and Final Declaration on the 3 The spin-off agreement is conditional on planned spin-off. This report was made Suitability of the Conversion Ratio in accordance formal approval by the AGMs of both public available to us during the audit of the spin- with § 12 sub-section 2 German Transformation Act (UmwG) companies by 30 June 1999, and the resolu- off agreement. tion for a share capital increase by the The German version of this joint report is authoritative shareholders of TAKKT in order to complete 9 Our audit was therefore mainly the spin-off. based on:

The spin-off agreement in accordance with § 126 UmwG, notarial deed of 13 April 1999, issued by public notary Hans-Jörg Schröder, Stuttgart, document no 191/1999 S

Joint spin-off report in accordance with § 127 UmwG, by the Management Boards of GEHE and TAKKT

Company statutes of GEHE and TAKKT, respectively.

58 ANNEXES 59 10 In carrying out our assignment, we B. Basis for the Spin-off Audit Any particular problems in the assess- The spin-off shall be based on the trans- have taken into account the statement ment of the legal entities must be specifically formation accounts of GEHE as of 30 June HFA 6/1988 “On Fusion Audits in accor- 14 The legal basis for the audit to be referred to. 1999, being the final accounts in accordance dance with § 340 b sub-section 4 AktG”, carried out by our company are §§ 125, 60, with §§ 125 section 1, 17, sub-section 2 sec- issued by the “Institut der Wirtschaftsprüfer” section 1 and §§ 9–12 UmwG. Subject of the 16 Another integral part of the spin-off tion 1 UmwG, as audited by PwC Deutsche (Institute of Certified Public Accountants). audit of the spin-off for the transfer in accor- audit to be carried out by our company is the Revision Aktiengesellschaft Wirtschafts- dance with § 123 sub-section 2 no 1, is the examination of the completeness of the prüfungsgesellschaft, Munich. The assets, 11 All requested information and evidence spin-off contract in accordance with §§ 9 f spin-off agreement in accordance with § 126 which comprise the Mail Order Division was supplied to us by the Management Board UmwG. The minimum content of the spin-off UmwG. However, the evaluation of the suit- of GEHE AG and are the object of the spin- of TAKKT. The completeness of the informa- and transfer contracts is set out in § 126 ability of the spin-off agreement was not the off, have been listed in § 2 of the spin-off tion given and the documentation supplied UmwG. In accordance with §12 UmwG, the subject of our audit. agreement. These are GEHE’s 100% share- has been confirmed to us by the Management certified public accountant auditing the holdings in: Board of TAKKT in a separate declaration. spin-off must provide a written report on the 17 In accordance with § 12 UmwG, we The type and scope of our audit activities results of his audit. The audit report must be submit the following report on the results of Kaiser + Kraft Europa GmbH, Stuttgart, have been recorded in our working papers. completed with a declaration, as to whether our audit. Germany the conversion ratio of the shares, the amount 12 Our assignment and its execution are of additional cash payments – where appli- C. Audit of the Spin-off Agreement K + K America Corporation, Milwaukee, based on the “General Conditions of Assign- cable, or the membership in the receiving Wisconsin/USA ment for ‘Wirtschaftsprüfer’ and ‘Wirtschafts- legal entity represents an appropriate 18 In accordance with our assignment, we prüfungsgesellschaften’”, in the version equivalent value. have investigated the spin-off agreement of Topdeq Holding GmbH, Pfungstadt, dated 1 January 1999. 13 April 1999 as to completeness and cor- Germany 15 The following information must be rectness of the data supplied in accordance 13 These arrangements shall likewise included: with § 126 sub-section 1 no 1–11 UmwG. We 21 The transfer of these assets as listed in apply to third parties in accordance with the can now provide the following detailed § 2 to TAKKT, shall take place at 24:00 hours agreements made. Methods which have been applied for the report on the data required in § 126 UmwG: on 30 June 1999. suggested conversion ratio 1. Designations of the Legal Entities 3. Conversion Ratio of the Shares reasons for the application of these Participating in the Spin-off (§ 126 sub-section 1 no 3 UmwG) methods (§126 sub-section 1 no 1 UmwG) 22 According to § 126 sub-section 1 no 3 19 According to §126 sub-section 1 no 1, UmwG, the conversion ratio of the shares which conversion ratio or which equiva- the spin-off agreement must contain the and – where applicable – the amount of the lent value would result in application of designated name or company and registered additional cash payment, or statements on the different methods, where several have office of the legal entities participating in the membership in the receiving legal been applied; at the same time, it must be the spin-off. § 1 of the spin-off agreement entity, must be made in the event of split laid out, which weighting has been lists the required data on the company name and subsequent spin-off. assigned to the different methods in and registered office of the legal entities establishing the suggested conversion concerned. They correspond with the stat- 23 According to § 3 sub-section 2 of the ratio, or of the equivalent value, and the utes of GEHE, the respective trade register spin-off contract, the conversion ratio is values they have been based on, and entry with the registry court “Registerge- 1 : 1. In return for the transfer of the assets which particular problems have occurred richt Stuttgart”, and the statutes of TAKKT, listed in § 2, TAKKT grants the shareholders in the assessment of the legal entities. which has been attached as annex C to the of GEHE one bearer no par value share of joint spin-off report, and the register entry TAKKT for each bearer share of GEHE at par with the registry court “Registergericht value of DM 5.00. Should the spin-off become Stuttgart”. effective only after entry of the planned conversion of the authorised capital of GEHE to 2. Agreement on the Transfer of Assets security shares, one no par value share of (§126 sub-section 1 no 2 UmwG) TAKKT shall be issued for each no par value 20 §1 of the spin-off agreement governs share of GEHE. The shares shall be issued the transfer of the Mail Order Division in its without charge, with profit-sharing from entirety, by way of spin-off for transfer to 1 July 1999. No additional cash payments TAKKT, against granting of TAKKT shares to need to be made. The shareholders of GEHE the shareholders of GEHE. are thereby receiving shares in TAKKT at

60 ANNEXES 61 the same ratio as their shares in GEHE. The 4. Details on Transfer of Shares 5. Initial Profit-Sharing of the New Shares 7. Granting of Special Rights conversion ratio of 1 : 1 mentioned in the (§126 sub-section 1 no 4 UmwG) (§126 sub-section 1 no 5 UmwG) to Individual Shareholders spin-off agreement therefore actually repre- 28 During the split and spin-off, the spin- 32 According to § 3 of the spin-off (§ 126 sub-section 1 no 7 UmwG) sents an issue ratio. off agreement must contain details on the contract, the bearer no par value shares of 35 According to § 4 sub-section 1 of the transfer of the shares of the receiving legal TAKKT, which shall be granted to all share- spin-off agreement, the receiving company 24 The spin-off of the Mail Order Division entity, or on the acquisition of membership holders of GEHE in the same ratio as their TAKKT shall grant no special rights in takes place with a transfer to TAKKT as the in the receiving legal entities. According to previous shareholdings and at no extra accordance with § 126 sub-section 1 no 7 receiving company, which was formed by § 5 of the spin-off contract, GEHE appoints charge, are entitled to profit-sharing from UmwG to individual shareholders or to hold- GEHE on 1 March 1999 with the legally Dresdner Bank AG in Frankfurt/Main as 1 July 1999. The entitlement to profit-shar- ers of special rights. Neither are measures required minimum authorised capital of trustee for the shares to be issued by TAKKT ing for the no par value shares of TAKKT, in accordance with §126 sub-section 1 no 7 EUR 50,000.00, and does not retain any and their transfer to the shareholders of with effect from 1 July 1999 in accordance UmwG provided to any such persons. further assets beyond the authorised share GEHE. TAKKT shall issue the shares to the with § 3 of the spin-off contract, shall capital as paid in cash. A dilution of the trustee before entry of the spin-off in the change, if the spin-off has not been entered 36 Within the legally required audit, we shareholding of individual shareholders will trade register of TAKKT, and instruct the by midnight of 31 December 1999 in the have not identified any evidence that special not occur, since the statutes of TAKKT trustee to distribute the shares to the share- trade register of GEHE. In this case, the rights in accordance with this rule are being require a compulsory recall of all TAKKT holders of GEHE after entry of the spin-off beginning of 1 January 2000 shall be the granted. founder shares held by GEHE, immediately in the trade register of GEHE. deadline for the transfer of the assets of the after the spin-off has taken effect. The recall GEHE Mail Order Division in accordance 37 According to the information given to follows by way of administrative compulsory 29 The appointment of the trustee is with § 6 spin-off contract, and the beginning us and the results of our audit, there are no recall according to § 237 sub-section 1 and 6 required in accordance with § 125 section 1 of the entitlement to profit-sharing in accor- holders of special rights (such as non-voting AktG, by decision of the Management Board. and § 71 UmwG. According to § 71 UmwG, dance with § 3 sub-section 1. In the event of shares, preferential shares, multiple-voting This must follow immediately after the the spin-off may be entered only after the a further delay beyond the 31 December of shares, bonds and bonus rights) in accor- increase of the authorised capital of TAKKT trustee has reported to the court, that he is any subsequent year, the deadlines shall be dance with § 126 sub-section 1 no 7 (2nd by EUR 72,900,000.00 to EUR 72,950,000.00 in control of the shares. delayed by an additional year respectively. sub-section) UmwG. The convertible bonds has been entered in the trade register and issued by Axa Colonia Konzern Finance the spin-off has been entered in the trade 30 The spin-off agreement does not con- 6. Spin-off Deadline (Luxembourg) S.A. do not represent a special registers of TAKKT and GEHE. tain any cash redemption offer for the share- (§126 sub-section 1 no 6 UmwG) right in accordance with §126 sub-section 1 holders in accordance with §§ 125 section 1 33 According to § 1 of the spin-off agree- no 7 UmwG, or in accordance with §§125 25 With the recall, GEHE is effectively and 29 UmwG. According to § 29 sub-section ment, the transfer of the Mail Order Division section 1, 23 UmwG, since these bonds were no longer a shareholder in TAKKT. This 1 section 2 UmwG, the receiving legal entity of GEHE to TAKKT shall be carried out inter- not issued by GEHE or on their behalf. ensures, that all GEHE shareholders receive is obliged to offer every shareholder, who nally, with effect from 30 June 1999 24:00 a shareholding in TAKKT corresponding to may file recourse against the decision of the hours. From 1 July 1999 00:00 hours (spin- 8. Granting of Special Privileges their current shareholding in GEHE. AGM, an adequate compensation in the spin- off deadline), all decisions and operations by (§ 126 sub-section 1 no 8 UmwG) off agreement, if the shares in the receiving GEHE concerning the transferred assets, 38 According to § 4 of the spin-off agree- 26 In view of the spin-off retaining the legal entity are subject to disposal restric- shall be accounted for by TAKKT. ment, no special privileges are granted to share ratio, and the conversion ratio (issue tions as required by the company’s statutes. any member of the Management Board or ratio) of 1 : 1, which allows TAKKT – in 34 In the event that the spin-off has Supervisory Boards of the participating com- combination with the authorised capital 31 No such restriction for disposal exists not been entered in the trade register of panies, or to the auditors of the final increased by EUR 72.9 million – to grant the for the bearer no par value shares of TAKKT. GEHE by midnight on 31 December 1999, accounts of the spin-off. shareholders of GEHE one share of TAKKT For this reason, no cash redemption offer is 31 December 1999 shall count as the dead- for each share of GEHE within the spin-off, necessary. line of the final accounts of GEHE, in contra- 39 There has been no evidence as to the shareholding structures will be the same diction to § 1 sub-section 3 of the spin-off the granting of special privileges to the for GEHE and TAKKT. agreement, and midnight on 31 December Management or Supervisory Boards. We 1999 and the beginning of 1 January 2000 hereby declare accordingly, that we – being 27 Since the share structures are identi- shall count as the deadline for the transfer the auditors of the final accounts and the cal, the conversion ratio (issue ratio) of of the assets of GEHE listed in § 2 of the spin-off – have not received any special 1 : 1 will not have to be established on the spin-off agreement (spin-off date) – in con- privileges. basis of company evaluations. For this tradiction to § 1 sub-section 3. In the event of reason, there are no particular difficulties a further delay beyond the 31 December of in the valuation of the respective legal entity the subsequent year, the deadlines shall be in accordance with § 12 sub-section 2 no 3 delayed by an additional year respectively. UmwG.

62 ANNEXES 63 9. Division of Assets The transfer of these assets and liabilities 11. Consequences for the Employees process. Notwithstanding other internal (§ 126 sub-section 1 no 9 UmwG) shall become effective on expiring of 30 June (§126 sub-section 1 no 11 UmwG) agreements, existing rights within the 40 The spin-off agreement must contain 1999. 49 §7 of the spin-off agreement explains transfer of pension obligations for retired an exact description and division of assets the consequences of the spin-off for the employees (current pensions and unchal- and liabilities being transferred to the 45 The 100% shareholdings of GEHE in employees and their representatives. lengeable claims) shall remain with the receiving legal entity, and the transferred Kaiser + Kraft Europa GmbH, K + K America sellers – as has been correctly laid out in businesses and operations and their alloca- Corporation and Topdeq Holding GmbH 11.1. Consequences of the Spin-off the spin-off agreement. tion to the receiving legal entities. represent the entire Mail Order Division for for the Employees office, warehouse and business equipment 50 As explained in § 7 sub-section 1 of There has been an additional transfer of 41 The assets and liabilities of GEHE to of GEHE. The new independent status of the the spin-off agreement, the spin-off shall the shares in Hoffmann Beteiligungs- und be transferred are listed in detail in §2 of the Mail Order Division and the separation from have no effect on the existing employment Verwaltungsgesellschaft mit beschränkter spin-off agreement. GEHE is intended to provide for an increased conditions at Kaiser + Kraft Europa GmbH, Haftung (“Hoffmann”) from VHI Interna- focus on the core competences of the speciﬁc K + K America Corporation and Topdeq tionale Versandhandels-Beteiligungsge- 42 These are the following GEHE 100% business areas of GEHE and TAKKT, and to Holding GmbH, or any of their affiliated sellschaft mbH (“VHI”) to Kaiser + Kraft shareholdings in: create so-called “pure plays”. companies. A transfer of operations in Europa GmbH. Due to the additional accordance with § 613 a BGB (German Civil acquisition of the limited partnership Kaiser + Kraft Europa GmbH, registered 10. Division of the Shares Code) is not being carried out. interest in Gaerner GmbH & Co. KG by office in Stuttgart, entered in the trade (§126 sub-section 1 no 10 UmwG) Hoffmann, a merger of the entire assets of register of the district court “Amtsgericht 46 §126 sub-section 1 no 10 UmwG stipu- 51 In the run-up to the spin-off, however, Gaerner shall ensue with Hoffmann, Stuttgart” under HRB 18864 lates that – in the event of split and subse- a re-structuring of the Mail Order Division which shall trade in future under the quent spin-off – the division of the shares of has been carried out by means of intra-group company name of Gaerner GmbH. This K + K America Corporation, statutory membership of each of the participating transfers. This comprises the division into does not represent a transfer of opera- office in the Corporation Trust Center, legal entities to the shareholders of the three business units each led by an interme- tions in accordance with § 613 a BGB. All 1209 Orange Street, City of Wilmington, transferring legal entity, and the scope of diate holding company, in order to adapt to employment arrangements existing with County of New Castle, Delaware 19801, the division must be stated. changing market requirements and the Gaerner shall be deemed a consequence USA, and administrative head office in strong growth of the Mail Order Division. of the merger with Hoffmann, including 770 South 70th Street, Milwaukee, Wis- 47 In order to implement the spin-off, TAKKT all rights and duties resulting from the consin 53214, USA shall increase its current authorised capital 52 These intra-group transfers have in existing employment arrangements, of EUR 50,000.00 by EUR 72,900,000.00 to part been made conditional upon the AGM including the transfer of undertakings for Topdeq Holding GmbH, registered office EUR 72,950,000.00 by issuing 72,900,000 of GEHE approving the spin-off agreement. retired employees (current pensions and in Pfungstadt, Germany, entered in the new bearer no par value shares (§ 3 sub-sec- They then become effective from 30 June unchallengeable claims). trade register of the district court “Amts- tion 3 of the spin-off contract). Immediately 1999 23:59 hours. gericht Darmstadt” under HRB 7294 following this issue, the authorised capital The acquisition of all assets by Topdeq shall be decreased to EUR 72,900,000.00 in 53 The following intra-group transactions Service GmbH from Topdeq International incl. any related legal status. accordance with the compulsory recall are subject to this condition: GmbH, which provided essential services required in § 5 of the statutes of TAKKT. for companies of the previous Topdeq 43 The spin-off shall be based on the Following the capital increase, and compul- Transfer of the business operations of group, has already been completed. transformation accounts of GEHE as of sory recall, the authorised share capital Kaiser + Kraft GmbH, KKWerbe GmbH According to § 613 a BGB, all employment 30 June 1999, as the ﬁnal accounts in accor- shall be divided up into 72,900,000 bearer Agentur für Media- und Marketing arrangements hereby affected have been dance with §§ 125 section 1, 17 sub-section 2 no par value shares. Service and VH Einkaufs-Beratungsge- transferred to Topdeq Service GmbH, section 1 UmwG, as audited by PwC Deutsche sellschaft für Büro- und Betriebseinrich- including all rights and duties, including Revision Aktiengesellschaft Wirtschafts- 48 This number of no par value shares tungen mbH, which have been sold to two the transfer of undertakings for employ- prüfungsgesellschaft, Munich, Germany. facilitates the granting to the shareholders new legal entities, i.e. Kaiser + Kraft Euro- ees. Any periods of service served and of GEHE within this spin-off, one no par pa GmbH and its company, Kaiser + Kraft acknowledged with Topdeq International 44 § 10 of the spin-off contract contains value share in TAKKT for each share in Deutschland GmbH. The employment GmbH shall be deemed served for Topdeq provisions for the event that individual GEHE. The spin-off therefore provides – in conditions hereby affected shall be trans- Service GmbH. Existing undertakings for assets and liabilities belonging to the assets combination with the compulsory recall of ferred to the purchaser, at the time of the retired employees (current pensions and listed in § 2 are not legally transferred to the founder shares – for identical share- deadline, with all related rights and unchallengeable claims) shall remain TAKKT. In this case, GEHE shall transfer holdings and thereby ensures that the share- duties, incl. the transfer of undertakings with Topdeq International GmbH, not- these assets and liabilities directly to TAKKT holder ratio remains the same. for employees in accordance with § 613 a withstanding other internal agreements. and TAKKT shall accept any such transfer. BGB. Employees’ rights and entitlements shall remain unaffected by this transfer

64 ANNEXES 65 11.2. Consequences of Spin-off for the 12. Other Arrangements in the Spin-off D. Results of Audit and Final The spin-off agreement we have audited Employees’ Representatives Agreement Declaration on the Suitability of provides for the retention of the share ratio 54 Works councils, corporate works coun- the Conversion Ratio in accordance within the spin-off of the Mail Order Division cils or business committees existing with a) Transfer of Assets with § 12 sub-section 2 UmwG of GEHE, with an issue ratio of 1 : 1. the operations of Kaiser + Kraft Europa 58 §1 of the spin-off agreement states, GmbH, K + K America Corporation and Top- that TAKKT shall carry forward in their 63 Following the final results of our audit Due to the spin-off of the Mail Order Divi- deq Holding GmbH, or any of their affiliated accounting the values for the transferred assignment, we, the auditors of the spin-off sion at the ratio of 1 : 1, each shareholder of companies, shall remain in office. The spin- assets and liabilities in the GEHE’s final agreement, conclude on the spin-off of the GEHE shall receive – immediately following off has not led to any changes in operations. accounts at 30 June 1999. Mail Order Division of GEHE and transfer the entry of the spin-off in the trade register Respective agreements with the existing to TAKKT as the receiving legal entity and of GEHE – the entitlement to one bearer no employee representatives have been made b) Expenses Incurred by the Agreement make the following declaration: par value share of TAKKT for each of his/her available to us. 59 §8 of the spin-off agreement provides shares. Should the spin-off only become for any expenses resulting from the com- 64 “The spin-off agreement of 13 April effective after entry of the planned conver- 55 The responsibility of the European pletion of the agreement and its detailed 1999 contains complete and correct state- sion of the authorised capital of GEHE to works council of GEHE AG for the employees explanations, including the expenses for the ments required in accordance with § 126 security shares, one share of TAKKT shall be of Kaiser + Kraft Europa GmbH and Topdeq trustee, but excluding however the expenses UmwG for the event of spin-off in accordance issued for each bearer no par value share of Holding GmbH, as well as those of their for the AGMs deciding on the spin-off, shall with § 123 sub-section 2 no 1. GEHE. Due to the spin-off retaining the affiliated companies, shall end with effect of be borne 50/50 by both GEHE and TAKKT – share ratio, with the conversion ratio (issue the spin-off. TAKKT itself is not obliged to even in the event that the spin-off does not The transferred assets and liabilities ratio) of 1 : 1, no company evaluation has establish a European works council. The pre- become effective. The expenses incurred have been detailed correctly in the spin-off been required to establish the suitability of requisites of co-determination of the employ- by any one contractual party in the prepara- agreement. the conversion, i.e. issue ratio. For this rea- ees in the Supervisory Board do not apply tion of agreement, shall be borne by that son, there have been no particular difficul- for TAKKT. However, GEHE being the contractual partner only. ties in the appraisal of the legal entities. shareholder in TAKKT, has declared to the employee representatives of the Mail Order 60 For this reason, no disadvantages have On the basis of our audit assignment, Division, to suggest and elect two employee been identified in this arrangement for any we hereby confirm the suitability of the con- representatives during the election of fur- of the contracting parties. version ratio.” ther members of the first Supervisory Board of TAKKT. The corporate works council of c) Provisions for Legal Transfer of Assets Kaiser + Kraft GmbH can make recommenda- and Liabilities tions in this respect. 61 § 10 of the spin-off agreement contains detailed provisions on the legal transfer of 56 TAKKT is part of the Franz Haniel & assets and liabilities. Cie. GmbH group, which is subject to co- determination on the Supervisory Board, in 62 In our opinion, no objections need be accordance with the Act on Co-determina- made against any of these provisions. Stuttgart, 21 April 1999 tion of 1976. Dr. Ebner, Dr. Stolz und Partner GmbH Wirtschaftsprüfungsgesellschaft 57 According to the findings of our audit, Steuerberatungsgesellschaft the consequences of the spin-off for the employees and their representations, as well as the related measures to be taken have been fully and correctly explained. * Gerhard Weigl Wolfgang Berger * Wirtschaftsprüfer Wirtschaftsprüfer

66 ANNEXES 67 F . ABBREVIATIONS

AGM Annual General Meeting For Investor Information Please Contact: AktG German Companies Act Georg W. Mehring-Schlegel Director of Investor Relations and Finance AXA Colonia AXA Colonia Group AG, Cologne Telephone +49 (0) 711 50 01–546 Telefax +49 (0) 711 50 01–736 bn billion E-mail: [email protected]

EStG German Income Tax Act

f following (page)

ff following (pages)

GEHE GEHE Aktiengesellschaft, Stuttgart

Haniel Franz Haniel & Cie. GmbH, Duisburg-Ruhrort

i.e. that is

Kaiser + Kraft Kaiser + Kraft GmbH, Stuttgart

KStG German Corporation Tax Act

m million GEHE Aktiengesellschaft Mail Order Division Mail Order Division for office, warehouse and Neckartalstraße 155 works equipment of GEHE Aktiengesellschaft D-70376 Stuttgart Telephone +49(0) 711 50 01–00 no number Telefax +49(0) 711 50 01–400 Internet www.gehe.de p.a. per annum (per year) TAKKT AG Neckartalstraße 155 subs. sub-section D-70376 Stuttgart Telephone +49(0) 711 50 01–99 TAKKT TAKKT AG, Stuttgart Telefax +49(0) 711 5001–214

UmwG German Transformation Act IntraService Klassische und Digitale Kommunikation UmwStG German Transformation Tax Act Frankfurt/Main

68 ABBREVIATIONS I. INTRODUCTION ...... 1 1.7 Effect of Spin-off on the Employees and their Representatives (§ 7) ...... 22 II. CURRENT SITUATION ...... 2 1.8 Expenses (§ 8) ...... 22 1.9 Conditions (§ 9) ...... 23 1 GEHE ...... 2 1.10 Legal Transfer of Assets and 1.1 Overview ...... 2 Liabilities (§ 10) ...... 23 1.2 Development of the GEHE Group ...... 2 1.3 Shareholder Structure ...... 3 2 Explanation of the Statutes of TAKKT ...... 24 1.4 Turnover, Results and Key Figures ...... 3 2.1 Company Name, Registered Office (§ 1) ...... 24 1.5 Employees ...... 3 2.2 Company Objects (§ 2) ...... 24 2.3 Announcements (§ 3) ...... 24 2 The Mail Order Division ...... 4 2.4 Amount and Allocation of Authorised Capital, 2.1 Overview ...... 4 Shares (§ 4) ...... 24 2.2 Historical Development ...... 5 2.5 Recall of GEHE Shares by TAKKT (§ 5) ...... 24 2.3 Development of Equity ...... 6 2.6 Composition of the Management Board (§ 6) . . 25 2.4 Development of Turnover and Profits ...... 6 2.7 Representation (§ 7) ...... 25 2.4.1 Turnover ...... 6 2.8 Composition and Term of Office For Investor Information 2.4.2 Profits ...... 6 of the Supervisory Board (§ 8) ...... 25 Please Contact: 2.5 Management ...... 7 2.9 Chairperson and Deputy (§ 9) ...... 26 2.6 Employees ...... 7 2.10 Management Rules, Calling of Meetings, Amendments (§ 10) ...... 26 Georg W. Mehring-Schlegel 3 TAKKT ...... 7 2.11 Remuneration of the Supervisory Director of Investor Relations and Finance 3.1 Overview ...... 7 Board (§ 11) ...... 26 Telephone +49 (0) 711 5001–546 3.2 Management Board ...... 7 2.12 Location, Calling of Meetings and Telefax +49 (0) 711 5001–736 Attendance at AGM (§§ 12, 13) ...... 26 E-mail: [email protected] III. REASONS FOR 2.13 Chairperson of the AGM (§ 14) ...... 27 THE MAIL ORDER DIVISION 2.14 Resolutions (§15) ...... 27 BECOMING INDEPENDENT ...... 8 2.15 Business Year, Reserves, Appropriation of Profits (§§ 16, 17) ...... 27 IV. COMMERCIAL COMMENTARY AND 2.16 Formation Expenses (§ 18) ...... 27 REASONS FOR SPIN-OFF ...... 10 3 Explanation of the Effects of Spin-off ...... 27 1 Overview ...... 10 3.1 Issue Ratio ...... 27 3.2 No negative Effect on Legal Status 2 Why Spin-off? ...... 10 of Shareholders ...... 27 2.1 Direct Participation of Shareholders 3.3 Effective Spin-off Date ...... 27 in the Success of Mail Order Division ...... 10 3.4 No Evaluation Problems ...... 28 2.2 Alternatives ...... 11 3.5 Advice in Accordance with § 142 Sub-section2 UmwG; Post-deadline Formation ...... 28 3 Why Spin-off to Transfer? ...... 12 3.5.1 Audit of Asset Transfer to TAKKT ...... 28 3.5.2 Post-deadline Formation ...... 28 4 Preparatory Restructuring within the Mail Order Division and VI. STOCK EXCHANGE ...... 29 the Tax-related Effects ...... 12 4.1 Overview ...... 12 1 Stock Market Quotation ...... 29 4.2 Details on Intra-Group Transfers ...... 13 4.3 Tax Effects on Purchase Agreements 2 Stock Market Price ...... 29 Subject to AGM Confirmation ...... 14 ANNEXES ...... 31 5 Effect on Taxation of Shareholders ...... 15 A. Pro forma Financial Statements and Profit GEHE Aktiengesellschaft 6 Effect on Balance Sheet Accounting ...... 16 and Loss Sheet for the Mail Order Division Neckartalstraße 155 6.1 GEHE ...... 16 1996, 1997, 1998 ...... 32 6.2 TAKKT ...... 17 D-70376 Stuttgart B. Spin-off Agreement ...... 34 Telephone +49(0)711 5001–00 7 Financial Effects caused by the Spin-off . . . . . 19 Telefax +49(0)711 5001–400 7.1 GEHE ...... 19 C. Statutes of TAKKT AG ...... 40 Internet www.gehe.de 7.2 TAKKT ...... 19 D. Explanation of the Evaluation Methods in 8 Effects of Spin-off on the Employees ...... 19 Establishing the Purchase Price in Connection TAKKT AG with the Preparatory Transfers Processes . . . 44 Neckartalstraße 155 V. LEGAL POSITION ...... 20 D-70376 Stuttgart E. Reports of Spin-off Auditors ...... 47 Telephone +49(0)711 5001–99 1 Explanation of Spin-off Agreement ...... 20 Telefax +49(0)711 5001–214 1.1 Transfer of Assets (§1) ...... 20 F. Abbreviations ...... 68 1.2 Subject of Spin-off (§ 2) ...... 20 1.3 Consideration (§3) ...... 21 IntraService The German version 1.4 Special Privileges and Rights (§ 4) ...... 22 Klassische und Digitale of this joint report is 1.5 Trustees (§ 5) ...... 22 Kommunikation authoritative 1.6 Change of Deadline (§ 6) ...... 22 Frankfurt/Main