Domination and Profit Transfer Agreement
Domination
and
Profit
Transfer Agreement
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between
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BorgWarner
Germany GmbH
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Hockenheimer
Str. 165-167, 68775 Ketsch
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Amtsgericht
Xxxxxxxx, XXX 000000
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"XxxxXxxxxx Xxxxxxx" -
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and
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BERU
Aktiengesellschaft
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Xxxxxxxxx.
000, 00000 Xxxxxxxxxxx
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Xxxxxxxxxxx
Xxxxxxxxx, XXX 205087
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"BERU" -
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§
1
Control
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(1)
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BERU
submits the control of its company to BorgWarner
Germany. Accordingly, BorgWarner Germany is authorized to issue
instructions to the executive board of BERU with regard to the management
of the company. BorgWarner Germany is not entitled to issue
instructions to the executive board of BERU to amend this agreement, to
maintain or to terminate it.
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(2)
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The
executive board of BERU is required pursuant to paragraph 1 to follow the
instructions of BorgWarner Germany. The executive board of BERU
shall continue to be responsible for the management and the representation
of BERU.
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(3)
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Instructions
must be issued in writing.
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§ 2
Transfer
of Profits
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(1)
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BERU
is obligated to transfer its entire profits to BorgWarner
Germany. Subject to the creation or dissolution of reserves in
accordance with paragraph 2, the annual net income which would accrue
without the profit transfer, reduced by a possible loss carried forward
from the preceding year and the amount to be allocated to the statutory
reserve, must be transferred.
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(2)
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With
the consent of BorgWarner Germany, BERU may allocate parts of the annual
net income to other profit reserves (§ 272 paragraph 3 German Commercial
Code (Handelsgesetzbuch,
"HGB"), insofar as this is admissible under commercial law and
economically justified by a sound commercial judgment. Other
profit reserves pursuant to § 272 paragraph 3 HGB created during
the term of this Agreement shall be dissolved upon the demand of
BorgWarner Germany and used to compensate an annual net loss or
transferred as profit. Other reserves as well as a profit
carried forward from the time before the term of this Agreement may not be
transferred as profit or used to compensate an annual net
loss.
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(3)
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The
obligation to transfer profits first applies to the entire profit of the
financial year of BERU in which this Agreement takes effect pursuant to
§ 6 paragraph 2.
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§ 3
Assumption
of Loss
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(1)
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BorgWarner
Germany is obligated to compensate BERU pursuant to the provisions in
§ 302 German Stock Corporation Act (Aktiengesetz, "AktG")
for each annual net loss that would otherwise arise during the term of
this Agreement, unless such loss is compensated for by withdrawing, in
accordance with § 2 paragraph 2 sentence 2, amounts from the other
profit reserves that have been allocated to them during the term of this
Agreement.
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(2)
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The
obligation to compensate BERU for its annual net loss first applies to the
net loss of the financial year of BERU in which this Agreement takes
effect pursuant to § 6
paragraph 2.
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§ 4
Guaranteed
Dividend
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(1)
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For
the term of this Agreement, BorgWarner Germany guarantees the outside
shareholders of BERU an adequate guaranteed dividend in the form of a
recurring cash payment ("Guaranteed
Dividend").
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(2)
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The
Guaranteed Dividend shall add up to a gross amount of EUR 4.73 per
no-par value share for each full financial year of BERU minus German
corporate income tax and solidarity surcharge in accordance with the rate
applicable to each of these taxes for the financial year
concerned. This deduction is to be calculated only on the basis
of the pro rata Guaranteed Dividend of EUR 3.19 per no-par value
share, included in the gross amount, arising from profits subject to
German corporate income tax plus solidarity
surcharge. According to the situation at the time of conclusion
of the Agreement, the portion of the Guaranteed Dividend in the amount of
EUR 3.19 per share consisting of profit burdened by German corporate
income tax is subject to 15% corporate income tax plus 5,5% solidarity
surcharge which constitutes a deduction of
EUR 0.50. Together with the other portion of the
Guaranteed Dividend in the amount of EUR 1.54 per share representing
profits which are not subject to German corporate income tax, this results
in a Guaranteed Dividend payment in the total amount of EUR 4.23 per
no-par value share for a complete financial year based on the
circumstances existing at the time the Agreement was
concluded.
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(3)
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The
Guaranteed Dividend shall be granted beginning with the financial year in
which this Agreement takes effect in accordance with § 6 paragraph
2.
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(4)
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If
this Agreement terminates during a BERU financial year or if, during the
term for which the obligation to transfer profits in accordance with
§ 2 paragraph 1 applies, BERU forms a short financial year, the
Guaranteed Dividend shall be reduced pro rata
temporis.
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(5)
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The
Guaranteed Dividend payment shall become due on the first banking day
following the Annual General Meeting of BERU for the preceding financial
year.
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(6)
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If
BERU’s share capital is increased by way of conversion of the company’s
funds in return for the issuance of new shares, the Guaranteed Dividend
per share shall decrease in such a way that the total amount of the
Guaranteed Dividend remains unchanged. If BERU’s share capital
is increased by means of a contribution in cash or in kind, the rights
arising from this § 4 shall also apply to the shares resulting from
the capital increase subscribed to by outside
shareholders.
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(7)
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In
the case that proceedings concerning the adequacy of the Guaranteed
Dividend (“Spruchverfahren”)
pursuant to the German Act on Appraisal Proceedings (“Spruchverfahrensgesetz”)
are initiated and the court determines a higher Guaranteed Dividend by
non-appealable decision, the outside shareholders shall be entitled to
request a corresponding supplement to the Guaranteed Dividend they have
received, even if they have already tendered their shares in return for
compensation. Likewise, all outside shareholders shall be
treated equally if BorgWarner Germany, in a settlement to avert or
terminate proceedings concerning the adequacy of the Guaranteed Dividend
(“Spruchverfahren”)
pursuant to the German Act on Appraisal Proceedings (“Spruchverfahrensgesetz”),
agrees to a higher Guaranteed Dividend vis-à-vis a BERU
shareholder.
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§ 5
Compensation
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(1)
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Upon
demand of an outside shareholder of BERU, BorgWarner Germany shall acquire
his shares in return for a cash compensation of EUR 71.32 per
share.
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(2)
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The
obligation of BorgWarner Germany to acquire shares is limited to a
specific period of time. The period of time shall expire two
months after the date on which the registration of this Agreement in the
commercial register of BERU has been announced in accordance with § 10
HGB. An extension of the time period under § 305 paragraph
4 sentence 3 AktG due to a motion for determination of the Guaranteed
Dividend or the compensation by the court responsible according to
§ 2 of the German Act on Appraisal Proceedings (“Spruchverfahrensgesetz”)
shall remain unaffected; in this case, the period of time expires two
months after the date on which the decision on the last motion ruled on
has been publicly announced in the electronic federal gazette (“Bundesanzeiger”).
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(3)
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The
sale of the shares is free of cost for BERU’s outside
shareholders.
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(4)
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If,
prior to the expiration of the time period defined in paragraph 2, BERU’s
share capital is increased by way of conversion of the company’s funds in
return for the issuance of new shares, the compensation per share shall
decrease in such a way that the total amount of the compensation remains
the same. If, prior to the expiration of such time period, the
share capital of BERU is increased by means of a contribution in cash or
in kind, the rights arising from this § 5 shall apply also to the
shares resulting from the capital increase subscribed to by outside
shareholders.
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(5)
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In
case that proceedings concerning the adequacy of the compensation (“Spruchverfahren”)
pursuant to the German Act on Appraisal Proceedings (“Spruchverfahrensgesetz”)
are initiated and the court determines an increased compensation by a
non-appealable decision, the outside shareholders shall be entitled to
request a corresponding supplement to the compensation they have received,
even if they have already tendered their shares in return for
compensation. Likewise, all outside shareholders shall be
treated equally if BorgWarner Germany, in a settlement to avert or
terminate proceedings concerning the adequacy of the compensation (“Spruchverfahren”)
pursuant to the German Act on Appraisal Proceedings (“Spruchverfahrensgesetz”),
agrees to a higher compensation vis-à-vis a BERU
shareholder.
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(6)
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If
this Agreement ends as a result of a termination for cause by BorgWarner
Germany , because BorgWarner Germany no longer holds the majority of the
voting rights under the shares in BERU each outside shareholder is
entitled to sell his shares for EUR 71.32 per share to BorgWarner
Germany, and BorgWarner Germany is in turn obligated to purchase these
shares. This right to sell the shares does not exist, if the
transfer of the shares in BERU by BorgWarner Germany to a bidder or to a
person acting in concert with the bidder within the meaning of § 2
paragraph 5 German Securities Acquisition and Takeover Act (Wertpapiererwerbs- und
Übernahmegesetz (WpÜG)) is effected as a result of or in connection
with a voluntary takeover offer pursuant to WpÜG or if a mandatory offer
pursuant to WpÜG is made as a result of the acquisition of the shares in
BERU which are held by BorgWarner Germany. The right to sell
the shares may be exercised after the day on which the registration of the
termination of this Agreement in the commercial register of BERU has been
announced in accordance with § 10 HGB. It expires after
two months. Paragraphs 3 and 4 of this § 5 shall apply
accordingly.
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§ 6
Effectiveness
and Term
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(1)
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To
take effect, this Agreement requires the consent of the General Meeting of
BERU and the consent of the shareholders’ meeting of BorgWarner
Germany.
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(2)
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This
Agreement shall take effect upon registration in the Commercial Register
at the registered office of BERU.
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(3)
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This
Agreement can be terminated by giving written notice subject to a notice
period of six months prior to the end of a financial year of
BERU. This Agreement may be terminated for the first time as of
the end of the financial year that expires at least five years after the
beginning of the financial year in which this Agreement has taken
effect.
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(4)
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The
right to terminate this Agreement for cause (wichtiger Xxxxx)
without notice shall remain unaffected. Particularly,
BorgWarner Germany and BERU are entitled to terminate for cause if
BorgWarner Germany no longer holds the majority of the voting rights of
shares in BERU.
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§ 7
Comfort
Letter (Patronatserklärung)
BorgWarner
Germany is a company that belongs to the BorgWarner Group of which the parent
company is BorgWarner Inc., Auburn Hills, USA, that is listed on the stock
exchange in the USA. BorgWarner Inc. has as the parent company of the BorgWarner
Group, without entering into this Agreement as a contracting party, issued a
comfort letter to BERU. In this comfort letter attached as an Annex to this
Agreement for information purposes, BorgWarner Inc. has irrevocably and without
any restrictions undertaken to ensure that BorgWarner Germany will be managed
and financially supported in such manner that BorgWarner Germany will at all
times be in a position to completely and timely perform all of its obligations
under this Agreement with BERU. This applies in particular to the
obligation pursuant to § 302 AktG to compensate any losses. BERU shall have
an own legal claim resulting from this declaration for payment to BorgWarner
Germany. Vis-à-vis the outside shareholders of BERU, BorgWarner Inc.
guarantees irrevocably and without any restrictions that BorgWarner Germany will
completely and timely fulfill all its obligations vis-à-vis the outside
shareholders under this Agreement, especially to pay the Guaranteed Dividend and
the compensation. To that extent, each outside shareholder of BERU
shall have a separate legal claim (§ 328 paragraph 1 German Civil Code
(BGB)) for payment to
BorgWarner Germany.
§ 8
Severability
Clause
Should a
present or future provision of this Agreement be or become entirely or partly
invalid or impracticable, or should there be an omission in this Agreement, the
validity of the remaining provisions shall not be affected
thereby. The parties to this Agreement, in the place of the invalid
or impracticable provision or in order to fill in the omission, undertake to
agree on an appropriate provision that, within the framework of what is legally
permissible, comes closest to what the parties to this Agreement intended or
would have intended in accordance with the purpose of this Agreement if they had
considered the point.
Xxxxx 00,
0000
XxxxXxxxxx
Xxxxxxx GmbH
/s/ Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Xxxxxxx Xxxxxxx
Managing
Director
Xxxxx 00,
0000
XXXX
Aktiengesellschaft
/s/ Xx. Xxxxxx Xxxxxxxx /s/ Xxxxxx Xxxxxxx
Xx. Xxxxxx
Xxxxxxxx Xxxxxx
Xxxxxxx
Chairman
of the Executive
Board Deputy-Member
of theExecutive Board
Annex: Comfort
Letter of BorgWarner Inc.
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[Convenience
Translation]
Comfort
Letter
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BorgWarner
Germany GmbH, Ketsch, registered in the commercial register of the Local
Court in Mannheim under HRB 335929, intends to enter on March 17, 2008,
into a domination and profit transfer agreement (“DTPA”) with BERU
Aktiengesellschaft, Ludwigsburg, registered in the commercial
register of the Local Court of Stuttgart under HRB 205087, as a
dependent enterprise. It is intended to agree under the DTPA on a
cash compensation in terms of § 305 German Stock Corporation Act (Aktiengesetz) in
an amount of EUR 71.32 per non-par value share and on a guaranteed
dividend in terms of § 304 German Stock Corporation Act (Aktiengesetz) in a
gross amount of EUR 4.73 (net currently EUR 4.23) per non-par
value share. These amounts are equal to the amounts determined as the
appropriate cash compensation in terms of § 305 German Stock
Corporation Act (Aktiengesetz) and,
respectively, as the appropriate guaranteed dividend in terms of
§ 304 German Stock Corporation Act (Aktiengesetz) by
PricewaterhouseCoopers Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft, the valuation expert jointly
instructed by BERU AG and BorgWarner Germany GmbH, in its valuation
opinion dated March 15, 2008 regarding the enterprise value of BERU
Aktiengesellschaft as of May 21, 2008 in connection with the intended
domination and profit transfer agreement according to Section 291
para 1 German Stock Corporation Act (Aktiengesetz) between
BERU AG, Ludwigsburg and BorgWarner Germany GmbH, Ketsch.
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BorgWarner
Germany GmbH belongs to the BorgWarner group whose parent company is
BorgWarner Inc., Auburn Hills, Michigan, USA. BorgWarner Inc. holds
indirectly through its subsidiaries all shares of BorgWarner Germany
GmbH.
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BorgWarner
Inc. hereby issues the following declaration, without entering into
the DTPA as a contracting party:
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1.
BorgWarner Inc. undertakes, without any restriction and irrevocably,
to ensure that BorgWarner Germany GmbH is managed and
financially supported in such a manner that BorgWarner Germany GmbH
is at all times in a position to timely perform all of its obligations
under or in connection with the DTPA. This applies in particular to the
obligation pursuant to § 302 German Stock Corporation Act (Aktiengesetz) to
compensate any losses. BERU shall have an own legal claim resulting from
this declaration for payment to BorgWarner Germany GmbH.
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2.
BorgWarner Inc. guarantees vis-à-vis the outside shareholders of BERU
Aktiengesellschaft irrevocably and without any restrictions that
BorgWarner Germany GmbH will completely and timely fulfill all its
obligations vis-à-vis the outside shareholders under the DTPA,
especially to pay the guaranteed dividend and the compensation.
To that extent, each outside shareholder of BERU Aktiengesellschaft
shall have a separate legal claim (§ 328 paragraph 1 German
Civil Code (Bürgerliches
Gesetzbuch)) for payment to BorgWarner Germany
GmbH.
This
comfort letter shall be governed by the laws of the Federal Republic of
Germany. Any dispute or claim arising out of or in connection with this
Letter of Comfort shall be subject to the jurisdiction of German
courts, and to the regional jurisdiction of the courts in Stuttgart.
BorgWarner Inc. submits itself to the enforceability of binding rulings of
German courts in this respect. Authorized recipient in Germany
of BorgWarner Inc. for any claims based on or in connection with this
comfort letter is BorgWarner Europe GmbH, attn. of the executive
directors, Hockenheimer Straße 165–167, 68775 Ketsch. Only the German
version of this comfort letter is legally binding.
March
17, 2008
BorgWarner
Inc.
/s/ Xxxxxxx X.
Xxxxxx
Xxxxxxx
X. Xxxxxx
Vice
President
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