domination.htm


    



    Domination

    and

    Profit
Transfer Agreement

    


    


    


    


    
      	
               
      

            	
              between

            


    

    


    
      	
               
      

            	
              BorgWarner
      Germany GmbH

            


    

    
      	
               
      

            	
              Hockenheimer
      Str. 165-167, 68775 Ketsch

            


    

    
      	
               
      

            	
              Amtsgericht
      Mannheim, HRB 335929

            


    

    
      	
               
      

            	
              -
      "BorgWarner Germany" -

            


    

    


    
      	
               
      

            	
              and

            


    

    


    
      	
               
      

            	
              BERU
      Aktiengesellschaft

            


    

    
      	
               
      

            	
              Mörikestr.
      155, 71636 Ludwigsburg

            


    

    
      	
               
      

            	
              Amtsgericht
      Stuttgart, HRB 205087

            


    

    
      	
               
      

            	
              -
      "BERU" -

            


    

    


    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    


    


    


     

    §
1

     

     

    Control

     

    
      	
              (1)

            	
              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.

            


    

    


    
      	
              (2)

            	
              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.

            


    

    


    
      	
              (3)

            	
              Instructions
      must be issued in writing.

            


    

     

    § 2

     

     

    Transfer
of Profits

     

    
      	
              (1)

            	
              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.

            


    

    


    
      	
              (2)

            	
              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.

            


    

    


    
      	
              (3)

            	
              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.

            


    

     

    § 3

     

     

    Assumption
of Loss

     

    
      	
              (1)

            	
              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.

            


    

    


    
      	
              (2)

            	
              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.

            


    

     

    § 4

     

     

    Guaranteed
Dividend

     

    
      	
              (1)

            	
              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").

            


    

    


    
      	
              (2)

            	
              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.

            


    

    


    
      	
              (3)

            	
              The
      Guaranteed Dividend shall be granted beginning with the financial year in
      which this Agreement takes effect in accordance with § 6 paragraph
      2.

            


    

    


    
      	
              (4)

            	
              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.

            


    

    


    
      	
              (5)

            	
              The
      Guaranteed Dividend payment shall become due on the first banking day
      following the Annual General Meeting of BERU for the preceding financial
      year.

            


    

    


    
      	
              (6)

            	
              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.

            


    

    


    
      	
              (7)

            	
              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.

            


    

     

    § 5

     

     

    Compensation

     

    
      	
              (1)

            	
              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.

            


    

    


    
      	
              (2)

            	
              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”).

            


    

    


    
      	
              (3)

            	
              The
      sale of the shares is free of cost for BERU’s outside
      shareholders.

            


    

    


    
      	
              (4)

            	
              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.

            


    

    


    
      	
              (5)

            	
              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.

            


    

    


    
      	
              (6)

            	
              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.

            


    

     

    § 6

     

     

    Effectiveness
and Term

     

    
      	
              (1)

            	
              To
      take effect, this Agreement requires the consent of the General Meeting of
      BERU and the consent of the shareholders’ meeting of BorgWarner
      Germany.

            


    

    


    
      	
              (2)

            	
              This
      Agreement shall take effect upon registration in the Commercial Register
      at the registered office of BERU.

            


    

    


    
      	
              (3)

            	
              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.

            


    

    


    
      	
              (4)

            	
              The
      right to terminate this Agreement for cause (wichtiger Grund)
      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.

            


    

     

    § 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.

    


    


    March 17,
2008

    


    BorgWarner
Germany GmbH

    


    /s/ Andreas Krystek
Andreas
Krystek

    Managing
Director

    


     

    March 17,
2008

    


    BERU
Aktiengesellschaft

    


    
/s/ Dr. Thomas Waldhier       /s/ Marcus
Knödler   

    Dr. Thomas
Waldhier                               Marcus
Knödler

    Chairman
of the Executive
Board           Deputy-Member
of theExecutive Board

    


    
      
        
           


        

        
           


          
            

          

        

        
           


        

      

    

    Annex:                                Comfort
Letter of BorgWarner Inc.

    


    


    

 

    
      
        	 
      	 
      	
                [Convenience
      Translation]

                 

                Comfort
      Letter

                 

              
	 
      	 
      	
                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.

                 

              
	 
      	 
      	
                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.

              
	 
      	 
      	
                BorgWarner
      Inc. hereby issues the fol­lowing declaration, without entering into
      the DTPA as a contracting party:

                 

              
	 
      	 
      	
                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.

                 

              
	 
      	 
      	
                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/ Anthony D.
      Hensel

                Anthony
      D. Hensel

                Vice
      President