Graphic Ad-hoc

Ad-hoc: Investment Agreement with Schaeffler

On August 21, 2008, Continental AG entered into a far-reaching Investment Agreement with Schaeffler KG, Mrs. Maria-Elisabeth Schaeffler and Mr. Georg F.W. Schaeffler. With this agreement, the dispute regarding the public takeover offer by the Frankish family owned business has been settled. Former German Chancellor Dr. Gerhard Schröder has been won as a guarantor for ensuring the interests of all stakeholders of Continental.

The open ended Investment Agreement, that cannot be terminated by the parties before spring 2014, contains several provisions to safeguard the interests of Continental AG and its shareholders, employees and customers. Schaeffler KG has committed itself to increase the offer price per Continental share from EUR 70.12 to EUR 75.00 (this price resulting in a premium of 39 % on the stock price per Continental share immediately prior to announcement of the takeover bid).

In addition, Schaeffler has undertaken to limit its position to a minority shareholding in Continental AG (up to 49.99 %) for a period of four years, to support the ongoing strategy and business policies of Continental AG's executive board while maintaining its current market and brand appearance and to not demand a sale of activities or other material structural measures.

A further material element of the agreement directed at safeguarding the interests of Continental AG is the obligation of Schaeffler to compensate Continental AG for possible negative effects resulting form a so called change-of-control in connection with existing financing agreements of Continental AG and negative tax effects resulting from Schaeffler's shareholding in the amount of overall 522 mn Euro.

Schaeffler KG further has accepted to give, in case of a possible sale of blocks of its minority stake in Continental within the next four years, a pre-emptive right to a person nominated by the guarantor, if the sale to such person is in the best interest of Continental AG and Schaeffler KG. In addition, it has been agreed that there will be no changes to Continental AG’s form of incorporation, its corporate seat, headquarters or business divisions, its listing on the stock exchange, its dividend policy or an increase of its debt to equity ratio against the wishes of Continental AG.

To safeguard the interests of the employees, Schaeffler KG is obliged not to conduct or support, without the consent of Continental’s executive board, any measures directed at changing the current collective bargaining or works council agreements or abolishing the employees’ codetermination rights based on parity in the supervisory board. In addition, Schaeffler is obliged to respect all rights of the employees, works councils and the labour unions under applicable law, agreements, regulations and contracts in force at Continental.

In addition, without undue delay after completion of the takeover offer both parties will examine the possibilities for strategic cooperation projects between the Schaeffler Group and the Continental Group particularly in the Powertrain division based on the principles of an alliance of equals between two productive and independent companies.

As a guarantor for ensuring the interests of Continental, its shareholders, its employees and other stakeholders, former German Chancellor Dr. Gerhard Schröder is authorized and empowered to enforce all obligations of Schaeffler at any time by legal action or out of court. In this regard he is entitled to request information from Schaeffler about their level of compliance with their obligations under the Investment Agreement.

Once the offer document has been amended by Schaeffler, the executive board and the supervisory board shall issue an additional statement pursuant to Sect. 27 of the Securities Acquisition and Takeover Act (WpÜG).