SCHEDULE 14A
(RULE 14A-101)(Rule 14a-101)INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTIONProxy Statement Pursuant to Section 14(a)OF THE SECURITIES EXCHANGE ACTof the SecuritiesExchange Act of 1934(AMENDMENT No.____)(Amendment No. )Filed by the registrant
/x/[X]Filed by a party other than the registrant/ /[ ]Check the appropriate box:
/ /[ ] Preliminary proxy statement./x/
| [ ] | Confidential, for use of the Commission only (as permitted by Rule 14a-6(e)(2)). |
BORGWARNER INC.
Payment of filing fee (Check the appropriate box):
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[X] No fee required.
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BORGWARNER INC. NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
Chicago, Illinois
To the Stockholders:
The Annual Meeting of Stockholders of
Only stockholders at the close of business on March 15, PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN
IT PROMPTLY IN THE ENCLOSED ENVELOPE WHETHER OR NOT YOU PLAN TO
ATTEND THE MEETING IN PERSON. YOUR VOTE IS IMPORTANT. BORGWARNER INC. PROXY STATEMENT
March
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of
Only stockholders of record at the close of business on
March 15,
The enclosed proxy, if properly signed and returned, will be
voted in accordance with its terms. Any proxy returned without
specification as to any matter will be voted as to each proposal
in accordance with the recommendation of the Board of Directors.
You may revoke your proxy at any time before the vote is taken by
delivering to the Secretary of the Company written revocation or
a proxy bearing a later date, or by attending and voting at the
Annual Meeting.
The cost of solicitation of proxies will be borne by the Company.
In addition to solicitation of proxies by use of the mail,
proxies may be solicited by directors, officers and regularly
engaged employees of the Company. Brokers, nominees and other
similar record holders will be requested to forward solicitation
material and will be reimbursed by the Company upon request for
their reasonable out-of-pocket expenses.
Votes cast by proxy or in person at the meeting will be tabulated
by the election inspectors appointed for the meeting and will
determine whether a quorum is present. Unless otherwise indicated
herein, the election inspectors will treat abstentions as shares
that are present and entitled to vote for purposes of
determining the presence of a quorum but as unvoted for purposes
of determining the approval of any matter submitted to the
stockholders for a vote. If a broker indicates on the proxy that
it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered
as present and entitled to vote with respect to that matter.
1. ELECTION OF DIRECTORS
The
The following table sets forth as of March 15, 2
Meetings of the Board of Directors and Committees
The Board of Directors held four regular meetings and
The Board of Directors has a standing Compensation Committee,
Finance and Audit Committee and Board Affairs Committee.
The present members of the Compensation Committee are 3
The present members of the Finance and Audit Committee are
The present members of the Board Affairs Committee are
In 1997, the Board adopted the Board of Directors Guidelines on
Corporate Governance Issues (the
Stockholders may make suggestions for board nominations pursuant
to procedures set forth in the Compensation of Directors
Directors who are not employees of the Company or its
subsidiaries received an annual retainer of $26,000 for service
on the Board of Directors and $1,000 for each Board meeting
attended. Committee members also receive $750 ($1,500 if Chairman
of a committee) for each committee meeting attended.
In addition, under the terms of the Borg-Warner Automotive, Inc.
1993 Stock Incentive Plan, as Amended (the 4
Stock Ownership
The following table sets forth as of March 15, 5
The following table sets forth as of March 15,
In addition to the Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934
requires that the 6
Executive Compensation
The following table shows, for the years ending December 31,
1999, 1998 SUMMARY COMPENSATION TABLE
[Additional columns below]
[Continued from above table, first column(s) repeated]
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Stock Options
The following table sets forth information with respect to the
named executive officers concerning grants of stock options made
during 1999 and concerning unexercised options held as of
December 31, 1999.
The following table sets forth information with respect to the
named executive officers concerning the exercise of stock options
during 1999 and concerning unexercised options held at
December 31, 1999.
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Long Term Incentive Plans
The following table sets forth information with respect to the
named executive officers concerning long-term incentive plan
awards made during 1999 pursuant to the Company’s Executive
Stock Performance Plan.
Employment Agreements
The Company has entered into an employment agreement, effective
January 1, 1998 (the “Agreement”), with
Mr. Fiedler which provides, among other things, for
Mr. Fiedler’s full-time employment until
December 30, 2002 at an annual salary of not less than
$500,000. Subject to the terms and conditions of the Agreement,
Mr. Fiedler will be eligible for annual performance bonuses
and awards under the Company’s Executive Stock Performance
Plan at target levels no less than those set for 1997. In
addition, the Company granted Mr. Fiedler a Non-Qualified
Stock Option, subject to the provisions of the 1993 Plan and the
terms and conditions of a Non-Qualified Stock Option Agreement,
to purchase from the Company 75,000 shares of Common Stock at the
fair market value per share on January 27, 1998, such
option to be exercisable for the entire 75,000 shares on
December 30, 2002.
In addition, subject to the terms and conditions of the
Agreement, and a non-negotiable full recourse Promissory Note
dated January 30, 1998 (the “Note”), the Company
has loaned Mr. Fiedler $2 million to be used
exclusively for the purchase of the Company’s Common Stock.
The entire loan, including all accumulated interest, will be
forgiven by the Company if Mr. Fiedler remains employed by
the Company through December 30, 2002 or as of earlier
termination by reason of death,
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The Company has entered into Change of Control Employment
Agreements (the “Change of Control Employment
Agreements”) with each of the named executive officers.
Below is a general description of certain terms and conditions of
the Change of Control Employment Agreements.
In the event of a “Change of Control” of the Company
followed within three years by (1) the termination of the
executive’s employment for any reason other than death,
disability, or “Cause” or (2) the termination of
the executive’s employment by the executive for “Good
Reason”, the Change of Control Employment Agreements provide
that the executive shall be paid a lump sum cash amount equal to
three times the executive’s annual base salary and recent
average bonus, and a lump sum cash amount equal to three times
the Company’s retirement contributions which would have been
made on behalf of the executive in the first year after
termination of employment. In addition, the executive is entitled
to continued employee welfare benefits for three years after
termination of employment.
“Change of Control” means (a) the acquisition by
any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act
of 1934) of beneficial ownership of 20% or more of either
(i) the then outstanding shares of Common Stock of the
Company or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors, (b) a change in the
majority of the Board, or (c) a major corporate transaction,
such as a merger, sale of substantially all of the
Company’s assets or a liquidation, which results in a change
in the majority of the Board or a majority of stockholders.
“Cause” means the willful and continued failure of the
executive to perform substantially the executive’s duties or
the willful engaging by the executive in illegal conduct or
gross misconduct materially injurious to the Company.
“Good Reason” means the diminution of responsibilities,
assignment to inappropriate duties, failure of the Company to
comply with compensation or benefit provisions, transfer to a new
work location more than 35 miles from the executive’s
previous work location, a purported termination of the Change of
Control Employment Agreement by the Company other than in
accordance with the Change of Control Employment Agreement, or
failure of the Company to require any successor to the Company to
comply with the Change of Control Employment Agreement.
Mr. Fiedler’s Change of Control Employment Agreement
was amended effective January 30, 1998 to provide that the
Note would be forgiven with respect to all outstanding principal
and accumulated interest thereon in the event of his termination
of employment by reason of a Change of Control, death or
disability, as defined in the Change of Control Employment
Agreement. The amendment to the Employment Agreement further
provides that if Mr. Fiedler’s employment is terminated
for Cause or if he voluntarily terminates employment other than
for Good Reason, the outstanding principal and accumulated
interest thereon under the Note will become immediately due and
payable in full.
Notwithstanding anything to the contrary set forth in any of the
Company’s previous filings under the Securities Act of 1933,
as amended, or the Securities Exchange Act of 1934, as amended,
that might incorporate future filings by reference, including
this Proxy Statement, in whole or in part, the following
Compensation Committee Report on Executive Compensation and
Performance Graph shall not be incorporated by reference into any
such filings.
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Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is
responsible for setting and administering the policies that
govern base salary, annual bonus, long-term incentives and stock
ownership programs for the executive officers of the Company.
Overall Policy
The Company’s executive compensation program is designed to
link executive compensation to corporate performance. To this
end, the Company has developed an overall compensation strategy
and specific compensation plans that tie executive compensation
to the Company’s success in meeting specified performance
goals. The overall objectives of this strategy are to attract and
retain the best possible executive talent, to motivate these
executives to achieve goals that support the Company’s
business strategy, to link executive and stockholder interests
through equity-based plans, and to provide a compensation package
that is based on individual performance as well as overall
business results.
The Compensation Committee reviews the Company’s executive
compensation program annually. The review includes a comparison
of current total compensation levels (including base salary,
annual bonus and long-term incentives) to those provided in
similar companies in the durable manufacturing sector that have
total sales in the range of one billion to three billion dollars,
with data being collected from several prominent executive
compensation surveys (the “Compensation Surveys”). In
addition to the Compensation Surveys, the Compensation Committee
also considers the compensation reported for executives by the
companies included in a peer group of automotive companies(the
“Peer Group Companies”). Financial results of the Peer
Group Companies are used to compare shareholder returns on the
performance graph. The Compensation Committee may adjust
compensation levels based upon information obtained from the
Compensation Surveys and the Peer Group Companies.
The Compensation Committee determines the compensation of the
five most highly compensated corporate executives, reviews the
policies and philosophy set for the next level of key executives
(approximately 250), and evaluates and recommends to the Board of
Directors all long-term incentive plans. This process is
designed to ensure congruity throughout the executive
compensation program. In reviewing the individual performance of
the executives whose compensation is detailed in this proxy
statement (other than Mr. Fiedler), the Compensation
Committee takes into account the views of Mr. Fiedler.
The key elements of the Company’s executive compensation
program are base salary, annual bonus and long-term incentives
which consist of stock options, Company stock and cash
compensation. The Compensation Committee’s policies with
respect to each of these elements, including the basis for the
compensation awarded to Mr. Fiedler, the Company’s CEO
during 1999, are discussed below.
Base Salary
Annual salary adjustments are determined by the Compensation
Committee by examining each executive officer’s current
responsibilities, the executive officer’s individual and
business unit performance, and by comparing the executive
officer’s current base salary to competitive median salaries
as reported in the Compensation Surveys and by the Peer Group
Companies.
Mr. Fiedler was CEO of the Company in 1999. The Compensation
Committee considered the scope and complexity of
Mr. Fiedler’s position, the Company’s performance
during the preceding
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Annual Bonus
The Company’s executive officers are eligible participants
in an annual cash bonus plan. Performance objectives are
established at the beginning of each year for the Company and
each of its business units. The performance objectives are based
on the increase in economic value of the Company or business unit
over the prior year. Economic value is determined by a formula
taking into account after-tax operating income and the average
operating investment of the Company or business unit.
Eligible executives are assigned threshold, target and maximum
bonus levels. For those executive officers responsible for the
entire Company, 100% of their bonus opportunity is based on the
increase in economic value for the Company; for those executive
officers responsible for a business unit, 30% of the bonus
opportunity is based on the increase in economic value for the
Company, and 70% is based on the increase in economic value for
the business unit. If the threshold level of these performance
measures is not met, no bonus is paid.
Executive officers are also eligible for an additional bonus
payment under the carryover feature of the annual bonus plan (the
“Carryover Bonus”). The Compensation Committee
believes that the Carryover Bonus encourages a longer term
perspective while continuing to reward participants for the
achievement of annual goals. Carryover Bonus allows participants
in the bonus plan to earn — over a two year
period — any bonus opportunity which was not attained
during the current Plan Year. Executives can earn the balance of
the unattained bonus opportunity whenever cumulative value
targets are achieved during the subsequent two years. No
Carryover Bonus from a prior year is earned if the threshold
level of performance for the current year is not achieved.
The potential annual total cash compensation (base salary plus
bonus) for each executive officer is targeted at the 65th
percentile of annual total cash compensation levels for similar
positions as reported by comparable companies in the Compensation
Surveys. Carryover Bonus from prior years may increase the
annual bonus opportunity of the executive officers above the
target level.
Although annual bonuses depend primarily on the achievement of
performance objectives as described above, the Compensation
Committee may adjust bonus measures and awards based on other
financial or non-financial actions that the Compensation
Committee believes will benefit long-term stockholder value.
In 1999, the increase in value of the Company resulted in a bonus
payout at the maximum opportunity level for the portion of
individual bonuses based on overall corporate performance. As a
result Mr. Fiedler earned a $1,011,823 cash bonus for the
year; of this, $273,423 represents Carryover Bonuses from 1997
and 1998. Mr. Fiedler’s target total cash (i.e., base
salary and target bonus) compensation plan for 1999 was near the
65th percentile of total cash compensation for CEOs as reported
in the Compensation Surveys.
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Long-term Incentive Plans Stock Options
The Company uses stock options to align the interests of
executives with those of the stockholders and to motivate the
executives to continue the long-term focus required for the
Company’s future success. Executives are granted stock
awards based on their level of responsibility for the management
and growth of the Company and individual contribution. Current
base salary and annual incentive opportunity, as well as size and
timing of previous stock awards, are also considered when
determining stock awards.
All stock options are granted at no less than the fair market
value of the stock on the date of grant. The number of shares
awarded to each executive officer is determined by an analysis of
median competitive data provided in the Compensation Surveys.
The analysis is based on the Company’s current stock price
and the projected stock price appreciation rate.
The gains on stock options granted by the Company are exempt from
the provisions of Section 162(m) of the Internal Revenue
Code (the “Code”) which limit the tax deductibility of
compensation in excess of one million dollars.
As noted above, Mr. Fiedler received a grant of 8,700
options in 1999. None of the other named executive officers
received an option grant in 1999.
Executive Stock Performance Plan
The Borg-Warner Automotive, Inc. Executive Stock Performance Plan
is a long-term incentive plan for selected top executives
including the named executive officers. It is designed to provide
competitive payouts at the end of a three year period relative
to how well the Company performs against the Peer Group Companies
in terms of total shareholder return (“TSR”). The
Compensation Committee believes that the Executive Stock
Performance Plan will help to focus key senior executives on the
long-term overall value of the Company to the investor community.
The award levels under the Executive Stock Performance Plan are
targeted to pay at approximately the 65th percentile of total
direct compensation (as reported by the Compensation Surveys) for
65th percentile TSR performance relative to the TSR performance
of the Peer Group Companies.
Payments made under this plan are exempt from the provisions of
Section 162(m) of the Code which limit the tax deductibility of
compensation in excess of one million dollars.
This plan is administered by a committee which consists solely of
two or more “outside directors” as defined by
Section 162(m) of the Code and the regulations thereunder.
For the period between January 1, 1997 to December 31,
1999, Mr. Fiedler had a target award of 595 performance
units at a value of $1,000 per unit. At the end of the
performance period, the Company’s TSR performance was at the
43rd percentile of the TSR performance of Peer Group Companies.
As a result, Mr. Fiedler earned an award of $393,200.
For the period between January 1, 1998 to December 31,
2000, Mr. Fiedler has a target award of 595 performance
units at a value of $1,000 per unit. Depending upon the
performance of the Company, Mr. Fiedler’s final award
can range from $0 if the Company’s TSR performance is below
the 25th percentile of the TSR performance of the Peer Group
Companies to $1,041,250 if the Company’s TSR
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For the period between January 1, 1999 to December 31,
2001, Mr. Fiedler has a target award of 595 performance
units at a value of $1,000 per unit. Depending upon the
performance of the Company, Mr. Fiedler’s final award
can range from $0 if the Company’s TSR performance is below
the 25th percentile of the TSR performance of the Peer Group
Companies to $1,041,250 if the Company’s TSR performance is
at the 90th percentile(or higher)of the TSR performance of the
Peer Group Companies.
Other
Compensation subject to the one million dollar limitation on
deductibility under Section 162(m) of the Code was not paid
in 1999 to any of the named executive officers.
The Compensation Committee will periodically review the executive
compensation plans of the Company to determine their compliance
with Section 162(m)of the Code. The Compensation Committee may,
however, recommend that compensation that is non-deductible be
paid to executive officers when such compensation is deemed in
the best interest of shareholders or the Corporation.
Paul E. Glaske, Chairman
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Performance Graph
Certain Relationships and Related Transactions
On January 30, 1998, the Company loaned Mr. Fiedler
$2 million for the exclusive purpose of Mr. Fiedler
purchasing the Company’s Common Stock. The loan is evidenced
by a non-negotiable full recourse promissory note (the
“Note”), which matures on December 30, 2002 (the
“Maturity Date”). The Note accrues interest at the rate
of 5.84% per annum, compounded semiannually, on the unpaid
balance until paid. In the event of Mr. Fiedler’s
voluntary termination of employment with the Company prior to the
Maturity Date (other than upon his “disability”) or
his involuntary termination of employment with the Company prior
to the Maturity Date for “cause,” Mr. Fiedler will
be obligated to prepay his entire obligation under the Note
within ten days. The entire obligation under the Note will be
forgiven if Mr. Fiedler remains employed by the Company
through December 30, 2002 or as of earlier termination by
reason of death, “disability,” or involuntary
termination other than for “cause.” The Note will also
be forgiven in the event of a “Change of Control” as
defined in the Change of Control Employment Agreement.
As part of a recapitalization, Burns International Security
Corporation (formerly BW-Security) (“Burns
International”) distributed all of the outstanding Common
Stock of the Company to its stockholders of record as of
January 22, 1993. In connection with the spin-off, the
Company and Burns International entered into certain agreements,
including, but not limited to, a Distribution and Indemnity
Agreement (the “Distribution Agreement”), and a Service
Agreement. The terms of such agreements were approved by the
Board of Directors of the Company.
The Distribution Agreement provides for, among other things, the
principal corporate transactions required to effect the spin-off
and certain other agreements governing the relationship between
the Company and Burns International with respect to or in
consequence of the spin-off. Subject to certain exceptions, the
Distribution Agreement provides for certain cross-indemnities
designed principally to place financial responsibility for the
liabilities of Burns International and its subsidiaries with
Burns International, and financial responsibility for the
liabilities of the Company, or related to its automotive
business, with the Company.
The Service Agreement provides that the Company will sublease
office space from Burns International until May 31, 1999,
with the amounts payable under such sublease to be equal to 50%
of the rent and common overhead expenses payable by Burns
International related to its lease of the premises. In 1999, such
amounts paid to Burns International aggregated approximately
$187,957.
The Company has agreed to indemnify Burns International (but not
its stockholders) against any liability resulting from any
transaction after the date of the spin-off involving the stock or
assets, or any combination thereof, of the Company or any of its
subsidiaries which causes the spin-off to fail to qualify as
tax-free under Section 355 of the Code.
Under the Company’s Employee Relocation Program, certain
employees asked to relocate by the Company are entitled to
relocation assistance provided by outside vendors selected and
paid for by the Company. During 1999, Mr. Manganello participated
in this program. Under the program, Mr. Manganello received
a $204,000 cash advance to purchase a new home which has since
been paid back by Mr. Manganello. In addition, under the
program, Mr. Manganello’s previous home was purchased
by the Company for $421,000 based on an appraisal conducted by an
independent third party and was subsequently resold by the
Company.
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2. APPROVAL OF THE AMENDMENT OF THE COMPANY’S 1993
STOCK INCENTIVE PLAN
At the meeting there will be presented to the stockholders a
proposal to approve an amendment to the Company’s 1993 Stock
Incentive Plan (the “1993 Plan”) to increase the
number of shares authorized to be issued by 1,200,000 shares. The
1993 Plan was originally adopted by the Board of Directors and
approved by the stockholders in August 1993. The 1993 Plan
was subsequently amended on November 8, 1995,
February 6, 1997 and January 27, 1998.
On February 2, 2000, the Board adopted an amendment to the
1993 Plan, subject to shareholder approval, to increase the total
number of shares of common stock available for issuance under
the 1993 Plan by an additional 1,200,000 shares. This is the only
amendment to the 1993 Plan being proposed at the meeting. The
Board believes that an additional share reserve will allow us to
provide the necessary incentives to our employees over the years.
Description of the 1993 Plan, as Amended
The following description of the material terms of the 1993 Plan,
as amended, is intended as a summary only and is qualified in
its entirety by reference to the 1993 Plan itself. A copy of the
1993 Plan, as amended, will be furnished by the Company to any
stockholder upon written request to the Corporate Secretary.
If the amendment to add 1,200,000 shares to the 1993 Plan is
approved, the total number of shares which will have been
authorized for issuance since the inception of the 1993 Plan will
be 2,700,000. Shares subject to an option or award may be
authorized and unissued shares or may be treasury shares. If an
award granted under the 1993 Plan expires, terminates or lapses
for any reason, without the issuance of shares of Common Stock
thereunder, such shares will again be available under the 1993
Plan.
The Compensation Committee of the Board of Directors administers
the 1993 Plan and determines the terms and conditions of any
award. Awards are granted to officers and other employees of the
Company, and its affiliates, as from time to time designated by
the Compensation Committee. The Compensation Committee may
delegate to the Company’s Chief Executive Officer the
authority to grant options for up to 3,000 shares of Common Stock
in any calendar year to any eligible employee other than an
executive officer subject to Section 16 of the Securities
Exchange Act of 1934. Directors of the Company are also eligible
to participate, but in the case of directors who are not also
employees, only pursuant to an automatic grant.
The 1993 Plan terminates on December 31, 2003. Under the
1993 Plan, options to purchase shares of Common Stock
(“Options”) or other awards granted and outstanding as
of the date the 1993 Plan terminates will not be affected or
impaired by such termination.
The exercise price to be paid by a participant is determined by
the Compensation Committee and will be set forth in an Option
agreement between the Company and the participant. The exercise
price cannot be less than 100% of the fair market value of the
Common Stock on the date on which the Option is granted.
The 1993 Plan authorized the Compensation Committee to grant
stock appreciation rights (“SARs”) in connection with
all or part of any Option. An SAR entitles its holder to receive
from the Company, at the time of exercise of such right, an
amount equal to the excess of the fair market value (determined
in accordance with procedures to be established by the
Compensation Committee) at the
17
Incentive stock options (within the meaning of Section 422
of the Code) may be granted at the discretion of the Compensation
Committee under the 1993 Plan.
The form of Option and SAR agreement to be used under the 1993
Plan (the “Option Agreement”) will provide that Options
and SARs will become fully exercisable upon a “Change in
Control” (as defined in the 1993 Plan). Otherwise, the
Option Agreement provides that if such participant’s
employment by the Company or its subsidiaries is terminated for
any reason, other than death, disability or retirement, such
participant may exercise an Option or SAR to the extent then
exercisable, or on such accelerated basis as the Compensation
Committee may determine, within the period ending on the earlier
of three months after such termination or the date the Option or
SAR expires in accordance with its terms; provided that if the
optionee dies within such three-month period, any unexercised
Option or SAR held by such optionee shall, notwithstanding the
expiration of such three-month period, continue to be exercisable
to the extent to which it was exercisable at the time of death
for a period of twelve months from the date of such death or
until the expiration of the stated term of such Option or SAR,
whichever period is shorter. However, if a participant’s
employment is terminated for cause, such participant’s
Option or SAR terminates immediately upon such termination of
employment.
If an optionee’s employment terminates by reason of
disability, any Option or SAR held by such optionee may
thereafter be exercised by the optionee, to the extent it was
exercisable at the time of termination or on such accelerated
basis as the Compensation Committee may determine, for a period
of three years (or such shorter period as the Compensation
Committee may specify at grant) from the date of such termination
of employment or until the expiration of the stated term of such
Option or SAR, whichever period is shorter, provided that if the
optionee dies within such three-year period (or such shorter
period), any unexercised Option or SAR held by such optionee
shall, notwithstanding the expiration of such three-year (or such
shorter) period, continue to be exercisable to the extent to
which it was exercisable at the time of death for a period of
twelve months from the date of such death or until the expiration
of the stated term of such Option or SAR, whichever period is
shorter.
The 1993 Plan also permits the Compensation Committee to grant
shares of restricted stock to a participant subject to the terms
and conditions imposed by the Compensation Committee. The
Compensation Committee may require that a certificate for such
shares be deposited with the Company. There will be established
for each award of restricted stock a restriction period of such
length as is determined by the Compensation Committee. Shares of
restricted stock may not be sold, assigned, transferred, pledged
or otherwise encumbered, except as described below, during the
restriction period. Except for such restrictions on transfer and
such other restrictions as the Compensation Committee may impose,
the participant will have all the rights of a holder of Common
Stock as to such restricted stock including, if applicable, the
right to vote the shares and to receive any dividends. Except as
provided by the Compensation Committee at the time of grant or
otherwise, upon
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In the event of a Change in Control: (i) any Options and
SARs outstanding as of the date such Change in Control is
determined to have occurred and not then exercisable and vested
shall become fully exercisable and vested to the full extent of
the original grant; and (ii) the restrictions applicable to
any shares of restricted stock shall lapse, and such restricted
stock shall become free of all restrictions and become fully
vested and transferable to the full extent of the original grant.
The 1993 Plan further provides that during the 60-day period
following a Change in Control, the holder of an Option has the
right to surrender such option for cash in an amount equal to the
difference between the “change in control price” (as
defined in the 1993 Plan) and the exercise price.
The Board of Directors of the Company may amend the 1993 Plan
(including amendments which have the effect of increasing the
cost of the 1993 Plan to the Company) or discontinue the 1993
Plan. No amendment shall be made without the approval of the
Company’s stockholders to the extent such approval is
required by law or agreement.
Each director of the Company who from and after August 1,
1993 is not otherwise an employee of the Company or any of its
subsidiaries or affiliates, on the third Tuesday of each year,
shall automatically receive an annual grant of Options to
purchase 1,000 shares of Common Stock having an exercise price
equal to the fair market value of the Common Stock at the date of
grant of such Option. Each director, upon joining the Board,
will also receive an initial grant of Options to purchase 2,000
shares of Common Stock having an exercise price equal to the fair
market value of the Common Stock as of such date. Each holder of
a director stock option granted pursuant to this provision will
also have rights in the event of a Change in Control as described
above.
Certain Federal Income Tax Considerations
The following is a brief summary of the federal income tax
consequences of transactions under the 1993 Plan based on federal
income tax laws in effect on January 1, 2000. This summary
is not intended to be exhaustive and does not discuss the tax
consequences of a participant’s death or provisions of the
income tax laws of any municipality, state or foreign country in
which an optionee may reside.
Options granted under the 1993 Plan may be either “Incentive
Stock Options,” as defined in Section 422 of the Code,
or Nonstatutory Stock Options.
Incentive Stock Options. The optionee does not recognize
taxable income upon grant or exercise of an Incentive Stock
Option unless the alternative minimum tax rules apply. If Common
Stock is issued to an optionee pursuant to the exercise of an
Incentive Stock Option, and if no disqualifying disposition of
such shares is made by such optionee within two years after the
date of grant or within one year after the transfer of such
shares to such optionee, then upon sale of such shares, any
amount realized in excess of the option exercise price will be
treated as a long-term capital gain and any loss sustained will
be a long-term capital loss, and no deduction will be allowed to
the Company for federal income tax purposes. The exercise of an
Incentive Stock Option may result in alternative minimum tax
liability for the optionee.
19
If Common Stock acquired upon the exercise of an Incentive Stock
Option is disposed of before the expiration of either holding
period described above (i.e. a disqualifying disposition),
generally the optionee will recognize ordinary income in the year
of disposition in an amount equal to the excess (if any) of the
fair market value of the shares at exercise (or, if less, the
amount realized on the disposition of the shares) over the option
exercise price paid for such shares, and the Company is entitled
to a tax deduction in the same amount. Any further gain or loss
realized by the participant will be taxed as short-term or
long-term capital gain or loss, as the case may be, and will not
result in any deduction by the Company. Different rules may apply
if shares are purchased by an optionee who is also an officer,
director or more than 10% stockholder. See discussion below of
“Special Rules Applicable to Corporate Insiders and
Restricted Stock Purchasers.”
Nonstatutory Stock Options. Except as noted below, with
respect to Nonstatutory Stock Options, (i) no income is
recognized by the optionee at the time the option is granted;
(ii) generally, at exercise, ordinary income is recognized
by the optionee in an amount equal to the difference between the
option exercise price paid for the shares and the fair market
value of the shares on the date of exercise, and the Company is
entitled to a tax deduction in the same amount; and (iii) at
disposition, any gain or loss is treated as capital gain or
loss. In the case of an optionee who is also an employee, any
income recognized upon exercise of a Nonstatutory Stock Option
will constitute wages for which withholding will be required.
However, different rules may apply if restricted stock is
purchased or if shares are purchased by an optionee who is also
an officer, director or more than 10% stockholder. See discussion
below of “Special Rules Applicable to Corporate
Insiders and Restricted Stock Purchasers.”
Stock Appreciation Rights. No income will be recognized by
a recipient in connection with the grant of an SAR. When an SAR
is exercised, the recipient will generally be required to include
as taxable ordinary income in the year of exercise an amount
equal to the amount of cash received and the fair market value of
any Common Stock received on the exercise. In the case of a
recipient who is also an employee, any income recognized upon
exercise of an SAR will constitute wages for which withholding
will be required. The Company will be entitled to a tax deduction
in the same amount. If the optionee receives Common Stock upon
the exercise of an SAR, any gain or loss on the sale of such
stock will be treated in the same manner as discussed above under
“Nonstatutory Stock Options.” See also “Special
Rules Applicable to Corporate Insiders and Restricted Stock
Purchasers.”
Restricted Stock. Generally, no income will be recognized
by a recipient in connection with the grant of restricted stock,
unless an election under Section 83(b) of the Code is filed
with the IRS within 30 days of the date of grant. Otherwise,
at the time the restricted stock vests, the recipient will
generally recognize compensation income in an amount equal to the
fair market value of the award at the time of vesting.
Generally, the recipient will be subject to the tax consequences
discussed under “Nonstatutory Stock Options.” In the
case of a recipient who is also an employee, any amount included
in income will constitute wages for which withholding will be
required. The Company will be entitled to a tax deduction in the
same amount and at the time the recipient recognizes ordinary
income with respect to an award of restricted stock.
Special Rules Applicable to Corporate Insiders and
Restricted Stock Purchasers. Generally, individuals subject
to Section 16(b) of the Exchange Act (“Insiders”)
and individuals who purchase restricted stock may have their
recognition of compensation income and the beginning of their
capital gains holding period deferred for up to six months after
option exercise (for Insiders), or until the restrictions lapse
(for restricted stock purchasers) (the “Deferral
Date”), with the excess of the fair market value of the
stock determined as of the Deferral Date over the purchase price
being taxed as
20
Capital Gains. Generally, under law in effect as of
January 1, 2000, net capital gain (net long-term capital
gain minus net short-term capital loss) is taxed at a maximum
rate of 20%. Capital losses are allowed in full against capital
gains plus up to $3,000 of other income.
Participation in the 1993 Plan
The grant of awards under the 1993 Plan to employees, including
the executive officers named in the Summary Compensation Table,
is subject to the discretion of the Compensation Committee. As of
the date of this proxy statement, the only awards that have been
granted under the 1993 Plan are non-qualified stock options,
each of which has a term of ten years and an exercise price equal
to the fair market value of the Common Stock on the date of
grant. There has been no determination by the Compensation
Committee with respect to future awards under the 1993 Plan.
Vote required and Board of Directors’ Recommendation
Approval of the amendment to the 1993 Plan requires the
affirmative vote of the holders of a majority of the shares of
Common Stock represented and voting in person or by proxy at the
Annual Meeting.
The Board of Directors believes that approval of the amended
1993 Plan is in the best interests of all stockholders and,
accordingly, recommends a vote FOR the proposed amendments. Your
proxy will be so voted unless you specify otherwise.
At the meeting, there will also be presented to the stockholders
a proposal to re-approve the Executive Stock Performance Plan, as
amended (the “Plan”). The Plan was originally approved
by the Board of Directors on August 7, 1995, subject to
stockholder approval, which was obtained on April 23, 1996.
The Plan is being recommended to the stockholders for re-approval
to comply with Code Section 162(m), which requires
re-approval of the Plan every five (5) years.
Section 162(m) of the Code limits the allowable deduction
for compensation paid or accrued with respect to the chief
executive officer and each of the four most highly compensated
executive officers of a publicly held corporation to no more than
$1,000,000 per year. Certain performance based compensation
which has been approved by stockholders, however, is not subject
to the deduction limitation. The Plan, as amended, has been
drafted to allow the Company to claim the deduction for awards
and benefits paid pursuant to the Plan.
Future benefits and amounts to be received under the Plan are not
currently determinable. For awards made for fiscal year 1999,
see the table on page 9 for benefits and amounts estimated
and
21
DESCRIPTION OF THE PLAN
The following description of the Plan is intended as a summary
only and is qualified in its entirety by reference to the Plan
itself. A copy of the Plan will be furnished by the Company to
any stockholder upon written request to the Corporate Secretary.
The purpose of the Plan is to motivate senior executives of the
Company to improve the long-term performance of the Company as a
whole, relative to its Peer Group, to enable the Company to grow
in value and serve the long-term interests of the stockholders.
The composition of the Peer Group has been revised to reflect
various corporate changes to the original members of the Peer
Group. The Peer Group, as amended, will include the following
companies: Arvin Industries, Inc., Cummins Engine, Inc., Dana
Corporation, Detroit Diesel Corporation, Eaton Corporation,
Johnson Controls, Inc., Lear Corporation, Magna International,
Inc. Class A, Mark IV Industries, Inc., Mascotech, Inc.,
Modine Manufacturing Co., SPX Corporation, Timken Company, Tower
Automotive, Inc. and TRW, Inc.
The Plan is administered by a committee which consists solely of
two or more “outside directors” as defined in
Section 162(m) of the Code and the regulations thereunder
(the “Committee”).
Participation in the Plan is limited to executives of the Company
who are designated to be eligible by the Committee. Such
executives shall (a) be part of a “select group of
management or highly compensated employees” (as that phrase
is used under Department of Labor
Regulation Section 2520.104-23) and (b) generally
be those executives who are in a position to make significant
contributions to the earnings of the Company. Participation in
the Plan during any performance period does not guarantee
participation in any subsequent performance period. Each of the
named executive officers are currently participants in the Plan.
The Committee assigns threshold, target and maximum performance
awards to each participant prior to the beginning of a
performance period. The awards are expressed in terms of
performance units, each with an initial value of $1,000.
Performance periods are three (3) years. The performance
award for each performance period shall be based on the
percentile rank of total shareholder return (“TSR”) of
the Company among the TSR of a peer group of companies during the
performance period. TSR can be expressed as a formula:
During an initial performance period, Company TSR at the 65th
percentile among peer group companies will result in a payout per
performance unit of $1,000. Payout per performance unit will be
greater than $1,000 when Company TSR is greater than the 65th
percentile and less than $1,000 when Company TSR is less than the
65th percentile. No performance payout is made if Company TSR is
below the 25th percentile.
Performance awards are payable 60% in Company common stock and
40% in cash. The maximum number of shares of Company common stock
available for payment of performance awards under the Plan shall
not exceed 400,000.
22
The Committee, in its discretion, may decrease, but not increase,
the size of a participant’s target performance award once
the performance period has begun; the Committee may decrease, but
not increase, the amount of a performance award payout once the
comparative results from peer group companies have been
considered.
In the event of a change of control, a performance period shall
end on the effective date of the change of control. TSR for a
performance period in which a change of control occurs shall be
determined by substituting the change of control price for the
share price at the end of the performance period in the TSR
formula.
Change of control price is defined as the higher of (a) the
highest reported sales price of a share of the Company’s
common stock as reported on the New York Stock Exchange’s
composite tape during the 60-day period prior to and including
the date of a change of control, or (b) if the change of
control is the result of a tender or exchange offer or a business
combination, the highest price per share of common stock paid in
such tender or exchange offer or business combination.
A change of control is defined as, subject to certain exceptions,
(a) the acquisition by any individual, entity or group
(within the meaning of section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934) of 20% or more of either
(i) the then outstanding shares of common stock of the
Company or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors, (b) a change in the
majority of the Board of Directors, (c) a major corporate
transaction, such as a merger or sale of substantially all of the
Company’s assets which results in a change in the majority
of the Board of Directors or a majority of shareholders or
(d) a liquidation of the Company.
The Plan may be amended in whole or in part by the Board of
Directors of the Company at any time (including amendments which
may have the effect of increasing the cost of the Plan to the
Company).
VOTE REQUIRED AND BOARD OF DIRECTOR’S RECOMMENDATION
Re-approval of the Plan requires the affirmative vote of the
holders of a majority of the shares of Common Stock represented
and voting in person or by proxy at the Annual Meeting.
The Board of Directors believes that re-approval of the plan
is in the best interests of all stockholders and, accordingly,
recommends a vote for the plan. Your proxy will be so voted
unless you specify otherwise.
The Board of Directors proposes that the stockholders approve the
selection by the Finance and Audit Committee of Deloitte &
Touche LLP to serve as the Company’s independent auditors
for the 2000 fiscal year. The Board of Directors anticipates that
representatives of Deloitte & Touche LLP will be present at
the meeting to respond to appropriate questions, and will have an
opportunity, if they desire, to make a statement.
The Board of Directors recommends a vote FOR the appointment
of Deloitte & Touche LLP as the independent auditors and your
proxy will be so voted unless you specify otherwise. 23
The Company has no reason to believe that any other business will
be presented at the Annual Meeting, but if any other business
shall be presented, votes pursuant to the proxy will be cast
thereon in accordance with the discretion of the persons named in
the accompanying proxy.
Stockholder proposals which are intended to be presented at the
2001 Annual Meeting pursuant to SEC Rule 14a-8 must be
received by the Company on or before November 26, 2000, for
inclusion in the proxy statement relating to that meeting.
A stockholder who intends to present business at the 2001 Annual
Meeting other than pursuant to Rule 14a-8 must comply with
the requirements set forth in the Company’s By-Laws. Among
other things, to bring business before an annual meeting, a
stockholder must give written notice to the Secretary of the
Company no less than 60 days and not more than 90 days
prior to the first anniversary of the preceding year’s
annual meeting. Therefore, for stockholder proposals other than
pursuant to Rule 14a-8, the Company must receive notice no
sooner than January 27, 2001, and no later than
February 26, 2001.
The Company will furnish, without charge, to each person whose
proxy is being solicited, upon request of such person, one copy
of the Company’s Annual Report on Form 10-K for the
year ended December 31, 1999, as filed with the Securities
and Exchange Commission. Requests for copies of such report
should be directed to the Investor Relations and Communications
Department, 200 South Michigan Avenue, Chicago,
Illinois 60604.
24
BORG-WARNER AUTOMOTIVE, INC.
1993 STOCK INCENTIVE PLAN
(Amended Effective November 8, 1995, April 29, 1997, SECTION 1. Purpose; Definitions. The purpose of the Plan is to give the Company a significant advantage
in attracting, retaining and motivating officers, employees and directors and to
provide the Company and its subsidiaries with the ability to provide incentives
more directly linked to the profitability of the Company’s businesses and
increases in stockholder value.
For purposes of the Plan, the following terms are defined as set forth
below:
a. “Affiliate” means a corporation or other entity controlled by the
Company and designated by the Committee as such.
b. “Award” means a Stock Appreciation Right, Stock Option or Restricted
Stock.
c. “Board” means the Board of Directors of the Company.
d. “Cause” has the meaning set forth in Section 5(i).
e. “Change in Control” and “Change in Control Price” have the meanings set
forth in Sections 8(b) and (c), respectively.
f. “Code” means the Internal Revenue Code of 1986, as amended from time to
time, and any successor thereto.
g. “Commission” means the Securities and Exchange Commission or any
successor agency.
h. “Committee” means the Committee referred to in Section 2.
i. “Company” means Borg-Warner Automotive, Inc., a Delaware corporation.
j. “Disability” means permanent and total disability as determined under
procedures established by the Committee for purposes of the Plan.
k. “Disinterested Person” shall mean a member of the Board who qualifies as
a disinterested person as defined in Rule 16b-3(c)(2), as promulgated by the
Commission under the Exchange Act, or any successor definition adopted by the
Commission.
l. “Exchange Act” means the Securities Exchange Act of 1934, as amended
from time to time, and any successor thereto.
m. “Fair Market Value” means, except as provided in Sections 5(j) and
6(b)(ii)(2), as of any given date, the mean between the highest and lowest
reported sales prices of the Stock on the New York Stock Exchange Composite Tape
or, if not listed on such exchange, on any other national securities exchange on
which the Stock is listed or on NASDAQ. If there is no regular public trading
market for such Stock, the Fair Market Value of the Stock shall be determined by
the Committee in good faith.
n. “Incentive Stock Option” means any Stock Option intended to be and
designated as an “incentive stock option” within the meaning of Section 422 of
the Code.
o. “Non-Qualified Stock Option” means any Stock Option that is not an
Incentive Stock Option.
p. “Plan” means the Borg-Warner Automotive, Inc. 1993 Stock Incentive
Plan, as set forth herein and as hereinafter amended from time to time.
q. “Restricted Stock” means an award granted under Section 7.
r. “Retirement” means retirement from active employment under a pension
plan of the Company, any subsidiary or Affiliate, or under an employment
contract with any of them, or termination of employment at or after age 55 under
circumstances which the Committee, in its sole discretion, deems equivalent to
retirement.
s. “Rule 16b-3” means Rule 16b-3, as promulgated by the Commission
under Section 16(b) of the Exchange Act, as amended from time to time.
t. “Stock” means Common Stock, par value $.01 per share, of the
Company.
u. “Stock Appreciation Right” means a right granted under Section 6.
v. “Stock Option” means an option granted under Section 5.
w. “Termination of Employment” means the termination of the
participant’s employment with the Company and any subsidiary or Affiliate. A
participant employed by a subsidiary or an Affiliate shall also be deemed to
incur a Termination of Employment if the subsidiary or Affiliate ceases to be
such a subsidiary or Affiliate, as the case may be, and the participant does not
immediately thereafter become an employee of the Company or another subsidiary
or Affiliate.
In addition, certain other terms used herein have definitions given to
them in the first place in which they are used.
SECTION 2. Administration. The Plan shall be administered by the Compensation Committee of the
Board or such other committee of the Board, composed of not less than two
Disinterested Persons, each of whom shall be appointed by and serve at the
pleasure of the Board. If at any time no Committee shall be in office, the
functions of the Committee specified in the Plan shall be exercised by the
Board.
The Committee shall have plenary authority to grant Awards pursuant to
the terms of the Plan to officers, employees and directors of the Company and
its subsidiaries and Affiliates.
Among other things, the Committee shall have the authority, subject to
the terms of the Plan:
(a) to select the officers, employees and directors to whom Awards may
from time to time be granted; provided that awards to non-employee directors may
be made only in accordance with Section 13;
(b) to determine whether and to what extent Incentive Stock Options,
Non-Qualified Stock Options, Stock Appreciation Rights and Restricted Stock or
any combination thereof are to be granted hereunder;
(c) to determine the number of shares of Stock to be covered by each
Award granted hereunder;
(d) to determine the terms and conditions of any Award granted
hereunder (including, but not limited to, the option price (subject to Section
5(a)), any vesting restriction or limitation and any vesting acceleration or
forfeiture waiver regarding any Award and the shares of Stock relating thereto,
based on such factors as the Committee shall determine);
(e) to modify, amend or adjust the terms and conditions of any Award,
at any time or from time to time, including, but not limited to, with respect to
performance goals and measurements applicable to performance-based Awards
pursuant to the terms of the Plan;
(f) to determine to what extent and under what circumstances Stock and
other amounts payable with respect to an Award shall be deferred; and
(g) to determine under what circumstances a Stock Option may be settled
in cash or Stock under Section 5(j).
The Committee shall have the authority to adopt, alter and repeal such
administrative rules, guidelines and practices governing the Plan as it shall,
from time to time, deem advisable, to interpret the terms and provisions of the
Plan and any Award issued under the Plan (and any agreement relating thereto)
and to otherwise supervise the administration of the Plan.
The Committee may act only by a majority of its members then in office,
except that the members thereof may (i) delegate to an officer of the Company
the authority to make decisions pursuant to paragraphs (c), (f), (g), (h) and
(i) of Section 5 (provided that no such delegation may be made that would cause
Awards or other transactions under the Plan to cease to be exempt from Section
16(b) of the Exchange Act) and (ii) authorize any one or more of their number or
any officer of the Company to execute and deliver documents on behalf of the
Committee.
Any determination made by the Committee or pursuant to delegated
authority pursuant to the provisions of the Plan with respect to any Award shall
be made in the sole discretion of the Committee or such delegate at the time of
the grant of the Award or, unless in contravention of any express term of the
Plan, at any time thereafter. All decisions made by the Committee or any
appropriately delegated officer pursuant to the provisions of the Plan shall be
final and binding on all persons, including the Company and Plan participants.
SECTION 3. Stock Subject to Plan. Subject to adjustment as provided herein, the total number of shares of
Stock of the Company available for grant under the Plan shall be 2,700,000;
provided that no “covered employee”, as such term is defined in Section 162(m)
of the Code, shall be granted more than 100,000 shares of Stock in any taxable
year. Shares subject to an Award under the Plan may be authorized and unissued
shares or may be treasury shares.
If any shares of Restricted Stock are forfeited for which the
participant did not receive any benefits of ownership (as such phrase is
construed by the Commission or its Staff), or if any Stock Option (and related
Stock Appreciation Right, if any) terminates without being exercised, or if any
Stock Appreciation Right is exercised for cash, shares subject to such Awards
shall again be available for distribution in connection with Awards under the
Plan.
In the event of any merger, reorganization, consolidation,
recapitalization, stock dividend, stock split, extraordinary distribution with
respect to the Stock or other change in corporate structure affecting the Stock,
the Committee or Board may make such substitution or adjustments in the
aggregate number and kind of shares reserved for issuance under the Plan, in the
number, kind and option price of shares subject to outstanding Stock Options and
Stock Appreciation Rights, in the number and kind of shares subject to other
outstanding Awards granted under the Plan and/or such other substitution or
adjustments in the consideration receivable upon exercise as it may determine to
be appropriate in its sole discretion; provided, however, that the number of
shares subject to any Award shall always be a whole number. Such adjusted option
price shall also be used to determine the amount payable by the Company upon the
exercise of any Stock Appreciation Right associated with any Stock Option.
SECTION 4. Eligibility. Officers, employees and directors of the Company, its subsidiaries and
Affiliates who are responsible for or contribute to the management, growth and
profitability of the business of the Company, its subsidiaries and Affiliates
are eligible to be granted Awards under the Plan. Except as expressly authorized
by Section 13 of the Plan, however, no grant shall be made to a director who is
not an officer or a salaried employee.
SECTION 5. Stock Options. Stock Options may be granted alone or in addition to other Awards
granted under the Plan and may be of two types: Incentive Stock Options and
Non-Qualified Stock Options. Any Stock Option granted under the Plan shall be in
such form as the Committee may from time to time approve.
The Committee shall have the authority to grant any optionee Incentive
Stock Options, Non-Qualified Stock Options or both types of Stock Options (in
each case with or without Stock Appreciation Rights). Incentive Stock Options
may be granted only to employees of the Company and its subsidiaries (within the
meaning of Section 424(f) of the Code). To the extent that any Stock Option is
not designated as an Incentive Stock Option or even if so designated
does not qualify as an Incentive Stock Option, it shall constitute a Non-Qualified Stock
Option.
The Committee may authorize the Chief Executive Officer of the
Corporation, who need not be a Disinterested Person, to grant in any calendar
year a Non-Qualified Stock Option (with or without Stock Appreciation Rights)
for up to 3,000 shares of Stock to any employee of the Company who is not an
executive officer of the Company subject to Section 16 of the Exchange Act. The
Committee may limit or qualify such authorization in any manner it deems
appropriate. Stock Options granted by the Chief Executive Officer shall have the
terms and conditions determined by the Committee and the Committee shall
periodically review such grants.
Stock Options shall be evidenced by option agreements, the terms and
provisions of which may differ. An option agreement shall indicate on its face
whether it is intended to be an agreement for an Incentive Stock Option or a
NonQualified Stock Option. The grant of a Stock Option shall occur on the date
the Committee by resolution selects an individual to be a participant in any
grant of a Stock Option, determines the number of shares of Stock to be subject
to such Stock Option to be granted to such individual and specifies the terms
and provisions of the Stock Option. The Company shall notify a participant of
any grant of a Stock Option, and a written option agreement or agreements shall
be duly executed and delivered by the Company to the participant. Such agreement
or agreements shall become effective upon execution by the participant.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to Incentive Stock Options shall be interpreted, amended or
altered nor shall any discretion or authority granted under the Plan be
exercised so as to disqualify the Plan under Section 422 of the Code or, without
the consent of the optionee affected, to disqualify any Incentive Stock Option
under such Section 422.
Stock Options granted under the Plan shall be subject to the following
terms and conditions and shall contain such additional terms and conditions as
the Committee shall deem desirable:
(a) Option Price. The option price per share of Stock purchasable under
a Stock Option shall be determined by the Committee and set forth in the option
agreement, and shall not be less than the Fair Market Value of the Stock subject
to the Stock Option on the date of grant, except that any Stock Options granted
on the effective date of the Company’s initial public offering of Common Stock
shall have an option price per share equal to the price per share paid by the
public in such offering.
(b) Option Term. The term of each Stock Option shall be fixed by the
Committee, but no Stock Option shall be exercisable more than 10 years after the
date the Stock Option is granted.
(c) Exercisability. Except as otherwise provided herein, Stock Options
shall be exercisable at such time or times and subject to such terms and
conditions as shall be determined by the Committee. If the Committee provides
that any Stock Option is exercisable only in installments, the Committee may at
any time waive such installment exercise provisions, in whole or in part,
based on such factors as the Committee may determine. In addition, the Committee
may at any time, in whole or in part, accelerate the exercisability of any Stock
Option.
(d) Method of Exercise. Subject to the provisions of this Section 5,
Stock Options may be exercised, in whole or in part, at any time during the
option term by giving written notice of exercise to the Company specifying the
number of shares of Stock subject to the Stock Option to be purchased.
The option price of Stock to be purchased upon exercise of any Option
shall be paid in full in cash (by certified or bank check or such other
instrument as the Company may accept) or, if and to the extent set forth in the
option agreement, may also be paid by one or more of the following: (i) in the
form of unrestricted Stock already owned by the optionee (and, in the case of
the exercise of a Non-Qualified Stock Option, Restricted Stock subject to an
Award hereunder) based in any such instance on the Fair Market Value of the
Stock on the date the Stock Option is exercised; provided, however, that, in the
case of an Incentive Stock Option, the right to make a payment in the form of
already owned shares of Stock may be authorized only at the time the Stock
Option is granted; (ii) by requesting the Company to withhold from the number of
shares of Stock otherwise issuable upon exercise of the Stock Option that number
of shares having an aggregate fair market value on the date of exercise equal to
the exercise price for all of the shares of Stock subject to such exercise; or
(iii) by a combination thereof, in each case in the manner provided in the
option agreement.
In the discretion of the Committee, payment for any shares subject to a
Stock Option may also be made by delivering a properly executed exercise notice
to the Company, together with a copy of irrevocable instructions to a broker to
deliver promptly to the Company the amount of sale or loan proceeds to pay the
purchase price. To facilitate the foregoing, the Company may enter into
agreements for coordinated procedures with one or more brokerage firms.
If payment of the option exercise price of a Non-Qualified Stock Option
is made in whole or in part in the form of Restricted Stock, the number of
shares of Stock to be received upon such exercise equal to the number of shares
of Restricted Stock used for payment of the option exercise price shall be
subject to the same forfeiture restrictions to which such Restricted Stock was
subject, unless otherwise determined by the Committee.
No shares of Stock shall be issued until full payment therefor has been
made. Subject to any forfeiture restrictions that may apply if a Stock Option is
exercised using Restricted Stock, an optionee shall have all of the rights of a
stockholder of the Company holding the Stock that is subject to such Stock
Option (including, if applicable, the right to vote the shares and the right to
receive dividends), when the optionee has given written notice of exercise, has
paid in full for such shares and, if requested, has given the representation
described in Section 11(a).
(e) Non-transferability of Stock Options. No Stock Option shall be
transferable by the optionee other than (i) by will or by the laws of descent
and distribution or (ii) in the case of a Non-Qualified Stock Option, pursuant
to a qualified domestic relations order (as defined in the Code or Title I of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
thereunder). All Stock Options shall be exercisable, during the optionee’s
lifetime, only by the optionee or by the guardian or legal representative of the
optionee or, in the case of a Non-Qualified Stock Option, its alternate payee
pursuant to such qualified domestic relations order, it being understood that
the terms “holder” and “optionee” include the guardian and legal representative
of the optionee named in the option agreement and any person to whom an option
is transferred by will or the laws of descent and distribution or, in the case
of a Non-Qualified Stock Option, pursuant to a qualified domestic relations
order.
(f) Termination by Death. If an optionee’s employment terminates by
reason of death, any Stock Option held by such optionee may thereafter be
exercised, to the extent then exercisable, or on such accelerated basis as the
Committee may determine, for a period of one year (or such other period as the
Committee may specify in the option agreement) from the date of such death or
until the expiration of the stated term of such Stock Option, whichever period
is the shorter. In the event of termination of employment due to death, if an
Incentive Stock Option is exercised after the expiration of the exercise periods
that apply for purposes of Section 422 of the Code, such Stock Option will
thereafter be treated as a Non-Qualified Stock Option.
(g) Termination by Reason of Disability. If an optionee’s employment
terminates by reason of Disability, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at the
time of termination, or on such accelerated basis as the Committee may
determine, for a period of three years (or such shorter period as the Committee
may specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the optionee dies
within such three-year period (or such shorter period), any unexercised Stock
Option held by such optionee shall, notwithstanding the expiration of such
three-year (or such shorter) period, continue to be exercisable to the extent to
which it was exercisable at the time of death for a period of 12 months from the
date of such death or until the expiration of the stated term of such Stock
Option, whichever period is the shorter. In the event of termination of
employment by reason of Disability, if an Incentive Stock Option is exercised
after the expiration of the exercise periods that apply for purposes of Section
422 of the Code, such Stock Option will thereafter be treated as a Non-Qualified
Stock Option.
(h) Termination by Reason of Retirement. If an optionee’s employment
terminates by reason of Retirement, any Stock Option held by such optionee may
thereafter be exercised by the optionee, to the extent it was exercisable at the
time of such Retirement or on such accelerated basis as the Committee may
determine, for a period of three years (or such shorter period as the Committee
may specify in the option agreement) from the date of such termination of
employment or until the expiration of the stated term of such Stock Option,
whichever period is the shorter; provided, however, that if the optionee dies
within such three-year (or such shorter) period, any unexercised Stock Option
held by such optionee shall, notwithstanding the expiration of such three-year
(or such shorter) period, continue to be exercisable to the extent to which it
was exercisable at the time of death for a period of 12 months from the date of
such death or until the expiration of the stated term of such Stock Option,
whichever period is the shorter. In the event of
termination of employment by reason of Retirement, if an Incentive Stock Option
is exercised after the expiration of the exercise periods that apply for
purposes of Section 422 of the Code, such Stock Option will thereafter be
treated as a Non-Qualified Stock Option.
(i) Other Termination. Unless otherwise determined by the Committee, if
an optionee incurs a Termination of Employment for any reason other than death,
Disability or Retirement, any Stock Option held by such Optionee shall thereupon
terminate, except that such Stock Option, to the extent then exercisable, or on
such accelerated basis as the Committee may determine, may be exercised for the
lesser of one year from the date of such Termination of Employment or the
balance of such Stock Option’s term if such Termination of Employment of the
optionee is involuntary and without Cause; provided, however, that if the
optionee dies within such one-year period, any unexercised Stock Option held by
such optionee shall notwithstanding the expiration of such one-year period,
continue to be exercisable to the extent to which it was exercisable at the time
of death for a period of 12 months from the date of such death or until the
expiration of the stated term of such Stock Option, whichever period is the
shorter. In the event of Termination of Employment for any reason other than
death, Disability or Retirement, if an Incentive Stock Option is exercised after
the expiration of the exercise periods that apply for purposes of Section 422 of
the Code, such Stock Option will thereafter be treated as a Non-Qualified Stock
Option. Unless otherwise determined by the Committee, for the purposes of the
Plan “Cause” shall mean (i) the conviction of the optionee for committing a
felony under Federal law or the law of the state in which such action occurred,
(ii) dishonesty in the course of fulfilling the optionee’s employment duties or
(iii) willful and deliberate failure on the part of the optionee to perform his
employment duties in any material respect.
(j) Cashing Out of Stock Option. On receipt of written notice of
exercise, the Committee may elect to cash out all or part of the portion of the
shares of Stock for which a Stock Option is being exercised by paying the
optionee an amount, in cash or Stock, equal to the excess of the Fair Market
Value of the Stock over the option price times the number of shares of Stock for
which to the Option is being exercised on the effective date of such cash out.
Cash outs pursuant to this Section 5(j) relating to options held by
optionees who are actually or potentially subject to Section 16(b) of the
Exchange Act shall comply with the “window period” provisions of Rule 16b-3(e),
to the extent applicable, and, in the case of cash outs of Non-Qualified Stock
Options held by such optionees, the Committee may determine Fair Market Value
under the pricing rule set forth in Section 6(b)(ii)(2).
(k) Change in Control Cash Out. Notwithstanding any other provision of
the Plan, during the 60-day period from and after a Change in Control (the
“Exercise Period”), unless the Committee shall determine otherwise at the time
of grant, an optionee shall have the right, whether or not the Stock Option is
fully exercisable and in lieu of the payment of the exercise price for the
shares of Stock being purchased under the Stock Option and by giving notice to
the Company, to elect (within the Exercise Period) to surrender all or part of
the Stock Option to the Company and to receive cash, within 30 days of such
notice, in an amount equal to the amount by which the Change in Control Price
per share of Stock on the date of such election shall exceed the exercise price
per share of Stock under the Stock Option (the “Spread”) multiplied by the
number of shares of Stock granted under the Stock Option as to which the right
granted under this Section 5(k) shall have been exercised; provided, however,
that if the Change in Control is within six months of the date of grant of a
particular Stock Option held by an optionee who is an officer or director of the
Company and is subject to Section 16(b) of the Exchange Act no such election
shall be made by such optionee with respect to such Stock Option prior to six
months from the date of grant. Notwithstanding any other provision hereof, if
the end of such 60-day period from and after a Change in Control is within six
months of the date of grant of a Stock Option held by an optionee who is an
officer or director of the Company and is subject to Section 16(b) of the
Exchange Act, such Stock Option shall be cancelled in exchange for a cash
payment to the optionee, effected on the day which is six months and one day
after the date of grant of such Option, equal to the Spread multiplied by the
number of shares of Stock granted under the Stock Option.
SECTION 6. Stock Appreciation Rights. (a) Grant and Exercise. Stock Appreciation Rights may be granted in
conjunction with all or part of any Stock Option granted under the Plan. In the
case of a Non-Qualified Stock Option, such rights may be granted either at or
after the time of grant of such Stock Option. In the case of an Incentive Stock
Option, such rights may be granted only at the time of grant of such Stock
Option. A Stock Appreciation Right shall terminate and no longer be exercisable
upon the termination or exercise of the related Stock Option.
A Stock Appreciation Right may be exercised by an optionee in
accordance with Section 6(b) by surrendering the applicable portion of the
related Stock Option in accordance with procedures established by the Committee.
Upon such exercise and surrender, the optionee shall be entitled to receive an
amount determined in the manner prescribed in Section 6(b). Stock Options which
have been so surrendered shall no longer be exercisable to the extent the
related Stock Appreciation Rights have been exercised.
(b) Terms and Conditions. Stock Appreciation Rights shall be subject to
such terms and conditions as shall be determined by the Committee, including the
following:
SECTION 7. Restricted Stock. (a) Administration. Shares of Restricted Stock may be awarded either
alone or in addition to other Awards granted under the Plan. The Committee shall
determine the officers and employees to whom and the time or times at which
grants of Restricted Stock will be awarded, the number of shares to be awarded
to any participant, the time or times within which such Awards may be subject to
forfeiture and any other terms and conditions of the Awards, in addition to
those contained in Section 7(c).
The Committee may condition the grant of Restricted Stock upon the
attainment of specified performance goals of the participant or of the Company
or subsidiary, division or department of the Company for or within which the
participant is primarily employed or upon such other factors or criteria as the
Committee shall determine. The provisions of Restricted Stock Awards need not be
the same with respect to each recipient.
(b) Awards and Certificates. Shares of Restricted Stock shall be
evidenced in such manner as the Committee may deem appropriate, including
book-entry registration or issuance of one or more stock certificates. Any
certificate issued in respect of shares of Restricted Stock shall be registered
in the name of such participant and shall bear an appropriate legend referring
to the terms, conditions, and restrictions applicable to such Award,
substantially in the following form:
The Committee may require that the certificates evidencing such shares be held
in custody by the Company until the restrictions thereon shall have lapsed and
that, as a condition of any Award of Restricted Stock, the participant shall
have delivered a stock power, endorsed in blank, relating to the Stock covered
by such Award.
(c) Terms and Conditions. Shares of Restricted Stock shall be subject
to the following terms and conditions:
SECTION 8. Change In Control Provisions. (a) Impact of Event. Notwithstanding any other provision of the Plan to
the contrary, in the event of a Change in Control:
(b) Definition of Change in Control. For purposes of the Plan, a
A "Change in Control" shall mean the happening of any of the following events:
(c) Change in Control Price. For purposes of the Plan, “Change in
Control Price” means the higher of (i) the highest reported sales price, regular
way, of a share of Common Stock in any transaction reported on the New York
Stock Exchange Composite Tape or other national exchange on which such shares
are listed or on NASDAQ during the 60-day period prior to and including the date
of a Change in Control or (ii) if the Change in Control is the result of a
tender or exchange offer or a Business Combination, the highest price per share
of Common Stock paid in such tender or exchange offer or Business Combination;
provided, however, that (X) in the case of a Stock Option which (I) is held by
an optionee who is an officer or director of the Company and is subject to
Section 16(b) of the Exchange Act and (II) was granted within 240 days of the
Change in Control, then the Change in Control Price for such Stock Option shall
be the Fair Market Value of the Stock on the date such Stock Option is exercised
or cancelled and (Y) in the case of Incentive Stock Options and Stock
Appreciation Rights relating to Incentive Stock Options, the Change in Control
Price shall be in all cases the Fair Market Value of the Stock on the date such
Incentive Stock Option or Stock Appreciation Right is exercised. To the extent
that the consideration paid in any such transaction described above consists all
or in part of securities or other non-cash consideration, the value of such
securities or other non-cash consideration shall be determined in the sole
discretion of the Board.
SECTION 9. Term, Amendment and Termination. The Plan will terminate on December 31, 2003. Under the Plan, Awards
outstanding as of December 31, 2003 shall not be affected or impaired by the
termination of the Plan.
The Board may amend, alter, or discontinue the Plan, but no amendment,
alteration or discontinuation shall be made which would (i) impair the rights of
an optionee under a Stock Option or a recipient of a Stock Appreciation Right or
Restricted Stock Award theretofore granted without the optionee’s or recipient’s
consent, except such an amendment made to cause the Plan to qualify for the
exemption provided by Rule 16b-3, or (ii) disqualify the Plan from the exemption
provided by Rule 16b-3. In addition, no such amendment shall be made without the
approval of the Company’s stockholders to the extent such approval is required
by law or agreement.
The Committee may amend the terms of any Stock Option or other Award
theretofore granted, prospectively or retroactively, but no such amendment shall
impair the rights of any holder without the holder’s consent except such an
amendment made to cause the Plan or Award to qualify for the exemption provided
by Rule 16b-3. The Committee may also substitute new Stock Options for
previously granted Stock Options, including previously granted Stock Options
having higher option prices.
Subject to the above provisions, the Board shall have authority to
amend the Plan to take into account changes in law and tax and accounting rules,
as well as other developments and to grant Awards which qualify for beneficial
treatment under such rules without stockholder approval.
SECTION 10. Unfunded Status of Plan. It is presently intended that the Plan constitute an “unfunded” plan
for incentive and deferred compensation. The Committee may authorize the
creation of trusts or other arrangements to meet the obligations created under
the Plan to deliver Stock or make payments; provided, however, that, unless the
Committee otherwise determines, the existence of such trusts or other
arrangements is consistent with the “unfunded” status of the Plan.
SECTION 11. General Provisions. (a) The Committee may require each person purchasing or receiving
shares pursuant to an Award to represent to and agree with the Company in
writing that such person is acquiring the shares without a view to the
distribution thereof. The certificates for such shares may include any legend
which the Committee deems appropriate to reflect any restrictions on transfer.
All certificates for shares of Stock or other securities delivered
under the Plan shall be subject to such stock transfer orders and other
restrictions as the Committee may deem advisable under the rules, regulations
and other requirements of the Commission, any stock exchange upon which the
Stock is then listed and any applicable Federal or state securities law, and the
Committee may cause a legend or legends to be put on any such certificates to
make appropriate reference to such restrictions.
(b) Nothing contained in the Plan shall prevent the Company or any
subsidiary or Affiliate from adopting other or additional compensation
arrangements for its employees.
(c) The adoption of the Plan shall not confer upon any employee any
right to continued employment nor shall it interfere in any way with the right
of the Company or any subsidiary or Affiliate to terminate the employment of any
employee at any time.
(d) No later than the date as of which an amount first becomes
includible in the gross income of the participant for Federal income tax
purposes with respect to any Award under the Plan, the participant shall pay to
the Company, or make arrangements satisfactory to the Company regarding the
payment of, any Federal, state, local or foreign taxes of any kind required by
law to be withheld with respect to such amount. Unless otherwise determined by
the Committee, withholding obligations may be settled with Stock, including
Stock that is part of the Award that gives rise to the withholding requirement.
The obligations of the Company under the Plan shall be conditional on such
payment or arrangements, and the Company, its Subsidiaries and its Affiliates
shall, to the extent permitted by law, have the right to deduct any such taxes
from any payment otherwise due to the participant. The Committee may establish
such procedures as it deems appropriate, including the making of irrevocable
elections, for the settlement of withholding obligations with Stock.
(e) At the time of grant, the Committee may provide in connection with
any grant made under the Plan that the shares of Stock received as a result of
such grant shall be subject to a right of first refusal pursuant to which the
participant shall be required to offer to the Company any shares that the
participant wishes to sell at the then Fair Market Value of the Stock, subject
to such other terms and conditions as the Committee may specify at the time of
grant.
(f) The reinvestment of dividends in additional Restricted Stock at the
time of any dividend payment shall only be permissible if sufficient shares of
Stock are available under Section 3 for such reinvestment (taking into account
then outstanding Stock Options and other Awards).
(g) The Committee shall establish such procedures as it deems
appropriate for a participant to designate a beneficiary to whom any amounts
payable in the event of the participant’s death are to be paid.
(h) The Plan and all Awards made and actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of Delaware.
SECTION 12. Effective Date of Plan. The Plan shall be effective on the date it is approved by the
shareholders of the Company.
SECTION 13. Director Stock Options. (a) Each director of the Company who is not otherwise an employee of
the Company or any Affiliate from and after August 1, 1993 shall, on the third
Tuesday of each year during such director’s term, automatically be granted
Non-Qualified Stock Options to purchase 1,000 shares of Stock having an exercise
price per share equal to 100% of the Fair Market Value of the Stock at the date
of grant of such Non-Qualified Stock Option. Each such director, upon joining
the Board, shall also be awarded an initial grant of Non-Qualified Stock Options
to purchase 2,000 shares of Stock having an exercise price equal to 100% of the
Fair Market Value of the Stock as of such date.
(b) An automatic director Stock Option shall be granted hereunder only
if as of each date of grant (or, in the case of any initial grant, from and
after the effective date of the Plan) the director (i) is not otherwise an
employee of the Company, any Affiliate or Merrill Lynch Capital Partners, Inc.,
(ii) has not been an employee of the Company or any subsidiary for any part of
the preceding fiscal year, and (iii) has served on the Board continuously since
the commencement of his term.
(c) Each holder of a Stock Option granted pursuant to this Section 13
shall also have the rights specified in Section 5(k).
(d) In the event that the number of shares of Stock available for
future grant under the Plan is insufficient to make all automatic grants
required to be made on such date, then all non-employee directors entitled to a
grant on such date shall share ratably in the number of options on shares
available for grant under the Plan.
(e) The provisions of paragraph (a) of this Section 13 may not be
amended more often than once every six months. Except as expressly provided in
this Section 13, any Stock Option granted hereunder shall be subject to the
terms and conditions of the Plan as if the grant were made pursuant to Section 5
hereof.
APPENDIX B BORG-WARNER AUTOMOTIVE, INC. Revised and Re-approved, February 2, 2000
TABLE OF CONTENTS
I. GENERAL
II. DEFINITIONS Where appropriate, references in this Plan to the masculine shall
include the feminine, and references to the singular shall include the plural.
III. ELIGIBILITY Participation in the Plan shall be limited to executives of the Company
who are designated to be eligible by the Committee. Such executives shall (i) be
part of a “select group of management or highly compensated employees” (as that
phrase is used under Department of Labor Regulation Section 2520.104-23) and
(ii) generally be those executives who are in a position to make significant
contributions to the earnings of the Company.
Participation in one Performance Award, however, will not automatically
guarantee participation in subsequent years. Participation for each Performance
Award under the Plan will be approved by the Committee after consultation with
the chief executive officer of Borg-Warner Automotive, Inc.
If a Participant is deemed to be no longer eligible for participation
in Performance Awards because of a change in job responsibilities, he will have
a prorated participation in existing Performance Awards for as long as his
eligibility was in effect. A Participant shall, for purposes of receiving
Performance Awards, continue his participation in the Plan until all Performance
Awards in which he is eligible to participate have been distributed.
IV. PLAN DESIGN
V. PAYMENT
VI. ADMINISTRATION
VII. AMENDMENT AND TERMINATION
VIII. MISCELLANEOUS
IX. CHANGE OF CONTROL
[BORGWARNER LOGO] This Proxy is Solicited by the Board of Directors in Connection PROXY: LAURENE H. HORISZNY and VINCENT M. LICHTENBERGER and each of them, are
hereby appointed by the undersigned as attorneys and proxies with full power of
substitution, to vote all the shares of Common Stock held of record by the
undersigned on March 15, 2000 at the Annual Meeting of Stockholders of
BorgWarner Inc. or at any adjournment(s) of the meeting, on each of the items on
the reverse side and in accordance with the directions given therein.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE /\ FOLD AND DETACH HERE /\
1. Election of three Class I Directors: 01- Phyllis O. Bonanno, 02- Andrew F. Brimmer,
03- Alexis P. Michas Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor, administrator,
trustee, or guardian, please give full title as such. If a corporation, please
sign in full corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized person. FOLD AND DETACH HERE Performance Graph Comparison of Cumulative Total Return 2
BORG-WARNER AUTOMOTIVE,26, 1999
22, 2000
Borg-Warner Automotive,BorgWarner Inc. will be
held on April 27, 1999,26, 2000, at 11:00 a.m. at the
Company'sCompany’s headquarters located at 200 South Michigan Avenue,
Chicago, Illinois, 60604, for the following purposes:
1. To elect the Class III Directors to serve for the next three years;
2. To ratify the appointment of Deloitte & Touche LLP as independent
auditors for the Company for 1999; and
1.
To elect the Class I Directors to serve for the next three
years; 2.
To approve the amendment of the Company’s 1993 Stock
Incentive Plan; 3.
To re-approve the Company’s Executive Stock Performance
Plan; 4.
To ratify the appointment of Deloitte & Touche LLP as
independent auditors for the Company for 2000; and 5.
To transact such other business as may properly come before the
meeting or any adjournment or postponement thereof. 19992000
will be entitled to vote at the meeting or any adjournment or
postponement thereof.
By order of the Board of Directors
Laurene H. Horiszny
Secretary
By order of the Board of Directors
Laurene H. Horiszny Secretary
BORG-WARNER AUTOMOTIVE,26, 199922, 2000
Borg-Warner Automotive,BorgWarner
Inc. (the "Company"“Company”) to be used at the Annual Meeting
of Stockholders of the Company on April 27, 1999,26, 2000, to be held
at the Company'sCompany’s headquarters at 200 South Michigan Avenue,
Chicago, Illinois 60604. This Proxy Statement and accompanying
form of proxy are being mailed to stockholders beginning on or
about March 26, 1999.22, 2000. The Company'sCompany’s Annual Report to
Stockholders for the year ended December 31, 19981999 is
enclosed.1999,2000, will be entitled to vote at the meeting. As
of such date, there were 26,202,26827,040,492 issued and 25,861,96826,685,733
outstanding shares of Common Stock (the "Common Stock"“Common
Stock”). Each share of Common Stock entitles the holder to
one vote.Company'sCompany’s Board of Directors is divided into three
classes. Three nominees (the "Class III Directors"“Class I Directors”)
are to be elected at this meeting to serve for a term of three
years and until their successors are elected and qualified. Three
other directors (the "Class I Directors") have terms expiring at the 2000
Annual Meeting of Stockholders and three other directors (the "Class“Class II Directors"Directors”) have
terms expiring at the 2001 Annual Meeting of Stockholders and
three other directors (the “Class III Directors”)
have terms expiring at the 2002 Annual Meeting of Stockholders.
Each of the nominees for
IIII Director is presently a director of the
Company and has agreed to serve if elected. In the event that any
nominee should become unavailable for election, the Board of
Directors may designate a substitute nominee, in which event the
shares represented by proxies at the meeting will be voted for
such substitute nominee unless an instruction to the contrary is
indicated on the proxy card. A plurality of votes of shares of
Common Stock present in person or by proxy at the meeting is
required to elect a director.
1999,2000, with
respect to each nominee and each director continuing to serve,
their name, age, principal occupation, the year in which they
first became a director of the Company (if
currently a director) and directorships in other
corporations.
Principal Occupation
Class I Directors Age and Directorships
Andrew F. Brimmer
1997 72 Dr. Brimmer has been President of Brimmer &
Company, Inc., an economic and financial
consulting firm since July, 1976. He is a Director
of Airborne Express, CarrAmerica Realty
Corporation, BlackRock Investment Income Trust,
Inc. and other BlackRock funds.
James J. Kerley
1994 76 Mr. Kerley was Chairman of the Board of Rohr,
Inc.("Rohr"), a manufacturer of aircraft engine
components from January 1993 until his retirement
in December 1994. Mr. Kerley was interim President
and Chief Executive Officer of Rohr from January
1993 until May 1993. Mr. Kerley is a Director of
DT Industries, Inc. and Goss Graphic Principal Occupation Class I Directors Age and Directorships
Phyllis O. Bonanno
199956
Ms. Bonanno was President of Columbia College from July, 1997
until March, 2000. From July, 1986 until June, 1997, she was
Corporate Vice President of International Trade for Warnaco,
Inc., a worldwide apparel manufacturer. She is a Director of
RockPort Trade Systems, Inc.
Alexis P. Michas
1993 41 Mr. Michas has been the Managing Partner since
1996 and a Director of Stonington Partners, Inc.,
an investment management firm, since 1993, and a
Managing Partner and a Director of Stonington
Partners, Inc. II since 1994. He has been a
Director of Merrill Lynch Capital Partners
("MLCP") since 1989 and a Consultant to MLCP since
1994. He was a Partner of MLCP from 1993 to 1994.
He was also a Managing Director of the Investment
Banking Division of Merrill Lynch, Pierce, Fenner
& Smith Incorporated ("MLPF&S") from 1991 to
1994.
He is a Director of Blue Bird Corporation,
Borg-Warner Security Corporation ("BW-Security"),
Dictaphone Corporation, Goss Graphic Systems, Inc.
and Packard BioScience Company.
Principal Occupation
Class II Directors Age and Directorships
Jere A. Drummond
1996 59 Mr. Drummond has been President and Chief
Executive Officer of BellSouth Telecommunications,
Inc. since January 1995 and was elected a director
of BellSouth Telecommunications, Inc. in July
1993. He was Group President-Customer Operations
from March 1991 until December 1994.
Ivan W. Gorr
1995 69 Mr. Gorr was Chairman and Chief Executive Officer
of Cooper Tire & Rubber Company from 1989 until
his retirement in 1994. Mr. Gorr is a Director of
Amcast Industrial Corporation and Arvin
Industries, Inc.
John F. Fiedler
1994 60 Mr. Fiedler has been Chairman of the Board since
March 1996 and Chief Executive Officer of the
Company since January 1995. He was President from
June 1994 to March 1996 and Chief Operating
Officer from June 1994 to December 1994.
Mr. Fiedler was Executive Vice President of The
Goodyear Tire & Rubber Company, in charge of the
North American Tire Division, from 1991 to 1994.
He is a Director of Dal-Tile International, Inc.
and Roadway Express, Inc.
Principal Occupation
Class III Directors Age and Directorships
John Rau
1997 50 Mr. Rau has been President and Chief Executive
Officer of Chicago Title Corporation, a provider
of real estate services, since January 1997.
FromJuly 1993 to December 1996, he was Dean of the
Indiana University School of Business. Mr. Rau is
also a Director of Chicago Title Corporation,
LaSalle National Bank, First Industrial Realty
Trust and Nicor, Inc.
Paul E. Glaske
1994 65 Mr. Glaske has been Chairman and Chief Executive
Officer since April 1992 and President since July
1986 of Blue Bird Corporation, a leading
manufacturer of school buses, motor homes and a
variety of other vehicles. Mr. Glaske is also a
Director of Suntrust Bank of Middle Georgia.
William E. Butler
1997 68 Mr. Butler was Chairman of the Board and Chief
Executive Officer of Eaton Corporation, a global
manufacturer of industrial, vehicle, construction,
commercial and aerospace products, from January
1992 until his retirement at the end of 1995. Mr.
Butler is a Director of Applied Industrial
Technologies, Ferro Corporation, The Goodyear Tire
& Rubber Company, Pitney Bowes, Inc. and U.S.
Industries, Inc. and the Datatel Scholars Foundation.
Andrew F. Brimmer
199773
Dr. Brimmer has been President of Brimmer & Company,
Inc., an economic and financial consulting firm since July, 1976.
He is a Director of CarrAmerica Realty Corporation, BlackRock
Investment Income Trust, Inc. and other BlackRock funds.
Alexis P. Michas
199342
Mr. Michas has been the Managing Partner since 1996 and a
Director since 1993 of Stonington Partners, Inc., an investment
management firm. He has been the Managing Partner and a Director
of Stonington Partners, Inc. II, since 1994. He is a
Director of Burns International Services Corporation, Dictaphone
Corporation, Goss Graphic Systems, Inc. and Packard BioScience
Company. Principal Occupation Class II Directors Age and Directorships
Jere A. Drummond
199660
Mr. Drummond has been Vice Chairman of BellSouth Corporation
since January 2000. He was President and Chief Executive
Officer of BellSouth Communications Group, a provider of
traditional telephone operations and products, from
January 1995 until December 1999. He was President and
Chief Executive Officer of BellSouth Telecommunications, Inc.
(“BellSouth”) from January 1995 until
December 1997 and was elected a director of BellSouth in
1993.
Ivan W. Gorr
199570
Mr. Gorr was Chairman and Chief Executive Officer of Cooper Tire
& Rubber Company from 1989 until his retirement in 1994. Mr.
Gorr is a Director of Arvin Industries, Inc. Principal Occupation Class II Directors Age and Directorships
John F. Fiedler
199461
Mr. Fiedler has been Chairman of the Board since March 1996
and Chief Executive Officer of the Company since
January 1995. He was President from June 1994 to
March 1996. He is a Director of Dal-Tile International, Inc.
and Roadway Express, Inc. Principal Occupation Class III Directors Age and Directorships
John Rau
199751
Mr. Rau has been President and Chief Executive Officer of Chicago
Title Corporation, a provider of real estate services and a New
York Stock Exchange publicly-traded company which owns Chicago
Title and Trust Company, Chicago Title Insurance Company and
Security Union Title Insurance Company, since January 1997.
From July 1993 to December 1996, he was Dean of the Indiana
University School of Business. Mr. Rau is also a Director of
Chicago Title Corporation, LaSalle National Bank, First
Industrial Realty Trust, Inc., Nicor, Inc. and divine
interVentures, inc.
Paul E. Glaske
199466
Mr. Glaske was Chairman and Chief Executive Officer from
April 1992 until his retirement in October 1999 of
Blue Bird Corporation, a leading manufacturer of school buses,
motor homes and a variety of other vehicles. Mr. Glaske is
also a Director of Suntrust Bank of Middle Georgia.
William E. Butler
199769
Mr. Butler was Chairman of the Board and Chief Executive Officer
of Eaton Corporation, a global manufacturer of industrial,
vehicle, construction, commercial and aerospace products, from
January 1992 until his retirement at the end of 1995.
Mr. Butler is a Director of Applied Industrial Technologies,
Ferro Corporation, The Goodyear Tire & Rubber Company,
Pitney Bowes, Inc. and U.S. Industries, Inc. fivetwo special
meetings during 1998. Messrs.1999. Directors Bonanno, Brimmer, Butler,
Drummond, Fiedler, Glaske, Gorr Kerley,and Michas and
Rau attended at least 75%
of the meetings of the Board of Directors and any committee on
which they served. Mr. DrummondRau was unable to attend at least 75%
of the meetings of the Board of Directors.Directors and of the Finance and
Audit Committee.
Messrs.Directors
Glaske (Chairman), Butler, Drummond and Rau. The responsibilities
of the Compensation Committee include reviewing and
Company'sCompany’s employee benefit plans.
The Compensation Committee met three times during 1998.1999.
Messrs.Directors Rau (Chairman), Bonanno, Brimmer, Kerley (Chairman), Brimmer, Michas and Rau.Michas.
The responsibilities of the Finance and Audit Committee include:
recommending to the Board of Directors the independent certified
public accountants to conduct the annual audit of the books and
accounts of the Company; reviewing the proposed scope of such
audit and approving the audit fees to be paid; and reviewing the
adequacy and effectiveness of the internal auditing, accounting
and financial controls of the Company with the independent
certified public accountants and the Company'sCompany’s financial and
accounting staff. The Finance and Audit Committee met fivethree
times during 1998.1999.
Messrs.Directors
Gorr (Chairman), Butler, Drummond and Glaske. The
responsibilities of the Board Affairs Committee include making
recommendations to the Board of Directors regarding:
(i) Board composition and structure, (ii) the nature,
duties and powers of Board committees, (iii) term of office
for members, (iv) qualified persons to be nominated for
election or re-election as directors, (v) stockholders'stockholders’
suggestions for board nominations and (vi) the successor to
the Chief Executive Officer. The Board Affairs Committee also
establishes criteria for board and committee membership and
evaluates Company policies relating to the recruitment of
directors. The Board Affairs Committee met fourfive times during
1998.1999.
"Guidelines"“Guidelines”) which
set forth the Board'sBoard’s position on various corporate
governance matters. The Guidelines, among other things, describe
the responsibilities of each of the Board'sBoard’s Committees,
certain procedures for Board meetings, the Board'sBoard’s policy on
independent directors, and the Company'sCompany’s preparation for
succession and management development. The Guidelines are
reviewed periodically and amended as needed.
Company'sCompany’s By-Laws.
"1993 Plan"“1993
Plan”), each director of the Company who from and after
February 1, 1993, is not otherwise an employee of the
Company or any of its subsidiaries or affiliates (as defined in
the 1993 Plan) shall, on the third Tuesday of each year,
automatically receive an annual grant of options to purchase
1,000 shares of Common Stock having an exercise price equal to
the fair market value of the Common Stock at the date of grant of
such option. Each director, upon joining the Board, will also
receive an initial grant of options to purchase 2,000 shares of
Common Stock having an exercise price equal to the fair market
value of the Common Stock as of such date. All such options
expire ten years after the date of grant and become exercisable
in installments on the second and third anniversaries of the date
of grant.
1999,2000, certain
information regarding beneficial ownership of Common Stock by
all entities that, to the best knowledge of the Company,
beneficially owned more than five percent of the Common Stock.
Number of Percent of Name of Beneficial Owner shares class
- -------------------------------- ---------- -----------
Morgan Stanley, Dean Witter, Discover & Co. 1,823,343(a) 7.8%
1585 Broadway
New York, NY 10036
Sound Shore Management, Inc. 1,610,100(b) 6.1%
8 Sound Shore Drive
Greenwich, CT 06836
Franklin Mutual Advisers, Inc. 1,785,600 (c) 7.6%1,589,900(a) 5.9%
51 John F. Kennedy Parkway
Short Hills, NJ 07078
KeyCorp 1,494,214(b) 5.5%
127 Public Square
Cleveland, OH 44114
(a) Pursuant to a Schedule 13G/A dated February 10, 1999, Morgan Stanley, Dean
Witter & Co. indicated that it had shared voting power with respect to 1,482,043
shares and shared dispositive power with respect to 1,823,343 shares and Morgan
Stanley Dean Witten Investment Management Limited, indicated that it had shared
voting power with respect to 1,207,603 shares and shared dispositive power with
respect to 1,511,903 shares.
(b) Pursuant to a Schedule 13G dated January 22, 1999, Sound Shore Management,
Inc. indicated that it had sole voting power with respect to 1,437,500 shares,
voting power with respect to 41,100, and sole dispositive power with respect to
1,610,100 shares.
(c) Pursuant to a Schedule 13G dated January 27, 1999, Franklin Mutual
Advisers, Inc. indicated that it had sole dispositive and sole voting power with
respect to 1,785,600(a)
Pursuant to a Schedule 13G dated January 13, 2000,
Franklin Mutual Advisers, Inc. indicated that it had sole
dispositive and sole voting power with respect to 1,589,900
shares. (b)
Pursuant to a Schedule 13G dated February 14, 2000,
KeyCorp indicated that it had sole power to vote with respect to
40,145 shares; shared power to vote or to direct the vote with
respect to 1,432,479 shares; sole power to dispose or to direct
the disposition with respect to 50,845 shares; and shared power
to dispose or to direct the disposition with respect to 1,439,479
shares. 19992000 certain
information regarding beneficial ownership of Common Stock by the
Company'sCompany’s directors and executive officers named in the
Summary Compensation Table and by all directors and executive
officers as a group.
Amount(a) and Nature Nature(b)Percent of Name of Beneficial Owner (b) of Stock Ownership class
- ------------------------ ------------- -----------
John F. Fiedler 112,920 123,179 *
Gary P. Fukayama 56,135 59,795 *
Fred
Timothy M. Kovalik*Manganello13,104 * 12,035 *
Ronald M. Ruzic 59,603 72,165 *
Robert D. Welding 21,404 25,966 *
Phyllis O. Bonanno 100 *
Andrew F. Brimmer 1,600 3,100 *
William E. Butler 500 2,600 *
Jere A. Drummond 900 4,500 *
James J. Kerley 5,500 6,500 *
Paul E. Glaske 9,500 13,510 *
Ivan W. Gorr 4,500 5,500 *
Alexis P. Michas 30,885 31,380 *
John Rau 2,000 3,500 *
All directors and executive officers of the Company (19(23
persons) 431,338 1.7%468,214 1.8 %
*Represents less than one percent.
** Mr. Kovalik retired from *
Represents less than one percent. (a)
Includes the following number of shares issuable upon the
exercise of options within the next 60 days: 36,000 for
Mr. Fiedler; 38,700 for Mr. Fukayama; 4,000 for
Mr. Manganello; 37,500 for Mr. Ruzic; 8,200 for
Mr. Welding; 2,500 for Dr. Brimmer; 1,500 for
Mr. Butler; 3,500 for Mr. Drummond; 5,500 for
Mr. Kerley; 4,500 for Mr. Gorr; 5,500 for
Mr. Glaske; 500 for Mr. Michas; 1,500 for Mr. Rau;
and 212,713 for all directors and executive officers of the
Company. (b)
Includes all shares with respect to which each officer or
director directly, or indirectly, through any contract,
arrangement, understanding, relationship or otherwise, has or
shares the power to vote or to direct voting of such shares or to
dispose or to direct the disposition of such shares. Company effective March 1, 1999.
(a) Includescommon shares reported above, the following
numberdirectors have acquired phantom stock units through the deferral
of shares issuable upondirector fees under the exercise of
options within the next 60 days: 33,000Deferred Compensation Plan for
Directors: Dr. Brimmer has 486.13 phantom stock units;
Mr. Fiedler; 38,700 forDrummond has 1,547.38 phantom stock units;
Mr. Fukayama; 37,500 forMichas has 471.83 phantom stock units; and Mr. Ruzic; 8,200 for Mr. Welding; 1,000 for Dr.
Brimmer; 500 for Mr. Drummond; 4,500 for Mr. Kerley; 3,500 for Mr. Gorr;
4,500 for Mr. Glaske; and 216,100 for all directors and executive officers
of the Company.
(b) Includes all shares with respect to which each officer or director
directly, or indirectly, through any contract, arrangement, understanding,
relationship or otherwise,Rau
has or shares the power to vote or to direct
voting of such shares or to dispose or to direct the disposition of such
shares.
467.80 phantom stock units.
Company'sCompany’s executive officers, directors
and greater than 10% stockholders file certain reports with
respect to beneficial ownership of the Company'sCompany’s equity
securities. Based on information provided to the Company by each
director and executive officer, the Company believes all reports
required to be filed in 19981999 were timely filed, except that Mr. Fiedler reported one transaction late on Form
5/A.
filed.
1997 and 1996,1997, the cash compensation paid by the Company
and its subsidiaries, as well as certain other compensation paid
or accrued for these years, to the Company'sCompany’s Chief Executive
Officer and the other persons who were serving as executive
officers at December 31, 1998.
SUMMARY COMPENSATION TABLE
Long-Term Compensation Awards(b)
-----------
Annual Compensation Other Annual Securities Compensation Underlying LTIP Name and Other Annual Securities All Other
Principal Annual Compensation Compensation Underlying LTIPCompensation
PositionYear Salary($) Bonus($) ($)(a) Options(#) Payouts($)(c)
- -------------- ---- -------- --------- ---- ---- ------------ -------------
Payouts
John F. Fiedler1998 $500,000 $245,549 $0 75,000 $610,143 $109,117Fiedler1999 $ 530,000 $ 1,011,823 $ 0 8,700 $ 393,200
Chairman and 1997 $472,500 $552,528 $0 6,000 $961,748 $96,5301998 $ 500,000 $ 245,549 $ 0 75,000 $ 610,143
Chief Executive1996 $450,000 $428,828 $377,500(d)10,000 $0 $51,158Executive Officer1997 $ 472,500 $ 522,528 $ 0 6,000 $ 961,748
Gary P.Fukayama1998 $315,489 $249,472 $111,125 P. Fukayama1999 $ 328,100 $ 444,866 $ 215,344 (d) 0 $215,345 $41,984$ 198,252
Executive Vice 1998 $ 315,489 $ 249,472 $ 111,125 (d) 0 $ 215,345
President 1997 $306,300 $155,319 $372,460 (d)$ 306,300 $ 155,319 $ 372,460 (e) 0 $339,441 $35,783
President 1996 $271,238 $199,600 $4,820 (e) 0 $0 $32,126
Fred M. Kovalik1998 $254,307 $ 28,377 $0 0 $215,345 $38,746
Executive Vice 1997 $246,900 $245,600 $596,750 (d) 0 $339,441 $34,330
President 1996 $246,300 $177,940 $0 0 $0 $25,450339,441
Ronald M. Ruzic1998 $268,070 $287,522 $0 Ruzic1999 $ 320,783 $ 407,202 $ 0 $215,345 $75,1790 $ 138,776
Executive Vice 1998 $ 268,070 $ 287,522 $ 168,844 (d) 0 $ 215,345
President 1997 $249,792 $210,360 $0 $ 249,792 $ 210,360 $ 0 $339,441 $69,326
President 1996 $231,000 $192,170 $600,469 (d) 0 $0 $41,049$ 339,441
Robert D. Welding 1998 $224,717 $128,392 $0 1999 $ 264,500 $ 374,582 $ 0 $61,527 $35,8540 $ 138,776
Executive Vice1997 $200,000 $164,217 $113,594 Vice1998 $ 224,717 $ 128,392 $ 0 0 $ 61,527
President 1997 $ 200,000 $ 164,217 $ 113,594 (d) 0 $96,983 $38,189$ 96,983
Timothy Manganello 1999 $ 197,760 $ 282,005 $ 17,699 (f) 0 $ 39,650
Vice President 1996 $168,779 $118,913 $0 1998 $ 153,150 $ 37,991 $ 290,794 (d) 0 $0 $20,305
/TABLE
$ 61,527 1997 $ 145,166 $ 106,400 $ 45,926 (f) 0 $ 0 All Other Compensation Name and Principal Position ($)(c)
John F. Fiedler $ 82,406
Chairman and $ 109,117
Chief Executive Officer $ 96,530
Gary P. Fukayama $ 43,581
Executive Vice $ 41,984
President $ 35,783
Ronald M. Ruzic $ 96,377
Executive Vice $ 75,179
President $ 69,326
Robert D. Welding $ 37,578
Executive Vice $ 35,854
President $ 38,189
Timothy Manganello $ 23,095
Vice President $ 48,469 $ 18,030 (a)
Excludes certain non-cash benefits that are deemed compensation
for federal income tax purposes. These non-cash benefits are
provided by the Company to its executive officers and include
group term life insurance and automobiles. The net cost to the
Company of such benefits during 1996,
1997, 1998, or 19981999 did not
exceed the lesser of $50,000 or 10% of the total annual salary
and bonus for each named executive officer. (b)
No restricted stock awards or long-term incentive plan payouts were made in 1996, 1997, 1998, or 1998.
1999. (c)
Includes amounts contributed by the Company on behalf of the
named executive officers during 1996, 1997, 1998 and 19981999 pursuant to
the provisions of the Borg-Warner Automotive, Inc. Retirement
Savings Plan and credits made pursuant to the Borg-Warner
Automotive, Inc. Retirement Savings Excess Benefit Plan. (d)
Represents gain on stock option exercise(s). (e)
Includes gain on stock exercise(s) and gross-up to cover taxes
for relocation expense reimbursements. (f)
Represents gross-up to cover taxes incurred for relocation
expense reimbursement. Potential Realizable Value at Assumed Number of Annual Rates of Stock Securities % of Total Price Appreciation for Underlying Options Granted Exercise Option Term Options Granted to Employees Price Expiration Name (#)(a) in Fiscal Year ($/Sh) Date 5%($) 10%($)
John F. Fiedler 8,700 3.3% $ 40.125 11/9/09 $ 219,539 $ 556,356
Gary P. Fukayama 0 0.0% $ 0.000 n.a. $ 0 $ 0
Ronald M. Ruzic 0 0.0% $ 0.000 n.a. $ 0 $ 0
Robert D. Welding 0 0.0% $ 0.000 n.a. $ 0 $ 0
Timothy M. Manganello 0 0.0% $ 0.000 n.a. $ 0 $ 0 (a)
Options granted in 1999 are exercisable starting 24 months
after the grant date, with 50% of the shares covered thereby
becoming exercisable at that time and with the remaining 50% of
the option shares becoming exercisable on the third anniversary
date. The options were granted for a term of 10 years,
subject to earlier termination in certain events related to
termination of employment. Number of Securities Value of Unexercised Shares Underlying Unexercised In-the-Money Options Acquired Options at FY-End(#) at FY-End($)(b) on Exercise Value Name (#) Realized($) Exercisable Unexercisable(a) Exercisable Unexercisable
John F. Fiedler 0 $ 0 33,000 86,700 $ 428,375 $ 8,513
Gary P. Fukayama 0 $ 0 38,700 0 $ 1,031,848 $ —
Ronald M. Ruzic 0 $ 0 37,500 0 $ 710,335 $ —
Robert D. Welding 0 $ 0 8,200 0 $ 150,703 $ —
Timothy M. Manganello 0 $ 0 4,000 0 $ 66,220 $ — (a)
Represents shares that could not be acquired by the named
executive officer as of December 31, 1999 and that become
exercisable based upon the satisfaction of certain periods of
employment. (b)
Represents the difference between the exercise price and the
share price of Common Stock as of December 31, 1999. Performance or Other Estimated Future Payouts Number Period under Non-Stock of Shares Until Price-Based Plans(c) Units or Maturation Rights or Threshold Target Maximum Name (#)(a) Payout(b) ($) ($) ($)
John F. Fiedler 595 36 months 148,750 595,000 1,041,250
Gary P. Fukayama 300 36 months 75,000 300,000 525,000
Ronald M. Ruzic 300 36 months 75,000 300,000 525,000
Robert D. Welding 240 36 months 60,000 240,000 420,000
Timothy M. Manganello 140 36 months 35,000 140,000 245,000
All executive officers, as a group (10) 1,435 36 months 531,250 2,125,000 3,718,750
All employees, who are not executive officers (3) 240 36 months 52,500 210,000 367,500 (a)
Performance units with an initial value of $1,000 per unit. (b)
The performance period for the 1999-2001 cycle is January 1,
1999 through December 31, 2001. (c)
Payouts under the Company’s Executive Stock Performance Plan
are based upon the percentile rank of the total stockholder
return of the Company among the total stockholder returns of a
peer group of companies. Total stockholder return is based on a
formula relating to market price appreciation of the
Company’s common stock and dividend return as compared to
the peer group companies’ stock market price appreciation
and dividend returns. 1994 1995 1996 1997 1998 1999 [data points]
BorgWarner (2)
100.0
130.19
159.39
218.05
236.75
173.96
SIC Code Index (3)
100.0
119.50
140.02
180.14
239.55
221.27
Peer Group Index (4)
100.0
109.70
135.35
174.85
174.25
141.01
S&P 500 Index (5)
100.0
137.58
169.17
225.61
290.09
351.13 3. RE-APPROVAL OF THE COMPANY’S EXECUTIVE STOCK PERFORMANCE
PLAN, AS AMENDED
share price at end of period - share price at start of
period + dividends per share paid during period (share price
at start of period) 4. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS BORGWARNER INC.
April 28, 1998 and Further Amended April 26, 2000)
(i) Stock Appreciation Rights shall be exercisable only at
such time or times and to the extent that the Stock Options to which
they relate are exercisable in accordance with the provisions of
Section 5 and this Section 6. (ii) Upon the exercise of a Stock Appreciation Right, an
optionee shall be entitled to receive an amount in cash, shares of
Stock or both equal in value to the excess of the Fair Market Value of
one share of Stock over the option price per share specified in the
related Stock Option multiplied by the number of shares in respect of
which the Stock Appreciation Right shall have been exercised, with the
Committee having the right to determine the form of payment. In the case of Stock Appreciation Rights relating to Stock
Options held by optionees who are actually or potentially subject to Section 16(b) of
the Exchange Act, the Committee: (1) may require that such Stock Appreciation Rights
be exercised for cash only in accordance with the applicable
“window period” provisions of Rule 16b-3; and (2) in the case of Stock Appreciation Rights relating
to Non-Qualified Stock Options, may provide that any amount to
be paid in cash upon exercise of such Stock Appreciation
Rights during a Rule 16b-3 “window period” shall be based on
the highest of the daily means between the highest and lowest
reported sales prices of the Stock on the New York Stock
Exchange or other national securities exchange on which the
shares are listed or on NASDAQ, as applicable, occurring
during such “window period”. (iii) Stock Appreciation Rights shall be transferable only to
permitted transferees of the underlying Stock Option in accordance with
Section 5(e). “The transferability of this certificate and the shares of
stock represented hereby are subject to the terms and
conditions (including forfeiture) of the 1993 Stock Incentive
Plan and a Restricted Stock Agreement. Copies of such Plan and
Agreement are on file at the offices of Borg-Warner
Automotive, Inc., 200 South Michigan Avenue, Chicago, Illinois
60604.” (i) Subject to the provisions of the Plan and the Restricted
Stock Agreement referred to in Section 7(c)(vi), during a period set by
the Committee, commencing with the date of such Award (the “Restriction
Period”), the participant shall not be permitted to sell, assign,
transfer, pledge or otherwise encumber shares of Restricted Stock. The
Committee may provide for the lapse of such restrictions in
installments or otherwise and may accelerate or waive such
restrictions, in whole or in part, in each case based on period of
service, performance of the participant or of the Company or the
subsidiary, division or department for which the participant is
employed or such other factors or criteria as the Committee may
determine. (ii) Except as provided in this paragraph (ii) and Section
7(c)(i) and the Restricted Stock Agreement, the participant shall have,
with respect to the namedshares of Restricted Stock, all of the rights of a
stockholder of the Company holding the class or series of Stock that is
the subject of the Restricted Stock, including, if applicable, the
right to vote the shares and the right to receive any cash dividends.
If so determined by the Committee in the applicable Restricted Stock
Agreement and subject to Section 11(f) of the Plan, (1) cash dividends
on the shares of Stock that are the subject of the Restricted Stock
Award shall be automatically deferred and reinvested in additional
Restricted Stock, and (2) dividends payable in Stock shall be paid in
the form of Restricted Stock. (iii) Except to the extent otherwise provided in the
applicable Restricted Stock Agreement and Sections 7(c)(i), 7(c)(iv)
and 8(a)(ii), upon a participant’s Termination of Employment for any
reason during the Restriction Period, all shares still subject to
restriction shall be forfeited by the participant. (iv) Except to the extent otherwise provided in Section
8(a)(ii), in the event of an involuntary Termination of Employment of a
participant for any reason (other than for Cause), the Committee shall
have the discretion to waive in whole or in part any or all remaining
restrictions with respect to any or all of such participant’s shares of
Restricted Stock. (v) If and when the Restriction Period expires without a prior
forfeiture of the Restricted Stock subject to such Restriction Period,
unlegended certificates for such shares shall be delivered to the
participant. (vi) Each Award shall be confirmed by, and be subject to the
terms of, a Restricted Stock Agreement. (i) Any Stock Options and Stock Appreciation Rights
outstanding as of the date such Change in Control is determined to have
occurred and not then exercisable and vested shall become fully
exercisable and vested to the full extent of the original grant. (ii) The restrictions applicable to any Restricted Stock shall
lapse, and such Restricted Stock shall become free of all restrictions
and become fully vested and transferable to the full extent of the
original grant. (i) The acquisition by any individual, entity or group (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act )(a
"Person") of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20% or more of either (A) the
then outstanding shares of common stock of the Company (the
"Outstanding Company Common Stock") or (B) the combined voting power of
the then outstanding voting securities of the Company entitled to vote
generally in the election of directors (the "Outstanding Company Voting
Securities"); provided, however, that for purposes of this subsection
(b), the following acquisitions shall not constitute a Change in
Control: (W) any acquisition directly from the Company, (X) any
acquisition by the Company, (Y) any acquisition by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any
corporation controlled by the Company, or (Z) any acquisition by any
corporation pursuant to a transaction which complies with clauses (A),
(B) and (C) of subsection (iii) of this Section 8(b); or (ii) Individuals who, as of the date hereof, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or
nomination for election by the Company's shareholders, was approved by
a vote of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual were a
member of the Incumbent Board, but excluding, for this purpose, any
such individual whose initial assumption of office occurs as a result
of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened
solicitation of proxies or consents by or on behalf of a Person other
than the Board; or (iii) Consummation by the Company of a reorganization, merger
or consolidation or sale or other disposition of all or substantially
all of the assets of the Company or the acquisition of assets of
another corporation (each of the foregoing, a "Business Combination"),
in each case, unless, following such Business Combination, (A) all or
substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such Business Combination beneficially own, directly or indirectly,
more than 60% of, respectively, the then outstanding shares of common
stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as
the case may be, of the corporation resulting from such Business
Combination (including, without limitation, a corporation which as a
result of such transaction owns the Company or all or substantially all
of the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their ownership,
immediately prior to such Business Combination of the Outstanding
Company Common Stock and Outstanding Company Voting Securities, as the
case may be, (B) no Person (excluding any employee benefit plan (or
related trust) of the Company or such corporation resulting from such
Business Combination) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then outstanding shares of common stock of
the corporation resulting from such Business Combination or the
combined voting power of the then outstanding voting securities of such
corporation except to the extent that such ownership existed prior to
the Business Combination and (C) at least a majority of the members of
the board of directors of the corporation resulting from such Business
Combination were members of the Incumbent Board at the time of the
execution of the initial agreement, or of the action of the Board,
providing for such Business Combination; or (iv) Approval by the shareholders of the Company of a complete
liquidation or dissolution of the Company.
EXECUTIVE STOCK PERFORMANCE PLAN I
GENERAL
1
1.1. Purpose
1
1.2. Effective Date
1
1.3. Termination Date
1 II
DEFINITIONS
1
2.1. “Beneficiary”
1
2.2. “Board of Directors”
1
2.3. “Change of Control”
1
2.4. “Change of Control Price”
3
2.5. “Committee”
3
2.6. “Common Stock”
4
2.7. “Company”
4
2.8. “Disability”
4
2.9. “Normal Retirement”
4
2.10. “Participant”
4
2.11. “Peer Group Companies”
4
2.12. “Performance Award”
4
2.13. “Performance Period”
4
2.14. “Plan”
4
2.15. “Shareholders”
4
2.16. “Termination for Cause”
4
2.17. “Total Shareholder Return of the Company”
5
2.18. “Total Shareholder Return of a Peer Group Company”
5 III
ELIGIBILITY
5 IV
PLAN DESIGN
5
4.1. Performance Period
5
4.2. Target and Performance Awards
6
4.3. Available Shares
6
4.4. Adjustment to Shares
7
4.5. Committee Discretion to Adjust Awards
7 V
PAYMENT
7
5.1. Timing and Form of Payment
7
5.2. Tax Withholding
8
5.3. Beneficiary Designation
8
5.4. Foreign Jurisdictions
8
5.5. Distribution upon Termination of Employment
9 VI
ADMINISTRATION
10
6.1. Committee
10
6.2. General Rights, Powers, and Duties of Committee
10
6.3. Information to be Furnished to Committee
10
6.4. Responsibility
11 VII
AMENDMENT AND TERMINATION
11
7.1. Amendment
11
7.2. Company’s Right to Terminate
11 VIII
MISCELLANEOUS
11
8.1. No Implied Rights; Rights on Termination of Service
11
8.2. No Right to Company Assets
11
8.3. No Employment Rights
12
8.4. Other Benefits
12
8.5. Offset
12
8.6. Non-assignability
12
8.7. Notice
12
8.8. Governing Laws
12 IX
CHANGE OF CONTROL
13
9.1. Performance Awards Upon a Change of Control
13
9.2. Payment of Performance Awards After a Change of Control
13 1.1. Purpose. The purpose of the Executive Stock Performance Plan
is to motivate senior management to improve the long-term
performance of the Company as a whole, relative to its peer
companies, so that the Company will continue to grow in value
and serve the long-term interests of its Shareholders. 1.2. Effective Date. The Plan shall become effective as of April
18, 1995, subject to its approval by the Shareholders of
Borg-Warner Automotive, Inc. at the 1996 Annual Meeting of
Shareholders. No Performance Awards shall be exercisable or
payable before approval of the Plan has been obtained from the
Shareholders. 1.3. Termination Date. No contingent Performance Awards shall be assigned under the Plan
after December 31, 2004; provided, however, that the Committee may cease the
assignment of contingent Performance Awards at any time prior to that date. The
termination of the assignment of contingent Performance Awards shall not cancel,
reduce or otherwise impair the rights of Participants to receive any contingent
Performance Awards assigned prior to such termination, and the Termination Date of the
Plan shall be the first date as of which all Performance Awards assigned hereunder
have been distributed to Participants. 2.1.
“Beneficiary” means the person or persons so designated by a
Participant pursuant to Section 5.3. 2.2.
“Board of Directors” means the Board of Directors of Borg-Warner Automotive, Inc. 2.3.
“Change of Control” means:
(a) The acquisition by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as
amended (the “Exchange Act”)) (a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of
either (i) the then outstanding shares of Common Stock (the “Outstanding
Company Common Stock”) or (ii) the combined voting power of the then
outstanding voting securities of the Company entitled to vote generally in the
election of directors (the “Outstanding Company Voting Securities”); provided,
however, that for purposes of
this subsection (a), the following acquisitions
shall not constitute a Change of Control: (W) any acquisition directly from
the Company other than an acquisition by virtue of the exercise of a
conversion privilege unless the security being so converted was itself
acquired directly from the Company by the holder exercising such conversion
privilege, (V) any acquisition by the Company, (Y) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company, or (Z) any acquisition
by any corporation pursuant to a transaction which complies with clauses (i),
(ii) and (iii) of subsection (c) of this Section 2.3; or
(b) Individuals who, as of the date hereof, constitute the Board (the “Incumbent
Board”) cease for any reason to constitute at least a majority of the Board;
provided, however, that any individual becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company’s
shareholders, was approved by a vote of at least a majority of the directors
then comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office occurs as a
result of an actual or threatened election contest with respect to the
election or removal of directors or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the Board; or
(c) Approval by the shareholders of the Company of a reorganization, merger or
consolidation or sale or other disposition of all or substantially all of the
assets of the Company or the acquisition of assets of another corporation
(each of the foregoing, a “Business Combination”), in each case, unless,
following such Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then outstanding shares of
common stock and the combined voting power of the then outstanding voting
securities entitled to vote generally in the election of directors, as the
case may be, of the corporation resulting from such Business Combination
(including, without limitation, a corporation which as a result of such
transaction owns the Company or all or substantially all of the Company’s
assets either directly or through one or more
subsidiaries) in substantially
the same proportions as their ownership, immediately prior to such Business
Combination of the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any employee
benefit plan (or related trust) of the Company or such corporation resulting
from such Business Combination) beneficially owns, directly or indirectly, 20%
or more of, respectively, the then outstanding
shares of common stock of the corporation resulting
from such Business Combination or the combined voting
power of the then outstanding voting securities of
such corporation except to the extent that such
ownership existed prior to the Business Combination
and (iii) at least a majority of the members of the
board of directors of the corporation resulting from
such Business Combination were members of the
Incumbent Board at the time of the execution of the
initial agreement, or of the action of the Board,
providing for such Business Combination; or
(d) Approval by the shareholders of the Company of a
complete liquidation or dissolution of the Company. 2.4.
“Change of Control Price” means the higher of (i) the highest
reported sales price, regular way, of a share of Common Stock
in any transaction reported on the New York Stock Exchange
Composite Tape or other national exchange on which such shares
are listed or on NASDAQ during the 60-day period prior to and
including the date of a Change of Control or (ii) if the
Change of Control is the result of a tender or exchange offer
or a Business Combination, the highest price per share of
Common Stock paid in such tender or exchange offer or Business
Combination. 2.5.
“Committee” means the committee of the Company appointed by the Board of Directors to
manage and administer the Plan. 2.6.
“Common Stock” means Borg-Warner Automotive, Inc.’s $0.01 par value common stock. 2.7.
“Company” means Borg-Warner Automotive, Inc. Where applicable, Company shall also
include such subsidiaries and affiliated companies of Borg-Warner Automotive, Inc.
that participate in the Plan with the consent of the Board of Directors. 2.8.
“Disability” shall have the same meaning as under the Company
sponsored long-term disability plan under which the
Participant is then eligible to participate. 2.9.
“Normal Retirement” means termination of employment after
attainment of age 65. However, the Committee, within its
complete discretion, may determine that a Participant who
terminates prior
to age 65 has terminated by virtue of Normal
Retirement 2.10.
“Participant” means an executive officers concerning grantsof the Company who is
designated, pursuant to Article III, to be eligible to receive
benefits under the Plan. 2.11.
“Peer Group Companies” means the automotive companies
designated from time to time by the Committee that will be
used as a benchmark to compare the relative Total Shareholder
Return of the Company. 2.12.
“Performance Award” is an amount whose final value will be
earned and paid to a Participant if certain predetermined
requirements are met. 2.13.
“Performance Period” is a period, as determined pursuant to
Section 4.1, with respect to which an assignment of
Performance Awards is made pursuant to this Plan. 2.14.
“Plan” means this Borg-Warner Automotive, Inc. Executive Stock Performance Plan as
amended from time to time. 2.15.
“Shareholders” means the Company’s Common Stock Shareholders. 2.16.
“Termination for Cause” means termination of a Participant’s
employment due to (i) the conviction of the Participant for
committing a felony under Federal law or the law of the state
in which such action occurred, (ii) dishonesty in the course
of fulfilling the Participant’s employment duties, or (iii)
willful and deliberate failure on the part of the Participant
to perform his employment duties in any material respect.
Whether Termination for Cause occurs shall be determined by
the Committee in its discretion. The determination of the
Committee shall be conclusive. 2.17.
“Total Shareholder Return of the Company” means the cumulative return on the Company’s
Common Stock expressed as a percentage, determined by dividing (i) the sum of (a) the
cumulative amount of dividends per share paid for the applicable Performance Period,
assuming dividend reinvestment, and (b) the difference between the average of the
closing sales prices of Common Stock on the last five trading days of such Performance
Period and the last five trading days preceding the first day of such Performance
Period, by (ii) the average of the closing sales prices of Common Stock on the last
five days preceding the first day of such Performance Period. 2.18.
“Total Shareholder Return of a Peer Group Company” means the cumulative return on such
company’s common stock expressed as a
percentage, determined by dividing (i) the sum
of (a) the cumulative amount of dividends paid per share for the applicable
Performance Period, assuming dividend reinvestment, and (b) the difference between the
average of the closing sales prices of such common stock on the last five trading days
of such Performance Period and the last five trading days preceding the first day of
such Performance Period, by (ii) the average of the closing sales prices of such
common stock on the last five days preceding the first day of such Performance Period. 4.1. Performance Period. The initial Performance Period under the
Plan shall begin on April 18, 1995 and shall terminate on
December 31, 1997. For 1996 and subsequent calendar years,
each Performance Period under the Plan shall begin on a
January 1 and shall terminate on the December 31 of the third
calendar year ending thereafter. Therefore, at a given time,
three Performance Periods may be in effect, each at a
different point in its cycle. 4.2. Target and Performance Awards. Subject to Section 4.5 below,
the Committee shall establish, prior to the Performance
Period, a target Performance Award for each Participant
eligible for such Performance Period.
(a) The Performance Award for each Performance Period shall be based on the
percentile rank of the Total Shareholder Return
of the Company among the Total
Shareholder Returns of the Peer Group Companies during such Performance
Period. The Committee shall determine a target percentile rank applicable to
each Performance Period and shall for each Performance Period establish
percentages of target Performance Awards earned at various percentile rankings
of the Company in relation to the Peer Group Companies for such Performance
Period, including a percentile rank below which no portion of a target
Performance Award shall be earned.
(b) Notwithstanding any other provisions of the Plan to
the contrary, the following provisions shall be
applicable to participation in the Plan by any
individual who the Committee determines is likely to
be, at the time any Performance Award becomes
payable, a “covered employee” within the meaning of
Section 162(m) of the Internal Revenue Code of 1986,
as amended, (the “Code”) and the regulations
thereunder:
(i) Such Performance Award shall be based solely
on achievement of the performance goals
applicable pursuant to Section 4.2.
(ii) Such Performance Award shall not be payable
hereunder except upon written certification
by the Committee that the applicable
performance goals have been satisfied to a
particular extent.
(iii) The maximum amount payable to such
Participant with respect to such Performance
Award shall be $2,000,000. 4.3. Available Shares. The maximum number of shares of Common Stock
which shall be available for payment of Performance Awards
under the Plan during its term, shall not exceed 400,000.
(Such amount shall be subject to adjustment as provided in
Section 4.4). The shares of Common Stock available for
issuance under the Plan may be authorized and unissued shares
or treasury shares. 4.4. Adjustment to Shares.
(a) If there is any change in the corporate capitalization of the Company, such as
a stock split, a corporate transaction (any merger, consolidation, separation,
including a spin-off or other distribution of stock optionsor property of the
Company, or reorganization (whether or not such reorganization comes within
the definition of such term in Section 368 of the Code)) or any partial or
complete liquidation of the Company, the Committee shall, in its sole
discretion, make such adjustments (if any) that it determines to be necessary
and/or appropriate (i) to the number and kind of shares available for
Performance Awards, and (ii) for purposes of properly comparing the price of
Common Stock at the beginning of the relevant Performance Period to the price
of Common Stock at the end of such Performance Period in order to determine
the Total Shareholder Return of the Company for such Performance Period.
(b) If there is any change in the corporate capitalization of any Peer Group
Company, such as a stock split, a corporate transaction (any merger,
consolidation, separation, including a spin-off or other distribution of stock
or property of the Peer Group Company, or reorganization (whether or not such
reorganization comes within the definition of such term in Section 368 of the
Code)) or any partial or complete liquidation of any Peer Group Company, the
Committee shall, to the extent it determines, in its sole discretion, to be
necessary and/or appropriate, take such change into account in determining the
Total Shareholder Return of the Peer Group Company for purposes of Section
4.2(a) (including, without limitation, by making such determination as if the
change had not occurred or by eliminating such Peer Group Company from the
list of Peer Group Companies for the applicable Performance Period). 4.5. Committee Discretion to Adjust Awards. At its own discretion,
the Committee may decrease, but not increase the size of a
Participant’s target Performance Award in a given Performance
Period once the Performance Period has begun. The Committee
may also, at its own discretion, decrease, but not increase,
the amount of a Performance Award payout once the comparative
results from the Peer Group Companies for the just completed
Performance Period have been considered. 5.1. Timing and Form of Payment. Performance Awards for each
Performance Period shall be payable as follows:
(a) An amount equal to 40% of the Performance Award shall
be paid in cash as soon as practicable after the end
of the Performance Period; and
(b) An amount equal to 60% of the Performance Award shall
be paid in shares of Common Stock as soon as
practicable after the end of the Performance Period.
The number of shares of Common Stock to be awarded
will be determined by dividing 60% of the Performance
Award by the average of the closing
sales prices of
the Company’s Common Stock on the last five trading
days of the Performance Period upon which the
Performance Awards are based. 5.2. Tax Withholding. The Company shall have the right to deduct
from all cash payments any federal, state, or local taxes
required by law to be withheld with respect to the entire
Performance Award. 5.3. Beneficiary Designation. A Participant may designate a Beneficiary who is to receive,
upon his death, the distributions that otherwise would have been paid to him. All
designations shall be in writing and shall be effective only if and when delivered to
the corporate secretary of the Company during the lifetime of the Participant. If a
Participant designates a Beneficiary without providing in the designation that the
Beneficiary must be living at the time of each distribution, the designation shall
vest in all of the distribution whether payable before or after the Beneficiary’s
death, and any distributions remaining upon the Beneficiary’s death shall be made to
the Beneficiary’s estate.
A Participant may from time to time during 1998his lifetime change
his Beneficiary by a written instrument delivered to the
corporate secretary of the Company. In the event a Participant
shall not designate a Beneficiary as aforesaid, or if for any
reasons such designation shall be ineffective, in whole or in
part, the distribution that otherwise would have been paid to
such Participant shall be paid to his estate and in such event
the term “Beneficiary” shall include his estate. 5.4. Foreign Jurisdictions. Performance Awards may be granted, without amending the Plan,
to Participants who are foreign nationals or employed outside the United States or
both, on such terms and conditions different from those specified in the Plan as may,
in the judgment of the Committee, be necessary or desirable to further the purposes of
the Plan or to accommodate differences in local law, tax policy or custom. Moreover,
the Committee may approve such supplements to or alternative versions of the Plan as
it may consider necessary or appropriate for such purposes without thereby affecting
the terms of the Plan as in effect for any other purpose; provided, however, that no
such supplement or alternative version shall: (a) increase the limitation contained
in Section 4.2(c)(iii); (b) increase the number of available shares under Section 4.3;
or (c) cause the Plan to cease to satisfy any conditions of Rule 16b-3 under the
Securities Exchange Act of 1934 or Section 162(m) of the Code (with respect to
Participants whose deductible compensation is limited thereby). 5.5. Distribution upon Termination of Employment.
(a) Death. If a Participant in the Plan dies before the end of the Performance
Period for which target Performance Awards have been established on his
behalf, such Participant’s Beneficiary will be eligible for a prorated portion
of the Performance Award that would have otherwise been earned after the end
of the applicable Performance Period. This distribution, if any is earned,
will be paid to the Beneficiary at the same time that all other Participants
under the Plan receive their Performance Awards with respect to that
Performance Period.
If the Participant’s Beneficiary is not alive at the
time of the Participant’s death, and the Participant
has no surviving spouse, the estate of the
Participant may petition the Committee for payment of
a prorated Performance Award to the estate in the
form of a cash lump sum to be paid as soon as
administratively feasible after the payout or
Performance Awards for the Performance Period have
been approved by the Committee.
(b) Disability. If a Participant in the Plan becomes
Disabled before the end of the Performance Period for
which target Performance Awards have been established
on his behalf, the Participant will be eligible for a
prorated portion of the Performance Award that would
have otherwise been earned after the end of the
Performance Period. This distribution, if any is
earned, will be paid to the Participant at the same
time that all other Participants under the Plan
receive their awards with respect to that Performance
Period.
(c) Normal Retirement. If a Participant in the Plan enters Normal Retirement
before the end of the Performance Period for which target Performance Awards
have been established on his behalf, the Participant will be eligible for a
prorated portion of the Performance Award that would have otherwise been
earned after the end of the Performance Period. This distribution, if any is
earned, will be paid to the Participant at the same time that all other
Participants under the Plan receive their Performance Awards with respect to
that Performance Period.
(d) Other Reasons. The Committee, in its sole discretion,
may authorize prorated eligibility for a Performance
Award to a Participant who terminates from the
Company before the end of a Performance Period for
reasons other than death, Disability, or Normal
Retirement, except that in the case of voluntary
resignation or Termination for Cause, no Performance
Award may be paid. 6.1. Committee. The Plan shall be administered by the Committee. If a Performance Award
payable hereunder is intended to be exempt from the $1 million deductibility
limitation of Code Section 162(m), then the Committee, from the time the target
Performance Award is established through the time the Performance Award is paid, shall
consist solely of two or more “outside directors” as defined in Code Section 162(m)
and the regulations thereunder. Further, the Committee shall at all times consist
solely of “disinterested persons” as defined in paragraph (c)(2)(i) of Rule 16b-3
under the Securities Exchange Act of 1934. The Committee may designate person(s) who
are Company employees to oversee the day to day administration of the Plan. 6.2. General Rights, Powers, and Duties of Committee. The Committee
shall be the Plan Administrator and it shall be responsible
for the management, operation, and administration of the Plan.
In addition to any powers, rights and duties set forth
elsewhere in the Plan, it shall have the following powers and
duties:
(a) To adopt such rules and regulations consistent with
the provisions of the Plan as it deems necessary for
the proper and efficient administration of the Plan;
(b) To administer the Plan in accordance with its terms
and any rules and regulations it establishes;
(c) To maintain records concerning unexercised optionsthe Plan sufficient to
prepare reports, returns and other information
required by the Plan or by law;
(d) To construe and interpret the Plan and resolve all
questions arising under the Plan;
(e) To direct the payment of benefits under the Plan, and
to give such other directions and instructions as may
be necessary for the proper administration of the
Plan; and
(f) To be responsible for the preparation, filing and
disclosure on behalf of the Plan of such documents
and reports as are required by any applicable federal
or state law, such as the filing of a notice with the
United States Department of Labor, pursuant to DOL
Reg. ‘2520.104-23, within 120 days of the Effective
Date. 6.3. Information to be Furnished to Committee. The Company shall
furnish to the Committee such data and information as it may
require. The records of the Company shall be determinative of
each Participant’s period of employment, termination of
employment and the reasons therefore, leave of absence,
reemployment, years of service, and personal data.
Participants and their Beneficiaries shall furnish to the
Committee such evidence, data, or information, and execute
such documents as the Committee requests. 6.4. Responsibility. No member of the Committee or of the Board of Directors or any person
who is designated to oversee the day to day administration of the Plan (as provided in
Section 6.1) shall be liable to any person for any action taken or omitted in
connection with the administration of this Plan unless attributable to his own fraud
or willful misconduct; nor shall the Company be liable to any person for any such
action unless attributable to fraud or willful misconduct on the part of a director,
officer or employee of the Company within the scope of his Company duties. Each
member of the Committee shall be indemnified and held harmless by the Company for any
liability arising out of the administration of the Plan, to the maximum extent
permitted by law. 7.1. Amendment. The Plan may be amended in whole or in part by the
Company, by action of the Board of Directors, at any time. The
Committee reserves the unilateral right to change any rule
under the Plan if it deems such a change necessary to avoid
the application of the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”) to the Plan. 7.2. Company’s Right to Terminate. The Company reserves the sole
right to terminate the Plan, by action of the Board of
Directors, at any time after the Effective Date. 8.1. No Implied Rights; Rights on Termination of Service. Neither
the establishment of the Plan nor any amendment thereof shall
be construed as giving any Participant, Beneficiary, or any
other person any legal or equitable right unless such right
shall be specifically provided for in the Plan or conferred by
specific action of the Committee in accordance with the terms
and provisions of the Plan. Except as expressly provided in
this Plan, the Company shall not be required or be liable to
make any payment under the Plan. 8.2. No Right to Company Assets. Neither the Participant nor any other person shall
acquire, by reason of the Plan, any right in or title to any assets, funds or property
of the Company whatsoever including, without limiting the generality of the foregoing,
any specific funds, assets, or other property which the Company, in its sole
discretion, may set aside in anticipation of a liability hereunder. Any benefits
which become payable hereunder shall be paid from the general assets of the Company.
The Participant shall have only a contractual right to the amounts, if any, payable
hereunder unsecured by any asset of the Company. Nothing contained in the Plan
constitutes a guarantee by the Company that the assets of the Company shall be
sufficient to pay any benefit to any person. 8.3. No Employment Rights. Nothing herein shall constitute a
contract of employment or of continuing service or in any
manner obligate the Company to continue the services of the
Participant, or obligate the Participant to continue in the
service of the Company, or as a limitation of the right of the
Company to discharge any of its employees, with or without
cause. Nothing herein shall be construed as fixing or
regulating the compensation payable to the Participant. 8.4. Other Benefits. No Performance Award paid under the Plan shall
be considered compensation for purposes of computing benefits
under any “employee benefit plan” (as defined in Section 3(3)
of ERISA) of the Company nor affect any benefits or
compensation under any other benefit or compensation plan of
the Company now or subsequently in effect (except as provided
to the contrary in such Company plan). 8.5. Offset. If, at the time payments or installments of payments
are to be made hereunder, the Participant or the Beneficiary
or both are indebted or obligated to the Company, then the
payments under the Plan remaining to be made to the
Participant or the Beneficiary or both may, at the discretion
of the Company, be reduced by the amount of such indebtedness
or obligation, provided, however, that an election by the
Company not to reduce any such payment or payments shall not
constitute a waiver of its claim for such indebtedness or
obligation. 8.6. Non-assignability. Neither the Participant nor any other person shall have any
voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage
or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt
the amounts, if any payable hereunder (whether payable in cash or Common Stock), or
any part thereof, which are expressly declared to be unassignable and
non-transferable. No part of the amounts
payable prior to actual payment shall be
subject to seizure or sequestration for the payment of any debts, judgments, alimony
or separate maintenance owed by the Participant or any other person, or be
transferable by operation of law in the event of the Participant’s or any other
person’s bankruptcy or insolvency. 8.7. Notice. Any notice required or permitted to be given under the
Plan shall be sufficient if in writing and hand delivered, or
sent by registered or certified mail, and if given to the
Company, delivered to the principal office of the Company,
directed to the attention of the Committee, with a copy to the
corporate secretary. Such notice shall be deemed given as of
December 31, 1998.
Potential Realizable
Number of % of Total Value at Assumed
Securities Options Annual Rates of Stock
Underlying Granted Exercise Price Appreciation for
Options to Employees Price Expiration Option Term
Name Granted(#)(a) in Fiscal Year ($/Sh) Date 5%($) 10%($)
- ----- ---------- ------------ -------- -------- -------- ---------
John F.
Fiedler 75,000 31.0% $54.438 1/27/08 $2,567,659 $6,506,952
Gary P.
Fukayama 0 0.0% $0.000 n.a. $0 $0
Fred M.
Kovalik 0 0.0% $0.000 n.a. $0 $0
Ronald M.
Ruzic 0 0.0% $0.000 n.a. $0 $0
Robert D.
Welding 0 0.0% $0.000 n.a. $0 $0
/TABLE
(a) Options granted in 1998 are exercisable starting 24 months after the grant
date, with 50% of the shares covered thereby becoming exercisable at that
time and with the remaining 50% of the option shares becoming exercisable
on the third anniversary date. The options were granted for a term of 10
years, subject to earlier termination in certain events related to
termination of employment.
The following table sets forth information with respect to the named
executive officers concerning the exercise of stock options during 1998 and
concerning unexercised options held at December 31, 1998.
Shares Number of Securities Value of Unexercised
Acquired Underlying Unexercised In-the-Money Options
on Exercise Value Options at FY-End(#) at FY-End($)(b)
Name (#) Realized($)ExercisableUnexercisable(a)Exercisable Unexercisable
- ------- ---------- ----------- ---- ------ ------------ -----------
John F. Fiedler 0 $0 25,000 86,000 $767,658 $412,692
Gary P. Fukayama 2,000 $111,125 38,700 0 $1,335,841 $ -
Fred M. Kovalik 0 $0 0 0 $ - $ -
Ronald M. Ruzic 3,000 $168,844 37,500 0 $1,290,415 $ -
Robert D. Welding0 $0 8,200 0 $277,547 $ -
/TABLE
(a) Represents shares that could not be acquired by the named executive officer
as of December 31, 1998 and that become exercisable based upon the
satisfaction of certain periods of employment.
(b) Represents the difference between the exercise price and the share price of
Common Stock as of December 31, 1998.
Long Term Incentive Plans
The following table sets forth information with respect to the named
executive officers concerning long-term incentive plan awards made during 1998
pursuant to the Company's Executive Stock Performance Plan.
Performance
or Other
Number Period Estimated Future Payouts
of Shares Until under Non-Stock
Units or Maturation Price-Based Plans(c)
Rights or Threshold Target Maximum
Name (#)(a) Payout(b) ($) ($) ($)
- ----------- ------- -------- -------- -------- ----------
John F. Fiedler 595 36 months 148,750 595,000 1,041,250
Gary P. Fukayama 300 36 months 75,000 300,000 525,000
Fred M. Kovalik 210 36 months 52,500 210,000 367,500
Ronald M. Ruzic 300 36 months 75,000 300,000 525,000
Robert D. Welding 210 36 months 52,500 210,000 367,500
All executive officers,
as a group (10) 2,065 36 months 516,250 2,065,000 3,613,750
All employees, who
are not executive
officers (3) 240 36 months 60,000 240,000 420,000
(a) Performance units with an initial value of $1,000 per unit.
(b) The performance period for the 1998-2000 cycle is January 1, 1998 through
December 31, 2000.
(c) Payouts under the Company's Executive Stock Performance Plan are based upon
the percentile rank of the total stockholder return of the Company among
the total stockholder returns of a peer group of companies. Total
stockholder return is based on a formula relating to market price
appreciation of the Company's common stock and dividend return as compared
to the peer group companies' stock market price appreciation and dividend
returns.
Employment Agreements
The Company has entered into an employment agreement, effective January 1,
1998 (the "Agreement"), with Mr. Fiedler which provides, among other things,
for Mr. Fiedler's full-time employment until December 30, 2002 at an annual
salary of not less than $500,000. Subject to the terms and conditions of the
Agreement, Mr. Fiedler will be eligible for annual performance bonuses and
awards under the Company's Executive Stock Performance Plan at target levels no
less than those set for 1997. In addition, the Company granted Mr. Fiedler a
Non-Qualified Stock Option, subject to the provisions of the 1993 Plan and the
terms and conditions of a Non-Qualified Stock Option Agreement, to purchase from
the Company 75,000 shares of Common Stock at the fair market value per share on
January 27, 1998, such option to be exercisable for the entire 75,000 shares on
December 30, 2002.
In addition, subject to the terms and conditions of the Agreement, and a
non-negotiable full recourse Promissory Note dated January 30, 1998 (the
"Note"), the Company has loaned Mr. Fiedler $2 million to be used exclusively
for the purchase of the Company's Common Stock. The entire loan, including all
accumulated interest, will be forgiven by the Company if Mr. Fiedler remains
employed by the Company through December 30, 2002 or as of earlier termination
by reason of death, "disability," or involuntary termination other than for
"cause." The Note will also be forgiven in the event of a "Change of Control"
as defined below.
The Company has entered into Change of Control Employment Agreements (the
"Change of Control Employment Agreements") with each of the named executive
officers. Below is a general description of certain terms and conditions of the
Change of Control Employment Agreements.
In the event of a "Change of Control" of the Company followed within three
years by (1) the termination of the executive's employment for any reason other
than death, disability, or "Cause" or (2) the termination of the executive's
employment by the executive for "Good Reason", the Change of Control Employment
Agreements provide that the executive shall be paid a lump sum cash amount equal
to three times the executive's annual base salary and recent average bonus, and
a lump sum cash amount equal to three times the Company's retirement
contributions which would have been made on behalf of the executive in the first
year after termination of employment. In addition, the executive is entitled to
continued employee welfare benefits for three years after termination of
employment.
"Change of Control" means (a) the acquisition by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934) of beneficial ownership of 20% or more of either (i) the
then outstanding shares of Common Stock of the Company or (ii) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote generally in the election of directors, (b) a change in the majority of
the Board, or (c) a major corporate transaction, such as a merger, sale of
substantially all of the Company's assets or a liquidation, which results in a
change in the majority of the Board or a majority of stockholders.
"Cause" means the willful and continued failure of the executive to perform
substantially the executive's duties or the willful engaging by the executive in
illegal conduct or gross misconduct materially injurious to the Company.
"Good Reason" means the diminution of responsibilities, assignment to
inappropriate duties, failure of the Company to comply with compensation or
benefit provisions, transfer to a new work location more than 35 miles from the
executive's previous work location, a purported termination of the Change of
Control Employment Agreement by the Company other than in accordance with the
Change of Control Employment Agreement, or failure of the Company to require any
successor to the Company to comply with the Change of Control Employment
Agreement.
Mr. Fiedler's Change of Control Employment Agreement was amended effective
January 30, 1998 to provide that the Note would be forgiven with respect to all
outstanding principal and accumulated interest thereon in the event of his
termination of employment by reason of a Change of Control, death or disability,
as defined in the Change of Control Employment Agreement. The amendment to the
Employment Agreement further provides that if Mr. Fiedler's employment is
terminated for Cause or if he voluntarily terminates employment other than for
Good Reason, the outstanding principal and accumulated interest thereon under
the Note will become immediately due and payable in full.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, that might incorporate future filings by
reference, including this Proxy Statement, in whole or in part, the following
Compensation Committee Report on Executive Compensation and Performance Graph
shall not be incorporated by reference into any such filings.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors is responsible for
setting and administering the policies that govern base salary, annual bonus,
long-term incentives and stock ownership programs for the executive officers of
the Company.
Overall Policy
The Company's executive compensation program is designed to link executive
compensation to corporate performance. To this end, the Company has developed
an overall compensation strategy and specific compensation plans that tie
executive compensation to the Company's success in meeting specified performance
goals. The overall objectives of this strategy are to attract and retain the
best possible executive talent, to motivate these executives to achieve goals
that support the Company's business strategy, to link executive and stockholder
interests through equity-based plans, and to provide a compensation package that
is based on individual performance as well as overall business results.
The Compensation Committee reviews the Company's executive compensation
program annually. The review includes a comparison of current total
compensation levels (including base salary, annual bonus and long-term
incentives) to those provided in similar companies in the durable manufacturing
sector that have total sales in the range of one billion to three billion
dollars, with data being collected from several prominent executive compensation
surveys (the "Compensation Surveys"). In addition to the Compensation Surveys,
the Compensation Committee also considers the compensation reported for
executives by the companies included in a peer group of automotive companies(the
"Peer Group Companies"). Financial results of the Peer Group Companies are used
to compare shareholder returns on the performance graph. The Compensation
Committee may adjust compensation levels based upon information obtained from
the Compensation Surveys and the Peer Group Companies.
The Compensation Committee determines the compensation of the five most
highly compensated corporate executives, reviews the policies and philosophy set
for the next level of key executives (approximately 160), and evaluates and
recommends to the Board of Directors all long-term incentive plans. This
process is designed to ensure congruity throughout the executive compensation
program. In reviewing the individual performance of the executives whose
compensation is detailed in this proxy statement (other than Mr. Fiedler), the
Compensation Committee takes into account the views of Mr. Fiedler.
The key elements of the Company's executive compensation program are base
salary, annual bonus and long-term incentives which consist of stock options,
Company stock and cash compensation. The Compensation Committee's policies with
respect to each of these elements, including the basis for the compensation
awarded to Mr. Fiedler, the Company's CEO during 1998, are discussed below.
Base Salary
Annual salary adjustments are determined by the Compensation Committee by
examining each executive officer's current responsibilities, the executive
officer's individual and business unit performance, and by comparing the
executive officer's current base salary to competitive median salaries as
reported in the Compensation Surveys and by the Peer Group Companies.
Mr. Fiedler was CEO of the Company in 1998. The Compensation Committee
considered the scope and complexity of Mr. Fiedler's position, the Company's
performance during the preceding year, his prior salary, and the median salaries
paid for similar positions as reported in the Compensation Surveys and by the
Peer Group Companies. Sales growth, profitability, and achievement of strategic
business objectives were among the factors considered in determining the
performance of the Company. Mr. Fiedler received a base salary of $500,000
during 1998, which represents an increase of 5.8% over the previous year. He
also received a grant of 75,000 stock options.
Annual Bonus
The Company's executive officers are eligible participants in an annual
cash bonus plan. Performance objectives are established at the beginning of each
year for the Company and each of its business units. The performance objectives
are based on the increase in value of the Company or business unit over the
prior year. Value is determined by a formula taking into account the current
earning power of the Company or business unit as well as cash flow.
Eligible executives are assigned threshold, target and maximum bonus
levels. For those executive officers responsible for the entire Company, 100%
of their bonus opportunity is based on the increase in value for the Company;
for those executive officers responsible for a business unit, 30% of the bonus
opportunity is based on the increase in value for the Company, and 70% is based
on the increase in value for the business unit. If the threshold level of these
performance measures is not met, no bonus is paid.
Executive officers are also eligible for an additional bonus payment under
the carryover feature of the annual bonus plan (the "Carryover Bonus"). The
Compensation Committee believes that the Carryover Bonus encourages a longer
term perspective while continuing to reward participants for the achievement of
annual goals. Carryover Bonus allows participants in the bonus plan to earn --
over a two year period -- any bonus opportunity which was not attained during
the current Plan Year. Executives can earn the balance of the unattained bonus
opportunity whenever cumulative value targets are achieved during the subsequent
two years. No Carryover Bonus from a prior year is earned if the threshold level
of performance for the current year is not achieved.
The potential annual total cash compensation (base salary plus bonus) for
each executive officer is targeted at the 65th percentile of annual total cash
compensation levels for similar positions as reported by comparable companies in
the Compensation Surveys. Carryover Bonus from prior years may increase the
annual bonus opportunity of the executive officers above the target level.
Although annual bonuses depend primarily on the achievement of performance
objectives as described above, the Compensation Committee may adjust bonus
measures and awards based on other financial or non-financial actions that the
Compensation Committee believes will benefit long-term stockholder value.
In 1998, the increase in value of the Company resulted in a bonus payout in
between the threshold opportunity and the target opportunity. As a result Mr.
Fiedler earned a $245,549 cash bonus for the year; there was no Carryover Bonus
opportunity in 1998. Mr. Fiedler's target total cash (i.e., base salary and
target bonus) compensation plan for 1998 was near the 50th percentile of total
cash compensation for CEOs as reported in the Compensation Surveys.
Long-term Incentive Plans
Stock Options
The Company uses stock options to align the interests of executives with
those of the stockholders and to motivate the executives to continue the long-
term focus required for the Company's future success. Executives are granted
stock awards based on their level of responsibility for the management and
growth of the Company and individual contribution. Current base salary and
annual incentive opportunity, as well as size and timing of previous stock
awards, are also considered when determining stock awards.
All stock options are granted at no less than the fair market value of the
stock on the date of grant. The number of shares awarded to each executive
officer is determined by an analysis of median competitive data provided in the
Compensation Surveys. The analysis is based on the Company's current stock
price and the projected stock price appreciation rate.
The gains on stock options granted by the Company are exempt from the
provisions of Section 162(m) of the Internal Revenue Code (the "Code") which
limit the tax deductibility of compensation in excess of one million dollars.
As noted above, Mr. Fiedler received a grant of 75,000 options in 1998.
None of the other named executive officers received an option grant in 1998.
Executive Stock Performance Plan
The Borg-Warner Automotive, Inc. Executive Stock Performance Plan is a
long-term incentive plan for selected top executives including the named
executive officers. It is designed to provide competitive payouts at the end of
a three year period relative to how well the Company performs against the Peer
Group Companies in terms of total shareholder return ("TSR"). The Compensation
Committee believes that the Executive Stock Performance Plan will help to focus
key senior executives on the long-term overall value of the Company to the
investor community.
The award levels under the Executive Stock Performance Plan are targeted to
pay at approximately the 65th percentile of total direct compensation (as
reported by the Compensation Surveys) for 65th percentile TSR performance
relative to the TSR performance of the Peer Group Companies.
Payments made under this plan are exempt from the provisions of Section
162(m) of the Code which limit the tax deductibility of compensation in excess
of one million dollars.
This plan is administered by a committee which consists solely of two or
more "outside directors" as defined by Section 162(m) of the Code and the
regulations thereunder.
For the period between January 1, 1996 to December 31, 1998, the Company's
TSR performance was at the 68th percentile of the TSR performance of the Peer
Group Companies. As a result, Mr. Fiedler earned an award of $610,143.
For the period between January 1, 1997 to December 31, 1999, Mr. Fiedler
has a target award of 595 performance units at a value of $1,000 per unit.
Depending upon the performance of the Company, Mr. Fiedler's final award can
range from $0 if the Company's TSR performance is below the 25th percentile of
the TSR performance of the Peer Group Companies to $1,041,250 if the Company's
TSR performance is at the 90th percentile(or higher)of the TSR performance of
the Peer Group Companies.
For the period between January 1, 1998 to December 31, 2000, Mr. Fiedler
has a target award of 595 performance units at a value of $1,000 per unit.
Depending upon the performance of the Company, Mr. Fiedler's final award can
range from $0 if the Company's TSR performance is below the 25th percentile of
the TSR performance of the Peer Group Companies to $1,041,250 if the Company's
TSR performance is at the 90th percentile(or higher)of the TSR performance of
the Peer Group Companies.
Other
Compensation subject to the one million dollar limitation on deductibility
under Section 162(m) of the Code was not paid in 1998 to any of the named
executive officers.
The Compensation Committee will periodically review the executive
compensation plans of the Company to determine their compliance with Section
162(m)of the Code. The Compensation Committee may, however, recommend that
compensation that is non-deductible be paid to executive officers when such
compensation is deemed in the best interest of shareholders.
Compensation Committee
Paul E. Glaske, Chairman
William E. Butler Jere A. Drummond John Rau
Performance Graph
Comparison of Cumulative Total Return
Among Company, Industry Index, Peer Group, and S&P 500 Index(1)
[data points] 1993 1994 1995 1996 1997 1998
Borg-Warner Automotive(2)100.0 91.69 119.38 146.15 199.94 217.09
SIC Code Index (3) 100.0 84.47 92.66 114.33 147.69 147.18
Peer Group Index (4) 100.0 84.06 100.35 117.62 150.46 200.04
S&P 500 Index (5) 100.0 101.32 139.40 171.41 228.59 293.92
(1) Assumes $100 invested on August 13, 1993; assumes dividends reinvested for
period of August 13, 1993 through December 31, 1998.
(2) BWA--Borg-Warner Automotive, Inc. (As compiled by Media General Financial
Services of Richmond, VA).
(3) SIC Code 3714--Motor Vehicle Parts & Accessories (As compiled by Media
General Financial Services of Richmond, VA).
(4) Peer Group--Consists of the following companies: Arvin Industries, Inc.,
Cummins Engine, Inc., Dana Corporation, Detroit Diesel Corporation, Eaton
Corporation, Ford Motor Company, General Motors Corporation, Johnson
Controls, Inc., Lear Seating Company, LucasVarity PLC, Magna International,
Inc. Class A, Mark IV Industries, Inc., Mascotech, Inc., Modine
Manufacturing Co., SPX Corporation, Timken Company, Tower Automotive, Inc.
and TRW, Inc. (As compiled by Media General Financial Services of Richmond,
VA).
(5) S&P 500--Standard & Poor's 500 Total Return Index (As compiled by Media
General Financial Services of Richmond, VA).
Certain Relationships and Related Transactions
On January 30, 1998, the Company loaned Mr. Fiedler $2 million for the
exclusive purpose of Mr. Fiedler purchasing the Company's Common Stock. The
loan is evidenced by a non-negotiable full recourse promissory note (the
"Note"), which matures on December 30, 2002 (the "Maturity Date"). The Note
accrues interest at the rate of 5.84% per annum, compounded semiannually, on the
unpaid balance until paid. In the event of Mr. Fiedler's voluntary termination
of employment with the Company prior to the Maturity Date (other than upon his
"disability") or his involuntary termination of employment with the Company
prior to the Maturity Date for "cause," Mr. Fiedler will be obligated to prepay
his entire obligation under the Note within ten days. The entire obligation
under the Note will be forgiven if Mr. Fiedler remains employed by the Company
through December 30, 2002 or as of earlier termination by reason of death,
"disability," or involuntary termination other than for "cause." The Note will
also be forgiven in the event of a "Change of Control" as defined in the Change
of Control Employment Agreement.
As part of a recapitalization, BW-Security distributed all of the
outstanding Common Stock of the Company to BW-Security's stockholders of record
as of January 22, 1993 in the Spin-Off. In connection with the Spin-Off, the
Company and BW-Security entered into certain agreements, including, but not
limited to, a Distribution and Indemnity Agreement (the "Distribution
Agreement"), and a Service Agreement. The terms of such agreements were
approved by the Board of Directors of the Company.
The Distribution Agreement provides for, among other things, the principal
corporate transactions required to effect the Spin-Off and certain other
agreements governing the relationship between the Company and BW-Security with
respect to or in consequence of the Spin-Off. Subject to certain exceptions, the
Distribution Agreement provides for certain cross-indemnities designed
principally to place financial responsibility for the liabilities of BW-Security
and its subsidiaries with BW-Security, and financial responsibility for the
liabilities of the Company, or related to its automotive business, with the
Company.
The Service Agreement provides that the Company will sublease office space
from BW-Security until May 31, 1999 (or, if earlier, the expiration or
termination of BW-Security's current lease), with the amounts payable under such
sublease to be equal to 50% of the rent and common overhead expenses payable by
BW-Security related to its lease of the premises. In 1998, such amounts paid to
BW-Security aggregated approximately $309,400.
The Company has agreed to indemnify BW-Security (but not its stockholders)
against any liability resulting from any transaction after the date of the
Spin-Off involving the stock or assets, or any combination thereof, of the
Company or any of its subsidiaries which causes the Spin-Off to fail to qualify
as tax-free under Section 355 of the Code.
2. RATIFICATION OF SELECTION OF INDEPENDENT AUDITORS
The Board of Directors proposes that the stockholders approve the selection
by the Finance and Audit Committee of Deloitte & Touche LLP to serve as the
Company's independent auditors for the 1999 fiscal year. The Board of Directors
anticipates that representatives of Deloitte & Touche LLP will be present at the
meeting to respond to appropriate questions, and will have an opportunity, if
they desire, to make a statement.
The Board of Directors recommends a vote FOR the appointment of Deloitte &
Touche LLP as the independent auditors and your proxy will be so voted unless
you specify otherwise.
OTHER INFORMATION
The Company has no reason to believe that any other business will be
presented at the Annual Meeting, but if any other business shall be presented,
votes pursuant to the proxy will be cast thereon in accordance with the
discretion of the persons named in the accompanying proxy.
Stockholder proposals which are intended to be presented at the 2000 Annual
Meeting pursuant to SEC Rule 14a-8 must be received by the Company on or before
November 21, 1999, for inclusion in the proxy statement relating to that
meeting.
A stockholder who intends to present business at the 2000 Annual Meeting
other than pursuant to Rule 14a-8 must comply with the requirements set forth in
the Company's By-Laws. Among other things, to bring business before an annual
meeting, a stockholder must give written notice to the Secretary of the Company
no less than 60 days and not more than 90 days prior to the first anniversary of
the preceding year's annual meeting. Therefore, for stockholder proposals other
than pursuant to Rule 14a-8, the Company must receive notice no sooner than
January 28, 2000, and no later than February 27, 2000.
The Company will furnish, without charge, to each person whose proxy is
being solicited, upon request of such person, one copy of the Company's Annual
Report on Form 10-K for the year ended December 31, 1998, as filed with the
Securities and Exchange Commission. Requests for copies of such report should be
directed to the Investor Relations and Communications Department, 200 South
Michigan Avenue, Chicago, Illinois 60604.
BORG-WARNER AUTOMOTIVE, INC.
[BORGWARNER AUTOMOTIVE LOGO]
This Proxy is Solicited by the Board of Directors in Connection
With the Annual Meeting of Stockholders
11:00 A.M. (C.S.T.)
April 27, 1999
PLACE: Borg-Warner Automotive, Inc.
200 South Michigan Avenue
Chicago, Illinois 60604
PROXY: LAURENE H. HORISZNY and VINCENT M. LICHTENBERGER and each of them, are
hereby appointed by the undersigned as attorneys and proxies with full power of
substitution, to vote all the shares of Common Stock held of record by the
undersigned on March 15, 1999 at the Annual Meeting of Stockholders of Borg-
Warner Automotive, Inc. Or at any adjournment(s) of the meeting, on each of the
items on the reverse side and in accordance with the directions given therein.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
- --------------------------------------------------------------------------------
1.Election of three Class III Directors: William E. Butler, Paul E. Glaske, John
Rau
FOR all nominees WITHHOLD AUTHORITY
listed above (except) as to vote for all nominees
marked to the contrary) listed
/ / / /
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name on the space provided below.)
2. Ratify the appointment of Deloitte & Touche LLP as independent auditors for
the Company for 1999.
FOR AGAINST ABSTAIN
/ / / / / /
3. To transact such other business as may properly come before the meeting or
any adjournment or postponement thereof.
IF NO CHOICE IS SPECIFIED, this Proxy will be voted "FOR" the election of
all listed nominees, and "FOR" proposal 2 in accordance with the recommendations
of a majority of the Board of Directors.
Date----------------, 1999
Signature-----------------
Signature-----------------
the date of delivery or, if delivery is made by mail, as of
the date shown on the postmark or the receipt for registration
or certification. 8.8. Governing Laws. The Plan shall be construed and administered according to the laws of
the State of Illinois. 9.1. Performance Awards Upon a Change of Control. If a Change of
Control occurs during one or more Performance Periods, then
Performance Awards with respect to these Performance Periods
shall be payable in accordance with the following provisions:
(a) Each such Performance Period shall end on the effective date of the Change of
Control. Each corresponding Peer Group Company’s Performance Period shall end
on the same day.
(b) For purposes of determining Total Shareholder Return
of the Company for any Performance Period during
which a Change of Control occurs, the Change of
Control Price (rather than the average of the closing
sales price of Common Stock on the last five trading
days of the Performance Period) shall be used as the
price of the Company’s Common Stock as of the end of
that Performance Period.
(c) If, due to a Change of Control, a Performance Period is shortened as provided
in Section 9.1(a), then the target Performance Award that was initially
established by the Committee with respect to that Performance Period shall be
lowered (on a prorated basis) to reflect the shorter Performance Period. For
example, if the initially established target Performance Award is $90,000, and
the Performance Period is shortened from 3 years to 6 months because of the
occurrence of a Change of Control, then the target Performance Award for that
Performance Period shall be lowered to $15,000. This subsection (c) shall
also apply where the Participant has, prior to the Change of Control,
qualified for a prorated Performance Award pursuant to Section 5(a), (b), (c),
or (d). In that case, the initial proration shall be adjusted by virtue of
the shortened Performance Period. 9.2. Payment of Performance Awards After a Change of Control.
Performance Awards payable with respect to any Performance
Period during which a Change of Control occurs shall be paid
in accordance with Article V, subject to the following:
(a) Any Participant who is employed by the Company on the
day prior to the effective date of the Change of
Control shall be deemed to have continued in
employment with the Company through the end of the
Performance Period.
(b) The Performance Period shall be deemed to have ended
as provided in Section 9.1(a).
(c) All Performance Awards shall be paid within 60 days
after the effective date of the Change of Control.
With the Annual Meeting of Stockholders 11:00 A.M. (C.S.T.) April 26, 2000 PLACE: BorgWarner Inc.
200 South Michigan Avenue
Chicago, Illinois 60604
PLEASE SIGN ON THE REVERSE SIDE AND RETURN PROMPTLY
IF NO CHOICE IS SPECIFIED, this Proxy will be
voted “FOR” the election of all listed nominees,
and “FOR” proposals 2, 3 and 4 in accordance with
the recommendations of a majority of the Board
of Directors.
Please mark your
votes as indicated in
the example [X] FOR all nominees
listed above (except as
marked to the contrary)
WITHHOLD AUTHORITY
to vote for all nominees
listed above
(INSTRUCTION: To withhold authority to vote
for any individual nominee, write that nominee’s
name on the space provided below.) [ ]
[ ]
2.
Approve the amendment of the
Company’s 1993 Stock Incentive Plan.
3.
Re-approve
the Company’s Executive Stock Performance Plan.
4.
Ratify the appointment of Deloitte &
Touche LLP as independent auditors for the
Company for 2000. FOR
AGAINST
ABSTAIN
FOR
AGAINST
ABSTAIN
FOR
AGAINST
ABSTAIN [ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ] 5. To transact such other business as may
properly come before the meeting or any
adjournment of postponement thereof. "By checking the box to the right, I consent to future access of the Annual
Report, Proxy Statements, prospectuses and other communications electronically
via the Internet. I understand that the Company may no longer distribute printed
materials to me for any future shareholder meeting until such consent is
revoked. I understand that I may revoke my consent at any time by contacting the
Company’s transfer agent, ChaseMellon Shareholder Services, Ridgefield Park, NJ
and that costs normally associated with electronic access, such as usage and
telephone charges, will be my responsibility." [ ] Signature___________________
Signature___________________ Date___________
Among Company, Industry Index, Peer Group, and S&P 500 Index(1) data points 1994 1995 1996 1997 1998 1999 BorgWarner (2) 100.0 130.19 159.39 218.05 236.75 173.96 SIC Code Index (3) 100.0 119.50 140.02 180.14 239.55 221.27 Peer Group Index (4) 100.0 109.70 135.35 174.85 174.25 141.01 S&P 500 Index (5) 100.0 137.58 169.17 225.61 290.09 351.13