BorgWarner Inc.
2004 Stock Incentive Plan
Performance Share Award Agreement
You have been selected to receive a Performance Share Award
under the BorgWarner Inc. 2004 Stock Incentive Plan (the
"Plan"), as specified below:
Participant: ______________________________
Address: __________________________________
Target Number of Performance Shares: ______
Performance Period: ____, 2005 to ___, 2007
Performance Measure: Relative Increase
in Total Shareholder Return Versus Peer
Group
THIS AGREEMENT, effective ___________,
2005, represents the grant of
Performance Shares by BorgWarner Inc.,
a Delaware corporation (the "Company"),
to the Participant named above,
pursuant to the provisions of the Plan.
All capitalized terms shall have the
meanings ascribed to them in the Plan,
unless specifically set forth otherwise
herein. The parties hereto agree as
follows:
1. Performance Period. The
Performance Period commences on January
1, 2005, and ends on December 31, 2007.
2. Value of Performance Shares. Each
Performance Share shall represent and
have a value equal to one share of
common stock, par value $0.01, of the
Company, subject to adjustment as
provided in Section 4(e) of the Plan.
3. Performance Shares and
Achievement of Performance Goal. The
number of Performance Shares to be
earned under this Agreement shall be
based upon the Company's Total
Shareholder Return as compared to the
Total Shareholder Return of the
Company's Peer Group (as identified in
Exhibit A) during the Performance Period.
For this purpose, "Total Shareholder
Return" shall be determined as follows:
Total Shareholder = Change in StockPrice + Dividends Paid
Return Beginning Stock Price
"Beginning Stock Price" shall mean the
average closing price as reported on
the New York Stock Exchange Composite
Tape of one (1) share of stock for the
five (5) trading days immediately prior
to the first day of the Performance
Period. "Ending Stock Price" shall mean
the average closing price as reported
on the New York Stock Exchange
Composite Tape of one (1) share of
stock for the five (5) trading days
immediately prior to the last day of
the Performance Period. "Change in
Stock Price" shall mean the difference
between the Ending Stock Price and the
Beginning Stock Price. Finally,
"Dividends Paid" shall mean the total
of all dividends paid on one (1) share
of stock during the Performance Period,
provided that dividends shall be
treated as though they are reinvested
at the end of each calendar quarter.
Following the Total Shareholder Return
determination, the Company's Percentile
Rank shall be determined as follows:
Percentile = Company Rank
Rank Total Number of Companies in Peer Group
Excluding BorgWarner Inc.
Company Rank shall be determined by
listing from highest Total Shareholder
Return to lowest Total Shareholder
Return each company in the Peer Group
(including the Company) and counting up
from the company with the lowest Total
Shareholder Return.
The percent of Target Number of
Performance Shares earned shall then be
determined based on the following chart:
Company's Percent of Target Number of
Percentile Rank Performance Shares Earned
90th and above 175.000%
75th 130.000%
65th 100.000%
50th 71.875%
35th 43.750%
25th 25.000%
Below 25th 0.000%
Interpolation shall be used to
determine the percent of Target Number
of Performance Shares earned in the
event the Company's Percentile Rank
does not fall directly on one of the
ranks listed in the above chart.
4. Termination Provisions. Except as
provided in Section 11(a) of this
Agreement and in the next paragraph, a
Participant shall be eligible for
payment of earned Performance Shares,
as specified in Section 3, only if the
Participant's employment with the
Company continues through the end of
the Performance Period.
If a Participant suffers a Disability,
dies, is terminated involuntarily
without Cause during the Performance
Period, or in the event of the
Participant's Retirement, the
Committee, in its sole discretion, may
waive the requirement that the
Participant be employed by the Company
through the end of the Performance
Period. In such a case, the
Participant (or in the event of the
Participant's death, the Participant's
beneficiary) shall be eligible for all
or that proportion of the number of
Performance Shares earned under Section
3 (determined at the end of the
Performance Period and based on actual
results) that his number of full months
of participation during the Performance
Period bears to the total number of
months in the Performance Period.
In the event of the Participant's
Termination of Employment for Cause or
voluntary Termination of Employment
during the Performance Period, or if
the Committee does not exercise its
discretion to waive the requirement
that the Participant be employed by the
Company through the end of the
Performance Period in the event of the
Participant's Termination of Employment
by reason of the Participant's death,
Disability, involuntary termination
without Cause, or Retirement prior to
the close of the Performance Period,
the Participant shall forfeit this
entire award, with no payment to the
Participant. The Participant's
transfer of employment to the Company
or any Subsidiary from another
Subsidiary or the Company during the
Performance Period shall not constitute
a Termination of Employment.
5. Dividends. The Participant shall
have no right to any dividends which
may be paid with respect to shares of
Stock until any such shares are
delivered to the Participant following
the completion of the Performance
Period.
6. Form and Timing of Payment of
Performance Shares. Payment of the
earned Performance Shares shall be made
utilizing a combination of Stock and
cash. The earned Performance Shares
shall be paid out as follows: sixty
percent (60%) in Stock and forty
percent (40%) in cash. Payment of
earned Performance Shares shall be made
within two and one-half months (2-1/2
months) following the close of the
Performance Period.
7. Tax Withholding. The Company
shall have the power and the right to
deduct or withhold, or require the
Participant or beneficiary to remit to
the Company, an amount sufficient to
satisfy federal, state, and local
taxes, domestic or foreign, required by
law or regulation to be withheld with
respect to any taxable event arising as
a result of this Agreement.
8. Nontransferability. Performance
Shares may not be sold, transferred,
pledged, assigned, or otherwise
alienated or hypothecated, other than
by will or by the laws of descent and
distribution.
9. Administration. This Agreement
and the rights of the Participant
hereunder are subject to all the terms
and conditions of the Plan, as the same
may be amended from time to time, as
well as to such rules and regulations
as the Committee may adopt for
administration of the Plan. It is
expressly understood that the Committee
is authorized to administer, construe,
and make all determinations necessary
or appropriate to the administration of
the Plan and this Agreement, all of
which shall be binding upon the
Participant. Any inconsistency between
the Agreement and the Plan shall be
resolved in favor of the Plan.
10. Specific Restrictions Upon
Shares. The Participant hereby agrees
with the Company as follows:
(a) The Participant shall acquire the
shares of Stock issuable with respect
to the Performance Shares granted
hereunder for investment purposes only
and not with a view to resale or other
distribution thereof to the public in
violation of the Securities Act of
1933, as amended (the "1933 Act"), and
shall not dispose of any such Stock in
transactions which, in the opinion of
counsel to the Company, violate the
1933 Act, or the rules and regulations
thereunder, or any applicable state
securities or "blue sky" laws.
(b) If any shares of Stock acquired
with respect to the Performance Shares
shall be registered under the 1933 Act,
no public offering (otherwise than on a
national securities exchange, as
defined in the Exchange Act) of any
such Stock shall be made by the
Participant under such circumstances
that he or she (or such other person)
may be deemed an underwriter, as
defined in the 1933 Act; and
(c) The Company shall have the
authority to endorse upon the
certificate or certificates
representing the Shares acquired
hereunder legends referring to the
foregoing restrictions.
11. Miscellaneous.
(a) Change in Control. As provided
by Section 12 of the Plan, in the event
of a Change in Control, the
restrictions applicable to the
Performance Shares granted under this
Agreement shall lapse, the Performance
Goal shall be deemed to have been
achieved at target level, and all other
terms and conditions shall be deemed to
have been satisfied. In the event that
the Performance Period is shortened due
to a Change in Control, the amount of
the Performance Shares deemed earned
shall be prorated by multiplying the
Target Number of Performance Shares by
a fraction, the numerator of which is
the actual number of whole months in
the shortened Performance Period and
the denominator of which is the number
of whole months in the original
Performance Period. Subject to Section
11(h) of this Agreement, payment shall
be made in Stock or cash, at the
discretion of the Committee, within
thirty (30) days following the
effective date of the Change in
Control.
(b) Adjustments to Shares. Subject to
Plan Section 4(e), in the event of any
merger, reorganization,
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 of
Directors of the Company may make such
substitution or adjustments in the
aggregate number and kind of shares of
Stock subject to this Performance Share
Award as it may determine, in its sole
discretion, to prevent dilution or
enlargement of rights.
(c) Notices. Any written notice
required or permitted under this
Agreement shall be deemed given when
delivered personally, as appropriate,
either to the Participant or to the
Compensation Department of the Company,
or when deposited in a United States
Post Office as registered mail, postage
prepaid, addressed, as appropriate,
either to the Participant at his or her
address set forth above or such other
address as he or she may designate in
writing to the Company, or to the
Attention: Compensation Department,
BorgWarner Inc., at its headquarters
office or such other address as the
Company may designate in writing to the
Participant.
(d) Failure To Enforce Not a Waiver.
The failure of the Company to enforce
at any time any provision of this
Agreement shall in no way be construed
to be a waiver of such provision or of
any other provision hereof.
(e) Governing Law. All questions
concerning the construction, validity
and interpretation of this Agreement
shall be governed by and construed
according to the internal law, and not
the law of conflicts, of the State of
Delaware, except that questions
concerning the relative rights of the
Company and the Participant with
respect to Shares, shall be governed by
the corporate law of the State of
Delaware.
(f) Provisions of Plan. The
Performance Shares provided for herein
are granted pursuant to the Plan, and
said Performance Shares and this
Agreement are in all respects governed
by the Plan and subject to all of the
terms and provisions thereof, whether
such terms and provisions are
incorporated in this Agreement solely
by reference or expressly cited herein.
If there is any inconsistency between
the terms of this Agreement and the
terms of the Plan, the Plan's terms
shall completely supersede and replace
the conflicting terms of this
Agreement.
(g) Code section 162(m). It is
intended that payments pursuant to this
Agreement to a Participant who is a
"covered officer" within the meaning of
section 162(m) of the Internal Revenue
Code constitute "qualified
performance-based compensation" within
the meaning of section 1.162.27(e) of
the Income Tax Regulations. To the
maximum extent possible, this Agreement
and the Plan shall be so interpreted
and construed. Except in the case of a
Change in Control, no amounts in excess
of the number of Performance Shares
earned under Section 3 of this
Agreement (determined at the end of the
Performance Period and based on actual
results) shall be paid to the
Participant. There shall be no waiver
by the Committee of any payment
limitations in the event of the
Participant's Retirement pursuant to
Section 11(b)(iii) of the Plan.
(h) Section 16 Compliance. If the
Participant is subject to Section 16 of
the Exchange Act, except in the case of
death or disability, at least six
months must elapse from the date of
acquisition of the Performance Shares
granted hereunder to the date of the
Participant's disposition of such
Performance Shares or the underlying
shares of Stock
IN WITNESS WHEREOF, the Company has
executed this Agreement in duplicate on
the day and year first above written.
BORGWARNER INC.
By: _______________________
I acknowledge receipt of a copy of the
Plan (either as an attachment hereto or
that has been previously received by
me) and that I have carefully read this
Award Agreement and the Plan. I agree
to be bound by all of the provisions
set forth in this Award Agreement and
the Plan.
BorgWarner Inc.
2004 Stock Incentive Plan
Performance Share Award Agreement
Exhibit A
Peer Group Companies
ArvinMeritor, Inc.
Autoliv, Inc.
Cummins Engine, Inc.
Dana Corporation
Delphi Automotive Systems Corp.
Dura Automotive Systems, Inc.
Eaton Corporation
Johnson Controls, Inc.
Lear Corporation
Magna International, Inc. Class A
Modine Manufacturing Co.
Tenneco Automotive, Inc.
Tower Automotive, Inc.
Visteon Corporation