EX-10.1 2 perfrmshar1.htm

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: _____________, 2006 to ______________, 2008

Performance Measure: Relative Increase in Total Shareholder Return Versus Peer
Group

THIS AGREEMENT, effective ___________, 2006, 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,
2006, and ends on December 31, 2008.

    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
Return

=

Change in Stock Price + Dividends Paid
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 Rank

Company 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 Percentile Rank

Percent of Target Number of Performance Shares Earned

90th and above

75th

65th

50th

35th

25th

Below 25th

175.000%

130.000%

100.000%

71.875%

43.750%

25.000%

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.        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 as soon as administratively practicable in the year after
the year in which the Performance Period ends, but, in any event, no later than
March 15 of the year following the year in which the Performance Period ends.

    5.        Termination Provisions.

           (a)  General.  Except as provided in Section 6 of this Agreement and
in Subsection (b), below, 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. 

           (b)  Termination for Death or Disability; Involuntary Termination
without Cause; Retirement.  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.  If the Committee exercises its discretion to waive, in whole or in
part, prior to the expiration of the Performance Period, any or all payment
limitations with respect to the Performance Shares awarded under this Agreement,
payment of the Performance Shares will be made in the year following the year in
which Performance Period ends, at the same time as the Committee has provided
for payment to all other recipients of awards under the Plan.

           (c)  Other Termination.  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. 

    6.        Change in Control Provisions. 

           (a)  General.  Subject to Subsection (b), below, 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
achieved at target level, and all other terms and conditions shall be deemed to
have been satisfied, in accordance with Section 12(a)(iv) of the Plan.   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(g) of this Agreement, and except as provided in
Subsection (b) below, 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)  Waiver of Payment Limitations Prior to a Change in Control. 
Payment for Performance Shares that have vested prior to the Change in Control
as a result of the Committee's waiver of payment limitations prior to the date
of the Change in Control shall be made in accordance with the following terms. 
Payment shall be made in cash and Stock in the same form as provided under
Section 4, above.  Payment shall be made (i) as soon as administratively
practicable in the year following the year in which the Performance Period would
otherwise have ended absent a Change in Control, or if earlier, (ii) as soon as
administratively practicable on or after the date of the Participant's
Termination of Employment.  Notwithstanding clause (ii) in the preceding
sentence, if the Participant is a "Specified Employee" who becomes entitled to
payment of Performance Shares under this Section 6(b) by reason of his or her
Termination of Employment, payment shall be made on the first day of the seventh
month following the month in which such Termination of Employment occurs, or, if
earlier, as soon as administratively practicable on or after the date of the
Participant's death.

    7.        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.

    8.        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.

    9.        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.

    10.      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.

    11.      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 such
legends referring to the foregoing restrictions.     

    12.      Miscellaneous.

    (a)      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 if 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. 

     (b)     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 Executive 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: Executive Compensation, BorgWarner
Inc., at its headquarters office or such other address as the Company may
designate in writing to the Participant.

    (c)      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.

    (d)      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.

    (e)      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.   

    (f)       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.      

    (g)      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.  If payment of Performance
Shares awarded under this Agreement is delayed to comply with applicable
securities laws, then payment shall be made as soon as administratively
practicable in the year in which the Committee reasonably determines that
payment would not cause such securities laws to be violated.

    (h)      Code Section 409A.  Except as provided in the next sentence, it is
intended that the arrangement under which Participant has been awarded
Performance Shares under this Agreement and the Plan does not provide for a
"deferral of compensation" subject to the requirements of Code Section 409A.  To
the extent that the Performance Shares awarded hereunder become vested as a
result of the Committee's waiver of payment limitations prior to the end of the
Performance Period, the Company and Participant agree that this Agreement shall
be administered in accordance with, and, if necessary, amended in a timely
manner to comply with, the requirements of paragraphs (2), (3), and (4) of Code
Section 409A, as interpreted by guidance and regulations issued by the Internal
Revenue Service.

IN WITNESS WHEREOF, the Company has executed this Agreement in duplicate on the
day and year first above written. 

                                                                                                        
BORGWARNER INC.

                       By: _______________________

The undersigned hereby accepts, and agrees to, all terms and provisions of the
foregoing Agreement. 

                                                                                                        
__________________________

Exhibit A

BorgWarner Inc.
2004 Stock Incentive Plan
Performance Share Award Agreement

Peer Group Companies

 

ArvinMeritor, Inc.

American Axle

Autoliv, Inc.

Dana Corporation

Gentex

Johnson Controls, Inc.

Lear Corporation

Magna International, Inc.

Modine Manufacturing Co.

Tenneco Automotive, Inc.

TRW

Visteon Corporation

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