Document:

10 K 12.31.2012 Exhibit 10.15

Exhibit 10.15
BORGWARNER INC.
2004 STOCK INCENTIVE PLAN 
NON-QUALIFIED STOCK OPTION AWARD AGREEMENT
 
Stock Option Grant Awarded to _____________________

	
						
	Column (1)

Date of Grant:
	Column (2)

Number of Shares Subject to Stock Option: 
	Column (3)

 
Exercise Price Per Share:
	Column (4)

 
Type of Stock Option: 
	Column (5)

Expiration Date of Stock Option:
	Column (6)
Cumulative Percentage
Exercise Schedule of 
Stock Option:

	M/D/Yr
	# Shares
	

<$        >

	Non-Qualified Stock Option
	M/D/Yr
	___% on
M/D/Yr

___% on
M/D/Yr

1.     Grant of Stock Option. Pursuant to Section 6 of the Borg Warner, Inc. 2004 Stock Incentive Plan, (the "Plan"), BorgWarner Inc., a Delaware corporation, hereby grants to the individual named above, an employee of the Company or an Affiliate (the "Optionee"), an option to purchase from the Company the number of its shares of common stock, $.01 par value shown above in Column 2 of this Award Agreement, upon and subject to the terms and conditions set forth in the Plan and this Award Agreement (the "Shares"). Capitalized terms not defined herein shall have the meanings specified in the Plan.
2.     Date of Grant. The date of grant of this Stock Option is the date set forth above in Column 1. 
3.     Type of Stock Option. This Stock Option is not intended to qualify as an incentive stock option within the meaning of section 422 of the Internal Revenue Code, and this Award Agreement shall be interpreted and treated consistently with the characterization of the Stock Option as a Non-Qualified Stock Option.
4.     Stock Option Price. The option price per share of Stock covered by the Stock Option shall be the price set forth above in Column 3 of this Award Agreement.

5.     Expiration Date. Unless the Stock Option is previously terminated pursuant to the terms of this Award Agreement and the Plan, the Stock Option granted by this Award Agreement shall terminate on the date shown above in Column 5 of this Award Agreement. 
6.     Exercise of Stock Option. 
A.     The Stock Option shall become exercisable as of the date set forth above in Column 6 according to the percentage shown for such date ("Exercisable Date"); provided that at all times during the period between Date of Grant and the Exercisable Date the Optionee has been employed by the Company or an Affiliate. The Committee (as such term is defined in the Plan) has, in its sole discretion, the authority to, in whole or in part, accelerate the exercisability of the Stock Option. The Stock Option may be exercised only to purchase whole Shares and in no case may a fraction of a Share be purchased. The right of the Optionee to purchase Shares may be exercised in whole at any time or in part from time to time after (and to the extent) the Stock Option has become exercisable and prior to the tenth anniversary of the Date of Grant; provided, however, that no portion of the Stock Option shall be exercisable unless (except as hereinafter provided in this Section 6) the Optionee at the time of exercise is, and at all times from the Date of Grant has been employed by the Company or an Affiliate. A Termination of Employment (as such term is defined in the Plan) shall not be deemed to have occurred if the transfer, promotion, reassignment or similar personnel move of the Optionee, at the request of the Company or an Affiliate, from any one entity within the Company or Affiliate to another entity within the Company or Affiliate results in the Optionee being immediately employed with such other entity. 
B.     If the Optionee dies while employed by the Company or an Affiliate, the Optionee's estate shall be permitted to exercise the Stock Option to the extent exercisable on the date of the Optionee's death or to the extent that the exercisability of the Stock Option may be accelerated by the Committee. The Stock Option may be exercised for a period of one year from the date of such death or until the expiration of the Stock Option, whichever period is shorter. 
C.     If the Optionee incurs a Termination of Employment by reason of Disability (as such term is defined in the Plan), the Optionee shall be permitted to exercise the Stock Option to the extent exercisable at the time of the termination or to the extent that the exercisability of the Stock Option may be accelerated by the Committee. If an Optionee incurs a Termination of Employment by reason of Retirement (as such term is defined in the Plan), the portion of the Stock Option Award not exercisable under this Agreement at such time shall become accelerated on the date of the Optionee's Retirement and become immediately exercisable. In the event of a Termination of Employment by reason of Disability or Retirement, the Stock Option may be exercised for a period of three years from the date of such termination or until the expiration of the Stock Option, whichever period is the shorter; provided, however, that if the three year period is the applicable period and the Optionee dies within such three year period, any unexercised Stock Option held by such Optionee shall, notwithstanding the expiration of such three year period, continue to be exercisable to the extent to which it was exercisable at the time of death for a period of twelve (12) months from the date of such death or until the expiration of the Stock Option, whichever period is the shorter.
D.     If the Optionee incurs a Termination of Employment and such Termination of Employment is involuntary and without Cause (as such term is defined in the Plan), the Optionee shall be permitted to exercise the Stock Option to the extent exercisable at the time of the termination or to the extent that the exercisability of the Stock Option may be accelerated by the Committee. The Stock Option may be exercised for a period of one year from the date of such termination or until the expiration of the Stock Option, whichever period is shorter; provided, however, that if the one year period is the applicable period and 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 twelve (12) months from the date of such death or until the expiration of the Stock Option, whichever period is the shorter.
E.     If the Optionee incurs a Termination of Employment for any reason other than as set forth in Sections 6(B), (C) and (D) above and such Termination of Employment is without Cause, the Optionee shall be permitted to exercise the Stock Option to the extent exercisable at the time of the Termination of Employment. The Stock Option may be exercised for a period of five (5) business days from the date of such termination or until the expiration of the Stock Option, whichever period is the shorter.
F.     If the Optionee incurs a Termination of Employment which is for Cause, the Stock Option held by the Optionee shall terminate at the time of the Optionee's Termination of Employment.
7.     Transferability of Stock Option. The Stock Option and this Stock Option Award Agreement shall be transferable by the Optionee: (i) by will or by the laws of descent and distribution, (ii) pursuant to a qualified domestic relations order (as such term is described in the Plan), or (iii) pursuant to a gift to the Optionee's "immediate family" members (as such term is described in the Plan) directly or indirectly by means of a trust, partnership, or limited liability company, subject in the case of all transfers pursuant to clause (iii), above, to the review of the Committee or its designee. A Stock Option shall be exercised, only by the Optionee, by the guardian or legal representative of the Optionee, or permitted transferee, it being understood that the terms "holder" and "Optionee" include any such guardian, legal representative or beneficiary or permitted transferee. A permitted transferee may transfer a Stock Option only by will or by the laws of descent and distribution. 
8.     Exercise of Stock Option; Payment.
A.     If the Optionee is then employed by the Company or an Affiliate and elects to exercise all or part of the Stock Option which is exercisable, he or she shall deliver to the Company a written notice, in a form acceptable to the Committee, specifying the number of Shares to be purchased under the Stock Option and an exercise date, not more than thirty days after the date of such notice, upon which such Shares shall be purchased and payment therefor shall be made. 

B.     If the Optionee's employment with the Company or an Affiliate is terminated for any of the reasons set forth in Section 6(B) through (E) above, then any election to exercise all or part of the Stock Option which is exercisable shall be done in the following manner: the Optionee or his or her estate shall deliver to the Company a written notice, in a form acceptable to the Committee, specifying the number of Shares to be purchased under the Stock Option and an exercise date, within the exercise period set forth for such reason in Section 6(B) through (E) above and with respect to Section 6(B) through (D), not more than thirty days after the date of such notice, upon which such Stock Option Shares shall be purchased and payment therefor shall be made.
C.     On the exercise date the Optionee has specified in the notice described in Section 8(A) or 8(B) above, the Optionee or his or her estate shall deliver to the Company (i) cash, certified or bank check or such other instrument as the Company may accept, made payable to the order of the Company in an amount equal to the product of the number of Shares specified to be purchased in such notice and the Option Price (the "Option Exercise Amount") and within five days thereafter payment, by cash, certified or bank check or such other instrument as the Company may accept, made payable to the order of the Company, in such amount as the Company in its sole discretion deems necessary to satisfy its liability to withhold federal, state or local income or other taxes incurred by reason of the exercise of the Stock 

Option or the transfer of Shares thereupon (collectively the "Applicable Tax"), or (ii) unrestricted Shares owned by the Optionee for more than six months prior to the exercise date, the value of which in whole Shares shall not exceed the Option Exercise Amount, and within 5 days thereafter unrestricted Shares owned by the Optionee, the value of which in whole Shares shall not exceed the Applicable Tax, the value of such Shares for the purpose of paying the Option Exercise Amount and the Applicable Tax (collectively the "Option Payment Amount") being the Fair Market Value (as such term is defined in the Plan) of the Shares on the exercise date, or (iii) a written request to the Company to withhold, from the number of Shares otherwise issuable upon the exercise of the Stock Option, that whole number of Shares having an aggregate Fair Market Value which does not exceed the Applicable Tax, or (iv) a combination of the above described forms of payment that equals the Option Payment Amount; provided that if the Optionee is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), then (y) such Optionee shall have the right to make payment of the Option Payment Amount only at the time and in the manner specified in Section 16 of the Exchange Act and the rules and regulations thereunder and (z) the Company shall have the right to retain or sell without notice, or to demand surrender of, Shares or Shares issuable upon the exercise of the Stock Option which have a Fair Market Value on the exercise date equal to the amount determined by the Company as necessary to satisfy any Applicable Tax. Upon receipt in full of the Option Payment Amount (including in the case of payment by check, the receipt by the Company of collected funds), the Optionee or his or her estate shall be deemed to be the owner of Shares so purchased and certificates representing such Shares shall thereupon be delivered to the Optionee or his or her estate. If the Company has entered into agreement(s) with one or more brokerage firms to enable the Optionee to facilitate payment for the Shares through such brokerage firm(s), the Optionee or his or her estate may make use of such coordinated procedure if he or she elects and if allowed by law. 
9.     Specific Restrictions Upon Shares.  The Optionee hereby agrees with the Company as follows:
A.      The Optionee shall acquire the Shares issuable upon the exercise of the Stock Option (the "Stock Option Shares") 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 Stock Option Shares 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 Stock Option 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 Option Shares shall be made by the Optionee (or any other person) 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 Stock Option Shares such legends referring to the foregoing restrictions.
10.     Change in Control Cash Out. During the sixty (60) day period from and after a Change in Control (as such term is defined in the Plan), the 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 being purchased under this Stock Option, to elect to surrender, by giving notice to the Company, all or part of this Stock Option to the Company and to receive cash, payable by the Company, within thirty (30) days of such notice, in an amount equal to the amount by which the Change in Control Price (as such term is defined in the Plan) per Share on the date of such election shall exceed the Option Price multiplied by the number of Shares surrendered under this Stock Option; less such amount as the Company deems necessary to satisfy its liability to withhold federal, state or local income or other taxes incurred by reason of the number of Shares surrendered; provided, however, that if the Change in Control is within six (6) months of the Date 

of Grant to an Optionee who is an officer or director of the Company and subject to Section 16(b) of the Exchange Act, then no such election shall be made by such Optionee with respect to this Stock Option prior to six (6) months from the Date of Grant. 
11.     Adjustments to Shares. 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 of Directors of the Company may make such substitution or adjustments in the aggregate number, kind and option price of shares subject to this Stock Option Award Agreement and/or such other substitutions or adjustments in the consideration receivable upon exercise as it may determine to be appropriate in its sole discretion. 
12.    Notices. Any written notice required or permitted under this Stock Option Award Agreement shall be deemed given when delivered personally, as appropriate, either to the Optionee 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 Optionee 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 Optionee.
13.     Failure to Enforce Not a Waiver. The failure of the Company to enforce at any time any provision of this Stock Option Award Agreement shall in no way be construed to be a waiver of such provision or of any other provision hereof.
14.     Governing Law. All questions concerning the construction, validity and interpretation of this Stock Option Award 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 Optionee with respect to the Shares, shall be governed by the corporate law of the State of Delaware.
15.     Provisions of Plan. The Stock Option provided for herein is granted pursuant to the Plan, and said Stock Option and this Stock Option Award 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 Stock Option Award Agreement solely by reference or are expressly cited herein. In the case of any conflict between the Plan and this Stock Option Award Agreement, the terms of the Plan shall control. 

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

BORGWARNER INC.

By: ________________________________
      Chairman & Chief Executive Officer

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 Stock Option Award Agreement and the Plan. I agree to be bound by all of the provisions set forth in this Stock Option Award Agreement and the Plan. 

__________________________________        _______________________________
Date                             Employee's Signature

__________________________________        ________________________________
SS# (U.S. Employees Only)                 Print Name

__________________________________        _________________________________
Home Street Address                     City, State, Zip, Country10 K 12.31.2012 Exhibit 10.16

Exhibit 10.16

BORG-WARNER AUTOMOTIVE, INC.
EXECUTIVE STOCK PERFORMANCE PLAN 
Revised and Re-approved, February 2, 2000 
TABLE OF CONTENTS
	
			
	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"
	2
	

	2.5. "Committee"
	2
	

	2.6. "Common Stock"
	2
	

	2.7. "Company"
	3
	

	2.8. "Disability"
	3
	

	2.9. "Normal Retirement"
	3
	

	2.10. "Participant"
	3
	

	2.11. "Peer Group Companies"
	3
	

	2.12. "Performance Award"
	3
	

	2.13. "Performance Period"
	3
	

	2.14. "Plan"
	3
	

	2.15. "Shareholders" 
	3
	

	2.16. "Termination for Cause"
	3
	

	2.17. "Total Shareholder Return of the Company"
	3
	

	2.18. "Total Shareholder Return of a Peer Group Company"
	4
	

	III. ELIGIBILITY
	4
	

	IV. PLAN DESIGN
	4
	

	4.1. Performance Period
	4
	

	4.2. Target and Performance Awards
	4
	

	4.3. Available Shares
	5
	

	4.4. Adjustment to Shares
	5
	

	4.5. Committee Discretion to Adjust Awards
	5
	

	V. PAYMENT
	6
	

	5.1. Timing and Form of Payment
	6
	

	5.2. Tax Withholding
	6
	

	5.3. Beneficiary Designation
	6
	

	5.4. Foreign Jurisdictions
	6
	

	5.5. Distribution upon Termination of Employment
	6
	

	VI. ADMINISTRATION
	7
	

	6.1. Committee
	7
	

	
			
	6.2. General Rights, Powers, and Duties of Committee
	7
	

	6.3. Information to be Furnished to Committee
	8
	

	6.4. Responsibility
	8
	

	VII. AMENDMENT AND TERMINATION
	8
	

	7.1. Amendment
	8
	

	7.2. Company's Right to Terminate
	8
	

	VIII. MISCELLANEOUS
	8
	

	8.1. No Implied Rights; Rights on Termination of Service
	8
	

	8.2. No Right to Company Assets
	9
	

	8.3. No Employment Rights
	9
	

	8.4. Other Benefits
	9
	

	8.5. Offset
	9
	

	8.6. Non-assignability
	9
	

	8.7. Notice
	9
	

	8.8. Governing Laws
	10
	

	IX. CHANGE OF CONTROL
	10
	

	9.1. Performance Awards Upon a Change of Control
	10
	

	9.2. Payment of Performance Awards After a Change of Control 
	10
	

I. GENERAL 

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.

II. DEFINITIONS 
Where appropriate, references in this Plan to the masculine shall include the feminine, and references to the singular shall include the plural. 

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 

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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

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 of 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 

3

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.

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 

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 

4

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 or 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, 

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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.

V. PAYMENT 

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 his 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.

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(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.
  

VI. ADMINISTRATION 

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:

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(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 the 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.

VII. AMENDMENT AND TERMINATION

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.

VIII. MISCELLANEOUS

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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 

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secretary. Such notice shall be deemed given as of 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.

IX. CHANGE OF CONTROL 

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.

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