Document:

EX-10.14

Exhibit 10.14

BORGWARNER INC.

BOARD OF DIRECTORS DEFERRED COMPENSATION PLAN

(As Amended and Restated Effective January 1, 2009)

November 26, 2008

 

 

BORGWARNER INC.

BOARD OF DIRECTORS DEFERRED COMPENSATION PLAN

As Amended and Restated Effective January 1, 2009

I. PURPOSE

The purpose of the BorgWarner Inc. Board of Directors Deferred Compensation Plan (the “Plan”) is to
enhance the Company’s ability to attract and retain qualified non-employee Directors. The Plan was
originally established effective January 1, 1995 as the Borg-Warner Automotive, Inc. Board of
Directors Deferred Compensation Plan. The Plan has subsequently been amended to permit allocation
of deferred amounts to Borg-Warner Automotive (now BorgWarner) Stock Units Accounts and has been
renamed the BorgWarner Inc. Board of Directors Deferred Compensation Plan. Except where otherwise
specified, this amendment and restatement of the Plan is effective January 1, 2009.

II. DEFINITIONS

Where appropriate, references in this Plan to the singular shall include the plural.

	 	2.1	 	“Beneficiary” shall mean the person or persons or entity designated by the
Participant to receive the balance of the Participant’s Account in the event of the
Participant’s death. The designation may be in favor of one or more Beneficiaries,
may include contingent as well as primary designations and named or unnamed trustees
under any will or trust agreement, may apportion the benefits payable in any manner
among the Beneficiaries. A Participant’s designation of one or more Beneficiaries
shall be made in writing in a manner designated by the Committee and shall not be
effective until received by the Committee. If a Participant’s designated
beneficiaries shall have predeceased the Participant, the Participant’s estate shall
be the Beneficiary. A Participant may change his or her Beneficiary without the
consent of any Beneficiary by similar instrument in accordance with rules and
procedures established by the Committee. The beneficiary designation form received
and acknowledged most recently by the Committee shall control as of any date. If
concurrent Beneficiaries are named without specifying the proportion of benefits due
each, distribution shall be made in equal shares to those Beneficiaries.
	 
	 	2.2	 	“Board of Directors” means the Board of Directors of BorgWarner Inc.
	 
	 	2.3	 	“Business Day” means a day on which the New York Stock Exchange is open for
trading.

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	 	2.4	 	“BW Stock Unit” means a measure of participation under the Plan which has a
value based on the Market Value of Common Stock. In the event of any Company stock
split, stock dividend, recapitalization, reorganization, merger, consolidation,
combination, exchange of shares, liquidation, spin-off or other similar change in
capitalization or event, or any distribution to holders of Common Stock other than a
regular cash dividend, the number of BW Stock Units credited to Participants’ BW Stock
Units Accounts under the Plan shall be appropriately adjusted by the Board of
Directors. The decision of the Board of Directors regarding any adjustment shall be
final, binding, and conclusive.
	 
	 	2.5	 	“BW Stock Units Account” means the subaccount of each Participant Account
that is established to reflect the Participant’s selection of BW Stock Units as an
Investment Option and to record the Company’s liability therefor, and which has a
value based on the Market Value of Common Stock.
	 
	 	2.6	 	“Committee” means the committee of the Company appointed by the Board of
Directors to manage and administer the Plan. This Committee shall consist of all or a
portion of those members of the Board of Directors who are employees of the Company.
	 
	 	2.7	 	“Common Stock” means the common stock, $0.01 par value, of BorgWarner Inc.
	 
	 	2.8	 	“Company” means BorgWarner Inc. (formerly, Borg-Warner Automotive, Inc.).
	 
	 	2.9	 	“Deferral Election” means the election agreement filed with the Committee by
a Participant for a Plan Year pursuant to the requirements of Article IV. The
Deferral Election shall indicate the percentage of the annual Retainer Fee that a
Participant is deferring, an allocation of the annual Retainer Fee deferral among the
Plan’s notional investment funds, and an election as to the time and form of payment
of the amounts deferred and associated earnings or losses.
	 
	 	2.10	 	“Deferral Year” means any calendar year with respect to which a Participant
files a Deferral Election, beginning as of January 1, 1995, and continuing until this
Plan is terminated.
	 
	 	2.11	 	“Deferred Benefit Account” means the account maintained on the books of the
Company for each Deferral Election of a Participant pursuant to Article IV.
	 
	 	2.12	 	“Disability” or “Disabled” means that a Participant is unable to engage in
any substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or can be expected to last
for a continuous period of not less than 12 months.

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For purposes of this Plan, a Participant shall also be deemed Disabled if
determined to be totally disabled by the Social Security Administration.

	 	2.13	 	“Effective Date” means January 1, 1995. The Effective Date with respect to
the addition of the BW Stock Unit Accounts and related amendments to the Plan is April
18, 1995. The Effective Date of this amendment and restatement of the Plan is January
1, 2009 unless otherwise provided.
	 
	 	2.14	 	“Investment Option” shall mean a security, mutual fund, common or collective
trust, insurance company pooled separate account, or other notional benchmark for
measuring the income, gain or loss recorded for all or a portion of a Participant
Account.
	 
	 	2.15	 	“Market Value” means, with respect to a share of Common Stock, the closing
price of such share on the New York Stock Exchange on the day in question, or the day
of the last previous sale if there is not any sales on the day in question.
	 
	 	2.16	 	“Participant” means a member of the Board of Directors of the Company who
(a) is not an employee of the Company, (b) is designated to be eligible to participate
in the Plan pursuant to Article III, and (c) has made an initial Deferral Election
pursuant to Article IV. A director who has deferred a percentage of his or her
Retainer Fee under the Plan shall continue as a Participant until he or she has
received payment of all amounts deferred by him or her pursuant to his or her Deferral
Elections under the Plan.
	 
	 	2.17	 	“Participant Account” means the account established for each Participant to
reflect the total liability of the Company to him or her for all Deferred Benefit
Accounts, as provided in Section 5.1.
	 
	 	2.18	 	“Plan” means this BorgWarner Inc. Amended and Restated Board of Directors
Deferred Compensation Plan, as amended from time to time.
	 
	 	2.19	 	“Retainer Fee” means the annual Retainer Fee payable during the relevant
Deferral Year to a Participant for services rendered as a member of the Board of
Directors of the Company. The Retainer Fee does not include payment of any specific
service fees (such as meeting fees, chairperson fees, etc.) to members of the Board of
Directors.
	 
	 	2.20	 	“Termination of Service” means the Participant’s cessation of service with
the Board of Directors for any reason whatsoever, whether voluntary or involuntary,
including by reason of death or Disability. In addition, for purposes of distributing
the portion of a Participant Account attributable to Retainer Fees earned on or after
January 1, 2005, a “Termination of Service” must also constitute a “Separation of
Service” from BorgWarner and all of its affiliates, as such term is defined in the
regulations for Section 409A of the Internal Revenue Code.

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	 	2.21	 	“Unforeseeable Emergency” means a severe financial hardship of the
Participant or the Participant’s beneficiary resulting from an illness or accident of
the Participant or the Participant’s Beneficiary, the Participant’s or beneficiary’s
spouse, or the Participant’s or beneficiary’s dependent (as defined in
section 152(a)); loss of the Participant’s or beneficiary’s property due to casualty;
or other similar extraordinary and unforeseeable circumstances arising as a result of
events beyond the control of the Participant or beneficiary. An event shall not
qualify as an unforeseeable emergency to the extent that such emergency is or may be
relieved through reimbursement or compensation from insurance or otherwise, by
liquidation of the Participant’s assets, to the extent the liquidation of such assets
would not cause severe financial hardship, or by cessation of deferrals under the
Plan. The purchase of a home and the payment of college tuition are not Unforeseeable
Emergencies.
	 
	 	2.22	 	“Unscheduled Withdrawal” is defined in Section 6.7.
	 
	 	2.23	 	“Valuation Date” means the date on which the value of a Participant Account
or any portion thereof is determined, as provided in Article V hereof. The first day
of each Deferral Year shall be a Valuation Date. Additional Valuation Dates may be
established by the Committee, including any other dates specifically mentioned in the
Plan; the Committee may provide for “daily valuation” of Participant Accounts.

III. ELIGIBILITY AND PARTICIPATION

Participation in the Plan shall be limited to all non-employee members of the Board of Directors
who elect to participate in the Plan by filing a Deferral Election with the Committee pursuant to
Article IV. A Participant who has made a Deferral Election for one or more Deferral Years but does
not make a Deferral Election (or elects not to defer a percentage of his or her annual Retainer
Fee) in a subsequent Deferral Year shall continue as a Participant until all benefits under the
Plan have been distributed to him or her.

IV. DEFERRAL ELECTIONS

	 	4.1	 	Time of Election. Deferral Elections made for a Deferral Year shall
be made no later than December 31 of the year prior to the Deferral Year for which the
Deferral Election is made. A new non-employee member of the Board of Directors shall
be eligible to participate in the Plan for a Deferral Year if he or she files a
Deferral Election with the Committee within 30 days of his or her commencement of
service as a member of the Board of Directors; such Deferral Election shall apply only
to Retainer Fees that have not been earned as of the date of the filing of the
Deferral Election.

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	 	4.2	 	Minimum and Maximum Deferral and Form of Election.

	 	a.	 	Prior to the beginning of each Deferral Year, each
Participant may elect to defer up to 100% of his or her Retainer Fee for such
Deferral Year, in increments of 5%. The Participant may also elect not to
defer any portion of his or her Retainer Fee in a Deferral Year. The
Participant shall also select one or more times and forms of distribution, as
specified in Section 6.1. A Participant’s Deferral Election shall become
effective in the year prior to the Deferral Year upon the Committee reviewing
it and deeming it complete. A Participant’s Deferral Election shall be
irrevocable after December 31 of the year prior to the year for which the
Deferral Election is made.
	 
	 	b.	 	A Participant shall complete a separate Deferral Election for
each Deferral Year; no Deferral Election shall continue in effect after the
Deferral Year for which it has been made. The amount of any Retainer Fee
deferred pursuant to each Deferral Election must remain in the Plan until the
Participant’s sixty-fifth birthday or his or her Termination of Service (as
elected by the Participant, subject to the provisions of Section 6.1) unless
the Committee elects to distribute such amounts due to an Unforeseeable
Financial Emergency (pursuant to Section 6.6).
	 
	 	c.	 	At the time of the Participant’s initial Deferral Election,
he or she shall also elect a Beneficiary and form of payment to such
Beneficiary, on a Beneficiary designation form provided by the Committee, as
provided in Section 6.3.

	 	4.3	 	Timing of Deferral Credits. The percentage amount of a Retainer Fee
that a Participant elects to defer in the Deferral Election shall cause an equivalent
reduction in the amount of the Retainer Fee actually paid in cash to the Participant
for that year. Retainer Fee deferrals shall be credited to each Participant’s
appropriate Deferred Benefit Account as of the first Business Day after the January 1
that immediately follows the relevant Deferral Year. For example, any Retainer Fee
payable to the Participant during 2009 shall be credited to the Participant’s Account
as of the first Business Day after January 1, 2010. Such amounts credited to the
Participant’s Account shall be allocated among the Investment Options elected by the
Participant pursuant to Section 5.1.
	 
	 	4.4	 	Failure to Submit Election Forms. If a Participant fails to submit a
Deferral Election within the relevant time limit under Section 4.1 that is accepted by
the Committee on or before December 31 of the year prior to the Deferral Year, the
Participant will be deemed to have elected to defer 0% of his or her Retainer Fee for
the Deferral Year for which such Deferral Election is required.

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	 	4.5	 	Termination of Deferral Election. The Committee shall terminate a
Participant’s Deferral Election for the remainder of the Deferral Year in which the
Committee grants the Participant’s written request for a distribution by reason of an
Unforeseen Financial Emergency.

V. STATUS OF DEFERRED AMOUNTS

	 	5.1	 	Participant Accounts.

	 	a.	 	Establishment and Crediting of Contributions, Earnings, and
Dividends. The Company shall establish a Participant Account for each
Participant to reflect accurately its total liability to the Participant for
all Deferred Benefit Accounts. The Participant Account shall be credited with
all amounts deferred by a Participant under each Deferral Election, and any
earnings, losses and distributions.
	 
	 	b.	 	Deferred Benefit Accounts. Each Participant Account shall
contain sub-accounts for each Deferred Benefit Account, and shall reflect
amounts in such Deferred Benefit Account that are attributable to the Retainer
Fee deferred under the applicable Deferral Election.
	 
	 	c.	 	Investment Options. The Company shall offer one or more
Investment Options for measuring the income, gain or loss recorded for a
Participant’s Account and may prospectively change Investment Options at any
time upon written notice to Participants. Until the Board of Directors
otherwise provides, the Investment Options under the Plan shall include BW
Stock Units.
	 
	 	d.	 	Investment Options Allocation Elections. A Participant shall
elect on his or her Deferral Election form or on such other form or by such
other means as may be specified by the Committee, one or more Investment
Options to which deferrals to be credited to his or her Participant Account
shall be allocated. A Participant may change the allocation of future
deferrals among the Investment Options and may change the allocation of his or
her Participant Account balance among the Investment Options as frequently as
permitted by the Committee under rules and procedures applicable to all
Participants. The Committee shall establish and may prospectively change its
rules regarding the timing and frequency of Investment Option elections and
may establish and may prospectively change minimum amounts or percentages for
allocating deferrals and transferring Account balances among the Investment
Options.
	 
	 	e.	 	Failure or Refusal to Allocate. In the event a Participant
fails or refuses to make an election allocating Deferrals credited to his or

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her Account among the then available Investment Options, the Committee
shall, in its discretion, either: (i) reject the Participant’s Deferral
Election as incomplete (if such rejection may be made prior to the
Deferral Year for which the Deferral Election is made); or (ii) specify
the Investment Option or Investment Options to which the Participant’s
Account shall be allocated and notify the Participant of its selection,
which notification may be the Participant Account statements provided to
the Participant. If the Committee specifies the Investment Option or
Investment Options to which a Participant’s Account has been allocated
because of the Participant’s failure or refusal to make an election
allocating Deferrals credited to his or her Account, neither the Committee
nor the Company shall have any liability to the Participants therefor.

	 	f.	 	Allocations to BW Stock Units Accounts. Amounts in a
Participant Account that have been allocated to BW Stock Units shall be
converted to BW Stock Units based on the Market Value of Common Stock as of
the date of crediting.
	 
	 	g.	 	Crediting of Dividends on BW Stock Units. Whenever the
Company pays a dividend on its Common Stock, in cash or property, at a time
when a Participant has BW Stock Units credited to his or her Account, the
Participant shall be credited with a number of additional BW Stock Units equal
to the result of multiplying the number of BW Stock Units in the Participant’s
Account on the dividend record date by the dividend paid on each share of
Common Stock, and then dividing this amount by the Market Value of the Common
Stock on the dividend payment date. In the case of any dividend distributable
in property other than Common Stock, the per share value of the dividend shall
be the value determined by the Company for federal income tax reporting
purposes.
	 
	 	h.	 	Transfers From or Into BW Stock Units Accounts.
Notwithstanding anything in this Section to the contrary,

	 	1.	 	Under such procedures as may be established
by the Committee, a Participant may elect to make one transfer per
year, from or into the Participant’s BW Stock Units Account, of
amounts previously credited to the Participant’s Account.
	 
	 	2.	 	Transfers must be in an amount that equals
or exceeds the lesser of $1,000 (or such other amount as the
Committee may establish) or the entire balance of the account from
which the transfer is made.

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	 	i.	 	Adjustments to Participant Accounts for Investment
Performance. A Participant Account balance shall be adjusted as of each
Valuation Date, based on the performance of the Investment Options selected or
deemed selected by the Participant, as if the portion of the Participant’s
Account allocated to an Investment Option were actually invested in such
Investment Option and adjusted for other amounts as if such other amounts were
actually charged or credited to an actual Account balance of the Participant.
The Committee may also charge as an expense against a Participant’s Account:
(i) amounts customarily charged by the sponsor of one or more Investment Funds
that are charged on a per Participant or per transaction basis and not
otherwise charged as an expense of an Investment Option; and (ii) the
Committee’s and the Company’s own expenses and out-of-pocket fees in
administering the Plan. The Committee’s allocation of charges and expenses
among Participant Accounts shall be final and conclusive against the
Participants and all other parties.

	 	5.2	 	Vesting of Participant Accounts. A Participant shall be 100 percent
vested in all amounts credited to his or her Participant Account at all times.
	 
	 	5.3	 	Effective Date. Article V shall be effective January 1, 2007 except
that Section 5.1(h) shall be effective January 1, 2009.

VI. DISTRIBUTIONS AND WITHDRAWALS OF BENEFITS

	 	6.1	 	Distribution Options. When making a Deferral Election pursuant to
Section 4.2, the Participant must elect one of the following alternative forms of
payment for each related Deferred Benefit Account:

	 	a.	 	Pre-2009 Balances. The following alternative forms of
payment shall apply to the portion of a Participant Account that is
attributable to Retainer Fees earned prior to January 1, 2009:

	 	1.	 	Substantially equal monthly installments
for a period of 5, 10, 15 or 20 years payable on the first day of
each month commencing on the January 1 next following the
Participant’s sixty-fifth (65th) birthday or Termination of Service,
according to the option chosen by the Participant.
	 
	 	2.	 	A lump sum payable on the first Business
Day after the January 1 next following the Participant’s sixty-fifth
(65th) birthday or Termination of Service, according to the option
chosen by the Participant.

	 	b.	 	Post-2008 Deferrals. The following alternative forms of
payment shall apply to the portion of a Participant Account that is
attributable to Retainer Fees earned after December 31, 2008:

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	 	1.	 	Substantially equal annual installments for
a period of 5 years commencing on the January 1 next following the
Participant’s sixty-fifth (65th) birthday or Termination of Service,
according to the option chosen by the Participant.
	 
	 	2.	 	A lump sum payable on the January 1 next
following the Participant’s sixty-fifth (65th) birthday or
Termination of Service, according to the option chosen by the
Participant.

Notwithstanding subsections (a) and (b) above, any Participant who is age
sixty-five (65) or older in the relevant Deferral Year must elect to commence
payment of any Deferred Benefit Account for such Deferral Year on the first
Business Day after the January 1 next following his or her Termination of Service.

	 	6.2	 	Change in Distribution Options.

	 	a.	 	Pre-2005 Balances. At least 24 months (or more) prior to the
expiration of the Participant’s term as a member of the Board of Directors or
the Participant’s sixty-fifth (65th) birthday, whichever occurs first, a
Participant may submit a written election to the Committee to change the
commencement of payment of one or more Deferred Benefit Accounts from
Termination of Service to age 65 or change the form of payment elected for
such Deferred Benefit Account(s) from installment payments to a lump sum
without penalty; provided, however, that if the Participant subsequently
incurs a Termination of Service within the 24 months immediately succeeding
such election change, the election change shall be null and void and the
original election shall be reinstated. However, any other changes elected by
the Participant shall result in a 10% reduction before payment of the relevant
Deferred Benefit Account. This includes, but is not limited to, (a) an
election to change from a lump sum payment to installment payments or (b) an
election to defer commencement of payment that is submitted to the Committee
less than 24 months prior to the expiration of the Participant’s term. The
Participant shall only be subjected to one 10% reduction in each affected
Deferred Benefit Account at one time, regardless of the number of changes in
form of payment that a Participant elects at that time. This Section 6.2(a)
shall only apply to the portion of a Participant’s Account that is
attributable to Retainer Fees earned prior to January 1, 2005.
	 
	 	b.	 	Post-2004 Balances. Prior to January 1, 2009, a change in
the form of payment may only be made in accordance with the Special Transition
Election provided by Section 6.10 hereof. After December 31, 2008, no change
in a Participant’s distribution election shall be permitted. This Section
6.2(b) shall only apply to

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the portion of a Participant Account that is attributable to Retainer Fees
earned on or after January 1, 2005.

	 	6.3	 	Designation of Beneficiary and Form of Death Benefit. Each
Participant must designate at least one Beneficiary on a Beneficiary designation form
provided by the Committee in the event of the Participant’s death. The Participant
shall also designate a form of death benefit from among the following: lump sum
payment or equal monthly installments (equal annual installments for installments
payable on or after January 1, 2007) for a period of 5 years. The form of death
benefit elected shall apply to the full amount of the Participant’s Account. All forms
of benefit shall commence as of the first Business Day after the January 1 next
following the Participant’s death.
	 
	 	6.4	 	Death Prior to Termination of Service.

	 	a.	 	Pre-2005 Balances. Upon the death of a Participant prior to
his or her Termination of Service, the Beneficiary of the deceased Participant
shall be entitled to a death benefit equal to the value of the Participant
Account. The form of benefit shall be as provided in Section 6.3. If the
Participant’s Beneficiary is not alive at the time of the Participant’s death,
payment of the Participant Account shall be made to the Participant’s estate
in the form of a lump sum on the first Business Day of the first month
subsequent to the Participant’s death (such day to be a Valuation Date with
respect to the applicable Participant Account) or as soon as otherwise
administratively feasible. This Section 6.4(a) shall only apply to the
portion of a Participant’s Account that is attributable to Retainer Fees
earned prior to January 1, 2005.
	 
	 	b.	 	Post-2004 Balances. Upon the death of a Participant prior to
his or her Termination of Service, the Beneficiary of the deceased Participant
shall be entitled to a death benefit equal to the value of the Participant
Account. The form of benefit shall be as provided in Section 6.3. This
Section 6.4(b) shall only apply to the portion of a Participant’s Account that
is attributable to Retainer Fees earned on or after to January 1, 2005.

	 	6.5	 	Death Following Termination of Service. Upon the death of a
Participant following his or her Termination of Service, the Beneficiary of the
deceased Participant shall continue to receive any of the remaining payments from the
Participant Account in the form of payment elected by the Participant in his or her
Deferral Elections.
	 
	 	6.6	 	Emergency Benefit: Waiver of Deferral. In the event that the
Committee, upon written petition of the Participant or his or her Beneficiary,
determines in its sole discretion that the Participant or his or her

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Beneficiary has suffered an Unforeseeable Financial Emergency, the Company shall
pay to the Participant or his or her Beneficiary on the first Business Day of the
first calendar month following such determination or as soon as practicable (such
date to be a Valuation Date with respect to the applicable Participant Account), an
amount necessary to satisfy the emergency, but not in excess of the Participant
Account balance, provided however, that no payments shall be made from a
Participant’s BW Stock Unit Account pursuant to this Section 6.6.

	 	6.7	 	Unscheduled Withdrawals for Pre-2005 Balances. A Participant may make
an Unscheduled Withdrawal of any amounts in his or her Participant Account that have
been in the Plan for at least five years by filing an election with the Committee. The
Company shall make payment of the requested withdrawal as of the first Business Day
after the January 1 next following the Committee’s receipt and approval of the
withdrawal election. Subject to the remainder of this Section 6.7, a request for an
Unscheduled Withdrawal may be filed at any time prior to December 15th of the year
preceding the year in which unscheduled withdrawal is made. A Participant may take no
less than the lesser of $2,000 or the remaining balance in his or her Participant
Account in the form of an Unscheduled Withdrawal. Amounts taken in the form of an
Unscheduled Withdrawal will be reduced by a 10% penalty at the time of payment. No
Unscheduled Withdrawals shall be made from a Participant’s BW Stock Unit Account.
This Section 6.7 shall only apply to the portion of a Participant Account that is
attributable to Retainer Fees earned prior to January 1, 2005.
	 
	 	6.8	 	Withholding Taxes. To the extent required by law in effect at the
time payments are made, the Company shall withhold any taxes required to be withheld
by any Federal, State, or local government.
	 
	 	6.9	 	Form of Distributions/Withdrawals. All distributions and withdrawals
made under the Plan shall be made in cash and shall be valued as of the Valuation Date
coincident with or immediately preceding the date of the distribution or withdrawal.
Distributions from the BW Stock Account shall be converted to cash, as of such
Valuation Date, in order to effect such distributions.
	 
	 	6.10	 	Code Section 409A Special Transition Rules Elections for Post-2004
Deferrals. Notwithstanding the required deadline for the submission of an initial
distribution election described in this Article 6, the Committee may, as permitted by
Code Section 409A and related Treasury guidance or Regulations, provide a limited
period beginning January 1, 2008, in which Participants may make new distribution
elections (from among those offered by the Plan except that the only the form of
installment payments available is the 5-year annual installments form described by
Section 6.1(b)(1)), by submitting a distribution election form, as prescribed by the
Committee, on or before the deadline established by the Committee, which

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in no event shall be later than December 31, 2008; provided, however, no such
change in election shall defer any payment which would otherwise have been made in
2008 nor accelerate any payment that is payable in 2009 or later into 2008. Any
distribution election made in accordance with the requirements established by the
Committee, pursuant to this section, shall not be treated as a change in the form
or timing of a Participant’s benefit payment for purposes of Code Section 409A or
the Plan. The Committee shall interpret all provisions relating to an election
submitted in accordance with this section in a manner that is consistent with Code
Section 409A and related Treasury guidance or Regulations. If any distribution
election submitted in accordance with this section either (i) relates to payments
that a Participant would otherwise receive in 2008, or (ii) would cause payments to
be made in 2008, such election shall not be effective. This Section 6.10(a) shall
only apply to the portion of a Participant Account that is attributable to Retainer
Fees earned after December 31, 2004 and shall be effective October 31, 2008.

VII. CLAIMS FOR BENEFITS PROCEDURE

	 	7.1	 	Claim for Benefits. Any claim for benefits under the Plan shall be
made in writing to any member of the Committee. If such claim is wholly or partially
denied by the Committee, the Committee shall, within a reasonable period of time, but
not later than 60 days after receipt of the claim, notify the claimant of the denial
of the claim.
	 
	 	7.2	 	Request for Review of a Denial of a Claim for Benefits. Upon the
receipt by the claimant of written notice of denial of the claim, the claimant may
within 90 days file a written request to the Committee, requesting a review of the
denial of the claim, which review shall include a hearing if deemed necessary by the
Committee in its sole discretion. In connection with the claimant’s appeal of the
denial of his or her claim, he or she may review relevant documents and may submit
issues and comments in writing.
	 
	 	7.3	 	Decision upon Review of Denial of Claim for Benefits. The Committee
shall render a decision on the claim review promptly, but no more than 60 days after
the receipt of the claimant’s request for review, unless special circumstances (such
as the need to hold a hearing) require an extension of time, in which case the 60 day
period shall be extended to 120 days. The decision of the Committee shall be final and
binding in all respects on both the Company and the claimant.

VIII. ADMINISTRATION

	 	8.1	 	Committee. The Plan shall be administered by the Committee. No member
of the Committee may be a Participant under the Plan. The Committee may designate
another administrative committee comprised of Company employees to oversee the day to
day administration of the Plan, including,

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without limitation, the solicitation, review and approval of Participant election
forms.

	 	8.2	 	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 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.

	 	8.3	 	Information to be Furnished to Committee. The Company shall furnish
the Committee such data and information as it may require. The records of the Company
shall be determinative of each Participant’s period of service as a member of the
Board of Directors, personal data and Retainer Fee deferrals. Participants and their
Beneficiaries shall furnish to the Committee such evidence, data or information, and
shall execute such documents, as the Committee requests.
	 
	 	8.4	 	Responsibility. No member of the Committee or of the Board of
Directors shall be liable to any person for any action taken or omitted in connection
with the administration of this Plan unless attributable to his or her 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 or her Company duties. Each member
of the Committee shall be indemnified and held harmless by the Company for any
liability arising

November 26, 2008

14

 

out of the administration of the Plan, to the maximum extent permitted by law.

IX. AMENDMENT AND TERMINATION

	 	9.1	 	Amendment. The Plan may be amended in whole or in part by the
Committee at any time. No amendment shall effectively decrease the value of a
Participant Account. The Committee reserves the unilateral right to change any rule
under the Plan if it deems such a change necessary to avoid constructive receipt, to
comply with the requirements of Code Section 409A, or to avoid the application of the
Employee Retirement Income Security Act of 1974, as amended, to the Plan.
	 
	 	9.2	 	Company’s Right to Terminate. The Committee reserves the sole right
to terminate the Plan at any time after the Effective Date. In the event of any such
termination, the Participant shall be entitled to the accrued amount of his or her
Participant Account. In the event of the Plan’s termination, the portion of the
Participant’s Accounts that is attributable to Retainer Fees earned on or after
January 1, 2005, shall be paid to the Participant in as early as possible consistent
with the requirements for payments of deferred compensation under Subsections (a)(2) –
(a)(4), inclusive of Code Section 409A and the regulations thereunder.

X. MISCELLANEOUS

	 	10.1	 	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.
	 
	 	10.2	 	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.

November 26, 2008

15

 

	 	10.3	 	No Service Rights. Nothing herein shall constitute a contract 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.
Nothing herein shall be construed as fixing or regulating the Retainer Fee or any
other amount payable to any Participant.
	 
	 	10.4	 	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. This Section
10.4 shall only apply to the portion of the Participant Account that is attributable
to Retainer Fees earned prior to January 1, 2005.
	 
	 	10.5	 	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, 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.
	 
	 	10.6	 	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. 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.
	 
	 	10.7	 	Governing Laws. The Plan shall be construed and administered
according to the laws of the State of Michigan.
	 
	 	10.8	 	Status of Investment Options. The Investment Options offered under
the Plan are for the sole purpose of providing a performance measurement for adjusting
Participant Accounts for income, gain or loss. Notwithstanding anything in this Plan
to the contrary, the Company shall not be required to actually invest monies in any
fund designated as an Investment Option, any decision to so invest shall remain within
the complete discretion of the Company, and any amounts so invested shall remain the
property of the

November 26, 2008

16

 

Company. A Participant whose Participant Account consists in whole or in part of
BW Stock Units shall have no rights of a shareholder of Common Stock. Neither the
Participant nor his or her Beneficiary shall have any right, other than the right
of an unsecured general creditor, against the Company or in respect to the benefits
payable, or which may be payable, to the Participant or Beneficiary under the Plan.

	 	10.9	 	Compliance With Court Orders. The Committee is authorized to comply
with any court order in any action in which the Plan or the Committee has been named
as a party, including any action involving a determination of the rights or interests
in a Participant’s benefits under the Plan. Notwithstanding the foregoing, the
Committee shall interpret this provision in a manner that is consistent with Code
Section 409A and other applicable tax law. In addition, if necessary to comply with a
qualified domestic relations order, as defined in Code Section 414(p)(1)(B), pursuant
to which a court has determined that a spouse or former spouse of a Participant has an
interest in the Participant’s benefits under the Plan, the Committee, in its sole
discretion, shall have the right to immediately distribute the spouse’s or former
spouse’s interest in the Participant’s benefits under the Plan to such spouse or
former spouse.
	 
	 	10.10	 	Distributions For the Payment of Taxes. If any portion of a
Participant Account under this Plan is required to be included in income by the
Participant prior to receipt due to a failure of this Plan to meet the requirements of
Code Section 409A and related Treasury guidance or Regulations, the Participant may
petition the Committee or Administrator, as applicable, for a distribution of that
portion of his or her Participant Account Balance that is required to be included in
his or her income. Upon the grant of such a petition, which grant shall not be
unreasonably withheld, the Company shall distribute to the Participant immediately
available funds in an amount equal to the portion of his or her Participant Account
required to be included in income as a result of the failure of the Plan to meet the
requirements of Code Section 409A and related Treasury guidance or Regulations, which
amount shall not exceed the Participant’s unpaid vested Participant Account balance
under the Plan. If the petition is granted, such distribution shall be made within
ninety (90) days of the date when the Participant’s petition is granted. Such a
distribution shall affect and reduce the Participant’s benefits to be paid under this
Plan.
	 
	 	10.11	 	Special Transition Rule for the Crediting of Participant Accounts.
Prior to January 2, 2007, the Plan’s Investment Options consisted of (1) the Moody’s
Money Market Credit Investment Option, (2) the Prime Rate Money Credit Option, and (3)
BWA Stock Units.

	 	a.	 	The opening balances of Participant Accounts on January 1,
2007 (if any) shall be based upon the value of Participant Accounts as of
December 31, 2006 as determined under the provisions of the Plan

November 26, 2008

17

 

for crediting and valuing Participant Accounts as in effect prior to its
amendment and restatement effective January 1, 2005, and based on
Participants’ Investment Options allocations as in effect on December 31,
2006.

	 	b.	 	On January 2, 2007, Participant Accounts shall be credited
with amounts deferred by the Participants for the 2006 Deferral Year in
accordance with their 2006 Deferral Elections, which deferrals shall be
allocated to the Participants’ Moody’s Money Market Credit Account, Prime Rate
Money Credit Account, and/or BW Stock Units Account, as previously elected by
the Participant.
	 
	 	c.	 	Following the crediting to Participant Accounts as provided
by Section 10.11 (a) and (b), each Participant Account shall be subsequently
reallocated on January 2, 2007 among the Investment Options as elected by the
Participant under rules and procedures established by the Committee.

	 	10.12	 	Code Section 409A.. It is intended that the provisions of the Plan
comply with Section 409A of the Code and the regulations and guidance promulgated
thereunder (collectively, “Code Section 409A”), and all provisions of the Plan shall
be construed in a manner consistent with the requirements for avoiding taxes or
penalties under Code Section 409A.

	 	a.	 	If under the Plan, an amount is to be paid in two or more
installments, for purposes of Code Section 409A, each installment shall be
treated as a separate payment.
	 
	 	b.	 	A Termination of Service shall not be deemed to have occurred
for purposes of any provision of the Plan providing for the payment of amounts
upon or following a Termination of Service unless such termination is also a
“Separation from Service” within the meaning of Code Section 409A and, for
purposes of any such provision of the Plan, references to a “resignation,”
“termination,” “termination of service” or like terms shall mean Separation
from Service.
	 
	 	c.	 	Participation in this Plan is limited to non-employee
directors of the Company. Accordingly, it is unlikely that any Participant
will subsequently become a “specified employee” of the Company within the
meaning of that term under Section 409A(2)(A) of the Code. If, however, a
Participant is deemed on the date of termination of his/her service to be a
“specified employee”, within the meaning of that term under the Code and using
the identification methodology selected by the Company from time to time, or
if none, the default methodology, then:

November 26, 2008

18

 

	 	1.	 	With regard to any payment under the Plan
to the Participant that is payable on account of separation from
service, such payment shall not be made or provided prior to the
earlier of (i) the expiration of the six-month period measured from
the date of the Participant’s Separation from Service or (ii) the
date of the Participant’s death; and
	 
	 	2.	 	On the first day of the seventh month
following the date of the Participant’s Separation from Service or,
if earlier, on the date of his/her death, (x) all payments delayed
pursuant to this section (whether they would otherwise have been
payable in a single sum or in installments in the absence of such
delay) shall be paid or reimbursed to the Participant in a lump sum,
and any remaining payments and benefits due under this Plan shall be
paid or provided in accordance with the normal dates specified from
them herein and (y) all distributions of equity delayed pursuant to
this section shall be made to the Participant.

	 	d.	 	No payment or distribution under the Plan shall be
accelerated or delayed, except as permitted under Code Section 409A.
	 
	 	e.	 	This Section 10.12 shall only apply to the portion of a
Participant Account that is attributable to Retainer Fees earned on or after
January 1, 2005.

November 26, 2008

19EX-10.15

Exhibit 10.15

AMENDED AND RESTATED

CHANGE OF CONTROL EMPLOYMENT AGREEMENT

          AGREEMENT by and between BorgWarner Inc., a Delaware corporation (the “Company”) and
                                        (the “Executive”) dated as of the                    day of              
        200                    .

          The Board of Directors of the Company (the “Board”), has determined that it is in the best
interests of the Company and its stockholders to assure that the Company will have the continued
dedication of the Executive, notwithstanding the possibility, threat or occurrence of a Change of
Control (as defined below) of the Company. The Board believes it is imperative to diminish the
inevitable distraction of the Executive by virtue of the personal uncertainties and risks created
by a pending or threatened Change of Control and to encourage the Executive’s full attention and
dedication to the Company currently and in the event of any threatened or pending Change of
Control, and to provide the Executive with compensation and benefits arrangements upon a Change of
Control which ensure that the compensation and benefits expectations of the Executive will be
satisfied and which are competitive with those of other corporations. Therefore, in order to
accomplish these objectives and in consideration of the Executive’s covenants in Section 10, the
Board has caused the Company to enter into this Agreement.

          NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:

          1. Certain Definitions. (a) The “Effective Date” shall mean the first date during
the Change of Control Period (as defined in Section 1(b)) on which a Change of Control (as defined
in Section 2) occurs. Anything in this Agreement to the contrary notwithstanding, if (i) the
Executive’s employment with the Company is terminated by the Company, (ii) the Date of Termination
is prior to the date on which a Change of Control occurs, and (iii) it is reasonably demonstrated
by the Executive that such termination of employment (A) was at the request of a third party that
has taken steps reasonably calculated to effect a Change of Control or (B) otherwise arose in
connection with or anticipation of a Change of Control, then for all purposes of this Agreement the
“Effective Date” shall mean the date immediately prior to such Date of Termination.

          (b) The “Change of Control Period” shall mean the period commencing on the date hereof and
ending on the third anniversary of the date hereof; provided, however, that
commencing on the date one year after the date hereof, and on each annual anniversary of such date
(such date and each annual anniversary thereof shall be hereinafter referred to as the “Renewal
Date”), unless previously terminated, the Change of Control Period shall be automatically extended
so as to terminate three years from such Renewal Date, unless at least 60 days prior to the Renewal
Date the Company shall give notice to the Executive that the Change of Control Period shall not be
so extended.

          2. Change of Control. For the purpose of this Agreement, a “Change of Control” shall
mean:

          (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

1

 

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 of the Company (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, (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 entity controlled by the Company, (Z) any acquisition pursuant to
a transaction which complies with clauses (i), (ii) and (iii) of subsection (c) of this Section 2;

          (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 stockholders, 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;

          (c) Consummation by the Company of a reorganization, statutory share exchange, merger or
consolidation or similar transaction involving the Company or any of its subsidiaries or sale or
other disposition of all or substantially all of the assets of the Company or the acquisition of
assets or stock of another entity by the Company or any of its subsidiaries (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 that 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 (or, for a non-corporate entity, equivalent securities)
and the combined voting power of the then outstanding voting securities entitled to vote generally
in the election of directors (or, for a non-corporate entity, equivalent governing body), as the
case may be, of the entity resulting from such Business Combination (including, without
limitation, an entity 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 corporation resulting from such Business Combination
or 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 (or, for a non-corporate entity, equivalent securities)
of the entity resulting from such Business Combination or the combined voting power of the then
outstanding voting securities of such entity 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 (or, for a non-corporate entity, equivalent governing body) of the entity resulting

2

 

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 stockholders of the Company of a complete liquidation or dissolution of
the Company.

          3. Employment Period. The Company hereby agrees to continue the Executive in its
employ, and the Executive hereby agrees to remain in the employ of the Company subject to the terms
and conditions of this Agreement, for the period commencing on the Effective Date and ending on the
[second/third] anniversary of such date (the “Employment Period”). The Employment Period shall
terminate upon the Executive’s termination of employment for any reason.

          4. Terms of Employment. (a) Position and Duties. (i) During the Employment
Period, (A) the Executive’s position (including status, offices, titles and reporting
requirements), authority, duties and responsibilities shall be at least commensurate in all
material respects with the most significant of those held, exercised and assigned to the Executive
at any time during the 120-day period immediately preceding the Effective Date and (B) the
Executive’s services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date or any office or location less than 35 miles from such
location.

               (ii) During the Employment Period, and excluding any periods of vacation and sick leave to
which the Executive is entitled, the Executive agrees to devote reasonable attention and time
during normal business hours to the business and affairs of the Company and, to the extent
necessary to discharge the responsibilities assigned to the Executive hereunder, to use the
Executive’s reasonable best efforts to perform faithfully and efficiently such responsibilities.
During the Employment Period it shall not be a violation of this Agreement for the Executive to (A)
serve on corporate, civic or charitable boards or committees, (B) deliver lectures, fulfill
speaking engagements or teach at educational institutions and (C) manage personal investments, so
long as such activities do not significantly interfere with the performance of the Executive’s
responsibilities as an employee of the Company in accordance with this Agreement. It is expressly
understood and agreed that to the extent that any such activities have been conducted by the
Executive prior to the Effective Date, the continued conduct of such activities (or the conduct of
activities similar in nature and scope thereto) subsequent to the Effective Date shall not
thereafter be deemed to interfere with the performance of the Executive’s responsibilities to the
Company.

          (b) Compensation. (i) Base Salary. During the Employment Period, the
Executive shall receive an annual base salary (“Annual Base Salary”), which shall be paid at an
annual rate, at least equal to twelve times the highest monthly base salary paid or payable,
including any base salary which has been earned but deferred, to the Executive by the Company and
its affiliated companies in respect of the twelve-month period immediately preceding the month in
which the Effective Date occurs. The Annual Base Salary shall be paid at such intervals as the
Company pays executive salaries generally. During the Employment Period, the Annual Base Salary
shall be reviewed no more than 12 months after the last salary increase awarded to the Executive
prior to the Effective Date and thereafter at least annually. Any increase in Annual Base Salary
shall not serve to limit or reduce any other obligation to the Executive under this

3

 

Agreement. Annual Base Salary shall not be reduced after any such increase and the term
Annual Base Salary as utilized in this Agreement shall refer to Annual Base Salary as so increased.
As used in this Agreement, the term “affiliated companies” shall include any company controlled
by, controlling or under common control with the Company.

               (ii) Annual Bonus. In addition to Annual Base Salary, the Executive shall be awarded,
for each fiscal year ending during the Employment Period, an annual bonus (the “Annual Bonus”) in
cash at least equal to the Executive’s average of the bonuses paid or payable under the Company’s
Management Incentive Bonus Plan, or any comparable annual bonus under any predecessor or successor
plan, in respect of the last three full fiscal years prior to the Effective Date (or, if the
Executive was first employed by the Company after the beginning of the earliest of such three
fiscal years, the average of the bonuses paid or payable under such plan(s) in respect of the
fiscal years ending before the Effective Date during which the Executive was employed by the
Company, with such bonus being annualized with respect to any such fiscal year if the Executive was
not employed by the Company for the whole of such fiscal year) (the “Recent Average Bonus”). If
the Executive has not been eligible to earn such a bonus for any period prior to the Effective
Date, the “Recent Annual Bonus” shall mean the Executive’s target annual bonus for the year in
which the Effective Date occurs. Each such Annual Bonus shall be paid no later than two and a half
months after the end of the fiscal year for which the Annual Bonus is awarded, unless the Executive
shall elect to defer the receipt of such Annual Bonus pursuant to an arrangement that meets the
requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”).

               (iii) Incentive, Savings and Retirement Plans. During the Employment Period, the
Executive shall be entitled to participate in all incentive, savings and retirement plans,
practices, policies and programs applicable generally to other peer executives of the Company and
its affiliated companies, but in no event shall such plans, practices, policies and programs
provide the Executive with incentive opportunities (measured with respect to both regular and
special incentive opportunities, to the extent, if any, that such distinction is applicable),
savings opportunities and retirement benefit opportunities, in each case, less favorable, in the
aggregate, than the most favorable of those provided by the Company and its affiliated companies
for the Executive under such plans, practices, policies and programs as in effect at any time
during the 120-day period immediately preceding the Effective Date or if more favorable to the
Executive, those provided generally at any time after the Effective Date to other peer executives
of the Company and its affiliated companies.

               (iv) Welfare Benefit Plans. During the Employment Period, the Executive and/or the
Executive’s family, as the case may be, shall be eligible for participation in and shall receive
all benefits under welfare benefit plans, practices, policies and programs provided by the Company
and its affiliated companies (including, without limitation, medical, prescription, dental,
disability, salary continuance, employee life, group life, accidental death and travel accident
insurance plans and programs) (“Company Welfare Benefit Plans”) to the extent applicable generally
to other peer executives of the Company and its affiliated companies, but if the Company Welfare
Benefit Plans provide the Executive with benefits which are less favorable, in the aggregate, than
the most favorable of such plans, practices, policies and programs in effect for the Executive at
any time during the 120-day period immediately preceding the

4

 

Effective Date (the “Former Company Welfare Benefit Plans”), the Company shall provide the
Executive with supplemental arrangements (such as individual insurance coverage purchased by the
Company for the Executive) such that the Company Welfare Benefit Plans together with such
supplemental arrangements provide the Executive with benefits which are at least as favorable, in
the aggregate, as those provided by the Former Company Welfare Benefit Plans.

               (v) Expenses. During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance
with the most favorable policies, practices and procedures of the Company and its affiliated
companies in effect for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its affiliated companies.

               (vi) Fringe Benefits. During the Employment Period, the Executive shall be entitled
to fringe benefits, including, without limitation, tax and financial planning services, payment of
club dues, and, if applicable, use of an automobile and payment of related expenses, in accordance
with the most favorable plans, practices, programs and policies of the Company and its affiliated
companies in effect for the Executive at any time during the 120-day period immediately preceding
the Effective Date or, if more favorable to the Executive, as in effect generally at any time
thereafter with respect to other peer executives of the Company and its affiliated companies;
provided, that such fringe benefits may be provided in cash or in kind, so long as the
after-tax benefits to the Executive of such fringe benefits are not diminished in the aggregate.

               (vii) Office and Support Staff. During the Employment Period, the Executive shall be
entitled to an office or offices of a size and with furnishings and other appointments, and to
personal secretarial and other assistance, at least equal to the most favorable of the foregoing
provided to the Executive by the Company and its affiliated companies at any time during the
120-day period immediately preceding the Effective Date or, if more favorable to the Executive, as
provided generally at any time thereafter with respect to other peer executives of the Company and
its affiliated companies.

               (viii) Vacation. During the Employment Period, the Executive shall be entitled to
paid vacation as well as paid days off for the period between Christmas and January 1, in each case
in accordance with the most favorable plans, policies, programs and practices of the Company and
its affiliated companies as in effect for the Executive at any time during the 365-day period
immediately preceding the Effective Date or, if more favorable to the Executive, as in effect
generally at any time thereafter with respect to other peer executives of the Company and its
affiliated companies.

          5. Termination of Employment. (a) Death or Disability. The Executive’s
employment shall terminate automatically upon the Executive’s death during the Employment Period.
If the Company determines in good faith that the Disability of the Executive has occurred during
the Employment Period (pursuant to the definition of Disability set forth below), it may give to
the Executive written notice in accordance with Section 12(b) of this Agreement of its intention to
terminate the Executive’s employment.

5

 

In such event, the Executive’s employment with the Company shall terminate effective on the
30th day after receipt of such notice by the Executive (the “Disability Effective Date”),
provided that, within the 30 days after such receipt, the Executive shall not have returned
to full-time performance of the Executive’s duties. For purposes of this Agreement, “Disability”
shall mean the absence of the Executive from the Executive’s duties with the Company on a full-time
basis for 180 consecutive business days (or for 180 business days in any consecutive 365 days) as a
result of incapacity due to mental or physical illness which is determined to be total and
permanent by a physician selected by the Company or its insurers and acceptable to the Executive or
the Executive’s legal representative.

          (b) Cause. The Company may terminate the Executive’s employment during the Employment
Period with or without Cause. For purposes of this Agreement, “Cause” shall mean:

          (i) the willful and continued failure of the Executive to perform substantially the
Executive’s duties with the Company or one of its affiliates (other than any such failure
resulting from incapacity due to physical or mental illness or following the Executive’s
delivery of a Notice of Termination for Good Reason), after a written demand for
substantial performance is delivered to the Executive by the Board or the Chief Executive
Officer of the Company which specifically identifies the manner in which the Board or Chief
Executive Officer of the Company believes that the Executive has not substantially
performed the Executive’s duties, or

          (ii) the willful engaging by the Executive in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the Company.

For purposes of this provision, no act or failure to act, on the part of the
Executive, shall be considered “willful” unless it is done, or omitted to be done,
by the Executive in bad faith or without reasonable belief that the Executive’s
action or omission was in the best interests of the Company. Any act, or failure
to act, based upon authority given pursuant to a resolution duly adopted by the
Board, or if the Company is not the ultimate parent entity and is not
publicly-traded, the board of directors (or, for a non-corporate entity,
equivalent governing body) of the ultimate parent of the Company (the “Applicable
Board”)or upon the instructions of the Chief Executive Officer of the Company or a
senior officer of the Company or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be done, by the Executive
in good faith and in the best interests of the Company. The cessation of
employment of the Executive shall not be deemed to be for Cause unless and until
there shall have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of not less than three-quarters of the entire
membership of the Applicable Board (excluding the Executive if the Executive is a
member of the Applicable Board) at a meeting of the Applicable Board called and
held for such purpose (after reasonable notice is provided to the Executive and
the Executive is given an opportunity, together with counsel for the Executive, to
be heard before the Applicable Board), finding that, in the good faith

6

 

opinion of the Applicable Board, the Executive is guilty of the conduct described
in subparagraph (i) or (ii) above, and specifying the particulars thereof in
detail.

          (c) Good Reason. The Executive’s employment may be terminated by the Executive for
Good Reason or by the Executive voluntarily without Good Reason. For purposes of this Agreement,
“Good Reason” shall mean:

          (i) the assignment to the Executive of any duties inconsistent in any respect with the
Executive’s position (including status, offices, titles and reporting requirements),
authority, duties or responsibilities as contemplated by Section 4(a) of this Agreement, or
any other diminution in such position, authority, duties or responsibilities (whether or
not occurring solely as a result of the Company’s ceasing to be a publicly traded entity),
excluding for this purpose an isolated, insubstantial and inadvertent action not taken in
bad faith and which is remedied by the Company promptly after receipt of notice thereof
given by the Executive;

          (ii) any failure by the Company to comply with any of the provisions of Section 4(b)
of this Agreement, other than an isolated, insubstantial and inadvertent failure not
occurring in bad faith and which is remedied by the Company promptly after receipt of
notice thereof given by the Executive;

          (iii) the Company’s requiring the Executive to be based at any office or location
other than as provided in Section 4(a)(i)(B) hereof or the Company’s requiring the
Executive to travel on Company business to a substantially greater extent than required
immediately prior to the Effective Date;

          (iv) any purported termination by the Company of the Executive’s employment otherwise
than as expressly permitted by this Agreement; or

          (v) any failure by the Company to comply with and satisfy Section 11(c) of this
Agreement.

For purposes of this Section 5(c), any good faith determination of “Good Reason” made by the
Executive shall be conclusive.

          (d) Incapacity. The Executive’s mental or physical incapacity following the
occurrence of an event described above in clauses (i) through (v) of Section 5(c) shall not affect
the Executive’s ability to terminate employment for Good Reason and the Executive’s death following
delivery of a Notice of Termination for Good Reason shall not affect the entitlement of the estate
of the Executive to severance payments or benefits provided hereunder upon a termination of
employment for Good Reason.

          (e) Notice of Termination. Any termination of employment by the Company for Cause, or
by the Executive for Good Reason, shall be communicated by Notice of Termination to the other party
hereto given in accordance with Section 12(b) of this Agreement. For purposes of this Agreement, a
“Notice of Termination” means a written notice which (i) indicates the specific termination
provision in this Agreement

7

 

relied upon, (ii) to the extent applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive’s employment under the
provision so indicated and (iii) if the Date of Termination (as defined below) is other than the
date of receipt of such notice, specifies the Date of Termination (which date shall be not more
than thirty days after the giving of such notice). The failure by the Executive or the Company to
set forth in the Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason or Cause shall not waive any right of the Executive or the Company, respectively,
hereunder or preclude the Executive or the Company, respectively, from asserting such fact or
circumstance in enforcing the Executive’s or the Company’s rights hereunder.

          (f) Date of Termination. “Date of Termination” means (i) if the Executive’s
employment is terminated by the Company for Cause, or by the Executive for Good Reason, the date of
receipt of the Notice of Termination or any later date specified therein, as the case may be, (ii)
if the Executive’s employment is terminated by the Company other than for Cause or Disability, the
date on which the Company notifies the Executive of such termination, (iii) if the Executive
resigns without Good Reason, the date on which the Executive notifies the Company of such
termination and (iv) if the Executive’s employment is terminated by reason of death or Disability,
the date of death of the Executive or the Disability Effective Date, as the case may be.
Notwithstanding the foregoing, in no event shall the Date of Termination occur until the Executive
experiences a “separation from service” within the meaning of Section 409A of the Code, and
notwithstanding anything contained herein to the contrary, the date on which such separation from
service takes place shall be the “Date of Termination.”

          6. Obligations of the Company upon Termination. (a) Good Reason; Other Than for
Cause, Death or Disability. If, during the Employment Period, the Company shall terminate the
Executive’s employment other than for Cause, Death or Disability or the Executive shall terminate
employment for Good Reason:

          (i) the Company shall pay to the Executive in a lump sum in cash within 30 days after
the Date of Termination the aggregate of the following amounts:

          (A) the sum of (1) the Executive’s Annual Base Salary through the Date of
Termination to the extent not theretofore paid, (2) the Executive’s business
expenses that are reimbursable pursuant to Section 4(b)(v) but have not been
reimbursed by the Company as of the Date of Termination; (3) the Executive’s Annual
Bonus for the fiscal year immediately preceding the fiscal year in which the Date
of Termination occurs, if such bonus has been determined but not paid as of the
Date of Termination; (4) any accrued vacation pay to the extent not theretofore
paid (the sum of the amounts described in subclauses (1), (2), (3) and (4), the
“Accrued Obligations”) and (5) an amount equal to the product of (x) the Recent
Average Bonus and (y) a fraction, the numerator of which is the number of days in
the current fiscal year through the Date of Termination, and the denominator of
which is 365 (the “Pro Rata Bonus”); provided, that notwithstanding the
foregoing, if the Executive has made an irrevocable election under any deferred
compensation arrangement subject to Section 409A of the Code to defer any portion
of the Annual Base Salary or the Annual Bonus described in clauses (1) or (3)
above,

8

 

then for all purposes of this Section 6 (including, without limitation,
Sections 6(b) through 6(d)), such deferral election, and the terms of the
applicable arrangement shall apply to the same portion of the amount described in
such clause (1) or clause (3), and such portion shall not be considered as part of
the “Accrued Obligations” but shall instead be an “Other Benefit” (as defined
below); and

               (B) the amount equal to the product of (1) [two/three] and (2) the sum of (x)
the Executive’s Annual Base Salary and (y) the Recent Average Bonus; and

               (C) an amount equal to the product of (1) [two/three] and (2) the sum of (a)
the Company Retirement Contributions (as defined in the BorgWarner Inc. Retirement
Savings Plan (“RSP”)) that would have been made under the RSP for the first Plan
Year (as defined in the RSP) ending after the Date of Termination if there had been
no Limitations (as defined below) on such Company Retirement Contributions and (b)
an amount equal to the Company Matching Contributions (as defined in the RSP) that
would have been made under the RSP in the first Plan Year after the Date of
Termination if there had been no Limitations on such Company Matching
Contributions, and assuming for these purposes that the Executive had elected to
defer the maximum amount of Compensation (as defined in the RSP) permitted by the
RSP (without regard to any Limitations on such deferral), and assuming for purposes
of calculating the amounts in clauses (a) and (b) that the Executive had remained
employed by the Company through the end of such Plan Year with compensation equal
to that required by Section 4(b)(i) and Section 4(b)(ii) of this Agreement
(“Limitations” meaning limitations contained in the RSP, the Employee Retirement
Income Security Act (“ERISA”) or the Code (including without limitation the
$150,000 cap on Compensation);

            (ii) for two years following the Date of Termination (the “Benefits Period”), the
Company shall provide the Executive and his eligible dependents with medical and dental
insurance coverage (the “Health Care Benefits”) and life insurance benefits no less
favorable to those which the Executive and his spouse and eligible dependents were
receiving immediately prior to the Date of Termination or, if more favorable to such
persons, as in effect generally at any time thereafter with respect to other peer
executives of the Company and the Affiliated Companies; provided, however,
that the Health Care Benefits shall be provided during the Benefits Period in such a manner
that such benefits are excluded from the Executive’s income for federal income tax
purposes; provided, further, however, that if the Executive becomes
re-employed with another employer and is eligible to receive health care benefits under
another employer-provided plan, the health care benefits provided hereunder shall be
secondary to those provided under such other plan during such applicable period of
eligibility. The receipt of the Health Care Benefits shall be conditioned upon the
Executive continuing to pay the Applicable Cobra Premium with respect to the level of
coverage that the Executive has elected for the Executive and the Executive’s spouse and
eligible dependents (e.g., single, single plus one, or family). During the portion of the
Benefits Period in which the Executive and his eligible dependents continue to receive
coverage under the

9

 

Company’s Health Care Benefits plans, the Company shall pay to the Executive a monthly
amount equal to the Applicable COBRA Premium in respect of the maximum level of coverage
that the Executive could have elected to receive for the Executive and the Executive’s
spouse and eligible dependents if the Executive were still an employee of the Company
during the Benefits Period (e.g., single, single plus one, or family) regardless of what
level of coverage is actually elected , which payment shall be paid in advance on the first
payroll day of each month, commencing with the month immediately following the Executive’s
Date of Termination. The Company shall use its reasonable best efforts to ensure that,
following the end of the Benefit Period, the Executive and the Executive’s spouse and
eligible dependents shall be eligible to elect continued health coverage pursuant to
Section 4980B of the Code or other applicable law (“COBRA Coverage”), as if the Executive’s
employment with the Company had terminated as of the end of such period. For purposes of
determining eligibility (but not the time of commencement of benefits) of the Executive for
retiree welfare benefits pursuant to the Company’s retiree welfare benefit plans, if any,
the Executive shall be considered to have remained employed until the end of the Benefit
Period and to have retired on the last day of such period. For purposes of this Provision,
“Applicable COBRA Premium” means the monthly premium in effect from time to time for
coverage provided to former employees under Section 4980B of the Code and the regulations
thereunder with respect to a particular level of coverage (e.g., single, single plus one,
or family).

     (iii) the Company shall, at its sole expense as incurred, provide the Executive with
outplacement services the scope and provider of which shall be selected by the Executive in
the Executive’s sole discretion, but the cost thereof shall not exceed $40,000;
provided, further, that such outplacement benefits shall end not later than
the last day of the second calendar year that begins after the Date of Termination; and

     (iv) except as otherwise set forth in the last sentence of Section 7, to the extent
not theretofore paid or provided, the Company shall timely pay or provide to the Executive
any other amounts or benefits required to be paid or provided or which the Executive is
eligible to receive under any plan, program, policy or practice or contract or agreement of
the Company and its affiliated companies (such other amounts and benefits shall be
hereinafter referred to as the “Other Benefits”) in accordance with the terms of the
underlying plans or agreements.

Notwithstanding the foregoing provisions of Section 6(a)(i) and Section 6(a)(ii), in the event that
the Executive is a “specified employee” within the meaning of Section 409A of the Code (as
determined in accordance with the methodology established by the Company as in effect on the Date
of Termination) (a “Specified Employee”), amounts that constitute “nonqualified deferred
compensation” within the meaning of Section 409A of the Code that would otherwise be payable and
benefits that would otherwise be provided under Section 6(a)(i) or Section 6(a)(ii) during the
six-month period immediately following the Date of Termination (other than the Accrued Obligations)
shall instead be paid, with interest on any delayed payment at the applicable federal rate provided
for in Section 7872(f)(2)(A) of the Code (“Interest”) determined as of the Date of Termination,

10

 

or provided on the first business day after the date that is six months following the Executive’s
Date of Termination (the “Delayed Payment Date”);

          (b) Death. If the Executive’s employment is terminated by reason of the Executive’s
death during the Employment Period, the Company shall provide the Executive’s estate or
beneficiaries with the Accrued Obligations and the Pro Rata Bonus and the timely payment or
delivery of the Other Benefits, and shall have no other severance obligations under this Agreement.
The Accrued Obligations (subject to the proviso set forth in Section 6(a)(1)(A) to the extent
applicable) and the Pro Rata Bonus shall be paid to the Executive’s estate or beneficiary, as
applicable, in a lump sum in cash within 30 days of the Date of Termination. With respect to the
provision of the Other Benefits, the term “Other Benefits” as utilized in this Section 6(b) shall
include, without limitation, and the Executive’s estate and/or beneficiaries shall be entitled to
receive, benefits (either pursuant to a plan, program, practice or policy or an individual
arrangement) at least equal to the most favorable benefits provided by the Company and the
affiliated companies to the estates and beneficiaries of peer executives of the Company and such
affiliated companies under such plans, programs, practices and policies relating to death benefits,
if any, as in effect with respect to other peer executives and their beneficiaries at any time
during the 120-day period immediately preceding the Effective Date or, if more favorable to the
Executive’s estate and/or the Executive’s beneficiaries, as in effect on the date of the
Executive’s death with respect to other peer executives of the Company and its affiliated companies
and their beneficiaries.

          (c) Disability. If the Executive’s employment is terminated by reason of the
Executive’s Disability during the Employment Period, the Company shall provide the Executive with
the Accrued Obligations and Pro Rata Bonus and the timely payment or delivery of the Other Benefits
in accordance with the terms of the underlying plans or agreements, and shall have no other
severance obligations under this Agreement. The Accrued Obligations (subject to the proviso set
forth in Section 6(a)(1)(A) to the extent applicable) and the Pro Rata Bonus shall be paid to the
Executive in a lump sum in cash within 30 days of the Date of Termination, provided, that
in the event that the Executive is a Specified Employee, the Pro Rata Bonus shall be paid, with
Interest, to the Executive on the Delayed Payment Date. With respect to the provision of the Other
Benefits, the term “Other Benefits” as utilized in this Section 6(c) shall include, and the
Executive shall be entitled after the Disability Effective Date to receive, disability and other
benefits (either pursuant to a plan, program, practice or policy or an individual arrangement) at
least equal to the most favorable of those generally provided by the Company and the affiliated
companies to disabled executives and/or their families in accordance with such plans, programs,
practices and policies relating to disability, if any, as in effect generally with respect to other
peer executives and their families at any time during the 120-day period immediately preceding the
Effective Date or, if more favorable to the Executive and/or the Executive’s family, as in effect
at any time thereafter generally with respect to other peer executives of the Company and the
affiliated companies and their families.

          (d) Cause; Other than for Good Reason. If the Executive’s employment is terminated
for Cause during the Employment Period, the Company shall provide the Executive with the
Executive’s Annual Base Salary (subject to the proviso set forth in Section 6(a)(1)(A) to the
extent applicable) through the Date of Termination, and the timely payment or delivery of the Other
Benefits, and shall have no other

11

 

severance obligations under this Agreement. If the Executive voluntarily terminates
employment during the Employment Period, excluding a termination for Good Reason, the Company shall
provide to the Executive the Accrued Obligations and the Pro Rata Bonus and the timely payment or
delivery of the Other Benefits and shall have no other severance obligations under this Agreement.
In such case, all the Accrued Obligations (subject to the proviso set forth in Section 6(a)(1)(A)
to the extent applicable) and the Pro Rata Bonus shall be paid to the Executive in a lump sum in
cash within 30 days of the Date of Termination, provided, that in the event that the
Executive is a Specified Employee, the Pro Rata Bonus shall be paid, with Interest, to the
Executive on the Delayed Payment Date.

          7. Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan, program, policy or practice provided by
the Company or any of its affiliated companies and for which the Executive may qualify, nor,
subject to Section 12(f), shall anything herein limit or otherwise affect such rights as the
Executive may have under any other contract or agreement with the Company or any of its affiliated
companies. Amounts which are vested benefits or which the Executive is otherwise entitled to
receive under any plan, policy, practice or program of or any contract or agreement with the
Company or any of its affiliated companies at or subsequent to the Date of Termination shall be
payable in accordance with such plan, policy, practice or program or contract or agreement except
as explicitly modified by this Agreement. Without limiting the generality of the foregoing, the
Executive’s resignation under this Agreement with or without Good Reason, shall in no way affect
the Executive’s ability to terminate employment by reason of the Executive’s “retirement” under any
compensation and benefits plans, programs or arrangements of the affiliated companies, including
without limitation any retirement or pension plans or arrangements or to be eligible to receive
benefits under any compensation or benefit plans, programs or arrangements of the Company or any of
its affiliated companies, including without limitation any retirement or pension plan or
arrangement of the Company or any of its affiliated companies or substitute plans adopted by the
Company or its successors, and any termination which otherwise qualifies as Good Reason shall be
treated as such even if it is also a “retirement” for purposes of any such plan. Notwithstanding
the foregoing, if the Executive receives payments and benefits pursuant to Section 6(a) of this
Agreement, the Executive shall not be entitled to any severance pay or benefits under any severance
plan, program or policy of the Company and the affiliated companies, unless otherwise specifically
provided therein in a specific reference to this Agreement.

          8. Full Settlement; Legal Fees. The Company’s obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations hereunder shall not be
affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which
the Company may have against the Executive or others. In no event shall the Executive be obligated
to seek other employment or take any other action by way of mitigation of the amounts payable to
the Executive under any of the provisions of this Agreement and except as specifically provided in
Section 6(a)(ii), such amounts shall not be reduced whether or not the Executive obtains other
employment. The Company agrees to pay as incurred (within 10 days following the Company’s receipt
of an invoice from the Executive), at any time from the Effective Date through the Executive’s
remaining lifetime (or, if longer, through the 20th anniversary of the Effective Date) to the full
extent permitted by law, all legal fees and expenses which the Executive may reasonably incur as a
result of any contest (regardless of the

12

 

outcome thereof) by the Company, the Executive or others of the validity or enforceability of,
or liability under, any provision of this Agreement or any guarantee of performance thereof whether
such contest is between the Company and the Executive or between either of them and any third
party, and (including as a result of any contest by the Executive about the amount of any payment
pursuant to this Agreement), plus in each case Interest determined as of the date such legal fees
and expenses were incurred. In order to comply with Section 409A of the Code, in no event shall
the payments by the Company under this Section 8 be made later than the end of the calendar year
next following the calendar year in which such fees and expenses were incurred, provided
that the Executive or the Executive’s estate shall have submitted an invoice for such fees and
expenses at least 10 days before the end of the calendar year next following the calendar year in
which such fees and expenses were incurred. The amount of such legal fees and expenses that the
Company is obligated to pay in any given calendar year shall not affect the legal fees and expenses
that the Company is obligated to pay in any other calendar year, and the Executive’s right to have
the Company pay such legal fees and expenses may not be liquidated or exchanged for any other
benefit.

          9. Certain Additional Payments by the Company.

          (a) Anything in this Agreement to the contrary notwithstanding, in the event it shall be
determined that any payment or distribution in the nature of compensation (within the meaning of
Section 280G(b)(2) of the Code by the Company to or for the benefit of the Executive (whether paid
or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise,
but determined without regard to any additional payments required under this Section 9) (a
“Payment”) would be subject to the excise tax imposed by Section 4999 of the Code or any interest
or penalties are incurred by the Executive with respect to such excise tax (such excise tax,
together with any such interest and penalties, are hereinafter collectively referred to as the
“Excise Tax”), then the Executive shall be entitled to receive an additional payment (a “Gross-Up
Payment”) in an amount such that after payment by the Executive of all taxes (including any
interest or penalties imposed with respect to such taxes), including, without limitation, any
income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed
upon the Gross-Up Payment, but excluding any income taxes and penalties imposed pursuant to Section
409A of the Code, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.

          (b) Subject to the provisions of Section 9(c), all determinations required to be made under
this Section 9, including whether and when a Gross-Up Payment is required and the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be
made by Pricewaterhouse Coopers L.L.P. or such other certified public accounting firm as may be
designated by the Executive (the “Accounting Firm”), which shall provide detailed supporting
calculations both to the Company and the Executive within 15 business days of the receipt of notice
from the Executive that there has been a Payment, or such earlier time as is requested by the
Company. In the event that the Accounting Firm is serving as accountant or auditor for the
individual, entity or group effecting the Change of Control, the Executive may appoint another
nationally recognized accounting firm to make the determinations required hereunder (which
accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses
of the Accounting Firm shall be borne solely by

13

 

the Company. Any determination by the Accounting Firm shall be binding upon the Company and
the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at
the time of the initial determination by the Accounting Firm hereunder, it is possible that
Gross-Up Payments which will not have been made by the Company should have been made
(“Underpayment”), consistent with the calculations required to be made hereunder. In the event
that the Company exhausts its remedies pursuant to Section 9(c) and the Executive thereafter is
required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to
or for the benefit of the Executive.

          (c) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service that, if successful, would require the payment by the Company of the Gross-Up Payment.
Such notification shall be given as soon as practicable but no later than ten business days after
the Executive is informed in writing of such claim and shall apprise the Company of the nature of
such claim and the date on which such claim is requested to be paid. The Executive shall not pay
such claim prior to the expiration of the 30-day period following the date on which the Executive
gives such notice to the Company (or such shorter period ending on the date that any payment of
taxes with respect to such claim is due). If the Company notifies the Executive in writing prior
to the expiration of such period that it desires to contest such claim, the Executive shall:

          (i) give the Company any information reasonably requested by the Company relating to
such claim,

          (ii) take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation, accepting
legal representation with respect to such claim by an attorney reasonably selected by the
Company,

          (iii) cooperate with the Company in good faith in order effectively to contest such
claim, and

          (iv) permit the Company to participate in any proceedings relating to such claim;

provided, however, that the Company shall bear and pay directly all costs and
expenses (including additional interest and penalties) incurred in connection with such contest and
shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or
income tax (including interest and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses. Without limitation on the foregoing provisions
of this Section 9(c), the Company shall control all proceedings taken in connection with such
contest and, at its sole option, may pursue or forgo any and all administrative appeals,
proceedings, hearings and conferences with the taxing authority in respect of such claim and may,
at its sole option, either pay the tax claimed to the appropriate taxing authority on behalf of the
Executive and direct the Executive to sue for a refund or contest the claim in any permissible
manner, and the Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as
the Company shall determine; provided, however, that if the Company pays such claim
and directs the

14

 

Executive to sue for a refund, the Company shall indemnify and hold the Executive harmless, on an
after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect
thereto) imposed with respect to such payment or with respect to any imputed income with respect to
such payment; and further provided that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to which such contested amount
is claimed to be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be
payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other taxing authority.

          (d) If, after the receipt by the Executive of a Gross-Up Payment or payment by the Company of
an amount on the Executive’s behalf pursuant to Section 9(c), the Executive becomes entitled to
receive any refund with respect to the Excise Tax to which such Gross-Up Payment relates or with
respect to such claim, the Executive shall (subject to the Company’s complying with the
requirements of Section 9(c)) promptly pay to the Company the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If, after payment by the
Company of an amount on the Executive’s behalf pursuant to Section 9(c), a determination is made
that the Executive shall not be entitled to any refund with respect to such claim and the Company
does not notify the Executive in writing of its intent to contest such denial of refund prior to
the expiration of 30 days after such determination, then the amount of such payment shall offset,
to the extent thereof, the amount of Gross-Up Payment required to be paid.

          (e) Any Gross-Up Payment, as determined pursuant to this Section 9, shall be paid by the
Company to the Executive within five days of the receipt of the Accounting Firm’s determination;
provided that, the Gross-Up Payment shall in all events be paid no later than the end of
the Executive’s taxable year next following the Executive’s taxable year in which the Excise Tax
(and any income or other related taxes or interest or penalties thereon) on a Payment are remitted
to the Internal Revenue Service or any other applicable taxing authority or, in the case of amounts
relating to a claim described in Section 8(c) that does not result in the remittance of any
federal, state, local and foreign income, excise, social security and other taxes, the calendar
year in which the claim is finally settled or otherwise resolved. Notwithstanding any other
provision of this Section 9, the Company may, in its sole discretion, withhold and pay over to the
Internal Revenue Service or any other applicable taxing authority, for the benefit of the
Executive, all or any portion of any Gross-Up Payment, and the Executive hereby consents to such
withholding.

          10. Confidential Information. The Executive shall hold in a fiduciary capacity for
the benefit of the Company all secret or confidential information, knowledge or data relating to
the Company or any of its affiliated companies, and their respective businesses, which shall have
been obtained by the Executive during the Executive’s employment by the Company or any of its
affiliated companies and which shall not be or become public knowledge (other than by acts by the
Executive or representatives of the Executive in violation of this Agreement). After termination
of the Executive’s employment with the Company, the Executive shall not, without the prior written
consent of the Company or as may otherwise be required by law or legal process, communicate or
divulge any such information, knowledge or data to anyone other than the Company and those persons
designated by it. In no event shall an asserted violation of the

15

 

provisions of this Section 10 constitute a basis for deferring or withholding any amounts
otherwise payable to the Executive under this Agreement, but the Company otherwise shall be
entitled to all other remedies that may be available to it at law or equity.

          11. Successors. (a) This Agreement is personal to the Executive and without the
prior written consent of the Company shall not be assignable by the Executive other than by will or
the laws of descent and distribution. This Agreement shall inure to the benefit of and be
enforceable by the Executive’s legal representatives.

          (b) This Agreement shall inure to the benefit of and be binding upon the Company and its
successors and assigns. Except as provided in Section 11(c), without the prior written consent of
the Executive this Agreement shall not be assignable by the Company.

          (c) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation or otherwise) to all or substantially all of the business and/or assets of the
Company to assume expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession had taken place. As
used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor
to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

          12. Miscellaneous. (a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Michigan, without reference to principles of conflict of
laws. The captions of this Agreement are not part of the provisions hereof and shall have no force
or effect. Subject to the last sentence of Section 12(g), this Agreement may not be amended or
modified other than by a written agreement executed by the parties hereto or their respective
successors and legal representatives.

          (b) All notices and other communications hereunder shall be in writing and shall be given by
hand delivery to the other party or by registered or certified mail, return receipt requested,
postage prepaid, addressed as follows:

If to the Executive:

                                                            

                                                            

                                                            

If to the Company:

BorgWarner Inc.

3850 Hamlin Road

16

 

Auburn Hills, Michigan 48326

Attention: General Counsel

or to such other address as either party shall have furnished to the other in writing in accordance
herewith. Notice and communications shall be effective when actually received by the addressee.

          (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of any other provision of this Agreement.

          (d) The Company may withhold from any amounts payable under this Agreement such Federal,
state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or
regulation.

          (e) The Executive’s or the Company’s failure to insist upon strict compliance with any
provision hereof or any other provision of this Agreement or the failure to assert any right the
Executive or the Company may have hereunder, including, without limitation, the right of the
Executive to terminate employment for Good Reason pursuant to Section 5(c)(i)-(v) of this
Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or
right of this Agreement.

          (f) The Executive and the Company acknowledge that, except as may otherwise be provided under
any other written agreement between the Executive and the Company, the employment of the Executive
by the Company is “at will” and, subject to Section 1(a) of this Agreement, prior to the Effective
Date, the Executive’s employment may be terminated by either the Executive or the Company at any
time prior to the Effective Date, in which case the Executive shall have no further rights under
this Agreement. From and after the Effective Date this Agreement shall supersede any other
agreement between the parties with respect to the subject matter hereof.

          (g) The Agreement is intended to comply with the requirements of Section 409A of the Code or
an exemption or exclusion therefrom and, with respect to amounts that are subject to Section 409A
of the Code, shall in all respects be administered in accordance with Section 409A of the Code.
Each payment under this Agreement shall be treated as a separate payment for purposes of Section
409A of the Code. In no event may the Executive, directly or indirectly, designate the calendar
year of any payment to be made under this Agreement. If the Executive dies following the Date of
Termination and prior to the payment of the any amounts delayed on account of Section 409A of the
Code, such amounts shall be paid to the personal representative of the Executive’s estate within 30
days after the date of the Executive’s death. All reimbursements and in-kind benefits provided
under this Agreement that constitute deferred compensation within the meaning of Section 409A of
the Code shall be made or provided in accordance with the requirements of Section 409A of the Code,
including, without limitation, that (i) in no event shall reimbursements by the Company under this
Agreement be made later than the end of the calendar year next following the calendar year in which
the applicable fees and expenses were incurred, provided, that the Executive shall have
submitted an invoice for such fees and expenses at least 10 days before the end of the calendar
year next following the calendar year in which such fees

17

 

and expenses were incurred; (ii) the amount of in-kind benefits that the Company is obligated
to pay or provide in any given calendar year shall not affect the in-kind benefits that the Company
is obligated to pay or provide in any other calendar year; (iii) the Executive’s right to have the
Company pay or provide such reimbursements and in-kind benefits may not be liquidated or exchanged
for any other benefit; and (iv) in no event shall the Company’s obligations to make such
reimbursements or to provide such in-kind benefits apply later than the Executive’s remaining
lifetime (or if longer, through the 20th anniversary of the Effective Date). Prior to the
Effective Date but within the time period permitted by the applicable Treasury Regulations, the
Company may, in consultation with the Executive, modify the Agreement, in the least restrictive
manner necessary and without any diminution in the value of the payments to the Executive, in order
to cause the provisions of the Agreement to comply with the requirements of Section 409A of the
Code, so as to avoid the imposition of taxes and penalties on the Executive pursuant to Section
409A of the Code.

          13. Survivorship. Upon the expiration or other termination of this Agreement or the
Executive’s employment, the respective rights and obligations of the parties hereto shall survive
to the extent necessary to carry out the intentions of the parties under this Agreement.

          IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the
authorization from its Board of Directors, the Company has caused this Agreement to be executed in
its name on its behalf, all as of the day and year first above written.

	 	 	 	 	 
	 	 	 
	 
	 	 	 	 
	 	 	BORGWARNER INC.
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 

18

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