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BorgWarner Inc.
2004 Stock Incentive Plan
Performance Share Award Agreement
You have been selected to receive a Performance Share Award
under the BorgWarner Inc. 2004 Stock Incentive Plan (the
"Plan"), as specified below:
Participant: ______________________________
Address: __________________________________
Target Number of Performance Shares: ______
Performance Period: ____, 2005 to ___, 2007
Performance Measure: Relative Increase
in Total Shareholder Return Versus Peer
Group
THIS AGREEMENT, effective ___________,
2005, represents the grant of
Performance Shares by BorgWarner Inc.,
a Delaware corporation (the "Company"),
to the Participant named above,
pursuant to the provisions of the Plan.
All capitalized terms shall have the
meanings ascribed to them in the Plan,
unless specifically set forth otherwise
herein. The parties hereto agree as
follows:
1. Performance Period. The
Performance Period commences on January
1, 2005, and ends on December 31, 2007.
2. Value of Performance Shares. Each
Performance Share shall represent and
have a value equal to one share of
common stock, par value $0.01, of the
Company, subject to adjustment as
provided in Section 4(e) of the Plan.
3. Performance Shares and
Achievement of Performance Goal. The
number of Performance Shares to be
earned under this Agreement shall be
based upon the Company's Total
Shareholder Return as compared to the
Total Shareholder Return of the
Company's Peer Group (as identified in
Exhibit A) during the Performance Period.
For this purpose, "Total Shareholder
Return" shall be determined as follows:
Total Shareholder = Change in StockPrice + Dividends Paid
Return Beginning Stock Price
"Beginning Stock Price" shall mean the
average closing price as reported on
the New York Stock Exchange Composite
Tape of one (1) share of stock for the
five (5) trading days immediately prior
to the first day of the Performance
Period. "Ending Stock Price" shall mean
the average closing price as reported
on the New York Stock Exchange
Composite Tape of one (1) share of
stock for the five (5) trading days
immediately prior to the last day of
the Performance Period. "Change in
Stock Price" shall mean the difference
between the Ending Stock Price and the
Beginning Stock Price. Finally,
"Dividends Paid" shall mean the total
of all dividends paid on one (1) share
of stock during the Performance Period,
provided that dividends shall be
treated as though they are reinvested
at the end of each calendar quarter.
Following the Total Shareholder Return
determination, the Company's Percentile
Rank shall be determined as follows:
Percentile = Company Rank
Rank Total Number of Companies in Peer Group
Excluding BorgWarner Inc.
Company Rank shall be determined by
listing from highest Total Shareholder
Return to lowest Total Shareholder
Return each company in the Peer Group
(including the Company) and counting up
from the company with the lowest Total
Shareholder Return.
The percent of Target Number of
Performance Shares earned shall then be
determined based on the following chart:
Company's Percent of Target Number of
Percentile Rank Performance Shares Earned
90th and above 175.000%
75th 130.000%
65th 100.000%
50th 71.875%
35th 43.750%
25th 25.000%
Below 25th 0.000%
Interpolation shall be used to
determine the percent of Target Number
of Performance Shares earned in the
event the Company's Percentile Rank
does not fall directly on one of the
ranks listed in the above chart.
4. Termination Provisions. Except as
provided in Section 11(a) of this
Agreement and in the next paragraph, a
Participant shall be eligible for
payment of earned Performance Shares,
as specified in Section 3, only if the
Participant's employment with the
Company continues through the end of
the Performance Period.
If a Participant suffers a Disability,
dies, is terminated involuntarily
without Cause during the Performance
Period, or in the event of the
Participant's Retirement, the
Committee, in its sole discretion, may
waive the requirement that the
Participant be employed by the Company
through the end of the Performance
Period. In such a case, the
Participant (or in the event of the
Participant's death, the Participant's
beneficiary) shall be eligible for all
or that proportion of the number of
Performance Shares earned under Section
3 (determined at the end of the
Performance Period and based on actual
results) that his number of full months
of participation during the Performance
Period bears to the total number of
months in the Performance Period.
In the event of the Participant's
Termination of Employment for Cause or
voluntary Termination of Employment
during the Performance Period, or if
the Committee does not exercise its
discretion to waive the requirement
that the Participant be employed by the
Company through the end of the
Performance Period in the event of the
Participant's Termination of Employment
by reason of the Participant's death,
Disability, involuntary termination
without Cause, or Retirement prior to
the close of the Performance Period,
the Participant shall forfeit this
entire award, with no payment to the
Participant. The Participant's
transfer of employment to the Company
or any Subsidiary from another
Subsidiary or the Company during the
Performance Period shall not constitute
a Termination of Employment.
5. Dividends. The Participant shall
have no right to any dividends which
may be paid with respect to shares of
Stock until any such shares are
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