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0000908255-00-000051.txt : 200003230000908255-00-000051.hdr.sgml : 20000323ACCESSION NUMBER:0000908255-00-000051CONFORMED SUBMISSION TYPE:10-K405PUBLIC DOCUMENT COUNT:9CONFORMED PERIOD OF REPORT:19991231FILED AS OF DATE:20000322

FILER:

COMPANY DATA:COMPANY CONFORMED NAME:BORGWARNER INCCENTRAL INDEX KEY:0000908255STANDARD INDUSTRIAL CLASSIFICATION:MOTOR VEHICLE PARTS & ACCESSORIES [3714]IRS NUMBER:133404508STATE OF INCORPORATION:DEFISCAL YEAR END:1231

FILING VALUES:FORM TYPE:10-K405SEC ACT:SEC FILE NUMBER:001-12162FILM NUMBER:575728

BUSINESS ADDRESS:STREET 1:200 S MICHIGAN AVECITY:CHICAGOSTATE:ILZIP:60604BUSINESS PHONE:3123228500

MAIL ADDRESS:STREET 1:200 SOUTH MICHIGAN AVESTREET 2:200 SOUTH MICHIGAN AVECITY:CHICAGOSTATE:ILZIP:60604

FORMER COMPANY:FORMER CONFORMED NAME:BORG WARNER AUTOMOTIVE INCDATE OF NAME CHANGE:19930628

10-K4051

________________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form10-K

Annual Report Pursuant to Section13 or 15(d)

of the Securities Exchange Act of 1934

For the fiscal year ended December31, 1999Commission file number:1-12162

BorgWarner Inc.

(formerly known as Borg-Warner Automotive, Inc.)

(Exact name of registrant as specified in itscharter)

Delaware13-3404508

(State of Incorporation)(I.R.S.Employer Identification No.)

200South Michigan Avenue

Chicago, Illinois 60604

(312)322-8500

(Address and telephone number of principalexecutive offices)

Securities registered pursuant to Section12(b) of the Act:

Name of each exchange

Title of each classon which registered

Common Stock, par value $.01 per shareNewYork Stock Exchange

Securities registered pursuant to Section12(g) of the Act:None

Indicate by check-mark whether theregistrant (1)has filed all reports required to be filed by Section13 or 15(d) of the Securities Exchange Act of 1934during the preceding 12months (or for such shorter periodthat the registrant was required to file such reports), and(2)has been subject to such filing requirements for thepast 90days.Yes XNo

The aggregate market value of the voting stock of the registrantheld by stockholders (not including voting stock held bydirectors and executive officers of the registrant) onMarch15, 2000 was approximately $878million. As ofMarch15, 2000, the registrant had 26,685,733 shares ofCommon Stock outstanding.

Indicate by check-mark if disclosure of delinquent filerspursuant to Item405 of RegulationS-K is not contained herein, and will not be contained, to the best ofregistrants knowledge, in definitive proxy or informationstatements incorporated by reference in PartIII of thisForm10-K or any amendment to thisForm10-K.X

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated herein byreference into the Part of the Form10-K indicated.

Part of Form10-K

into which

Documentincorporated

BorgWarner Inc. 1999Annual Report to StockholdersPartsI, II and IV

BorgWarner Inc. Proxy Statement for the 2000Annual Meetingof
StockholdersPartIII

BORGWARNER INC.

FORM10-K

YEAR ENDED DECEMBER31, 1999

INDEX

Item

NumberPage

PARTI

1.Business3

2.Properties10

3.Legal Proceedings11

4.Submission of Matters to a Vote of Security Holders11

PARTII

5.Market for the Registrants Common Equity and RelatedStockholder Matters11

6.Selected Financial Data12

7.Managements Discussion and Analysis of Financial Conditionand
Results of Operations12

7aMarket Risk Disclosure12

8.Financial Statements and Supplementary Data12

9.Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure12

PARTIII

10.Directors and Executive Officers of the Registrant13

11.Executive Compensation13

12.Security Ownership of Certain Beneficial Owners and Management13

13.Certain Relationships and Related Transactions13

PARTIV

14.Exhibits, Financial Statement Schedules, and Reports onForm8-K13

PART I

Item1. Business

BorgWarner Inc. (formerly Borg-Warner Automotive, Inc.) (theCompany), a Delaware corporation, was incorporated in 1987. The Company is a leading, global Tier I supplier of highly engineered systems and components, primarily for vehiclepowertrain applications. These products are manufactured and sold worldwide, primarily to original equipment manufacturers(OEMs) of passenger cars, sport utility vehicles,trucks, commercial transportation products and industrialequipment. The Company operates 60 manufacturing and technicalfacilities in 14 countries serving customers in North America,South America, Europe and Asia, and is an original equipmentsupplier to every major OEM in the world.

Financial Information About Segments

Incorporated herein by reference is Note12 of the Notes tothe Consolidated Financial Statements on pages 40 through 42 ofthe Companys Annual Report for the year endedDecember31, 1999 (the Companys AnnualReport) filed as an exhibit to this report.

Narrative Description of Operating Segments

The Companys products fall into five reportable operatingsegments: Air/ Fluid Systems, Cooling Systems, Morse TEC,TorqTransfer Systems and Transmission Systems. TorqTransferSystems was previously named Powertrain Systems and TransmissionSystems was previously known as Automatic Transmission Systems.The name changes were made to recognize the expanded growthopportunities for each of these businesses. Net revenues bysegment for the three years ended December31, 1999, 1998and 1997, are as follows (in millions of dollars):

Year ended December 31,

199919981997

Air/ Fluid Systems$491.5$351.4$342.4

Cooling Systems142.8

Morse TEC856.0536.2349.0

TorqTransfer Systems563.3518.8613.6

Transmission Systems413.4355.0369.4

Divested operations41.3121.1150.2

Interbusiness eliminations(49.7)(45.7)(57.6)

Net sales$2,458.6$1,836.8$1,767.0

The sales information presented above excludes the sales by theCompanys unconsolidated joint ventures. See JointVentures. Such sales totaled approximately$287million in 1999, $247million in 1998 and $336million in 1997.

Air/ Fluid Systems

Air/ Fluid Systems designs and manufactures sophisticatedmechanical, electro-mechanical and electronic components andsystems used for engine air intake and exhaust management, fueland vapor management, electronically controlled automatictransmissions and steering and suspension systems. Key productsfor engine air intake management produced by the Company includethrottle bodies, intake manifolds, throttle position sensors, and complete engine induction systems. The Companys productsfor emissions control and improved gas mileage include mechanical and electrical air pumps, air control valves and pressurefeedback exhaust gas re-circulation valves. The fuel managementand vapor recovery products include roll valves, canister purgesolenoids and complete vapor recovery systems. Air/ Fluid Systems also produces fuel tanks used on commercial vehicle applications and oil pumps.

3

Cooling Systems

Cooling Systems, the Companys newest segment, is acombination of the businesses acquired from Eaton Corporation and the Schwitzer cooling businesses acquired as part of the Kuhlman Corporation acquisition in 1999. Cooling Systems manufacturesviscous fan clutches, on-off fan drives and fans which are usedas part of the engine cooling system. Product features includeimproved fuel economy and emissions control by minimizingparasitic power loss. These products are provided from facilities in the U.S., Germany, U.K., Brazil, Korea and China. The Company believes it is a leading global supplier of such products butcompetes with other large independent producers as well asdivisions of its OEM customers.

Morse TEC

Morse TEC manufactures chain and chain systems, includingHY-VO front-wheel drive (FWD) transmissionchain and four-wheel drive (4WD) chain, MORSEGEMINI Chain Systems, timing chain and timing chainsystems, crankshaft and camshaft sprockets, chain tensioners andsnubbers and turbochargers for passenger car and commercialvehicle applications.

HY-VO chain is used in transmissions and for 4WD transfercase applications. Transmission chain is used to transfer powerfrom the engine to the transmission. The Companys MORSEGEMINI Chain System emits significantly less chain pitchfrequency noise than conventional transmission chain systems. The chain in a transfer case distributes power between the front and rear output shafts which, in turn, drive the front and rearwheels. The Company believes it is the worlds leadingmanufacturer of chain for FWD transmissions and 4WD transfercases. The Company is an original equipment supplier to everymajor manufacturer that uses chain for such applications.

The Companys timing chain system is used on Fords new family of overhead cam engines, including the Duratech andTriton engines, as well as Chryslers 2.7 liter, 3.7 literand 4.7 liter overhead cam engines. The Company has been selected to provide timing systems for a number of Japanese and Europeanapplications beginning in 1999. The Company believes that it isthe worlds leading manufacturer of timing chain.

This segment also provides turbochargers for passenger car,commercial vehicle and industrial applications for diesel andgasoline engine manufacturers in Europe, North America, SouthAmerica and Asia. In December1998, the Company announcedthe completion of its purchase of the European turbochargerbusiness of AG Khnle, Kopp & Kausch (AGKhnle), renaming it 3K-Warner Turbosystems GmbH(3K-Warner). In 1999, the business was expanded bythe addition of the Schwitzer Group turbocharger portion of theKuhlman Corporation acquisition. A turbocharger is a devicedesigned to force additional intake air into the engine to create a cleaner and more powerful ignition. Benefits of turbochargingin both passenger car and commercial vehicle applications include greater power for a given engine size, improved fuel economy and significantly reduced emissions. The Company believes it thesecond leading manufacturer of turbochargers in the world.

TorqTransfer Systems

TorqTransfer Systems products include 4WD and all-wheeldrive transfer cases and related systems to transfer torquewithin the drivetrain.

Transfer cases are installed primarily on light trucks andsport-utility vehicles. A transfer case attaches to thetransmission and distributes torque to the front and rear axlesfor 4WD, improving vehicle control during off-road use and in avariety of road conditions. The Company has designed anddeveloped an exclusive 4WD Torque-on-Demand(TOD) transfer case system, which allows vehicles toautomatically shift from two-wheel drive to 4WD when electronicsensors indicate it is necessary. The TOD transfer case isavailable on the Ford Explorer, the best selling sport-utilityvehicle in the United States in 1999, 1998 and 1997, and the Ford Expedition, Lincoln Navigator, Isuzu Trooper and SsangYong Musso from Daewoo.

4

Sales of 4WD transfer cases represented 22%, 27% and 34% of theCompanys total revenues for 1999, 1998 and 1997,respectively. The Company believes that it is the worldsleading independent manufacturer of 4WD transfer cases, producing approximately 1.2million transfer cases in 1999. TheCompanys largest customer of 4WD transfer cases is FordMotor Company. The Company supplies the majority of the 4WDtransfer cases for Ford, including those installed in the FordExplorer, the Ford Expedition, the Ford F-150 and Ranger pick-uptrucks, the Mercury Mountaineer and the Lincoln Navigator.

The Company supplies transfer cases for the Mercedes-Benz 4WDvehicle, which was first made available to consumers in 1997 andis manufactured at Mercedes-Benzs United Statespassenger-vehicle manufacturing facility. Under a five-yearagreement, which has a three-year extension provision, theCompany developed and supplies Mercedes-Benz with two-speed,electronically controlled, all-wheel drive transfer cases thatare compatible with its anti-skid braking system.

Transmission Systems

The Company engineers and manufactures components for automatictransmissions and the systems that combine such components around the world. Principal product lines include friction plates,one-way clutches, transmission bands and torque converter lock-up clutches for automatic transmissions. The Company is a supplierto virtually every major automatic transmission manufacturer inthe world. The Companys 50%-owned joint venture in Japan,NSK-Warner Kabushiki Kaisha (NSK Warner), is aleading producer of friction plates and one-way clutches inJapan.

Acquisitions during 1999

Kuhlman Corporation

On March1, 1999, the Company acquired all the outstandingshares of common stock of Kuhlman Corporation(Kuhlman), for a purchase price of$693.0million. The Company also assumed $131.6million of Kuhlmans existing indebtedness, which it subsequentlyrefinanced. The Company funded the transaction by issuing commonstock and by borrowing approximately $543.2million.

Kuhlman was a diversified industrial manufacturing company thatoperated in two product segments: vehicle and electricalproducts. In vehicle products, Kuhlmans Schwitzer Group and Kysor were leading worldwide manufacturers of proprietary engine components, including turbochargers, fans and fan drives, fueltanks, instrumentation, heating/ ventilation/ air conditioningsystems, and other products for commercial transportation andindustrial equipment. The vehicle products units have beenintegrated into the Companys Air/ Fluid Systems, CoolingSystems and Morse TEC operating segments.

The electrical products businesses acquired from Kuhlmanconsisted of Kuhlman Electric Corporation (KuhlmanElectric) and Coleman Cable Systems, Inc. (ColemanCable). These businesses manufactured transformers for theutility industry and wire and cable for utilities and otherindustries. At the time of the Kuhlman acquisition, the Companyannounced that it intended to sell the businesses by the end ofthe year. As of December31, 1999, the Company had completed the sales of both Kuhlman Electric and Coleman Cable. TheCompany received cash proceeds of approximately$227.1million and $30.3million face value debtinstruments from the buyers of the businesses. The debtinstruments were adjusted to a carrying value of$12.9million because of their terms and credit-worthiness.

Eaton Corporations Fluid Power Acquisition

Effective October1, 1999, the Company acquired EatonCorporations Fluid Power Division, one of the worldsleading manufacturers of powertrain cooling solutions for theglobal automotive industry, for $321.7million. To partially finance the acquisition, the Company issued $150million of 8.0% senior unsecured notes maturing September2019. Cashfrom operations funded the remainder of

5

the acquisition price. The Fluid Power Division designs andproduces a variety of viscous fan drive cooling systems primarily for passenger vehicles such as light trucks, sport-utilityvehicles and vans. It has been combined with the commercialcooling systems business acquired from Kuhlman in March to formthe Companys newest segment, Cooling Systems.

Joint Ventures

The Company has five joint ventures in which it has aless-than-100% ownership interest. Results from three of theseventures, in which the Company is the majority owner, areconsolidated as part of the Companys results. TheCompanys ownership interest in the two unconsolidated joint ventures NSK-Warner and Beijing Warner Gear Co., Ltd. are 50%and 49.9%, respectively. These investments are reported using the equity method.

Management of the unconsolidated joint ventures is shared withthe Companys respective joint venture partners. Certaininformation concerning the Companys joint ventures is setforth below:

PercentageFiscal

Owned byLocation1999 Sales

YeartheofJoint Venture($ in

Joint VentureProductsOrganizedCompanyOperationPartnermillions)

Unconsolidated

NSK-Warner K.KFriction products196450%JapanNippon Seiko K.K.$275

Beijing Warner
Gear Co., Ltd.Manual transmissions199249.9%ChinaBeijing Gear Works$12

Consolidated

Borg-Warner Automotive Korea, Inc.Friction products198780%KoreaNSK Warner K.K.$38

Divgi-Warner LimitedTransfer cases, manual transmissions and automatic locking hubs199560%IndiaDivgi Metalwares, Ltd.$5

Borg-Warner ShenglongFans, fan drives199970%ChinaNingbo Shenglong Group Co., Ltd.$1(a)

(Ningbo) Co. Ltd.

(a)Sales for Borg-Warner Shenglong (Ningbo) Co. Ltd. represent fullyear 1999 results. The Company only recorded results for twomonths worth of sales because it began consolidating Borg-WarnerShenglong (Ningbo) Co. Ltd. in November of 1999.

See Note12 of the Notes to Consolidated FinancialStatements on pages 40 through 42 of the Companys AnnualReport for geographic information.

Customers

Approximately 75% of the Companys total sales in 1999 wereto automotive OEMs, with the remaining 25% of the Companyssales to a diversified group of industrial, construction andagricultural vehicle manufacturers, auto part manufacturers andto distributors of automotive aftermarket and replacement parts.

The Companys worldwide sales in 1999 to Ford,DaimlerChrysler Corporation and General Motors Corporationconstituted approximately 28%, 17% and 12%, respectively, of its1999 consolidated sales. Approximately 25% of consolidated salesfor 1999 were outside the United States, including exports.However, a substantial portion of such sales were to foreign OEMs of vehicles that are, in turn, exported to the United States.See Note12 of the Notes to Consolidated FinancialStatements on pages40 through 42 of the CompanysAnnual Report.

The Companys automotive products are sold directly to OEMspursuant to the terms and conditions of the OEMs purchaseorders, and deliveries are subject to periodic authorizationsbased upon the production schedules of the OEMs. The Companyships its products directly from its plants to the OEMs.

6

Sales and Marketing

Each of the Companys operating segments has its own salesfunction headed by a vice president of sales. Account executivesfor each group are assigned to serve specific OEM customers forone or more of a business groups products. Such accountexecutives spend the majority of their time in direct contactwith OEM purchasing and engineering employees and are responsible for servicing existing business and for identifying andobtaining new business. Because of their close relationship withthe OEMs, account executives are able to identify and meetcustomers needs based upon their knowledge of theCompanys products and design and manufacturingcapabilities. Upon securing a new order, account executivesparticipate in product launch team activities as a key interfaceto the customers.

Research and Development

Each of the Companys operating segments has its ownresearch and development (R&D) organization. Over 500employees, including engineers, mechanics andtechnicians, are engaged in R&D activities at Companyfacilities worldwide. The Company also operates testingfacilities such as prototype, measurement and calibration, lifetesting and dynamometer laboratories.

By working closely with the OEMs and anticipating their futureproduct needs, the Companys R&D personnel conceive,design, develop and manufacture new proprietary automotivecomponents and systems. R&D personnel also work to improvecurrent products and production processes. The Company believesits commitment to R&D will allow it to obtain new orders from its OEM customers.

Consistent with its strategy of developing technologicallyinnovative products, the Company spent approximately$91.6million, $65.1million and $59.0million in1999, 1998 and 1997, respectively, on R&D activities. Notincluded in the reported R&D activities werecustomer-sponsored R&D activities that were approximately$9.4million, $8.4million and $8.0million in1999, 1998 and 1997, respectively.

Patents and Licenses

The Company has approximately 2,500 active domestic and foreignpatents and patent applications pending or under preparation, and receives royalties from licensing patent rights to others. While it considers its patents on the whole to be important, theCompany does not consider any single patent, group of relatedpatents or any single license essential to its operations in theaggregate or to the operations of any of the Companysbusiness groups individually. The expiration of the patentsindividually and in the aggregate is not expected to have amaterial effect on the Companys financial position orfuture operating results. The Company owns numerous trademarks,some of which are valuable but none of which are essential to its business in the aggregate.

The Company owns the BorgWarner and Borg-Warner Automotive trade names and housemarks, and variationsthereof, which are material to the Companys business.

Competition

Each of the Companys operating segments competes worldwidewith a number of other manufacturers and distributors whichproduce and sell similar products. Price, quality andtechnological innovation are the primary elements of competition. Competitors include vertically integrated units of theCompanys major OEM customers, as well as a large number ofindependent domestic and international suppliers. Many of thesecompanies are larger and have greater resources than the Company.

A number of the Companys major OEM customers manufacture,for their own use and for others, products which compete with the Companys products. Although these OEM customers haveindicated that they will continue to rely on outside suppliers,the OEMs could elect to manufacture products to meet their ownrequirements or to compete with the Company. There can be noassurance that the Companys business will not be adverselyaffected by increased competition in the markets in which itoperates.

7

The competitive environment has changed dramatically over thepast few years as the Companys traditional United StatesOEM customers, faced with intense international competition, have expanded their worldwide sourcing of components with the statedobjective of better competing with lower-cost imports. As aresult, the Company has experienced competition from suppliers in other parts of the world enjoying economic advantages such aslower labor costs, lower health care costs and, in some cases,export subsidies and/or raw materials subsidies.

Employees

As of December31, 1999, the Company and its consolidatedsubsidiaries had approximately 14,400 salaried and hourlyemployees (as compared with approximately 10,100 employees atDecember31, 1998), of which approximately 9,900 were U.S.employees. Approximately 43% of the Companys domestichourly workers are unionized. The hourly workers at theCompanys European facilities are also unionized. TheCompany believes its present relations with employees to besatisfactory.

Raw Materials

Each of the Companys operating segments believes that itssupplies of raw materials for manufacturing requirements in 2000are adequate and are available from multiple sources. It iscommon, however, for customers to require their prior approvalbefore certain raw materials or components can be used, therebyreducing sources of supply that would otherwise be available.Manufacturing operations for each of the Companys operating segments are dependent upon natural gas, fuel oil, propane andelectricity.

Environmental Regulation and Proceedings

The Companys operations are subject to federal, state,local and foreign laws and regulations governing, among otherthings, emissions to air, discharge to waters and the generation, handling, storage, transportation, treatment and disposal ofwaste and other materials. The Company believes that itsbusiness, operations and facilities have been and are beingoperated in compliance in all material respects with applicableenvironmental and health and safety laws and regulations, many of which provide for substantial fines and criminal sanctions forviolations. However, the operation of automotive partsmanufacturing plants entails risks in these areas, and there canbe no assurance that the Company will not incur material costs or liabilities. In addition, potentially significant expenditurescould be required in order to comply with evolving environmentaland health and safety laws, regulations or requirements that maybe adopted or imposed in the future.

The Company believes that the overall impact of compliance withregulations and legislation protecting the environment will nothave a material effect on its financial position or futureoperating results, although no assurance can be given in thisregard. Capital expenditures and expenses in 1999 attributable to compliance with such legislation were not material.

The Company and certain of its current and former direct andindirect corporate predecessors, subsidiaries and divisions havebeen identified by the United States Environmental ProtectionAgency and certain state environmental agencies and privateparties as potentially responsible parties (PRPs) atvarious hazardous waste disposal sites under the ComprehensiveEnvironmental Response, Compensation and Liability Act(Superfund) and equivalent state laws and, as such,may be liable for the cost of cleanup and other remedialactivities at 40 such sites. Responsibility for cleanup and other remedial activities at a Superfund site is typically sharedamong PRPs based on an allocation formula.

Based on information available to the Company which, in mostcases, includes: an estimate of allocation of liability amongPRPs; the probability that other PRPs, many of whom are large,solvent public companies, will fully pay the costs apportioned to them; currently available information from PRPs and/or federalor state environmental agencies concerning the scope ofcontamination and estimated remediation costs; remediationalternatives; estimated legal fees; and other factors, the

8

Company has established a reserve for indicated environmentalliabilities in the aggregate amount of approximately$17.8million at December31, 1999. The Company expects this amount to be expended over the next three to five years.

The Company believes that none of these matters, individually orin the aggregate, will have a material adverse effect on itsfinancial position or future operating results, generally eitherbecause estimates of the maximum potential liability at a siteare not large or because liability will be shared with otherPRPs, although no assurance can be given with respect to theultimate outcome of any such matter.

Executive Officers

Set forth below are the names, ages, positions and certain otherinformation concerning the executive officers of the Company asof March15, 2000.

NameAgePosition with Company

John F. Fiedler61Chairman and Chief Executive Officer

Lawrence B. Skatoff60Executive Vice President and Chief Financial Officer

William C. Cline50Vice President and Controller

Gary P. Fukayama52Executive Vice President

Christopher A. Gebelein53Vice PresidentBusiness Development

Laurene H. Horiszny44Vice President, Secretary and General Counsel

John A. Kalina54Vice President, Chief Information Officer

Geraldine Kinsella52Vice PresidentHuman Resources

Timothy Manganello50Vice President

John J. McGill45Vice President

Jeffrey L. Obermayer44Vice President and Treasurer

Ronald M. Ruzic61Executive Vice President

Robert D. Welding51Executive Vice President

F. Lee Wilson45Vice President

Mr.Fiedler has been Chairman of the Board of Directorssince March 1996 and has been Chief Executive Officer of theCompany since January1995. He was President fromJune1994 to March1996.

Mr.Skatoff has been Executive Vice President and ChiefFinancial Officer since January2000. He was Senior VicePresident and Chief Financial Officer at Premark InternationalInc. from September1991 to December1999.

Mr.Cline has been Vice President and Controller of theCompany since May1993.

Mr.Fukayama has been Executive Vice President of theCompany since November1992. He has been Group President ofBorgWarner Air/ Fluid Systems Inc. since May1996. He wasPresident and General Manager of Borg-Warner Automotive Automatic Transmission Systems Corporation from January1995 toApril1996.

Mr.Gebelein has been Vice PresidentBusinessDevelopment of the Company since January1995.

Ms.Horiszny has been Vice President, Secretary and GeneralCounsel of the Company since May1993.

Mr.Kalina has been Vice President, Chief InformationOfficer of the Company since January1999. He was anExecutive IT Consultant for IBM from August1997 untilJanuary1999 and was Chief Information Officer for WalbroCorporation from September1995 until December1996.

Ms.Kinsella has been Vice PresidentHuman Resources of the Company since May1993.

Mr.Manganello has been Vice President of the Company andPresident and General Manager of BorgWarner TorqTransfer SystemsInc. since February1999. He was Vice President, Operationsof Borg-Warner Automotive Powertrain Systems Corporation, MunciePlant from December1995 until

9

January1999. He was Vice President, Business Development of Borg-Warner Automotive Powertrain Systems Corporation, fromOctober1994 until November1995.

Mr.McGill has been Vice President of the Company andPresident and General Manager of BorgWarner Cooling Systems Inc.since October1999. He was General Manager of EatonsFluid Power Division from January1998 to October 1999. Hewas General Manager of Eatons Torque Control Products fromApril1996 to January1998 and was Operations Managerof Eatons Engine Components from April1994 toApril1996.

Mr.Obermayer has been Vice President and Treasurer of theCompany since December1999. He was Acting Treasurer fromJune1999 until December1999 and Vice President,Finance & Business Development ATS Group fromMay1999 until December1999. He was Vice President and Controller of ATS Group from October1996 untilApril1999 and was Director, Financial Planning &Investments from January1994 until September1996.

Mr.Ruzic has been Executive Vice President of the Companyand Group President of BorgWarner Morse TEC Inc. sinceOctober1992, Chairman of 3K-Warner Turbosystems sinceSeptember1998 and Vice Chairman of AG Khnle sinceSeptember 1997.

Mr.Welding has been Executive Vice President of the Company since November1999 and has been President of BorgWarnerTransmission Systems Inc. since May1996. He was VicePresident of the Company from May1996 untilOctober1999 and was Vice PresidentOperations ofBorg-Warner Automotive Automatic Transmission SystemsCorporation, Bellwood Plant, from November1993 toMay1996.

Mr.Wilson has been Vice President of the Company andPresident and General Manager of BorgWarner Turbo Systems Inc.since January2000. He was a Director for Allied SignalAerospace (n/k/a Honeywell) for various product lines fromOctober1997 to December1999.

Item2. Properties

As of December31, 1999, the Company had 49 manufacturingfacilities strategically located throughout the United States and worldwide. In addition to its domestic manufacturing facilities, the Company has four facilities in Germany, two facilities inEngland, Wales, Korea, Brazil, Japan and India, and one facilityin each of Canada, Italy, Mexico, China, France and Taiwan. TheCompany also has numerous sales offices, warehouses and technical centers. The Companys executive offices, which are leased, are located in Chicago, Illinois. In general, the Companybelieves that its properties are in good condition and areadequate to meet its current and reasonably anticipated needs.

The following is additional information concerning theheadquarters and the major manufacturing plants operated by theCompany and its consolidated subsidiaries. Unless otherwisenoted, these plants are owned by the Company.

1999

Percent of

Capacity

Utilization

Locations(1)(2)

Air/ Fluid Systems73.8%

Headquarters: Warren, Michigan
Blytheville, Arkansas; Buffalo, New York (leased); Charlotte,North Carolina; Chester, South Carolina; Dixon, Illinois; GrandRapids, Michigan (leased); Sallisaw, Oklahoma; Springfield, Ohio; Tulle, France; Walker, Michigan; Water Valley, Mississippi;White Pigeon, Michigan

Cooling Systems76.4%

Headquarters: Marshall, Michigan
Bradford, England (leased); Cadillac, Michigan; Markdorf,Germany; Changwon, South Korea (leased); Fletcher, NorthCarolina; Gainesville, Georgia (leased); Ningbo, China; Sao Josedos Campos, Brazil (leased)

10

1999

Percent of

Capacity

Utilization

Locations(1)(2)

Morse TEC98.5%

Headquarters: Ithaca, New York; Indianapolis, Indiana
Arcore, Italy; Asheville, North Carolina; Bradford, England;Campinas Sao Paolo, Brazil; Guadalajara, Mexico; Hengoed, Wales;Ithaca, New York; Nabari City, Japan; Simcoe, Ontario, Canada;Spring Lake, Michigan; Tainan Shien, Taiwan; Kirchheimbolanden,Germany

TorqTransfer Systems124.9%

Headquarters: Sterling Heights, Michigan
Cary, North Carolina; Livonia, Michigan; Longview, Texas(leased); Margam, Wales; Muncie, Indiana; Pune, India (60% JV);Seneca, South Carolina; Sirsi, India (60% JV)

Transmission Systems136.6%

Headquarters: Lombard, Illinois
Bellwood, Illinois; Coldwater, Michigan; Eumsung, Korea (80% JV); Frankfort, Illinois; Heidelberg, Germany; Ketsch, Germany;Margam, Wales

(1)The figure shown in each case is a weighted average of thepercentage utilization of each major plant within the category,with an individual plant weighted in proportion to the number ofemployees employed when such plant runs at 100% capacity.Capacity utilization at the 100% level is defined as operatingfive days per week, with two eight-hour shifts per day and normal vacation schedules.

(2)The table excludes joint ventures owned 50% or less.

Item3. Legal Proceedings

The Company is presently, and is from time to time, subject toclaims and suits arising in the ordinary course of its business.In certain such actions, plaintiffs request punitive or otherdamages that may not be covered by insurance. The Companybelieves that it has established adequate provisions forlitigation liabilities in its financial statements in accordancewith generally accepted accounting principles. These provisionsinclude both legal fees and possible outcomes of legalproceedings.

It is the opinion of the Company that the various asserted claims and litigation in which the Company is currently involved willnot materially affect its financial position or future operatingresults, although no assurance can be given with respect to theultimate outcome for any such claim or litigation.

Item4. Submission of Matters to a Vote of SecurityHolders

There were no matters submitted to the security holders of theCompany during the fourth quarter of 1999.

PART II

Item5. Market for the Registrants Common Equityand Related Stockholder Matters

The Companys Common Stock is listed for trading on the NewYork Stock Exchange. As of March15, 2000, there wereapproximately 3,300 holders of record of Common Stock.

The Company has paid cash dividends of $.15 per share on itsCommon Stock and Non-Voting Common Stock during each quarter forthe last two fiscal years. While the Company currently expectsthat comparable quarterly cash dividends will continue to be paid in the future, the dividend policy is subject to review andchange at the discretion of the Board of Directors.

11

High and low sales prices (as reported on the New York StockExchange composite tape) for the Common Stock for each quarter in 1998 and 1999 were:

Quarter endedHighLow

March31, 1998$64.500$49.625

June30, 1998$68.125$43.688

September30, 1998$51.563$37.063

December31, 1998$55.813$33.313

March31, 1999$56.000$42.438

June30, 1999$60.000$46.375

September30, 1999$57.875$40.875

December31, 1999$43.375$36.750

Item6.Selected Financial Data

The Selected Financial Data for the five years endedDecember31, 1999 with respect to the following line itemsset forth on page43 of the Companys Annual Report isincorporated herein by reference and made a part of this report:net sales; net earnings; net earnings per share; total assets;total debt; and cash dividend declared per share. See thematerial incorporated herein by reference in response toItem7 of this report for a discussion of the factors thatmaterially affect the comparability of the information containedin such data.

Item7.Managements Discussion and Analysis of Financial Condition and Results of Operations

The Managements Discussion and Analysis of FinancialCondition and Results of Operations set forth on pages18through 24 in the Companys Annual Report are incorporatedherein by reference and made a part of this report.

Item7a.Market Risk Disclosure

Information with respect to interest rate risk and foreigncurrency exchange risk is contained on page24 of theCompanys Annual Report and is incorporated herein byreference. Information with respect to the levels of indebtedness subject to interest rate fluctuation is contained in Note6 of the Notes to Consolidated Financial Statements onpages33 and 34 of the Companys Annual Report and isincorporated herein by reference. Information with respect to the Companys level of business outside the United States which is subject to foreign currency exchange rate market risk is contained in Note12 of the Notes to Consolidated FinancialStatements on page42 under the caption Geographic Information and is incorporated herein by reference.

Item8.Financial Statements and Supplementary Data

The Consolidated Financial Statements (including the notesthereto) of the Company and the Independent Auditors Report as set forth on pages25 through 43 in the CompanysAnnual Report are incorporated herein by reference and made apart of this report. Supplementary financial informationregarding quarterly results of operations (unaudited) for theyears ended December31, 1999 and 1998 is set forth onpage42 of the Companys Annual Report. For a list offinancial statements filed as part of this report, seeItem14, Exhibits, Financial Statement Schedules, andReports on Form8-K beginning on page13.

Item9.Changes in and Disagreements with Accountants on Accountingand Financial Disclosure

Not applicable.

12

PART III

Item10.Directors and Executive Officers of theRegistrant

Information with respect to directors and nominees for electionas directors of the Company under the caption Election ofDirectors on pages1 through 4 of the CompanysProxy Statement and information under the captionSection16(a) Beneficial Ownership ReportingCompliance on page6 of the Companys ProxyStatement is incorporated herein by reference and made a part ofthis report. Information with respect to executive officers ofthe Company is set forth in PartI of this report.

Item11.Executive Compensation

Information with respect to compensation of executive officersand directors of the Company under the captionsCompensation of Directors on page4 of theCompanys Proxy Statement and ExecutiveCompensation, Stock Options, Long-TermIncentive Plans, and Employment Agreements onpages7 through 10 of the Companys Proxy Statement isincorporated herein by reference and made a part of this report.

Item12.Security Ownership of Certain BeneficialOwners and Management

Information with respect to security ownership by persons knownto the Company to beneficially own more than five percent of theCompanys Common Stock, by directors and nominees fordirectors of the Company and by all directors and executiveofficers of the Company as a group under the caption StockOwnership on page6 of the Companys ProxyStatement is incorporated herein by reference and made a part ofthis report.

Item13.Certain Relationships and RelatedTransactions

Information with respect to certain relationships and relatedtransactions under the caption Certain Relationships andRelated Transactions on page16 of the CompanysProxy Statement is incorporated herein by reference and made apart of this report.

PART IV

Item14.Exhibits, Financial Statement Schedules,and Reports on Form8-K

(a) 1.The following consolidated financial statements of the Company on pages 25 through 43 of the CompanysAnnual Report are incorporated herein by reference:

Independent Auditors Report

Consolidated Statements of Operations years endedDecember31, 1999, 1998 and 1997

Consolidated Balance Sheets December31, 1999and 1998

Consolidated Statements of Cash Flows years endedDecember31, 1999, 1998 and 1997

Consolidated Statements of Stockholders Equityyears ended December31, 1999, 1998 and 1997

Notes to Consolidated Financial Statements

2. Certain schedules for whichprovisions are made in the applicable accounting regulations ofthe Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore havebeen omitted.

13

3. The exhibits filed in response toItem601 of RegulationS-K are listed in theExhibitIndex on pageA-1.

(b)Reports on Form8-K.

(1) On October6, 1999, the Company filed a report onForm8-K announcing that it had completed the publicoffering of $150,000,000 aggregate principal amount of its 8%Senior Notes due 2019.

(2) On October15, 1999, the Company filed a report on Form8-K announcing that it had completed the previouslyannounced acquisition of the Fluid Power Division of EatonCorporation.

14

SIGNATURES

Pursuant to the requirements of Section13 or 15(d) ofthe Securities Exchange Act of 1934, the registrant has dulycaused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BORGWARNER INC.

By:/s/ JOHN F. FIEDLER

John F. Fiedler

Chairman and Chief Executive Officer

Date: March22, 2000

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated onthis 22nd day of March, 2000.

SignatureTitle

/s/ JOHN F. FIEDLER
John F. FiedlerChairman of the Board of Directors and Chief Executive Officer(Principal Executive Officer)

/s/ LAWRENCE B. SKATOFF
Lawrence B. SkatoffExecutive Vice President and Chief Financial Officer (PrincipalFinancial Officer)

/s/ WILLIAM C. CLINE
William C. ClineVice President and Controller
(Principal Accounting Officer)

/s/ PHYLLIS O. BONANNO
Phyllis O. BonannoDirector

/s/ ANDREW F. BRIMMER
Andrew F. BrimmerDirector

/s/ WILLIAM E. BUTLER
William E. ButlerDirector

/s/ JERE A. DRUMMOND
Jere A. DrummondDirector

/s/ PAUL E. GLASKE
Paul E. GlaskeDirector

/s/ IVAN W. GORR
Ivan W. GorrDirector

/s/ JAMES J. KERLEY
James J. KerleyDirector

/s/ ALEXIS P. MICHAS
Alexis P. MichasDirector

/s/ JOHN RAU
John RauDirector

/s/ JOHN F. FIEDLER
John F. FiedlerAs attorney-in-fact for the directors marked by an asterisk.

15

EXHIBIT INDEX

Exhibit

NumberDocument Description

*3.1Restated Certificate of Incorporation of the Company(incorporated by reference to ExhibitNo.3.1 of theCompanys Quarterly Report on Form10-Q for the quarter ended September30, 1993).

*3.2By-laws of the Company (incorporated by reference to ExhibitNo.3.2 of the Companys Quarterly Report onForm10-Q for the quarter ended September30, 1993).

*3.3Certificate of Designation, Preferences and Rights ofSeriesA Junior Participating Preferred Stock (incorporatedby reference to Exhibit3.3 of the Companys AnnualReport on Form10-K for the year ended December31,1999).

*4.1Indenture, dated as of November1, 1996, between Borg-Warner Automotive, Inc. and The First National Bank of Chicago(incorporated by reference to ExhibitNo.4.1 toRegistration Statement No.333-14717).

*4.2Indenture, dated as of February15, 1999, betweenBorg-Warner Automotive, Inc. and The First National Bank ofChicago (incorporated by reference to ExhibitNo.4.1to Amendment No.1 to Registration StatementNo.333-66879).

*4.3Rights Agreement, dated as of July22, 1998, betweenBorg-Warner Automotive, Inc. and ChaseMellon ShareholderServices, L.L.C. (incorporated by reference to Exhibit4.1to the Registration Statement on Form8-A filed onJuly 24, 1998).

*10.1Credit Agreement dated as of December7, 1994 amongBorg-Warner Automotive, Inc., as Borrower, the Lenders listedtherein, as Lenders, Chemical Bank and the Bank of Nova Scotia,as Co-Arrangers, Chemical Bank, as Administrative Agent and TheBank of Nova Scotia as Documentation Agent (incorporated byreference to Exhibit No.10.1 to the CompanysAnnual Report on Form10-K for the year endedDecember31, 1994).

*10.2First Amendment of Credit Agreement dated as of December15, 1995 (incorporated by reference to Exhibit10.2 of theCompanys Annual Report on Form10-K for the year ended December31, 1995).

*10.3Second Amendment of Credit Agreement dated as of January16, 1996 (incorporated by reference to Exhibit10.3 of theCompanys Annual Report on Form10-K for the year ended December31, 1996).

*10.4Replacement and Restatement Agreement dated as of October10, 1996 to the Credit Agreement dated as of December7,1994 (incorporated by reference to Exhibit10.1 onForm 10-Q for the quarter ended September30, 1996).

*10.5Amendment to Credit Agreement dated as of February2, 1999to the Credit Agreement dated as of December7, 1994(incorporated by reference to Exhibit10.5 of theCompanys Annual Report on Form10-K for the year ended December31, 1998).

*10.6Distribution and Indemnity Agreement dated January27, 1993between Borg-Warner Automotive, Inc. and Borg-Warner SecurityCorporation (incorporated by reference to ExhibitNo.10.2 to Registration Statement No.33-64934).

*10.7Tax Sharing Agreement dated January27, 1993 betweenBorg-Warner Automotive, Inc. and Borg-Warner Security Corporation (incorporated by reference to ExhibitNo.10.3 toRegistration Statement No.33-64934).

*10.8Borg-Warner Automotive, Inc. Management Stock Option Plan, asamended (incorporated by reference to ExhibitNo.10.6to Registration Statement No.33-64934).

*10.9Borg-Warner Automotive, Inc. 1993 Stock Incentive Plan as amended effective November8, 1995 (incorporated by reference toAppendixA of the Companys Proxy Statement datedMarch20, 1998).

A-1

Exhibit

NumberDocument Description

*10.10Receivables Transfer Agreement dated as of January28, 1994among BWA Receivables Corporation, ABN AMRO Bank N.V. as Agentand the Program LOC Provider and Windmill Funding Corporation(incorporated by reference to ExhibitNo. 10.12 to the Companys Annual Report on Form10-K for the yearended December31, 1993).

*10.11Amended and Restated Receivables Loan Agreement dated as ofDecember23, 1998 among BWA Receivables Corporation, asBorrower, Borg-Warner Automotive, Inc., as Collection Agent, ABNAMRO Bank N.V., as Agent, the Banks from time to time partyhereto, ABN AMRO Bank N.V., as the Program LOC Provider and theProgram LOC Provider and Windmill Funding Corporation(incorporated by reference to ExhibitNo. 10.11 of the Companys Annual Report on Form10-K for the yearended December31, 1998).

*10.12First Amendment dated as of March25, 1999 to Amended andRestated Receivables Loan Agreement dated as of December23, 1998 (incorporated by reference to ExhibitNo.10.1 to the Companys Quarterly Report on Form10-Q for the quarter ended September30, 1999).

10.13Second Amendment dated as of December22, 1999 to Amendedand Restated Receivables Loan Agreement dated as ofDecember23, 1998.

*10.14Service Agreement, dated as of December31, 1992, by andbetween Borg-Warner Security Corporation and Borg-WarnerAutomotive, Inc. (incorporated by reference toExhibitNo. 10.10 to Registration StatementNo.33-64934).

*10.15Borg-Warner Automotive, Inc. Transitional Income Guidelines forExecutive Officers amended as of May1, 1989 (incorporatedby reference to Exhibit10.16 to the Companys AnnualReport on Form10-K for the year ended December31,1993).

*10.16Borg-Warner Automotive, Inc. Management Incentive Bonus Plandated January1, 1994 (incorporated by reference toExhibitNo.10.18 to the Companys Annual Reporton Form 10-K for the year ended December31, 1993).

*10.17Borg-Warner Automotive, Inc. Retirement Savings Excess BenefitPlan dated January27, 1993 (incorporated by reference toExhibitNo.10.20 of the Companys Annual Reporton Form10-K for the year ended December31, 1993).

*10.18Borg-Warner Automotive, Inc. Retirement Savings Plan datedJanuary27, 1993 as further amended and restated effectiveas of April1, 1994 (incorporated by reference toExhibit 10.18 to the Companys Annual Report onForm10-K for the year ended December31, 1995).

*10.19Borg-Warner Automotive, Inc. Deferred Compensation Plan datedJanuary1, 1994 (incorporated by reference toExhibitNo.10.24 of the Companys Annual Reporton Form 10-K for the year ended December31, 1993).

*10.20Form of Employment Agreement for JohnF. Fiedler(incorporated by reference to ExhibitNo.10.0 of theCompanys Quarterly Report on Form10-Q for the quarter ended June30, 1994).

*10.21Amended Form of Employment Agreement for JohnF. Fiedlerdated January27, 1998 (incorporated by reference toExhibit10.21 of the Companys Annual Report onForm10-K for the year ended December31, 1997).

*10.22Form of Change of Control Employment Agreement for ExecutiveOfficers (incorporated by reference to ExhibitNo.10.1 to the Companys Quarterly Report on Form10-Q for the Quarter ended September30, 1997).

A-2

Exhibit

NumberDocument Description

*10.23Amendment to the Change of Control Employment Agreement betweenthe Company and JohnF. Fiedler dated effectiveJanuary30, 1998 (incorporated by reference to Exhibit 10.23 of the Companys Annual Report on Form10-K forthe year ended December31, 1997).

*10.24Assignment of Trademarks and License Agreement (incorporated byreference to ExhibitNo.10.0 of the CompanysQuarterly Report on Form10-Q for the quarter endedSeptember30, 1994).

*10.25Amendment to Assignment of Trademarks and License Agreement(incorporated by reference to ExhibitNo.10.23 of theCompanys Form10-K for the year endedDecember31, 1998).

*10.26Borg-Warner Automotive, Inc. Executive Stock Performance Plan(incorporated by reference to ExhibitNo.10.23 of theCompanys Annual Report on Form10-K for the year ended December31, 1995).

*10.27Agreement of Purchase and Sale dated as of May31, 1996 byand among Coltec Industries Inc., Holley Automotive Group, Ltd.,Holley Automotive Inc., Coltec Automotive Inc., and HolleyAutomotive Systems GmbH and Borg-Warner Automotive, Inc.,Borg-Warner Automotive Air/ Fluid Systems Corporation andBorg-Warner Automotive Air/ Fluid Systems Corporation of Michigan (incorporated by reference to Exhibit10.1 of theCompanys Current Report on Form8-K dated as ofJune17, 1996).

*10.28Agreement and Plan of Merger dated as of December17, 1998by and between Borg-Warner Automotive, Inc., BWA Merger Corp. and Kuhlman Corporation (incorporated by reference to Exhibit2 of the Companys Current Report on Form8-K dated asof December21, 1998).

10.29Asset Purchase Agreement dated as of August2, 1999 amongEaton Corporation, the Seller Subsidiaries, Borg-WarnerAutomotive, Inc. and the Buyer Subsidiaries.

13.1Annual Report to Stockholders for the year ended December31, 1999 with manually signed Independent Auditors Report.(The Annual Report, except for those portions which are expressly incorporated by reference in the Form10-K, is furnishedfor the information of the Commission and is not deemed filed aspart of the Form10-K).

21.1Subsidiaries of the Company.

23.1Independent Auditors Consent.

27.1Financial Data Schedule.

99.1Cautionary Statements.

*Incorporated by reference.

Indicates a management contract or compensatory plan orarrangement required to be filed pursuant to Item14(c).

A-3

EX-10.132

Second Amendment Dated as of December 22, 1999 to Amended and Restated Receivables Loan Agreement Amended and Restated Receivables Purchase Agreement Amended and Restated Subordination Agreement Amended and Restated Limited Guaranty each Dated as of December 23, 1998 and Third Amendment to Amended and Restated Indemnity Agreement Dated as of December 22, 1999

This Amendment (the "Amendment"), dated as of December 22, 1999, is enteredinto among BWA Receivables Corporation (the "Borrower"), Borg-Warner Automotive,Inc. ("BWAI" and in its capacity as Collection Agent, the "Collection Agent"),Borg-Warner Automotive Diversified Transmission Products Corporation ("DTP"),Borg-Warner Automotive Air/Fluid Systems Corporation ("AFS"), Borg-WarnerAutomotive Morse TEC Corporation ("TEC"), Borg-Warner Automotive AutomaticTransmission Systems Corporation ("ATS"), Borg-Warner Automotive PowertrainSystems Corporation ("PTS"), Borg-Warner Automotive Turbo Systems Corporation("Turbo"), Borg-Warner Automotive Fuel Systems Corporation ("Fuel"), and Borg-Warner Automotive Cooling Systems Corporation ("CSC"); (CSC at times beinghereinafter referred to as the "New Originator"), Windmill Funding Corporation,a Delaware corporation ("Windmill"), ABN AMRO Bank N.V., as Windmill's programletter of credit provider (the "Program LOC Provider"), the Bank listed on thesignature page hereof (the "Bank") and ABN AMRO Bank N.V., as agent forWindmill, the Program LOC Provider and the Banks (the "Agent").

Reference is hereby made to (i) that certain Amended and RestatedReceivables Loan Agreement, dated as of December 23, 1998 (as amended,supplemented or otherwise modified through the date hereof, the "LoanAgreement"), among the Borrower, the Collection Agent, Windmill, the Program LOCProvider, the Bank and the Agent, (ii) that certain Amended and RestatedReceivables Purchase Agreement, dated as of December 23, 1998 (as amended,supplemented or otherwise modified through the date hereof, the "PurchaseAgreement"), among DTP, AFS, TEC, ATS, PTS, Turbo, Fuel and the Borrower,(iii) that certain Amended and Restated Indemnity Agreement, dated as ofDecember 23, 1998 (as amended, supplemented or otherwise modified through thedate hereof, the "Indemnity Agreement"), among DTP, AFS, TEC, ATS, PTS, Turbo,Fuel and the Agent, (iv) that certain Amended and Restated Limited Guaranty,dated as of December 23, 1998 (as amended, supplemented or otherwise modifiedthrough the date hereof, the "Guaranty"), by BWAI, DTP, AFS, TEC, ATS, PTS,Turbo and Fuel in favor of the Borrower and (v) that certain Amended andRestated Subordination Agreement, dated as of December 23, 1998 (as amended,supplemented or otherwise modified through the date hereof, the "SubordinationAgreement"), among DTP, AFS, TEC, ATS, PTS, Turbo, Fuel, the Borrower and Agent(each of the Loan Agreement, Purchase Agreement, Indemnity Agreement, Guarantyand Subordination Agreement being referred to herein individually as an "AmendedAgreement" and collectively as the "Amended Agreements"). Terms used herein andnot otherwise defined herein which are defined in each Amended Agreement or theother Transaction Documents (as defined in the Loan Agreement) shall have thesame meaning herein as defined therein.

For good and valuable consideration, the receipt and adequacy of which arehereby acknowledged, the parties hereto hereby agree as follows:

Section 1. Amendments to Loan Agreement. Subject to the followingterms and conditions, including without limitation the conditions precedent setforth in Section 6, upon execution by the parties hereto in the space providedfor that purpose below, the Loan Agreement shall be, and it hereby is, amendedas follows:

(a) The defined term "Approved Obligor" appearing in Section 1.1 of the LoanAgreement is amended in its entirety to be and to read as follows:"Approved Obligor" shall mean each of Ford Motor Company, General MotorsCorporation, Daimler Chrysler Corporation, New Venture Gear, CaterpillarCorporation and the wholly-owned Subsidiaries of each of the foregoing.

(b) The defined term "Approved Obligor Limit" appearing in Section 1.1 of theLoan Agreement is amended in its entirety to be and to read as follows:"Approved Obligor Limit" shall mean, (a) with respect to Ford Motor Company,$72,000,000, (b) with respect to General Motors Corporation, $40,000,000,

(c) with respect to Daimler Chrysler Corporation, $42,000,000, (d) with respectto New Venture Gear, $10,000,000 and (e) with respect to CaterpillarCorporation, $7,000,000; provided, however, that the Agent may designate alesser amount as the Approved Obligor Limit for any Approved Obligor, upon therequest of any Bank or the Program LOC Provider following the occurrence of aDowngrading Event with respect to such Approved Obligor or any Subsidiary ofsuch Approved Obligor.

(c) The date "December 22, 1999" appearing in clause (iv) of the defined term"Bank Termination Date" appearing in Section 1.1 of the Loan Agreement isdeleted and replaced with the date "December 20, 2000".(d) The defined term "Federal Funds Effective Rate" appearing in Section 1.1 tothe Loan Agreement is hereby deleted and replaced with the following:"Federal Funds Effective Rate" means for any day the greater of (i) the highestrate per annum as determined by ABN AMRO at which overnight Federal funds areoffered to ABN AMRO for such day by major banks in the interbank market, and(ii) if ABN AMRO is borrowing overnight funds from a Federal Reserve Bank thatday, the highest rate per annum at which such overnight borrowings are made onthat day. Each determination of the Federal Funds Effective Rate by ABN AMROshall be conclusive and binding on the Borrower except in the case of manifesterror.

(e) The defined term "Originator" appearing in Section 1.1 of the LoanAgreement is amended in its entirety to be and to read as follows:"Originator" shall mean each of the following Delaware corporations: Borg-Warner Automotive Diversified Transmission Products Corporation; Borg-WarnerAutomotive Air/Fluid Systems Corporation; Borg-Warner Automotive Morse TECCorporation; Borg-Warner Automotive Automatic Transmission Systems Corporation;Borg-Warner Automotive Powertrain Systems Corporation; Borg-Warner AutomotiveTurbo Systems Corporation; Borg-Warner Automotive Fuel Systems Corporation andBorg-Warner Automotive Cooling Systems Corporation.

(f) The date "December 22, 1999" appearing in clause (c) of the defined term"Program LOC Provider Termination Date" appearing in Section 1.1 of the LoanAgreement is deleted and replaced with the date "December 20, 2000".

(g) The defined term "Windmill Termination Date" appearing in Section 1.1 tothe Loan Agreement is hereby deleted and replaced with the following:"Windmill Termination Date" means the earliest of (a) the Business Daydesignated by Windmill at any time to the Borrower and (b) the Bank TerminationDate.

(h) The following definitions shall be added to Section 1.1 to the LoanAgreement, as alphabetically appropriate: "Allocated Commercial Paper" meanscommercial paper notes issued by Windmill for a tenor and in an amountspecifically requested by any Person in connection with a Receivable PurchaseFacility.

"Break Funding Costs" means for any Pool Funded Loan Interest amounts payable toWindmill under the applicable Receivables Purchase Facility in connection withany prepayment or amortization of amounts payable thereunder in excess of theamount of the investment or loan prepaid or amortized and accrued and unpaidinterest or discount thereon.

"Discount Period" means, with respect to any Settlement Date or the BankTermination Date, the period from and including the preceding Settlement Date(or if none, the date that the first Loan is made hereunder) to but notincluding such Settlement Date or Bank Termination Date, as applicable."Funding Charges" means, for each day, the sum of (i) interest accrued on PooledCommercial Paper on such day, plus (ii) any and all accrued commissions inrespect of placement agents and commercial paper dealers in respect of suchPooled Commercial Paper for such day, plus (iii) issuing and paying agents' feesincurred on such Pooled Commercial Paper for such day, plus (iv) other costsassociated with funding small or odd-lot amounts with respect to all ReceivablePurchase Facilities which are funded by Pooled Commercial Paper for such day,minus (v) any accrual of income net of expenses received on such day frominvestment of collections received under all Receivable Purchase Facilitiesfunded with Pooled Commercial Paper, minus (vi) any payment received on such daynet of expenses in respect of Break Funding Costs related to the prepayment ofany Loan Interests held by Windmill pursuant to the terms of any ReceivablePurchase Facilities funded substantially with Pooled Commercial Paper."Pool Funded Loan Interest" means each investment or loan of Windmill under aReceivables Loan Facility funded with Pooled Commercial Paper."Pooled Allocation" means, for each Pool Funded Loan Interest, an amount eachday equal to the product of (i) the Pooled Percentage Share of such LoanInterest on such day multiplied by (ii) the aggregate amount of Funding Chargesfor such day.

"Pooled Commercial Paper" means commercial paper notes of Windmill except (A)Allocated Commercial Paper, and (B) Specially Pooled Paper."Pooled Percentage Share" means, for each Pool Funded Loan Interest, a fraction(expressed as a percentage) the numerator of which is equal to the Investmentassociated with such Pool Funded Loan Interest and the denominator of which isequal to the aggregate amount of all outstanding investment (or comparable termsused in any Receivable Purchase Facility) held by Windmill which is fundedsubstantially with Pooled Commercial Paper."Receivable Purchase Facility" means any receivables purchase agreement, loanagreement or other similar contractual arrangement to which Windmill is a partyrelating to the transfer, purchase or financing of receivables or other assets."Settlement Date" means the 25th day of each calendar month."Specially Pooled Paper" means the aggregate of all commercial paper notes ofWindmill issued in connection with Receivables Purchase Facilities designatedfrom time to time by the Agent (in its sole discretion). Specially Pooled Paperwill not include Pooled Commercial Paper or Allocated Commercial Paper at anytime.(i) Section 2.3 of the Loan Agreement is hereby deleted and replaced with thefollowing:

Section 2.3. Selection of Interest Rates and Tranche Periods. (a)(1) Theprovisions of this subsection (a)(1) shall apply to each Loan Amount of Windmillfunded with commercial paper issued on or before the Agent makes the electiondescribed in clause (a)(2) below: Each Loan Amount shall be allocated to one ormore Tranches reflecting the Interest Rates at which such Loan Amount accruesInterest and the Tranche Periods for which such Interest Rates apply. Each LoanAmount of Windmill shall accrue Interest at the CP Rate. Each Tranche shall bein the minimum amount of $1,000,000 and in multiples thereof. All Interestaccrued on the Loan Amount of Windmill during a Tranche Period shall be payableby the Borrower on the last day of such Tranche Period. (2) At the Agent'soption, the Agent may notify the Borrower that the provisions of this subsection(a)(2) shall apply to each Loan Amount of Windmill funded with Pooled CommercialPaper issued after the Agent delivers a notice to the Borrower that it elects tohave the provisions of this clause (a)(2) to be applicable to the Loan Amount ofWindmill: The Borrower shall pay Funding Charges with respect to Windmill'sLoan Interest for each day that any Loan Amount in respect of such Loan Interestis outstanding. Each such Loan Interest will accrue Funding Charges each daybased on the Pooled Allocation. On each Settlement Date the Borrower shall payto the Agent (for the benefit of Windmill) an aggregate amount equal to allaccrued and unpaid Funding Charges in respect of such Loan Interest for theimmediately preceding Interest Period; (3) Each Loan Amount of the CommittedLenders shall be allocated to one or more Tranches reflecting the Interest Ratesat which such Loan Amount accrues Interest and the Tranche Periods for whichsuch Interest Rates apply. In each request for a Loan from a Committed Lenderand three Business Days before the expiration of any Tranche Period applicableto any Committed Lender's Loan Amount, the Borrower may request the TranchePeriod(s) to be applicable to such Loan Amount and the Interest Rate(s)applicable thereto. Each Loan Amount of the Committed Lenders may accrueInterest at either the Eurodollar Rate or the Prime Rate, in all cases asestablished for each Tranche Period applicable to such Loan Amount. EachTranche shall be in the minimum amount of $1,000,000 and in multiples thereofor, in the case of Interest accruing at the Prime Rate, in any amount thatotherwise has not been allocated to another Tranche Period. Any Loan Amount ofthe Committed Lenders not allocated to a Tranche Period shall be a PrimeTranche. During the pendency of a Termination Event, the Agent may reallocateany outstanding Loans of the Committed Lenders to a Prime Tranche. All Interestaccrued on the Loan Amount of the Committed Lenders during a Tranche Periodshall be payable by the Borrower on the last day of such Tranche Period or, fora Eurodollar Tranche with a Tranche Period of more than three months, 90 daysafter the commencement, and on the last day, of such Tranche Period.

(b) The Agent shall allocate the Investment of Windmill to Tranche Periodsin its sole discretion. If, by the time required in Section 2.3(a), theBorrower fails to select an Interest Rate or Tranche Period for any Loan Amountof the Committed Lenders, such Loans shall automatically accrue Interest at thePrime Rate for a three Business Day Tranche Period. Any Loans purchased fromWindmill pursuant to Article III hereof shall accrue interest at the Prime Rateand have an initial Tranche Period of three Business Days.

(c) If the Agent or any Committed Lender determines (i) that maintenanceof any Eurodollar Tranche would violate any applicable law or regulation, (ii)that deposits of a type and maturity appropriate to match fund any of suchLender's Eurodollar Tranches are not available or (iii) that the maintenance ofany Eurodollar Tranche will not adequately and fairly reflect the cost of suchLender of funding Eurodollar Tranches, then the Agent, upon the direction ofsuch Lender, shall suspend the availability of, and terminate any outstanding,Eurodollar Tranche so affected. All Loans allocated to any such terminatedEurodollar Tranche shall be reallocated to a Prime Rate Tranche.

(j) Exhibit C, Exhibit G, Exhibit H to the Loan Agreement are each amendedin their entirety to be and to read as set forth on Annex I hereto.

Section 2. Amendments to Purchase Agreement. Subject to the following termsand conditions, including without limitation the conditions precedent set forthin Section 6, upon execution by the parties hereto in the space provided forthat purpose below, the Purchase Agreement shall be, and it hereby is, amendedas follows:

(a) The cover page of the Purchase Agreement shall be deemed amended so asto include CSC as one of the parties to the Purchase Agreement.

(b) The first paragraph of the Purchase Agreement is amended in itsentirety to be and to read as follows:"Amended and Restated Receivables Purchase Agreement (this "Agreement"), datedas of December 23, 1998, by and among Borg-Warner Automotive DiversifiedTransmission Products Corporation ("DTP"), Borg-Warner Automotive Air/FluidSystems Corporation ("AFS"), Borg-Warner Automotive Morse TEC Corporation("TEC"), Borg-Warner Automotive Automatic Transmission Systems Corporation("ATS"), Borg-Warner Automotive Powertrain Systems Corporation ("PTS"), Borg-Warner Automotive Turbo Systems Corporation ("Turbo"), Borg-Warner AutomotiveFuel Systems Corporation ("Fuel") and Borg-Warner Automotive Cooling SystemsCorporation ("CSC" and collectively with DTP, AFS, TEC, PTS, ATS, Turbo, andFuel, the "Sellers") and BWA Receivables Corporation (the "Purchaser")."

(c) Exhibit D and Exhibit E to the Purchase Agreement are each amended in theirentirety to be and to read as set forth on Annex II hereto.

Section 3. Amendment to Indemnity Agreement. Subject to the following termsand conditions, including without limitation the conditions precedent set forthin Section 6, upon execution by the parties hereto in the space provided forthat purpose below, the Indemnity Agreement shall be and it hereby is amended byamending in its entirety the first paragraph of the Indemnity Agreement to beand to read as follows:

"Amended and Restated Indemnity Agreement (this "Indemnity Agreement"), dated asof December 23, 1998, made by and among Borg-Warner Automotive, Inc., Borg-Warner Automotive Diversified Transmission Products Corporation, Borg-WarnerAutomotive Air/Fluid Systems Corporation, Borg-Warner Automotive Morse TECCorporation, Borg-Warner Automotive Automatic Transmission Systems Corporation,Borg-Warner Automotive Powertrain Systems Corporation, Borg-Warner AutomotiveTurbo Systems Corporation, Borg-Warner Automotive Fuel Systems Corporation andBorg-Warner Automotive Cooling Systems Corporation (collectively, the"Indemnifiers") and the Agent (as defined below) for the benefit of theBeneficiaries (as defined below)."

Section 4. Amendment to Guaranty. Subject to the following terms andconditions, including without limitation the conditions precedent set forth inSection 6, upon execution of the parties hereto in the space provided for thatpurpose below, the Guaranty shall be, and it hereby is, amended by amending inits entirety the first paragraph of the Guaranty to be and to read as follows:"Amended and Restated Limited Guaranty (this "Guaranty"), dated as ofDecember 23, 1998, made by Borg-Warner Automotive, Inc. ("BWAI"), Borg-WarnerAutomotive Diversified Transmission Products Corporation ("DTP"), Borg-WarnerAutomotive Air/Fluid Systems Corporation ("AFS"), Borg-Warner Automotive MorseTEC Corporation ("TEC"), Borg-Warner Automotive Automatic Transmission SystemsCorporation ("ATS"), Borg-Warner Automotive Powertrain Systems Corporation("PTS"), Borg-Warner Automotive Turbo Systems Corporation ("Turbo"), Borg-WarnerAutomotive Fuel Systems Corporation ("Fuel") and Borg-Warner Automotive CoolingSystems Corporation ("CSC" and collectively with DTP, AFS, TEC, ATS, Turbo, andFuel the "Originators" and collectively with BWAI, DTP, AFS, TEC, ATS, Turbo,and Fuel the "Guarantors"), in favor of BWA Receivables Corporation (the"Beneficiary")."

Section 5. Amendment to Subordination Agreement. Subject to the followingterms and conditions, including without limitation the conditions precedent setforth in Section 6, upon execution by the parties hereto in the space providedfor that purpose below, the Subordination Agreement shall be, and it hereby is,amended by amending in its entirety the first paragraph of the SubordinationAgreement to be and to read as follows:"Amended and Restated Subordination Agreement (this "Subordination Agreement"),dated as of December 23, 1998, by and among Borg-Warner Automotive, Inc.("BWAC"), Borg-Warner Automotive Diversified Transmission Products Corporation("DTP"), Borg-Warner Automotive Air/Fluid Systems Corporation ("AFS"), Borg-Warner Automotive Morse TEC Corporation ("TEC"), Borg-Warner AutomotiveAutomatic Transmission Systems Corporation ("ATS"), Borg-Warner AutomotivePowertrain Systems Corporation ("PTS"), Borg-Warner Automotive Turbo SystemsCorporation ("Turbo"), Borg-Warner Automotive Fuel Systems Corporation ("Fuel")and Borg-Warner Automotive Cooling Systems Corporation ("CSC" and collectivelywith DTP, AFS, TEC, ATS, PTS, Turbo, and Fuel the "Subordinated Creditors"), BWAReceivables Corporation (the "Borrower"), and ABN AMRO Bank N.V., as agent forthe Lenders (as defined below) (in such capacity, the "Agent"), for the benefitof the Agent and the Lenders (the Agent and the Lenders being collectivelyreferred to herein as the "Senior Creditors"."

Section 6. The effectiveness of this Amendment is subject to thesatisfaction of all of the following conditions precedent:

(a) Each of the parties hereto shall have accepted this Amendment in thespaces provided for that purpose below.

(b) The Agent shall have received in form and substance satisfactory tothe Agent:

(i) The Revolving Subordinated Promissory Note executed by the Borrower infavor of the New Originator;

(ii) Originals of proper UCC-1 financing statements executed by the NewOriginator;

(iii) Copies of the resolutions of the board of directors of the NewOriginator, certified by its secretary or any assistant secretary, approvingeach of the Transaction Documents to which it is (or is stated to be) a party.

(iv) A Certificate of incorporation of the New Originator certified by theSecretary of State of its state of incorporation.

(v) Good standing certificates for the New Originator issued by theSecretaries of State of the jurisdiction where it has material operations.

(vi) A certificate of the secretary or any assistant secretary of the NewOriginator certifying (i) the names and signatures of the officers authorized onits behalf to execute each Transaction Document to which it is (or is stated tobe) a party and (ii) a copy of its by-laws.

(vii) Favorable opinions of counsel to the New Originator insubstantially the form of Exhibit I to the Loan Agreement, and as to such othermatters as the Agent may reasonably request.

(viii) All other legal matters incident to the execution and deliveryhereof and to the transactions contemplated hereby shall be satisfactory to theAgent.

Section 7. Each Amended Agreement, as amended and supplemented hereby or ascontemplated herein, and all rights and powers created thereby and thereunder orunder the other Transaction Documents and all other documents executed inconnection therewith, are in all respects ratified and confirmed. From andafter the date hereof, each Amended Agreement shall be amended and supplementedas herein provided, and, except as so amended and supplemented, each AmendedAgreement, each of the other Transaction Documents and all other documentsexecuted in connection therewith shall remain in full force and effect.

Section 8. This Amendment may be executed in two or more counterparts, eachof which shall constitute an original but both or all of which, when takentogether, shall constitute but one instrument.

Section 9. This Amendment shall be governed and construed in accordance withthe internal laws of the State of Illinois.[Signature Pages to Follow]

In Witness Whereof, the parties have causedthis Amendment to be executedand delivered by their duly authorized officers as of the date first abovewritten.

ABN AMRO Bank N.V., as the Agent, as a Bank and as the Program LOC Provider

By:Title:

By:Title:

Windmill Funding CorporationBy:Title:

BWA Receivables CorporationBy:Title:

Borg-Warner Automotive, Inc.By:Title:

Borg-Warner Automotive Diversified Transmission Products CorporationBy:Title:

Borg-Warner Automotive Air/Fluid Systems CorporationBy:Title:

Borg-Warner Automotive Morse TEC CorporationBy:Title:

Borg-Warner Automotive Automatic Transmission Systems CorporationBy:Title:

Borg-Warner Automotive Powertrain Systems CorporationBy:Title:

Borg-Warner Automotive Turbo Systems CorporationBy:Title:

Borg-Warner Automotive Fuel Systems CorporationBy:Title:

By its execution below, the undersigned hereby elects to become (i)a Seller under the Purchase Agreement, (ii) an Indemnifier under the IndemnityAgreement, (iii) an Originator and a Guarantor under the Guaranty and (iv) aSubordinated Creditor under the Subordination Agreement. Upon the effectivenessof this Agreement, the undersigned shall have all the rights and obligationsunder each relevant Transaction Document as held by each of the otherOriginators prior to giving effect this Amendment.

Borg-Warner Automotive Cooling Systems

By:Title:Address: 200 S. Michigan Chicago, Illinois 60604Attention: Vice-President and TreasurerTelephone: 312-322-8500Telecopy: 312-322-8712

Annex IExhibit CToReceivables Loan AgreementLockboxes and Lockbox Banks

Exhibit GToReceivables Loan AgreementAddresses of Borrower And Originator

Exhibit HtoReceivables Loan Agreement

Borrower's and Borg-Warner Entities' Corporate Names; Trade Names; Assumed Names

1.) Borg-Warner Automotive, Inc.2.) Borg-Warner Automotive Powertrain Systems Corporation -Borg-Warner Powertrain Assemblies3.) Borg-Warner Automotive Diversified Transmission Products Corporation -Borg-Warner Powertrain Assemblies4.) Borg-Warner Automotive Air/Fluid Systems Corporation Borg-Warner Automotive Electronic & Mechanical Systems Corporation -Borg-Warner Control Systems5.) Borg-Warner Automotive Morse TEC Corporation -Borg-Warner Automotive Transmission & Engine Components Corporation -Morse Chain Systems

6.) Borg-Warner Automotive Automatic Transmission Systems Corporation -Borg-Warner Automotive Transmission & Engine Components Corporation -Borg-Warner Automotive Automatic Transmission Systems (ATS) -Borg & Beck7.) BWA Receivables Corporation8.) Borg-Warner Automotive Turbo Systems Corporation9.) Borg-Warner Automotive Fuel Systems Corporation10.) Borg-Warner Automotive Cooling Systems Corporation

Annex IIExhibit DToReceivables Purchase AgreementList of Principal Places of Business and Location of Records

Exhibit EtoReceivables Purchase Agreement

Corporate Names; Trade Names; Assumed Names; Assumed Names

1.) Borg-Warner Automotive, Inc.2.) Borg-Warner Automotive Powertrain Systems Corporation -Borg-Warner Powertrain Assemblies3.) Borg-Warner Automotive Diversified Transmission Products Corporation -Borg-Warner Powertrain Assemblies4.) Borg-Warner Automotive Air/Fluid Systems Corporation Borg-Warner Automotive Electronic & Mechanical Systems Corporation -Borg-Warner Control Systems

5.) Borg-Warner Automotive Morse TEC Corporation -Borg-Warner Automotive Transmission & Engine Components Corporation -Morse Chain Systems

6.) Borg-Warner Automotive Automatic Transmission Systems Corporation -Borg-Warner Automotive Transmission & Engine Components Corporation -Borg-Warner Automotive Automatic Transmission Systems (ATS) -Borg & Beck

7.) Borg-Warner Automotive Turbo Systems Corporation

8.) Borg-Warner Automotive Fuel Systems Corporation

9.) Borg-Warner Automotive Cooling Systems Corporation

EX-10.293

ASSET PURCHASE AGREEMENT

THIS ASSET PURCHASE AGREEMENT is made and entered into as of August 2,1999, among Eaton Corporation, an Ohio corporation (the "Seller"), each of theSeller Subsidiaries (as hereinafter defined), Borg-Warner Automotive, Inc., aDelaware corporation (the "Buyer"), and each of the Buyer Subsidiaries (ashereinafter defined).

RECITALS:

A. The Seller is engaged in the design, manufacture and marketing of fanclutches, viscous fan drives, plastic molded fans, water pumps and water pumpimpellers for engine cooling systems (the "Business") by and through theSeller's Fluid Power Division (the "Division"); and

B. The Seller, directly and indirectly through Eaton MDH Company, Inc., aDelaware corporation ("Eaton MDH"), Eaton GmbH, a corporation organized underthe laws of Germany ("Eaton GmbH"), Eaton ETN Offshore Ltd., a corporationorganized under the laws of the Province of Ontario, Canada ("Eaton ETN"), EatonLimited (U.K.), a corporation organized under the laws of England and Wales("Eaton (U.K.)"), Eaton (China) Investments Co., Ltd., a corporation organizedunder the laws of the People's Republic of China ("Eaton (China)"), and EatonLtda., a limited liability company organized under the laws of Brazil ("EatonLtda.," and collectively with Eaton MDH, Eaton GmbH, Eaton ETN, Eaton (U.K.) andEaton (China) the "Seller Subsidiaries"), owns or leases the assets used in theconduct of the Business of the Division, including, without limitation, tradeaccounts receivable, inventory, land, buildings, fixtures, machinery andequipment, contract rights, customer and supplier lists, records and relatedinformation, patents, trade secrets and trademarks; and

C. The Seller desires to sell, and to cause the Seller Subsidiaries tosell, and the Buyer desires to purchase, and shall cause HERKULESAchtunddreiBigste Verwaltungsgesellschaft mbH, a corporation organized under thelaws of Germany, registered in the Commercial Register kept at the Lower Courtof Frankfurt am Main under HRB 46323, which is a wholly-owned indirectSubsidiary of the Buyer ("HERKULES"), to purchase, substantially all of theassets of the Division and assume certain liabilities of the Division describedherein with respect to its German operations, shall cause Borg-Warner AutomotiveSouth Asia Corporation, a Delaware corporation ("Borg South Asia"), to purchasethe ESACO Interest (as hereinafter defined), and shall cause Lacom SchwitzerEquipamentos Ltda, a limited liability company organized under the laws ofBrazil ("Lacom," and collectively with HERKULES and Borg South Asia, the "BuyerSubsidiaries"), to purchase, substantially all of the assets of the Division andassume certain liabilities of the Division described herein with respect to itsBrazilian operations in accordance with the terms and conditions of thisAgreement.

NOW, THEREFORE, in consideration of the payments herein provided for andthe covenants herein contained, the parties hereby agree as follows.

ARTICLE 1

DEFINITIONS

Unless elsewhere defined herein, the following terms shall have themeanings set forth in this Article 1.

"Accounts Receivable" means all of the Division's trade and other accountsreceivable including all accounts receivable, if any, that are owed by theSeller or by any Subsidiary or Affiliate of the Seller and which relate to theDivision.

"ADR" has the meaning set forth in Section 22.2.

"Affiliate" shall mean, with respect to any Person, at the time in question, anyother Person controlling, controlled by or under common control with suchPerson. For purposes of this definition, "control" (including the terms "controlling," "controlled by" and" under common control with") means thepossession, directly or indirectly, of the power to direct or cause thedirection of the management and policies of a Person, whether through theownership of voting securities, by contract, or otherwise.

"Agreement" means this Asset Purchase Agreement.

"Approval Authority" has the meaning set forth in Section 7.12(a).

"Asset Transfer Date" has the meaning set forth in Section 10.4(f).

"Assumed Liabilities" has the meaning set forth in Section 3.1.

"Assumption Agreement" has the meaning set forth in Section 3.1.

"Authorized Individuals" has the meaning set forth in Section 22.1.

"Bonuses" has the meaning set forth in Section 5.28.

"Breaching Party" has the meaning set forth in Section 20.2(b).

"Business" has the meaning set forth in Recital A.

"Buyer" has the meaning set forth in the first paragraph of this Agreement.

"Buyer Obligations" has the meaning set forth in Section 9.7(a).

"Buyer's Pension Plan" has the meaning set forth in Section 10.4(a).

"Buyer's Pension Trust" has the meaning set forth in Section 10.4(a).

"Buyer's Retirement Savings Plan" has the meaning set forth in Section 10.6(a).

"Buyer Subsidiaries" has the meaning set forth in Recital C.

"Buyer's Welfare Benefit Plans" has the meaning set forth in Section 10.3(a).

"CAA" means the Clean Air Act, 42 U.S.C. SS 7401, et seq., as amended.

"CERCLA" means the Comprehensive Environmental Response, Compensation andLiability Act of 1980, 42 U.S.C. SS 9601, et seq., as amended by, among otherthings, the Superfund Amendments and Reauthorization Act of 1986.

"Closing" means the closing of the transactions contemplated by this Agreement.

"Closing Balance Sheet" has the meaning set forth in Section 4.3(a).

"Closing Date" has the meaning set forth in Section 15.1.

"COBRA" means the Consolidated Omnibus Budget Reconciliation Act of 1985, asamended, including the rules and regulations promulgated thereunder.

"Contracts" means all purchase orders, sales orders, distributor agreements,franchise agreements, sales representation agreements, warranty agreements,service agreements, employment and consulting agreements, guaranty agreements,confidentiality agreements and other agreements, contracts and commitments ofany sort whatever.

"Corresponding Exhibit" means an exhibit which is numbered, captioned or namedto correspond to the number, caption or name of the section of this Agreementwhich refers to that exhibit.

"Corresponding Schedule" means a schedule which is numbered, captioned or namedto correspond to the number, caption or name of the section of this Agreementwhich refers to that schedule.

"CWA" means the Federal Water Pollution Control Act, 33 U.S.C. SS 1251, et seq.,as amended.

"Defense Rejection Notice" has the meaning set forth in Section 19.5(a).

"Division" has the meaning set forth in Recital A.

"Division Employees" means all persons employed (including persons who aretemporarily absent from active employment by reason of disability, illness,injury, workers' compensation, military leave, approved leave of absence orlayoff ("Inactive Employees")) by the Seller or a Seller Subsidiary in theconduct of the Business.

"Division U.S. Retirees" has the meaning set forth in Section 10.3(b).

"Dual Purpose Proprietary Technology" has the meaning set forth in Section 2.4.

"Eligible Claim" has the meaning set forth in Section 19.3.

"Employee Benefit Plan" means each employee bonus, retirement, pension, profitsharing, stock option, stock appreciation, stock purchase, incentive, deferredcompensation, hospitalization, medical, dental, vision, life and other healthand disability (whether provided by insurance or otherwise), severance,termination and other plan, program, arrangement, polic