1. Heat oven to 350°F. Grease and flour 13x9x2-inch baking pan.
2. Combine chocolate and water in small saucepan. Cook over low heat, stirring occasionally, until chocolate is melted. Set aside to cool slightly.
3. Beat butter and sugar in large mixer bowl until light and fluffy. Add egg yolks and vanilla; beat well. Add chocolate; beat until blended. Stir together flour, baking powder and salt; add alternately with milk to butter mixture. Beat egg whites in medium bowl until stiff, but not dry; fold into batter. Pour batter into prepared pan.
4. Bake 45 to 50 minutes or until wooden pick inserted in center comes out clean. Cool completely in pan on wire rack. Frost as desired. 12 to 15 servings.