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EXHIBIT 10(L)
SUMMARY PLAN DESCRIPTION
LONG-TERM INCENTIVE PLAN
THE BFGOODRICH COMPANY
MARCH, 1999
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SUMMARY PLAN DESCRIPTION
BFGOODRICH LONG-TERM INCENTIVE PLAN
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933.
The Long-Term Incentive Plan is designed to provide long-term incentive
compensation to key executives who are in positions to influence the performance
of the Company, and thereby enhance shareholder value over time. The Plan
provides a significant additional financial opportunity and complements other
parts of the Company's total compensation program for executives (base salary,
Management Incentive Program, stock options and benefits).
The following is a summary of the main provisions of the Long-Term Incentive
Plan. The official and controlling provisions of the Plan are contained in the
text of the Stock Option Plan and the Long-Term Incentive Plan. In case of any
discrepancies, the Plan documents will govern. In this summary, BFGoodrich is
referred to as the "Company", and the Long-Term Incentive Plan is referred to as
the "LTIP" or the "Plan".
The benefits described in this summary have been structured to be in compliance
with current tax law. Any change in legislation or the interpretation of tax
laws which affect the tax nature of the benefits provided may necessitate
revisions in the Plan.
The Company reserves the right to amend, modify, suspend or partially or
completely terminate the Plan at any time.
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PLAN OVERVIEW
- - Participation in the LTIP will be approved by the Compensation Committee of
the Board of Directors.
- - The LTIP will provide for annual grants of Performance Shares with
three-year overlapping cycles. Every year, a separate three-year
performance cycle will begin.
- - At the beginning of each three-year cycle, a grant of Performance Shares
will be made to each participant. Grants will be credited as phantom
Performance Shares in a book account for each participant. Each phantom
Performance Share will be equivalent to one share of BFGoodrich common
stock.
- - The Compensation Committee of the Board of Directors will establish a
consolidated Company goal based on average ROE over each three-year cycle.
All LTIP participants will be measured against the same ROE goal which will
reflect consolidated Company results. No separate goals will be set for
operating segment participants.
- - During the Plan cycle, dividend equivalents will be accrued on all phantom
Performance Shares. Such dividend equivalents will be credited to each
participant's account in the form of additional phantom Performance Shares
at the same time and in the same amount as actual dividend payments on
BFGoodrich common stock.
- - Participants will be entitled to a payout of shares at the end of each Plan
cycle only if a threshold performance standard is met. The number of shares
to be received free of further restrictions will range from 50% to 200% of
the total phantom Performance Share account (including shares credited
through dividend equivalents), based on attainment against goals set by the
Committee.
- - Payments from the Plan, if any, at the end of the Plan cycle, will be made
in actual shares of BFG common stock, less the number of shares to satisfy
applicable withholding taxes.
- - Participants may elect to defer all or a portion of their award until
termination of employment as described in the Performance Share Deferred
Compensation Plan.
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- - The Compensation Committee of the Board of Directors retains the right in
its sole discretion to reduce any award which would otherwise be payable,
unless there has been a Change in Control, as defined in the Stock Option
Plan. However, an Agreement and Plan of Merger with Coltec Industries Inc
was made prior to the release of this grant. As it relates to this LTIP
grant (but not to any prior grants), the approval of the merger shall not
constitute a change of control and the shares shall not become immediately
payable.
PLAN PROVISIONS
ELIGIBILITY
Eligibility to participate in the LTIP will be determined by the Compensation
Committee of the Board of Directors.
AWARD GRANTS
The LTIP rewards financial performance for three-year overlapping cycles. Every
year, a separate three-year performance cycle will begin.
At the beginning of each three-year cycle, a grant of Performance Shares will be
made to each participant. Grants will be credited as phantom Performance Shares
in a book account for each participant. Each phantom Performance Share will be
equivalent to one share of BFGoodrich common stock.
The Company will maintain a phantom Performance Share account for each
participant for each separate three-year cycle. The account will be used solely
for record keeping purposes. No actual BFGoodrich common shares will be
registered in participants' names.
DIVIDENDS
Dividend equivalents will be accrued on all phantom Performance Shares in each
participant's account for each Plan cycle. Such dividend equivalents will be
credited to each participant's account in the form of additional phantom
Performance Shares at the same time and in the same amount as actual dividend
payments on BFGoodrich common stock.
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PERFORMANCE GOALS
The performance goal used to determine the number of Performance Shares earned
by each participant at the end of each Plan cycle will be based on average
return on equity (ROE) over each three-year cycle. The Compensation Committee of
the Board of Directors will establish a consolidated Company goal for each
three-year cycle. All LTIP participants will be measured against the same ROE
goal which will reflect consolidated Company results.
PLAN PAYOUTS
Payments from the Plan, if any, at the end of the Plan cycle, will be made in
actual shares of BFG common stock, less the number of shares to satisfy
applicable withholding taxes.
At the end of each three-year cycle, if a participant is still employed by the
Company, he or she will receive a payment from the Plan after the Compensation
Committee determines the final payout based upon specific financial performance
goals established for participants.
Participants will be entitled to a payout of shares at the end of each Plan
cycle only if a threshold performance standard is met. If threshold performance
is achieved, the number of shares to be received free of further restrictions
will range from 50% to 200% of a participant's total phantom Performance Share
account (including shares credited through dividend equivalents) for that Plan
cycle, based on attainment against goals set by the Committee.
TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT
If a participant becomes totally disabled under the Company's Long-Term
Disability Plan, or retires (or is deemed to retire) under the Company's
Retirement Program for Salaried Employees during a Plan cycle, the participant
will receive a pro rata payout at the end of the Plan cycle, based upon the time
portion of the cycle during which he or she was employed. The actual payout will
not occur until after the end of the three-year cycle, at which time the
financial performance for the entire three-year cycle will be used to determine
the size of the award in that event.
If a participant dies during a Plan cycle, the participant will receive a pro
rata payout of the shares originally awarded to him or her, including a pro rata
payout
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of dividends credited to the participant's account, based upon financial results
calculated for the portion of the cycle through the end of the fiscal quarter
following the participant's death.
OTHER TERMINATION OF EMPLOYMENT
If a participant terminates employment prior to the end of a Plan cycle for
reasons other than death, disability or retirement, he or she will forfeit all
Performance Shares, unless the Compensation Committee determines otherwise.
NEW HIRES OR PROMOTIONS INTO ELIGIBLE POSITIONS
Participants will become eligible for participation in the Plan at their new
position level beginning with the Plan cycle which begins on the January 1
immediately following their hire or promotion date. No new Performance Share
awards or adjustments to Performance Share awards for Plan cycles that commenced
prior to a participant's hire or promotion date will be made.
CHANGE IN CONTROL
Generally, participants will not receive a payout under the Plan until the end
of a three-year Plan cycle. An exception will occur, however, if there is a
Change in Control of the Company. A Change in Control is defined in the Stock
Option Plan. The effect of a Change in Control on a participant's ability to
receive Performance Shares is described in the Long-Term Incentive Plan.
Generally, that Plan provides that, as of the date of the Change in Control, a
participant will become entitled to a prorated portion of the shares originally
awarded to him or her, based upon financial performance for the portion of the
cycle which ends on the date of the Change in Control. A participant's
entitlement to additional shares will be based upon financial performance for
the portion of the three-year cycle which occurs after the Change in Control.
At the time the Compensation Committee made this grant, the Agreement and Plan
of Merger dated as of November 22, 1998 among The B.F.Goodrich Company, Runway
Acquisition Corporation and Coltec Industries Inc ("Coltec") had been executed,
and provided that, subject to certain conditions, Coltec would become a
wholly-owned subsidiary of the Company and the existing shareholders of Coltec
would receive shares of Company stock which will constitute approximately
one-third of the outstanding shares of the Company following the merger.
Approval by the Company's shareholders of the issuance
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of the Company shares in connection with this transaction (the "Approval") would
constitute a change in control under the Plan. It is agreed that for the
purposes of this long-term incentive plan grant (but not for any prior grants),
the Approval shall not constitute a change in control and the shares granted
hereby shall not become immediately payable upon the Approval.
DEFERRAL OF PAYOUTS
Participants may elect to defer all or a portion of Performance Shares that may
be earned and payable at the end of a Plan cycle as described in the Performance
Share Deferred Compensation Plan. A deferral election must be made before the
Plan cycle begins, using a form provided by the Company.
PLAN ADMINISTRATION
The Plan is administered by the Compensation Committee of the Board of
Directors. The Committee has full power and authority to construe, interpret and
administer the Plan. All decisions, actions or interpretations of the Committee
shall be final, conclusive and binding on all parties.
The Committee retains the right in its sole discretion to reduce any award which
would otherwise be payable, unless there has been a Change in Control.
The Committee reserves the right to amend, modify, suspend or partially or
completely terminate the Plan, unless there has been a Change in Control.
TAX INFORMATION
Generally, participants are not taxed on Performance Shares until the date on
which they become entitled to a payout of their Performance Shares. Under
current tax law, on the date participants become entitled to receive the shares
following completion of a three-year performance cycle, the market value of the
shares (net of any shares deferred) at that time is considered to be ordinary
income and they will be taxed on that amount. If participants hold the shares
and later sell them, any appreciation over the market value of the shares when
they received them at the end of the three-year cycle will be taxed based on
capital gains tax rules.
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EARNINGS FOR BENEFIT PURPOSES
Any income participants derive from Performance Share payouts will not be
considered eligible earnings for Company or subsidiary pension plans, savings
plans, profit sharing plans or any other benefit plans.
WITHHOLDING TAX INFORMATION
At the end of the three-year performance period, the number of actual BFGoodrich
common shares participants will receive will be net of an amount of shares
sufficient to satisfy any federal, state and local withholding tax requirements
with which the Company must comply.
Participants should consult their tax advisor for a complete explanation of the
tax impact of their participation in the Long-Term Incentive Plan.
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1999 - 2001
BFGOODRICH LONG-TERM INCENTIVE PLAN
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS
COVERING SECURITIES THAT HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933.
Name:
AWARD GRANT
You have been granted the following Long-Term Incentive Plan shares for the
three-year performance period 1999 through 2001:
________ phantom Performance Shares
Grants are credited as phantom Performance Shares in a book account for you.
Each phantom Performance Share will be equivalent to one share of BFGoodrich
common stock.
PLAN GOALS
The number of phantom Performance Shares you earn will depend on the three-year
performance of the total Company, as measured against specific Return on Equity
(ROE) targets. At the end of the three-year performance period, you will earn
phantom Performance Shares based on the following schedule:
Total Company Percent Payout of
Three-Year Phantom Performance
Average ROE Share Account
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Below 15.0% 0%
(Threshold) 15.0% 50%
(Target) 16.0% 100%
17.0% 150%
(Maximum) 18.0% and above 200%
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(Note: If performance for the three-year period is between the percentage
attainment levels listed on this chart, your Performance Share award
will be prorated accordingly. For example, an average ROE of 16.3% will
pay out Performance Shares equal to 115.0% of the phantom Performance
Share Account.)
For assessing performance against 1999 - 2001 Long-Term Incentive Plan goals,
the Compensation Committee will use ROE as reported to shareholders with the
following adjustments:
- - Exclude the income and equity effect of extraordinary items, accounting
principle changes and discontinued operations which are not included in the
operating plan for 1999 (as such terms are defined under United States
generally accepted accounting principles ("GAAP") as in effect from time to
time). Accounting principle changes result from the adoption of GAAP
different from GAAP at the start of the Plan year.
- - Exclude the income and equity effect of nonrecurring items which are not
included in the operating plan for 1999. Nonrecurring items are material
events or transactions that are unusual in nature or occur infrequently.
OTHER IMPORTANT INFORMATION
- - Grants will be credited as phantom Performance Shares in a book account for
you. Each phantom Performance Share will be equivalent to one share of
BFGoodrich common stock.
- - Dividend equivalents will be accrued on all phantom Performance Shares in
your account during the Plan cycle. Such dividend equivalents will be
credited to your account in the form of additional phantom Performance
Shares at the same time and in the same amount as actual dividend payments
on BFGoodrich common stock.
- - You will not earn any phantom Performance Shares if the Company's average
ROE during the 1999 - 2001 period is below 15.0% (threshold performance).
- - If threshold performance is achieved, the number of shares to be received
free of further restrictions will range from 50% to 200% of your total
phantom Performance Share account (including shares credited through
dividend equivalents), based on attainment against goals set by the
Compensation Committee.
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- - Payments from the Plan, if any, at the end of the Plan cycle, will be made
in actual shares of BFG common stock, less the number of shares to satisfy
applicable withholding taxes.
- - New phantom Performance Share grants and performance targets are expected
to be established for another three-year Plan period beginning in 2000.
- - If you become totally disabled under the Company's Long-Term Disability
Plan, or retire under the Company's Retirement Program for Salaried
Employees during the Plan cycle, you will receive a pro rata payout at the
end of the Plan cycle, based upon the time portion of the cycle during
which you were employed. The actual payout will not occur until after the
end of the three-year cycle, at which time the financial performance for
the entire three-year cycle will be used to determine the size of the award
in that event.
- - If you die during a Plan cycle, you will receive a pro rata payout of your
account, based upon financial results calculated for the portion of the
cycle through the end of the fiscal quarter following your death.
- - If you terminate employment prior to the end of the Plan cycle for reasons
other than death, disability or retirement, you will forfeit all
Performance Shares.
- - The Compensation Committee of the Board of Directors retains the right in
its sole discretion to reduce any award which would otherwise be payable,
unless there has been a Change in Control, as defined in the Stock Option
Plan.
- - Any income you derive from a payout of Performance Shares will not be
considered eligible earnings for Company or subsidiary pension plans,
savings plans, profit sharing plans or other benefit plans.
FOR MORE INFORMATION
If you have questions about the Long-Term Incentive Plan or need additional
information, contact Gary Habegger at (330) 659-7855.
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