1
EXHIBIT 10(K)
1995 - 1997
BFGOODRICH LONG-TERM INCENTIVE PLAN
-----------------------------------
This is a summary of the benefits to which you are entitled under the
BFGoodrich Long-Term Incentive Plan. The complete details of the Plan are
contained in the text of the Key Employees' Stock Option Plan, the Performance
Share Plan and the Long-Term Incentive Plan. This summary is qualified by the
terms and conditions contained in those plan documents.
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING SECURITIES THAT HAVE
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
PURPOSE
- -------
The Long-Term Incentive Plan is designed to provide a long-term incentive to
key executives who are in positions to influence the performance of the Company
and its individual business units, 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).
PLAN OVERVIEW
- -------------
The Long-Term Incentive Plan rewards financial performance over three-year
cycles, which do not overlap. At the beginning of each three-year cycle, two
types of awards of BFGoodrich common stock may be granted to you -- Restricted
Shares and Performance Shares. However, you will not obtain full ownership
privileges to any of the shares awarded to you until the end of the three-year
cycle. At that time, if you are still employed by the Company, you will become
entitled to receive the Restricted Shares awarded to you. Additionally, you
will be entitled to receive the Performance Shares awarded to you at the end of
the cycle, if you meet certain financial performance targets established for
you at the beginning of the three-year cycle. If actual financial performance
differs from your financial performance target, the number of Performance
Shares that you actually receive, if any, will differ from the number awarded
to you at the beginning of the three-year cycle. Your participation, the
number of shares granted to you, your financial performance targets, and all
other aspects of the Long-Term Incentive Plan will be determined by the
Compensation Committee of the Board of Directors of the Company, which has full
authority to administer the Plan.
2
BFGOODRICH COMMON STOCK AWARDS
- ------------------------------
The Long-Term Incentive Plan provides additional compensation to key executives
through the granting of shares of BFGoodrich common stock. The common stock
granted shall be in two forms -- Restricted Shares and Performance Shares.
Each is described below.
* RESTRICTED SHARES. At the beginning of each three-year cycle, you
may be awarded a specified number of shares of BFGoodrich common
stock which shall be classified as Restricted Shares. You will
not become the owner of these Restricted Shares when they are
awarded to you. During the three-year cycle, they will be held by
the Secretary of the Company. You will receive dividends each
quarter and have voting rights based on the number of shares
granted at the beginning of the three-year performance period, but
you will not have any ability to sell, pledge, or otherwise
transfer them. On January 2, immediately following the end of the
three-year cycle, you will become the owner of these shares, as
long as you are actively employed by the Company through the last
day of the Plan cycle. If you are not then employed by the
Company, you or your beneficiary may still be entitled to receive
your shares, if the reason you are not employed is because of your
death, or permanent and total disability. If you retire before
the end of the three-year cycle, the Compensation Committee, in
its' sole discretion, will determine whether to grant ownership to
you of some or all of the shares. There are restrictions on your
ability to sell or transfer these shares even after you become the
owner of them. You may not sell or transfer the Restricted Shares
you receive (net of withholding taxes) for two years after
completion of the three-year cycle.
* PERFORMANCE SHARES. At the beginning of each three-year cycle,
you may also be awarded a number of shares of BFGoodrich common
stock which shall be classified as Performance Shares. During the
three-year cycle, they will be held by the Secretary of the
Company. You will receive dividends each quarter and have voting
rights based on the number of shares granted at the beginning of
the three-year performance period, but you will not have any
ability to sell, pledge, or otherwise transfer them. At the end
of the three-year cycle, if you are still employed by the Company,
you will become the owner of these shares after the Compensation
Committee determines the final payout based upon specific
financial performance targets established for you. Your financial
performance targets will be disclosed to you at the beginning of
the three-year cycle. If actual financial performance differs
from the financial performance target set for you, the number of
shares of common stock which you will receive, if any, will differ
from the number awarded to you at the beginning of the cycle. If
the financial performance is less than the target, you will
receive fewer shares; if the financial performance is better than
target, you will receive more shares. If actual financial
performance fails to meet a threshold financial target, then no
Performance Shares will be conveyed to you. The information given
to you by letter at the beginning of the cycle will describe these
variations to you.
-2-
3
Unlike the Restricted Shares, all of the Performance Shares that
you receive at the end of the three-year cycle will be free of all
restrictions and you may do with them as you wish. If you die,
retire, or become permanently and totally disabled during the
cycle, such that you are not an active employee of the Company at
the end of the cycle, you or your beneficiary will receive a
prorated portion of the shares awarded to you, 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 your award in that
event. If you terminate for other reasons prior to the end of the
three-year cycle, you will forfeit all the Performance Shares.
The performance target used to determine the number of Performance
Shares you will receive at the end of the Plan cycle will be based
upon the following:
* FOR OPERATING SEGMENTS: Three-year average segment operating
income return on net capital employed (OIRONCE).
* FOR CORPORATE STAFF PARTICIPANTS: Three-year average total
Company return on equity (ROE).
* FOR OPERATING SEGMENT PRESIDENTS: One-half of original
Performance Share grant related to the president's own segment
performance (OIRONCE); one-half of original Performance Share
grant related to total Company performance (ROE).
Your performance target can be adjusted by the Compensation Committee of the
Board of Directors, in its' sole discretion, at any time during the three-year
cycle, if doing so is warranted by extraordinary events such as an acquisition,
divestiture, restructuring, change in accounting practice, or any other unusual
or extraordinary financial or operational event.
Generally, you will not receive full ownership of any shares granted to you
under the Plan until the end of the three-year cycle. An exception will occur,
however, if there is a Change in Control of the Company. A Change in Control
is defined in the Key Employees' Stock Option Plan. If one occurs, you shall
immediately receive all Restricted Shares awarded to you at the beginning of
the cycle. The effect of a Change in Control on your ability to receive
Performance Shares is described in the Performance Share Plan. Generally, that
plan provides that, as of the date of the Change in Control, you will become
entitled to a prorated portion of the shares originally awarded to you, based
upon financial performance for the portion of the cycle which ends on the date
of the Change in Control. Your 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.
- 3 -
4
If you transfer to another position in the Company during the three-year cycle,
you will be entitled to the following:
* RESTRICTED SHARES. The transfer will have no effect whatsoever on
the Restricted Shares awarded to you. You will receive these
shares at the end of the three-year period, provided you are still
employed by the Company.
* PERFORMANCE SHARES. The performance target for a particular
position will apply to you if you are employed in that position
during any portion of the three-year cycle. The total number of
shares that you will be entitled to receive at the end of the
cycle will be based upon the following formula:
<Capttion>
Percent of Percentage Payout Number of
Original Three-Year Cycle Relative to Shares Earned
Performance X Cycle Spent X Performance Target = Based On
Share Award In Particular for Particular Particular
Position Position Position
The total shares earned based on each position you hold during the
three-year cycle will be summed to arrive at the total number of
shares you are entitled to receive at the end of the cycle.
When you transfer to a new position, the Compensation Committee
reserves the right to adjust the award of Performance Shares to
you upward or downward, as appropriate to reflect the duties and
responsibilities of the new position.
For new hires and employees promoted into positions that make them eligible to
participate in the program, the Compensation Committee of the Board of
Directors, upon recommendation from management, may grant an award on a
prorated basis. The amount of the award will be based on the time remaining in
the three-year performance cycle, but the performance targets will be the same
as for other participants.
TAX INFORMATION
- ---------------
Restricted Shares and Performance Shares are taxed similarly under current tax
law. However, you may make a special election regarding the taxation of your
Restricted Shares.
Generally, you are not taxed on either Restricted Shares or Performance Shares
until the date on which any restrictions of ownership lapse or the date on
which you become entitled to your Performance Shares. Under current tax law,
on the date you become entitled to receive the shares following completion of
the three-year performance cycle, the market value of the shares at that time
is considered to be ordinary income and you will be taxed on that amount. If
you hold the shares and later sell them, any appreciation over the market value
of the shares when you received them at the end of the three-year cycle will be
taxed at capital gains rates.
- 4 -
5
There is one difference in the taxation of Restricted Shares. You may make a
special "Section 83(b)" election under Section 83(b) of the Internal Revenue
Code. Such an election will permit you to elect to be taxed on the market
value of the shares as of the date on which they are first awarded to you.
The tax would then become payable for the year in which shares are originally
granted. Any appreciation after that date will be taxed at capital gains
rates. If, however, you later forfeit your Restricted Shares before the end of
the three-year cycle (e.g., by leaving the Company), none of the tax that you
already have paid may be recovered or used as a tax deduction. The election
must be made within 30 days after the Compensation Committee makes the award.
If you want to make this election, you should contact Richard N. Jacobson in
the Law Department at (216) 374-2874.
Dividends paid on both Restricted Shares and Performance Shares are income to
you. These dividends will be paid each quarter by your payroll department.
Under the Internal Revenue Code, these payments are considered compensation and
not dividends and will be included on your W-2 statement. Normal payroll
withholding taxes will be deducted from these payments. Any income you derive
from either Restricted Shares or Performance Shares will not be considered
eligible earnings for Company or subsidiary pension plans, savings plans or
profit sharing plans.
WITHHOLDING TAX INFORMATION
- ---------------------------
At the end of the three-year performance period, the number of Restricted
Shares and Performance Shares you 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.
You should consult your tax advisor for a complete explanation of the tax
impact of your participation in the Long-Term Incentive Plan.
January 4, 1996
- 5 -
6
1995 - 1997
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:
Corporate Staff Participant
You have been granted the following Long-Term Incentive Plan shares for the
three-year performance period 1995 through 1997:
Restricted Shares: X,XXX shares of BFG common stock
Performance Shares: X,XXX shares of BFG common stock
RESTRICTED STOCK
- ----------------
On January 2, 1998, you will receive the X,XXX Restricted Shares (less the
number of shares sufficient to satisfy any federal, state and local withholding
tax requirements), provided you are actively employed by the Company through
December 31, 1997. You may not sell or transfer these shares until January 1,
2000.
PERFORMANCE SHARES
- ------------------
The number of Performance Shares you receive 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
receive Performance Shares based on the following schedule. This schedule only
applies to your Performance Shares.
Total Company Percent Payout
Three-Year Performance
Average ROE Share Grant
------------------ ----------------
Below X.X% 0%
(Threshold) Y.Y% 50%
(Target) Z.Z% 100%
(Maximum) A.A% and above 150%
(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 XX.X%
will pay out Performance Shares equal to XXX.X% of the grant amount.)
- 6 -
7
OTHER IMPORTANT INFORMATION
- ---------------------------
* You will not receive any Performance Shares if the Company's
average ROE during the 1995-1997 period is below X.X%. You
nevertheless will receive the Restricted Shares, provided you still
are actively employed by the Company at the end of 1997.
* New share grants and performance targets are expected to be
established for another three-year Plan period beginning in 1998.
* You will receive quarterly cash dividends throughout the three-year
Plan period on your initial award for both Restricted Shares and
Performance Shares. These dividends will be paid by your payroll
department until December 31, 1997. Under the Internal Revenue
Code, these payments are considered compensation and not dividends
and will be included on your W-2. Normal payroll withholding taxes
will be deducted from these payments. In the event performance
does not meet the threshold required for payout of the Performance
Shares, the dividends you already received are yours to keep.
* You will have voting rights during the three-year Plan period on
both Restricted Shares and Performance Shares.
* Any income you derive from either Restricted Shares or Performance
Shares will not be considered eligible earnings for Company or
subsidiary pension plans, savings plans or profit sharing plans.
FOR MORE INFORMATION
- --------------------
If you have questions about the Long-Term Incentive Plan or need additional
information, contact Gary Habegger at (216) 374-2155.
February 23, 1995
- 7 -