THE BFGOODRICH COMPANY
MANAGEMENT INCENTIVE PROGRAM
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PURPOSE
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The BFGoodrich Management Incentive Program (the Program) has been established
to provide opportunities to certain key management personnel to receive
incentive compensation as a reward for high levels of personal performance above
the ordinary performance standards compensated by base salary, and for their
contributions to strong performance of the business units to which they are
assigned. The Program is designed to provide a competitive level of rewards when
all relevant performance objectives are achieved.
ELIGIBILITY
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Participation in the Program will be limited to those key executives that have
the potential to influence significantly and positively the performance of the
Company or the business unit to which they are assigned. Participants will be
selected by management annually. Inclusion of a key manager as a participant
does not, however, assure that an incentive award will be paid to the
participant for the year since actual awards are determined at the sole
discretion of management.
To be eligible for participation in a particular year, a key manager must have
assumed the duties of an incentive-eligible position and have been selected for
participation in the Program by July 1 of that year. To receive an award, the
participant must remain employed by The BFGoodrich Company through December 15
of the Program year, subject to the Change in Control provisions.
PARTICIPANT CATEGORIES
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Each participant will be assigned each year to an incentive category based on
organizational level and potential impact on important Company or business unit
results. The participant categories define the target level of incentive
opportunity, stated as a percentage of salary midpoint, that will be available
to the participant. Category assignments are initiated on the recommendation of
the appropriate Division head and approved by the Corporate Executive Office.
MANAGEMENT INCENTIVE PROGRAM
GUIDELINES FOR CATEGORIES
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TARGET BONUS
AS PERCENT OF
BASE SALARY
CATEGORY MIDPOINT ELIGIBILITY GUIDELINES
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A 85% Chairman and Chief Executive Officer
B 75% Vice Chairman; President; Chief Operating Officer
C 70% Executive Vice Presidents
D N/A Not Currently Used
E 60% Corporate Senior Vice Presidents
F 55% Other Company officers B Corporate Vice Presidents and
Operating Segment Group Vice Presidents
G 45% 1) 1800 or more Hay Points; or
2) Direct Report to Operating Segment President
and Hay Points Above 1300
H 40% 1) 1400 - 1799 Hay Points; or
2) Treasurer, Controller or Corporate Staff VP
I 35% 1200 - 1399 Hay Points
J 30% 1000 - 1199 Hay Points
K 25% 900 - 999 Hay Points
L 20% Less than 900 Hay Points
INCENTIVE PROGRAM ELEMENTS
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FINANCIAL GOAL(S)
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A single measure of current year financial performance by the unit such as
Operating Income for a Division and Net Income or Pre-Tax Income for Corporate
staff is used to determine financial goals. The actual number selected as an
incentive plan goal need not coincide with the Operating Plan, but
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will be determined by management as representing a performance level which
merits full target level incentive payout. A threshold level is selected on the
same basis representing the minimum acceptable performance level to qualify for
any financial performance incentives and a maximum is set at a level judged as
deserving of maximum incentive payout.
STRATEGIC/OPERATIONAL GOALS
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Strategic and operational goals are specific, current-year business and
non-financial objectives. While their achievement may not be measurable
mathematically, they must be accomplished in order to meet the current year's
Operating Plan or to successfully implement longer term strategies. Performance
of the unit against these goals will be evaluated by the Executive Office on a
scale of 0 to 150% accomplishment with at least a 50% rating required to qualify
for any incentive payment under this factor.
WEIGHTING FACTORS
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The weighting of financial vs. strategic/operational performance reflects their
relative importance to the unit in the current year. The weightings may vary
between 80% / 20% and 50% / 50% and determine the portion of the target
incentive amount allocated to each performance measure. If a unit falls short of
the threshold level of financial performance, the amount of incentive available
for strategic/operational performance is limited to half the allocated amount.
INCENTIVE EARNINGS SCHEDULE
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Generally, threshold levels of performance will earn 50% of target incentive
amounts and maximum levels will earn 150%. Attainment below threshold levels
will earn no incentives. The actual award will be based on both the individual
and the units attainment of previously established goals and objectives.
INDIVIDUAL
PERFORMANCE INCENTIVE GUIDELINE
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Acceptable 50%
Satisfactory Plus 75%
Good l00%
Very Good l25%
Excellent l50%
TARGET INCENTIVE AMOUNT
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The incentive target is the dollar amount of target level incentive opportunity
for each plan participant. It is the product of the participant's range midpoint
and the target incentive percentage determined by his incentive category
designation.
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PROVISIONS
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A. The Management Incentive Program is a discretionary compensation
plan. While performance is an important element in determining
incentive under the Program, actual payments, if any, are made at the
sole discretion of management. No awards under the Program are to be
considered earned until received.
B. Awards to participants who serve in incentive-eligible positions for
less than a full year, or who serve in two or more positions in a
year that are of significantly different size, will be adjusted on a
roughly PRO RATA basis.
PAYMENT UPON CHANGE IN CONTROL
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Anything to the contrary notwithstanding, within five days following the
occurrence of a Change in Control, the Company shall pay to each participant an
interim lump-sum cash payment (the 'Interim Payment') with respect to his or her
participation in the Management Incentive Program. The amount of the Interim
Payment shall equal the product of (x) the number of months, including
fractional months, that have elapsed until the occurrence of the Change in
Control in the calendar year in which the Change of Control occurs and (y)
one-twelfth of the greater of (i) the amount most recently paid to each
participant for a full calendar year, or (ii) the 'target incentive amount' for
each participant in effect prior to the Change in Control for the calendar year
in which the Change in Control occurs, in each case under the Program. The
Interim Payment shall not reduce the obligation of the Company to make a final
payment under the terms of the Program, but any Interim Payment made shall be
offset against any later payment required under the terms of the Program for the
calendar year in which a Change in Control occurs. Notwithstanding the
foregoing, in no event shall any participant be required to refund to the
Company, or have offset against any other payment due any participant from or on
behalf of the Company, all or any portion of the Interim Payment.
For purposes of the Program, a Change in Control shall mean
(i) The acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the 'Exchange Act')), of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) of 20% or more of either (A) the then outstanding
shares of common stock of the Company (the 'Outstanding Company
Common Stock') or (B) the combined voting power of the then
outstanding voting securities of the Company entitled to vote
generally in the election of directors (the 'Outstanding Company
Voting Securities'); provided, however, that the following
acquisitions shall not constitute a Change of Control: (A) any
acquisition directly from the Company (other than by exercise of a
conversion privilege), (B) any acquisition by the Company or any of
its subsidiaries, (C) any acquisition by any employee benefit plan
(or related trust) sponsored or maintained by the Company or any of
its subsidiaries or (D) any acquisition by any corporation with
respect to which, following such acquisition, more than 70% of,
respectively, the then outstanding shares of common stock of such
corporation and the combined voting power of the then outstanding
voting securities
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of such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Company Voting Securities immediately prior to such
acquisition in substantially the same proportions as their ownership,
immediately prior to such acquisition, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities, as the case
may be; or
(ii) During any period of two consecutive years, individuals
who, as of the beginning of such period, constitute the Board (the
'Incumbent Board') cease for any reason to constitute at least a
majority of the Board; provided, however, that any individual
becoming a director subsequent to the beginning of such period whose
election, or nomination for election by the Company's shareholders,
was approved by a vote of at least a majority of the directors then
comprising the Incumbent Board shall be considered as though such
individual were a member of the Incumbent Board, but excluding, for
this purpose, any such individual whose initial assumption of office
occurs as a result of either an actual or threatened election contest
(as such terms are used in Rule 14a-11 of Regulation 14A promulgated
under the Exchange Act); or
(iii) Approval by the shareholders of the Company of a
reorganization, merger or consolidation, in each case, with respect
to which all or substantially all of the individuals and entities who
were the beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities immediately
prior to such reorganization, merger or consolidation, do not,
following such reorganization, merger or consolidation, beneficially
own, directly or indirectly, more than 70% of, respectively, the then
outstanding shares of common stock and the combined voting power of
the then outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such reorganization, merger or consolidation in
substantially the same proportions as their ownership, immediately
prior to such reorganization, merger or consolidation of the
Outstanding Company Common Stock and Outstanding Company Voting
Securities, as the case may be; or
(iv) Approval by the shareholders of the Company of (A) a
complete liquidation or dissolution of the Company or (B) a sale or
other disposition of all or substantially all of the assets of the
Company, other than to a corporation, with respect to which following
such sale or other disposition, more than 70% of, respectively, the
then outstanding shares of common stock of such corporation and the
combined voting power of the then outstanding voting securities of
such corporation entitled to vote generally in the election of
directors is then beneficially owned, directly or indirectly, by all
or substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company Common
Stock and Outstanding Company Voting Securities immediately prior to
such sale or other disposition in substantially the same proportion
as their ownership, immediately prior to such sale or other
disposition, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be.
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Management Incentive Program - BFGoodrich Co.
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