2001-2003 Long-term Incentive Summary Plan

SUMMARY PLAN DESCRIPTION


2001 - 2003
LONG-TERM INCENTIVE PLAN


THE BFGOODRICH COMPANY


APRIL 2001


2


SUMMARY PLAN DESCRIPTION


2001 - 2003 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 2001 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, unless there has been a Change in Control.


2 3


PLAN OVERVIEW


o Participation in the LTIP will be approved by the Compensation Committee of
the Board of Directors.


o The LTIP will provide for annual grants of Performance Shares with
multi-year overlapping cycles. Every year, a separate multi-year
performance cycle will begin.


o At the beginning of each Plan cycle, a grant of Performance Shares will be
made to each participant. Grants will be credited as phantom Performance
Shares in a book-entry account for each participant. Each phantom
Performance Share will be equivalent to one share of BFGoodrich common
stock.


o With respect to each Plan cycle, the Compensation Committee of the Board of
Directors will establish multi-year performance goals for the Company and
each segment. The performance goals will include Total Business Return
("TBR") for the Company and each Segment and Relative Total Shareholder
Return ("RTSR") for the Company using the manufacturing component of the
S&P 500 as the benchmark. The performance goals applicable to each
participant will be set forth in his or her award agreement.


o 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.


o 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 0% to 200% of
the total phantom Performance Share account (including shares credited
through dividend equivalents), based on attainment against goals set by the
Committee.


o 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.


o 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.


o 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 2001 Stock
Option Plan.


3 4


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 multi-year overlapping cycles. Every year, a separate multi-year performance cycle will begin.


At the beginning of each Plan cycle, a grant of Performance Shares will be made to each participant. Grants will be credited as phantom Performance Shares in a book-entry 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 Plan 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.


4 5


PERFORMANCE GOALS


With respect to each Plan cycle, the Compensation Committee of the Board of Directors will establish multi-year performance goals for the Company and each segment. The performance goals will include Total Business Return ("TBR") for the Company and each Segment and Relative Total Shareholder Return ("RTSR") for the Company using the manufacturing component of the S&P 500 as the benchmark. The performance goals applicable to each participant will be set forth in his or her award agreement.


The determination of whether the performance goals have been met will be made by the Compensation Committee following the end of the plan cycle. For Plan purposes, TBR will be calculated with the following adjustments:


o Adjust for the short-term EBITDA and TBR cash flow impact of long-cycle
investments to the Segment or the Company for those investments that are
discussed with the Board of Directors.


o Exclude the EBITDA impact of externally reported special items that are
one-time events not associated with the normal operation of the business.
One-time events are defined as infrequent and not recurrent in nature and
are limited in their financial impact to a specific time period. Special
items may include, but are not limited to, accounting principle changes,
restructuring charges, merger costs, natural disasters or discontinued
operations. The TBR cash flow impact of special items will be included in
the TBR measurement.


o Adjust for the EBITDA and TBR cash flow impact of significant acquisitions
and divestitures during the year of the activity in a TBR neutral manner.


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 Plan 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 0% to 200% of a participant's total phantom Performance Share account (including shares credited


5 6


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 dies, becomes totally disabled under the Company's Long-Term Disability Plan, or retires under the Company's Retirement Program for Salaried Employees (or a similar pension plan maintained by a subsidiary) during a Plan cycle, the participant (or his or her estate) 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 Plan cycle, at which time the financial performance for the entire Plan cycle ...