Document:

Ex-10.1

 

EXHIBIT 10.1

Goodrich Corporation

Four Coliseum Centre

2730 West Tyvola Road

Charlotte, NC 28217-4578

Tel: 704 423-7000

Fax: 704 423-7002

www.goodrich.com

March 1, 2004

Dear (Name):

As we discussed at the Global Management Meeting in Scottsdale, we have been
working with the Compensation Committee of our Board of Directors to review our
long-term incentive compensation plans. The Goodrich Stock Option Plan, as
approved by our shareholders, provides us with the ability to use stock
options, performance shares, restricted stock, and several other equity-based
compensation tools.

The focus of our review was to ensure that our plans are competitive, both from
an executive compensation standpoint as well as a shareholder standpoint. As
you know, the current corporate environment includes increased corporate
governance, regulatory oversight, and continued scrutiny of executive
compensation. Shareholders want to ensure a balance between providing
competitive, performance-based compensation to the management team while
ensuring that their investment is not significantly diluted through equity
compensation grants. With these issues in mind, we developed a recommendation
for the Compensation Committee of our Board to consider. I am pleased to
announce that the Committee unanimously approved our recommendation.

Our new Long-Term Incentive Plan will include grants of restricted stock, stock
options, and performance units. The Compensation Committee and I believe that
this new approach delivers the correct balance between shareholders and you, as
the management team of Goodrich. We will develop a more comprehensive
communication program to ensure that all participants fully understand the
various components and their potential value, as well as providing periodic
performance updates.

The weightings of each component of the Long-Term Incentive Plan will vary
based upon the individual’s role within the organization. We have used salary
level to define that level, and we will periodically adjust the breakpoints.
Following is a chart which highlights the weightings at each level:

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	Restricted	 	Stock	 	Performance
	Management Level
	 	Stock
	 	Options
	 	Units

	Global Management Team (GMC attendees)
	 	 	40	%	 	 	30	%	 	 	30	%
	Middle Management Team (Salary 3 $150,000)
	 	 	70	%	 	 	30	%	 	 	—	 
	Management Team (Salary < $150,000)
	 	 	100	%	 	 	—	 	 	 	—	 

 

 

Our approach to long-term incentive compensation is to develop target long-term
incentive value based on competitive data gathered from various executive
compensation surveys. From these target values, we establish grant guidelines
that are based on salary levels among the management team. These guidelines
are intended to provide managers with a target level of long-term incentive
compensation based on target level Company performance. An individual’s
performance may also be considered in determining recommended grant levels.
Recommended grants of restricted stock, stock options, and performance units
are submitted to the Compensation Committee for final approval. Your personal
2004 long-term incentive plan participation includes the following grants:

	 	 	 
	Restricted Stock

Stock Options:

Performance Units

	 	(Restricted)

(Options)

(Units)

Restricted Stock

The most significant change to the Long-Term Incentive Plan is the increased
use of Restricted Stock. The major reasons for making this change are: (i) a
strong management desire to provide a retention incentive; (ii) shareholder
concerns about the dilution effect of stock option grants; and (iii) to
encourage management ownership of Goodrich stock. As you have seen with the
weightings, restricted stock will be a more significant component at all levels
of the management team and the sole equity vehicle at lower levels. Restricted
stock provides an underlying value to the participant, regardless of the
direction of Goodrich stock price. This reduces the downside risk to
participants in a declining stock price environment. As the stock price
increases, the interests of management and shareholders are aligned.

The vesting period on the restricted stock is designed to provide retention
value to the company. Vesting will occur 50% at the end of the third year, 25%
at the end of the fourth year, and the remaining 25% at the end of the fifth
year. Accelerated vesting will occur in the event of death, disability, or
retirement. Unvested restricted stock units will be forfeited in the event of
termination, voluntary or involuntary. Cash dividend equivalents will be paid
to participants each quarter through regular payroll processing and will be
treated as taxable for withholding purposes. These restricted stock units will
be issued as of February 17, 2004, which will begin the vesting period.

Stock Options

The use of stock options will be limited in the future to those members of
management earning at least $150,000 (which will be updated periodically).
Beginning with the 2004 grants, which will be issued as of February 17, 2004,
the grants will vest equally over three years (1/3 per year, rather than the
current 35%, 35% and 30% schedule). The exercise price for these grants will
be $30.53, the average of the high/low price on February 17, 2004. Also, all
options granted, beginning in 2004 and beyond, will be nonqualified stock
options. We will no longer be issuing incentive stock option grants. As you
will recall, the incentive stock option grants allow a

 

 

participant to exercise a grant and hold the shares with no taxable income
recognition until the ultimate sale of the shares. However, the company does
not recognize any compensation expense for incentive stock options due to their
preferential tax treatment. The use of Incentive Stock Options has
significantly declined in practice over the past several years.

Performance Units

We requested your consent to change the payout method of the former LTIP to
cash rather than shares. This change reduces the utilization of Goodrich
shares. The basic concept of the performance units will remain the same. You
will be granted a number of performance units (essentially phantom shares) that
will be earned based on the achievement of certain financial goals. Dividends
paid during the measurement period will be reinvested in additional performance
units.

The financial goals for the 2004 Performance Share grants are Return on
Invested Capital (“ROIC”) and Relative Total Shareholder Return (“RTSR”). RTSR
will be measured against a peer group of 34 aerospace and defense companies.
As in the past, target will be median performance against the peer group, and
threshold and maximum will be 25th and 75th percentile performance,
respectively. We will begin to provide quarterly updates on performance
against both the LTIP and ROIC measures.

For the 2004-2006 Performance Share Grants ROIC goals have been set as follows:

	 	 	 	 	 
	2004-2006 Goals
	 	Return on Invested Capital*

	Threshold
	 	 	7.45	%
	Target (median)
	 	 	8.35	%
	Threshold
	 	 	9.45	%

*Actual 2003 ROIC was 8.083%.

We will discuss these changes to the plans in more detail at the April Global
Management Meeting in Charlotte. Some of these changes will be described in
our upcoming Proxy Statement.

I am sure that you will agree that these plans balance your needs and the needs
of our shareholders. I am excited about the changes and believe that these
plans will help align the talented management of Goodrich to create value for
our customers, our shareholders and each of us.

Marshall O. LarsenEx-10.2

 

EXHIBIT 10.2

DIRECTORS’ DEFERRED COMPENSATION PLAN

(Adopted By The Board Of Directors On February 17, 2004)

RESOLVED, that effective January 1, 2003, a fixed retainer be paid to each
Director, except employees or former employees of the Company or its
subsidiaries within five years of their termination of employment who are
Directors, for services as a member of the Board of Directors, at a rate of
$50,000 per year; and

FURTHER RESOLVED, that Directors may elect to defer (the “Deferral Election”)
all or a portion of the fixed retainer and meeting fees described below under
the Directors’ Deferred Compensation Plan (the “Plan”) into a bookkeeping
account (“Deferred Compensation Account”) denominated in phantom shares
(“Phantom Shares”) with each Phantom Share equal to the fair market value of
one share of Company common stock. The Deferral Election shall remain in
effect for the calendar year for which made and shall continue in effect for
each succeeding calendar year unless revoked or modified prior to the
commencement of such succeeding year. The Plan terms and provisions shall
include the following:

     (1) Dividend equivalents will be accrued on all Phantom Shares under the
Plan. Upon the payment date of each dividend declared on the Company’s common
stock, that number of additional Phantom Shares will be credited to each
Director’s account which is equivalent in value to the aggregate amount of
dividends which would be paid if the number of Phantom Shares credited to each
Director’s account were actual shares of the Company’s common stock.

     (2) Upon termination of service as a Director for any reason, actual
shares of the Company’s common stock equal in number to the number of Phantom
Shares credited to the Director’s account, less any applicable withholding,
shall be promptly paid to the Director or his or her designated beneficiary (or
estate if no beneficiary designated).

     (3) For all purposes of the Plan, the fair market value for the Company’s
common stock and Phantom Shares shall be the mean of the high and low prices of
the Company’s common stock on the relevant date as reported on the New York
Stock Exchange — Composite Transactions Listing (or similar report) or if no
sale was made on such date, then on the next preceding day on which such sale
was made.

1

 

     (4) No award of Phantom Shares shall be assignable or transferable by the
Directors, except by will or by the laws of descent and distribution.

     (5) The number of Phantom Shares credited to a Director’s account shall be
adjusted to reflect any stock split, stock dividend, combination of shares,
merger, consolidation, reorganization, or other change in the structure of the
Company or the nature of the Company’s common stock (the “event”) in the same
manner as the event affects the Company’s common stock.

     (6) The Board of Directors may alter or amend the Plan, in whole or in
part, from time to time, or terminate the Plan at any time, provided, however,
no such action shall adversely affect any rights or obligations with respect to
awards of Phantom Shares previously made under the Plan, without consent of the
individual Director.

FURTHER RESOLVED, that a fee of $1,500 be paid to each Director, except
employees or former employees of the Company or its subsidiaries within five
years of their termination of employment who are Directors, for attendance at
each duly called meeting of the Board and for attendance at each duly called
meeting of any Committee of the Board of which he or she is a member (other
than as Chairman), or which he or she is requested by the Chairman of such
Committee to attend, together with an allowance for any proper expenses
incurred in attending such meeting; and

FURTHER RESOLVED, that a fee of $2,500 be paid to each Director, except
employees or former employees of the Company or its subsidiaries within five
years of their termination of employment who are Directors, for attendance at
each duly called meeting of any Committee of the Board of which he or she is
Chairman, together with an allowance for any proper expenses incurred in
attending such meeting; and

FURTHER RESOLVED, that the officers of the Company be and they severally are
authorized to do and perform each and every act and thing and to execute and
deliver any and all documents as, on the advice of legal counsel of the
Company, such officers may deem necessary or advisable to implement the intent
and purpose of the preceding resolutions, such officer’s execution thereof to
be conclusive evidence of the exercise of the discretionary authority herein
conferred; and

FURTHER RESOLVED, that the foregoing resolutions shall supercede, in their
entirety, the resolutions regarding compensation of directors adopted by the
Board on December 3, 2002.

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