UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

SCHEDULE 14A

SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934

Filed by the Registrant þ

Filed by a Party other than the Registrant o

Check the appropriate box:

o     Preliminary Proxy Statement

o     Confidential, For Use of the Commission Only (as permitted by Rule 14a-6(e)(2))

þ     Definitive Proxy Statement

o     Definitive Additional Materials

o     Soliciting Material Pursuant to §240.14a-12

Goodrich Corporation

(Name of Registrant as Specified in Its Charter)

N/A

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

o		No fee required.
þ		Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.

	(1)		Title of each class of securities to which transaction applies: common stock, par value $5 per share
	(2)		Aggregate number of securities to which transaction applies: 125,222,805 outstanding shares of common stock and awards (including options to purchase shares) for which 6,040,198 shares of common stock are issuable.
	(3)		Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): $127.50 per outstanding share of common stock plus $575,213,056 in the aggregate to cash out options to purchase shares of common stock and other awards.
	(4)		Proposed maximum aggregate value of transaction: $16,541,120,694
	(5)		Total fee paid: $1,895,613

þ		Fee paid previously with preliminary materials.
o		Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.

	(1)		Amount previously paid:
	(2)		Form, Schedule or Registration Statement No.:
	(3)		Filing Party:
	(4)		Date Filed:

 

February 7, 2012

 

Dear Fellow Shareholders:

 

You are cordially invited to attend a special meeting of shareholders of Goodrich Corporation, which is referred to as Goodrich, to be held on March 13, 2012, at 9:00 a.m. (Eastern Time), at Goodrich’s headquarters, Four Coliseum Centre, 2730 West Tyvola Road, Charlotte, North Carolina, unless postponed to a later date.

 

At the special meeting, we will ask you to (1) adopt a merger agreement among Goodrich, United Technologies Corporation, which is referred to as UTC, and Charlotte Lucas Corporation, a wholly owned subsidiary of UTC, (2) approve a merger-related named executive officer compensation proposal, and (3) adjourn the special meeting, if necessary, in order to further solicit proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement. If the merger agreement is adopted and the merger is completed, Goodrich will become a wholly owned subsidiary of UTC and each of your shares of Goodrich common stock will be converted into the right to receive $127.50 in cash, without interest.

 

The proxy statement accompanying this letter is furnished in connection with the solicitation by the Board of Directors of Goodrich of proxies to be used at the special meeting.

 

The Board of Directors of Goodrich, which is referred to as the Board, has carefully reviewed and considered the terms and conditions of the proposed merger. Based on its review, the Board has determined that the merger is fair to and in the best interests of Goodrich and its shareholders. Accordingly, the Board has unanimously approved the merger agreement and unanimously recommends that you vote FOR the adoption of the merger agreement, FOR approval of the merger-related named executive officer compensation proposal and, if necessary, FOR the adjournment proposal.

 

Your vote is very important. The merger cannot be completed unless holders of at least two-thirds of the shares of Goodrich common stock outstanding and entitled to vote at the special meeting vote to adopt the merger agreement.

 

Only holders of record of shares of Goodrich common stock at the close of business on February 6, 2012, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof.

 

Whether or not you plan to attend the special meeting, please complete, sign and date the enclosed proxy and return it promptly in the enclosed postage-paid return envelope, or give your proxy by telephone or over the Internet by following the instructions on the proxy card. You may revoke the proxy at any time prior to its exercise at the special meeting in the manner described in the proxy statement accompanying this letter. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote. Your vote in person at the special meeting will supersede any previously submitted proxy.

 

If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the special meeting.

 

If you fail to return your proxy or to attend the special meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote AGAINST the adoption of the merger agreement.

 

The proxy statement accompanying this letter explains the proposed merger, the merger agreement and the merger-related named executive officer compensation proposal, and provides specific information concerning the special meeting. Please read the entire proxy statement carefully.

 

Sincerely,

 

 

Marshall O. Larsen
Chairman & Chief Executive Officer

 

This Proxy Statement is dated February 7, 2012, and is first being mailed to Goodrich shareholders on or about February 9, 2012.

Four Coliseum Centre

2730 West Tyvola Road

Charlotte, North Carolina 28217

 

NOTICE TO SHAREHOLDERS

 

A special meeting of shareholders of Goodrich Corporation, which is referred to as Goodrich, will be held at 9:00 a.m. (Eastern Time), on March 13, 2012, at Goodrich’s headquarters, Four Coliseum Centre, 2730 West Tyvola Road, Charlotte, North Carolina, unless postponed to a later date. The special meeting is being held to consider and vote upon the following proposals:

 

1. To adopt the Agreement and Plan of Merger, dated as of September 21, 2011, as such agreement may be amended from time to time in accordance with its terms, by and among Goodrich, United Technologies Corporation, which is referred to as UTC, and Charlotte Lucas Corporation, a wholly owned subsidiary of UTC. If the merger agreement is adopted and the merger is completed, Goodrich will become a wholly owned subsidiary of UTC and each outstanding share of Goodrich common stock will be converted into the right to receive $127.50 in cash, without interest.

 

2. To approve, on a non-binding advisory basis, the compensation to be paid to Goodrich’s named executive officers that is based on or otherwise relates to the merger, discussed under the section entitled “The Merger — Interests of Goodrich’s Directors and Executive Officers in the Merger” beginning on page 43 (we refer to this proposal as the merger-related named executive officer compensation proposal).

 

3. To approve adjournments of the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

Only holders of record of shares of Goodrich common stock at the close of business on February 6, 2012, the record date for the special meeting, are entitled to notice of, and to vote at, the special meeting and any adjournments or postponements thereof. Each share of common stock is entitled to vote on all matters that properly come before the special meeting and is entitled to one vote on each matter properly brought before the special meeting.

 

The Board of Directors of Goodrich, which is referred to as the Board, unanimously recommends that Goodrich shareholders vote FOR the adoption of the merger agreement. Goodrich cannot complete the merger unless the merger agreement is adopted by the affirmative vote of the holders of at least two-thirds of the shares of Goodrich common stock outstanding and entitled to vote at the special meeting.

 

The Board also unanimously recommends that Goodrich shareholders vote FOR the merger-related named executive officer compensation proposal and FOR any adjournment of the special meeting to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

The attached proxy statement describes the proposed merger, the actions to be taken in connection with the merger and the merger-related named executive officer compensation proposal, and provides additional information about the parties involved. A proxy for use at the meeting in the form accompanying this Notice is hereby solicited on behalf of the Board from holders of Goodrich common stock.

 

Whether or not you plan to attend the special meeting, please complete, sign and date the enclosed proxy and return it promptly in the enclosed postage-paid return envelope, or give your proxy by telephone or over the Internet by following the instructions on the proxy card. You may revoke the proxy at any time prior to its exercise at the special meeting in the manner described in the attached proxy statement. Completing a proxy now will not prevent you from being able to vote at the special meeting by attending in person and casting a vote. Your vote at the special meeting will supersede any previously submitted proxy.

If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the special meeting.

 

If you fail to return your proxy or to attend the special meeting in person, your shares will not be counted for purposes of determining whether a quorum is present at the special meeting and will have the same effect as a vote AGAINST the adoption of the merger agreement.

 

Please do not send any stock certificates at this time.

 

By Order of the Board of Directors,

 

 

Frank A. DiPiero
Secretary

 

February 7, 2012

 

This document incorporates important business and financial information about Goodrich Corporation from documents that are not included in or delivered with this document. See “Additional Information” on page 78. You can obtain documents incorporated by reference in this document by requesting them in writing or by telephone from Goodrich Corporation, Four Coliseum Centre, 2730 West Tyvola Road, Charlotte, North Carolina 28217, Attn: Corporate Secretary. You will not be charged for any of these documents that you request. If you wish to request documents, you should do so as promptly as possible in order to receive them before the special meeting.

 

If you have any questions about the merger or if you need additional copies of the proxy statement or the enclosed proxy card, you may contact Phoenix Advisory Partners, our proxy solicitor, at:

 

Phoenix Advisory Partners
110 Wall Street, 27^th Floor
New York, NY 10005
Banks and Brokers Call: (212) 493-3910
All Others Call Toll Free: (877) 478-5038

 

TABLE OF CONTENTS

 

 

SUMMARY

	•	the total number of shares of Goodrich common stock covered by the option, multiplied by
	•	the excess, if any, of $127.50 over the per share exercise price of the option.

	•	vesting of, and payment of the merger consideration for, stock options, performance units and restricted share units granted prior to September 21, 2011;
	•	payment of severance and other benefits upon certain terminations of employment in connection with the merger; and
	•	provision under the merger agreement of certain indemnification arrangements by UTC.

 

 

The Merger

 

 

 

 

 

 

 

 

 

 

Phoenix Advisory Partners

110 Wall Street, 27^th Floor

New York, NY 10005

Banks and Brokers Call: (212) 493-3910

All Others Call Toll Free: (877) 478-5038

 

Other Special Meeting Proposals

 

 

Procedures

 

 

 

 

 

 

 

This document contains forward-looking statements within the meaning of the federal securities laws. Forward-looking statements are not based on historical facts but instead reflect Goodrich’s expectations, estimates or projections concerning future results or events. These statements generally can be identified by the use of forward-looking words or phrases such as “believe,” “expect,” “anticipate,” “may,” “could,” “intend,” “intent,” “belief,” “estimate,” “plan,” “likely,” “will,” “should” or similar words or phrases. These statements are not guarantees of performance and are inherently subject to known and unknown risks, uncertainties and assumptions that are difficult to predict and could cause our actual results, performance or achievements to differ materially from those expressed or indicated by those statements. We cannot assure you that any of our expectations, estimates or projections will be achieved.

 

The forward-looking statements included in this document are only made as of the date of this document and we disclaim any obligation to publicly update any forward-looking statement to reflect subsequent events or circumstances.

 

Numerous factors could cause our actual results and events to differ materially from those expressed or implied by forward-looking statements, including, without limitation: demand for and market acceptance of new and existing products; our ability to extend our commercial OE contracts beyond the initial contract periods; cancellation or delays of orders or contracts by customers or with suppliers; our ability to obtain price adjustments pursuant to certain of our long-term contracts; the financial viability of key suppliers and the ability of our suppliers to perform under existing contracts; the extent to which we are successful in integrating and achieving expected operating synergies for recent and future acquisitions; successful development of products and advanced technologies; the impact of bankruptcies and/or consolidations in the airline industry; the health of the commercial aerospace industry, including the large commercial, regional, business and general aviation aircraft manufacturers; global demand for aircraft spare parts and aftermarket services; changing priorities or reductions in the defense budgets in the U.S. and other countries, U.S. foreign policy and the level of activity in military flight operations; the possibility of restructuring and consolidation actions; threats and events associated with and efforts to combat terrorism; the extent to which changes in regulations and/or assumptions result in changes to expenses relating to employee and retiree medical and pension benefits; competitive product and pricing pressures; our ability to recover under contractual rights of indemnification for environmental, asbestos and other claims arising out of the divestiture of our tire, vinyl, engineered industrial products and other businesses; the effect of changes in accounting policies or legislation, including tax legislation; cumulative catch-up adjustments or loss contract reserves on long-term contracts accounted for under the percentage of completion method of accounting; domestic and foreign government spending, budgetary and trade policies; economic and political changes in international markets where we compete, such as changes in currency exchange rates, interest rates, inflation, fuel prices, deflation, recession and other external factors over which we have no control; the outcome of contingencies including completion of acquisitions, joint ventures, divestitures, tax audits, litigation and environmental remediation efforts; the impact of labor difficulties or work stoppages at our, a customer’s or a supplier’s facilities; other factors that are set forth in management’s discussion and analysis of Goodrich’s most recently filed reports with the Securities & Exchange Commission, which is referred to as the SEC; and uncertainties associated with the proposed acquisition of Goodrich by UTC, including uncertainties relating to the anticipated timing of filings and approvals relating to the transaction, the expected timing of completion of the transaction and the ability to complete the transaction. This list of factors is illustrative, but by no means exhaustive. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.

 

We are furnishing this proxy statement to our shareholders as part of the solicitation of the enclosed proxy card by our Board for use at the special meeting in connection with the proposed merger and the other matters to be voted on at the special meeting. This proxy statement provides our shareholders with the information they need to know to be able to vote or instruct their vote to be cast at the special meeting.

 

Date, Time and Place

 

We will hold the special meeting on March 13, 2012 at 9:00 a.m. (Eastern Time), at Goodrich’s headquarters, Four Coliseum Centre, 2730 West Tyvola Road, Charlotte, North Carolina, unless postponed to a later date.

 

Record Date; Shareholders Entitled to Vote

 

The record date for the special meeting is February 6, 2012. Record holders of shares of Goodrich common stock at the close of business on the record date are entitled to vote or have their votes cast at the special meeting. On January 30, 2012, the most recent practicable date before this proxy statement was printed, there were 125,798,934 outstanding shares of Goodrich common stock. Shareholders will have one vote for the merger and any other matter properly brought before the special meeting for each share of Goodrich common stock they owned at the close of business on the record date.

 

Quorum

 

A quorum of shareholders is necessary to hold a valid meeting. Under our By-Laws, the holders of record of a majority of the shares of Goodrich common stock, present in person or by proxy, constitute a quorum. Abstentions are counted as present for establishing a quorum.

 

If a quorum is not present, the special meeting will be postponed until the holders of the number of shares of Goodrich common stock required to constitute a quorum attend.

 

If you submit a properly executed proxy card, even if you abstain from voting or vote against the adoption of the merger agreement, your shares of Goodrich common stock will be counted for purposes of calculating whether a quorum is present at the special meeting. If additional votes must be solicited to adopt the merger agreement, it is expected that the meeting will be adjourned to solicit additional proxies.

PROPOSALS TO BE CONSIDERED AT THE SPECIAL MEETING

 

ITEM 1 — THE MERGER

 

As discussed elsewhere in this proxy statement, our shareholders will consider and vote on a proposal to adopt the merger agreement. You should carefully read this proxy statement in its entirety for more detailed information concerning the merger agreement and the merger. In particular, you should read in its entirety the merger agreement, which is attached as Annex A to this proxy statement. The Board unanimously recommends that Goodrich shareholders vote FOR the adoption of the merger agreement.

 

If you return a properly executed proxy card but do not indicate instructions on your proxy card, your shares of Goodrich common stock represented by such proxy card will be voted FOR the adoption of the merger agreement.

 

Goodrich is required pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, which is referred to as the Exchange Act, to include in this proxy statement a non-binding, advisory vote on the compensation payable to each of our named executive officers (Marshall Larsen, Scott Kuechle, Terrence Linnert, John Carmola and Cynthia Egnotovich) in connection with the proposed merger pursuant to Goodrich compensation and benefit arrangements.

 

The plans and arrangements pursuant to which this compensation is payable were previously disclosed to our shareholders as part of the Compensation Discussion and Analysis and related sections of our annual proxy statements. We believe that these historical compensation arrangements have played a key role in our ability to attract and retain superior executive talent, which has allowed us to achieve key business objectives

and maximize shareholder value, and help to ensure that executives remain focused on job duties in connection with a potential transaction. We also believe that our shareholders agree that these compensation arrangements are reasonable and appropriate, as evidenced by the overwhelming majority of shareholders that voted to approve the compensation of our named executive officers at our April 19, 2011 annual meeting of shareholders. Except as described below with respect to the amendment to the Management Continuity Agreement with Terrence Linnert, we have not adopted any new or modified any existing compensation arrangements for our named executive officers in connection with the merger.

 

Goodrich and UTC have commenced an integration planning process to determine the employment status of the named executive officers following the effective time of the merger. It has been determined that Mr. Larsen will become Chairman and Chief Executive Officer of a combined UTC Aerospace Systems business unit. Additional decisions regarding these individuals are expected to be made closer to, or after, the closing of the merger.

 

The Board unanimously recommends that Goodrich shareholders approve the following resolution:

 

“RESOLVED, that the shareholders of Goodrich Corporation approve, on an advisory basis, the compensation to be paid to its named executive officers that is based on or otherwise relates to the merger as disclosed in the Golden Parachute Compensation table in the proxy statement and the related narrative disclosures in the section of the proxy statement entitled “The Merger — Interests of Goodrich Directors and Executive Officers in the Merger”.”

 

The description of the payments contained in the section entitled “The Merger — Interests of Goodrich Directors and Executive Officers in the Merger” as well as the table below entitled “Golden Parachute Compensation” is intended to comply with Item 402(t) of Regulation S-K, which requires disclosure of information about compensation for each named executive officer that is based on or otherwise relates to the merger and will or may become payable either by Goodrich or UTC. We are asking Goodrich shareholders to approve the “golden parachute” compensation that will or may become payable by Goodrich to each of its named executive officers as set forth in the “Golden Parachute Compensation” table below and as described in “The Merger — Interests of Goodrich Directors and Executive Officers in the Merger.”

 

The “Golden Parachute Compensation” table below sets forth the information required by Item 402(t) of Regulation S-K regarding the compensation for each of our named executive officers that is based on or otherwise relates to the merger, assuming the following:

 

 

Please note that the amounts indicated below are estimates based on multiple assumptions that may or may not actually occur (including assumptions described in this proxy statement) or may occur at times different than the time assumed. Some of these assumptions are based on information currently available and, as a result, the actual amounts, if any, to be received by a named executive officer may differ in material respects from the amounts set forth below. Regardless of the manner in which a named executive officer’s employment terminates, the officer is entitled to receive amounts already earned and vested during his or her term of employment.

 

Golden Parachute Compensation

 

 

 

 

 

Vote Information and Board of Directors Recommendation

 

The vote on this Item 2 is a vote separate and apart from the vote on Item 1 to adopt the merger agreement and Item 3 to approve adjournments of the special meeting. Accordingly, you may vote to approve Item 1 or 3 and vote not to approve this Item 2 on executive compensation and vice versa. Because the vote is advisory in nature only, it will not be binding on either Goodrich or UTC regardless of whether the merger is completed. Therefore, as the compensation to be paid in connection with the proposed merger is contractual with respect to the named executive officers, regardless of the outcome of this advisory vote, such

compensation will be payable, subject only to the terms and conditions applicable thereto, if the merger is completed.

 

The Board unanimously recommends that Goodrich shareholders vote FOR the merger-related named executive officer compensation proposal.

 

If you return a properly executed proxy card but do not indicate instructions on your proxy card, your shares of Goodrich common stock represented by such proxy card will be voted FOR the merger-related named executive officer compensation proposal.

 

Shareholders may be asked to vote on a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

The Board unanimously recommends that shareholders vote FOR a proposal to adjourn the special meeting, if necessary, to permit further solicitation of proxies if there are not sufficient votes at the time of the special meeting to adopt the merger agreement.

 

If you return a properly executed proxy card but do not indicate instructions on your proxy card, your shares of Goodrich common stock represented by such proxy card will be voted FOR a proposal to adjourn the special meeting, if necessary.

 

Shareholder Vote Required to Adopt the Proposals at the Special Meeting

 

Adoption of the merger agreement requires the affirmative vote of the holders of at least two-thirds of the shares of Goodrich common stock outstanding and entitled to vote at the special meeting. All of our directors and all of our executive officers, who collectively own approximately 1.4% of the shares of Goodrich common stock entitled to vote at the special meeting, have informed us that they currently intend to vote all of their shares of Goodrich common stock FOR the adoption of the merger agreement. Consequently, approximately 65.3% of our shares of common stock, or approximately 82,146,704 shares of common stock, not held by directors or executive officers must be voted in favor of adoption of the merger agreement for this proposal to be approved.

 

Abstentions and shares not in attendance at the special meeting will have the same effect as a vote AGAINST the proposal to adopt the merger agreement. An abstention occurs when a shareholder marks a proxy card to abstain from voting for or against a proposal.

 

The approval, on a non-binding advisory basis, of the merger-related named executive officer compensation proposal requires the affirmative vote of a majority of the votes cast by holders of shares of Goodrich common stock present or represented by proxy at the special meeting entitled to vote on the proposal. Abstentions and shares not in attendance at the special meeting will have no effect on the outcome of any vote on the merger-related named executive officer compensation proposal.

 

Whether or not a quorum is present, a proposal to approve an adjournment of the special meeting requires the affirmative vote of holders of a majority of the shares of Goodrich common stock entitled to vote on the proposal present or represented by proxy at the special meeting. Abstentions will have the same effect as a vote AGAINST a proposal to adjourn the special meeting, but shares not in attendance at the special meeting will have no effect on the outcome of any vote on a proposal to adjourn the special meeting.

 

Because brokers and banks holding shares of Goodrich common stock in “street name” may vote your shares of Goodrich common stock on the adoption of the merger agreement, approval of the merger-related named executive officer compensation proposal and adjournments of the special meeting, if necessary, only if you provide instructions on how to vote, your failure to provide instructions will result in your shares not

being present at the meeting and not being voted on any proposal. Consequently, there cannot be any broker non-votes occurring in connection with a proposal at the special meeting.

 

Voting

 

Voting and Proxies

 

Shareholders have a choice of voting by proxy over the Internet, by using a toll-free telephone number or by completing a proxy card and mailing it in the postage-paid envelope provided. Please refer to your proxy card or the information forwarded by your bank, broker or other holder of record to see which options are available to you. Please be aware that if you vote over the Internet, you may incur costs such as telephone and Internet access charges for which you will be responsible. The Internet and telephone voting facilities for shareholders of record will close at 11:59 p.m. Eastern Time on March 12, 2012.

 

If you submit your proxy through use of the Internet or by telephone voting procedures or by returning your signed proxy card, but do not include “FOR,” “AGAINST” or “ABSTAIN” on a proposal to be voted, your shares will be voted in favor of that proposal. If you indicate “ABSTAIN” on the proposal to adopt the merger agreement or the proposal to adjourn the special meeting, it will have the same effect as a vote “AGAINST” that proposal. If you indicate “ABSTAIN” on the merger-related named executive officer compensation proposal, it will have no effect on the outcome of the vote on that proposal.

 

Proxies for shares of common stock will also represent shares held under our Dividend Reinvestment Plan. Proxies will also be considered to be voting instructions to the plan trustee with respect to shares held in accounts under the Goodrich Corporation Employees’ Savings Plan. Goodrich has been advised that voting instructions from plan participants must be received by not later than 11:59 p.m. Eastern Time on March 9, 2012 in order to be included in the final voting instruction tabulation provided to the plan trustee.

 

If your shares are held by a bank or broker, you must follow the voting instructions provided to you by the bank or broker. Unless you give your bank or broker instructions on how to vote your shares, your bank or broker will not be able to vote your shares on the proposals.

 

If your shares are held in the name of a bank, broker or other holder of record, you must obtain a proxy, executed in your favor, from the holder of record to be able to vote at the special meeting.

 

If a shareholder does not submit a proxy or otherwise vote his or her shares of Goodrich common stock in any of the ways described above, it will have the same effect as a vote “AGAINST” the proposal to adopt the merger agreement, but will have no effect on the merger-related named executive officer compensation proposal and the proposal to adjourn the special meeting, if necessary.

 

If you have any questions about how to vote or direct a vote in respect of your shares of Goodrich common stock, you may contact our proxy solicitor at:

 

Phoenix Advisory Partners

110 Wall Street, 27^th Floor

New York, NY 10005

Banks and Brokers Call: (212) 493-3910

All Others Call Toll Free: (877) 478-5038

 

Shareholders should not send in their stock certificates with their proxy cards.  A letter of transmittal with instructions for the surrender of certificates representing shares of Goodrich common stock will be mailed to shareholders if the merger is completed.

Revocation of Proxies

 

Any proxy given by a Goodrich shareholder may be revoked at any time before it is voted at the special meeting by doing any of the following:

 

 

Solicitation Costs

 

We are soliciting the enclosed proxy card on behalf of our Board. In addition to solicitation by mail, our directors, officers and employees may solicit proxies in person, by telephone or by electronic means. These persons will not be specifically compensated for doing this.

 

We have retained Phoenix Advisory Partners to assist in the solicitation process. We will pay Phoenix Advisory Partners a fee of $15,000 plus reimbursement of out-of-pocket costs and expenses. We also have agreed to indemnify Phoenix Advisory Partners against various liabilities and expenses that relate to or arise out of its solicitation of proxies (subject to certain exceptions).

 

We will ask banks, brokers and other custodians, nominees and fiduciaries to forward our proxy solicitation materials to the beneficial owners of shares of Goodrich common stock held of record by such nominee holders. We will reimburse these nominee holders for their customary clerical and mailing expenses incurred in forwarding the proxy solicitation materials to the beneficial owners.

 

Exchange of Stock Certificates

 

Our shareholders should not send stock certificates with their proxies. Separate transmittal documents for the surrender of shares of Goodrich common stock in exchange for the merger consideration will be mailed to our shareholders promptly following the effective date of the merger. See “The Merger Agreement — Payment for Shares” beginning on page 57.

 

The discussion in this proxy statement of the merger and the principal terms of the merger agreement is subject to, and is qualified in its entirety by reference to, the merger agreement, a copy of which is attached to this proxy statement as Annex A. You should read the entire merger agreement carefully.

 

Background of the Merger

 

As part of their ongoing oversight and management of Goodrich’s business, the Board and senior management of Goodrich regularly review strategic alternatives available to Goodrich and assess takeover preparedness. In connection with these reviews and assessments, the Board and senior management enlist the assistance of financial advisors and outside legal counsel.

 

On September 15, 2010, Mr. Louis R. Chênevert, the Chairman and Chief Executive Officer of UTC, saw Mr. Marshall O. Larsen, Chairman, President and Chief Executive Officer of Goodrich, at an industry event and indicated that he would like to talk with Mr. Larsen in a less public setting and asked that Mr. Larsen call him in the near future. Mr. Chênevert did not indicate to Mr. Larsen what he wanted to discuss.

 

Several days later, Mr. Larsen called Mr. Chênevert. Mr. Chênevert indicated that he was interested in a potential business combination transaction between UTC and Goodrich. During the course of the discussion, Mr. Chênevert indicated that, subject to the approval of the board of directors of UTC, which is referred to as

the UTC board, UTC would be prepared to acquire Goodrich for $100 per share, consisting of $75 in cash and $25 in UTC common stock. Mr. Larsen indicated that Goodrich was not for sale and that he thought it would be better for them to discuss the matter in person rather than over the phone. Mr. Chênevert and Mr. Larsen agreed to an in-person meeting so that Mr. Chênevert could more fully describe UTC’s proposal.

 

On October 12, 2010, the Board convened a regular meeting of its directors. Representatives from Wachtell, Lipton, Rosen & Katz, which is referred to as Wachtell Lipton and which had from time to time since the late 1980s provided the Board with legal advice on a variety of matters, including its review of strategic matters, were present at the meeting and, as Wachtell Lipton regularly had done in the past, discussed Goodrich’s takeover defense profile. The Wachtell Lipton partners at the meeting had not performed work for UTC, another long-standing Wachtell Lipton client, at any point in recent years (the statements set forth below with respect to Wachtell Lipton’s representation of UTC were provided by UTC for inclusion in this proxy statement). Wachtell Lipton had not provided advice to UTC or Mr. Chênevert in connection with his discussions in September 2010 with Mr. Larsen. At an executive session of the meeting, at which neither Wachtell Lipton nor other outside advisers were present, Mr. Larsen updated the Board on his recent conversation with Mr. Chênevert.

 

On November 5, 2010, the Board convened a meeting. Mr. Larsen updated the Board on his plans to meet Mr. Chênevert later that month. Members of Wachtell Lipton did not attend this meeting.

 

On November 29, 2010, Mr. Chênevert and Mr. Larsen met in Charleston, South Carolina. During the course of the meeting, Mr. Chênevert again indicated that, subject to approval of the UTC board, UTC would be prepared to acquire Goodrich for $100 per share, consisting of $75 in cash and $25 in UTC common stock. Mr. Chênevert indicated that this proposal had been discussed with the UTC board. Mr. Larsen told Mr. Chênevert that he understood the proposal and that, although Goodrich was not for sale, he would inform the Board of the proposal. Members of Wachtell Lipton had not provided advice to UTC or Mr. Chênevert in connection with the November 29 meeting with Mr. Larsen.

 

On November 30, 2010, the Board convened a meeting. Mr. Larsen updated the Board on his meeting with Mr. Chênevert. The Board determined to discuss the matter further at its regularly scheduled board meeting to be held on December 6, 2010.

 

On December 6, 2010, the Board convened its regularly scheduled board meeting. Representatives from Credit Suisse and Wachtell Lipton were present at the meeting. Credit Suisse and Wachtell Lipton regularly assisted Goodrich in connection with its review of strategic matters. The Wachtell Lipton partners at the Board meeting had not performed work for UTC at any point in recent years. During the course of the December 6 meeting, Mr. Larsen outlined UTC’s proposal as he understood it from his conversation with Mr. Chênevert. With the assistance of Credit Suisse and Wachtell Lipton, the Board engaged in an extensive and thorough discussion about UTC’s interest in acquiring Goodrich. At the conclusion of this discussion, the Board unanimously determined that the proposed offer price was inadequate.

 

Following the board meeting, Mr. Larsen called Mr. Chênevert and explained that he presented UTC’s proposal to the Board. Mr. Larsen further explained that the Board unanimously concluded that the proposal was not in the best interests of Goodrich’s shareholders and stated that he could hold no further discussions with respect to UTC’s proposal. Mr. Chênevert thanked Mr. Larsen for his time and consideration of the proposal and concluded the conversation.

 

On December 8, 2010, the Board convened a meeting and Mr. Larsen updated the Board on his conversation with Mr. Chênevert, including Mr. Larsen’s statement that he had concluded discussions with respect to UTC’s proposal.

 

On June 1, 2011, Mr. Chênevert called Mr. Larsen with a new proposal. During the course of the conversation, Mr. Chênevert indicated that UTC continued to be very interested in a potential business combination transaction with Goodrich, and that UTC was prepared to offer $110 per share for Goodrich, 75% of which would be in cash and 25% of which would be in UTC common stock. Mr. Chênevert stated that, although the proposal would be subject to the final approval of the UTC board, the UTC board was aware and supportive of the proposal. Mr. Larsen told Mr. Chênevert that he understood the proposal and that, although

Goodrich was not for sale, he would inform the Board of the proposal. Wachtell Lipton had not provided advice to UTC or Mr. Chênevert in connection with his June 1 telephone call with Mr. Larsen.

 

Following this conversation, Mr. Larsen contacted Mr. Terrence G. Linnert, Executive Vice President, Administration and General Counsel of Goodrich, and Mr. Scott Kuechle, Chief Financial Officer of Goodrich, to discuss UTC’s new proposal. Later that day, Mr. Linnert contacted Wachtell Lipton to explain UTC’s new proposal.

 

On June 3, 2011, Mr. Larsen updated the Board’s Committee on Governance regarding his discussion with Mr. Chênevert.

 

On June 6, 2011, the Board held a meeting, without the presence or advice of Wachtell Lipton, and Mr. Larsen updated the Board on his most recent discussion with Mr. Chênevert. The Board determined to convene a meeting on June 13, 2011 to consider UTC’s new proposal.

 

On June 7, 2011, a partner at Wachtell Lipton telephoned Mr. Linnert. The Wachtell Lipton partner referenced the firm’s long-standing relationship with UTC and explained that Wachtell Lipton would not be able to represent Goodrich going forward with respect to UTC’s new $110 proposal, as Wachtell Lipton would be representing UTC in connection with discussions between Goodrich and UTC. The Wachtell Lipton partner stated that neither he nor other Wachtell Lipton attorneys who had participated in discussions with the Board in connection with UTC’s prior proposal would be part of the Wachtell Lipton team representing UTC in connection with such discussions.

 

On June 13, 2011, the Board convened a meeting. Present at the meeting were members of Goodrich’s senior management and representatives from Credit Suisse and Jones Day, which Goodrich had retained as its legal advisor shortly before this meeting and which had previously performed work for Goodrich and is a highly regarded international law firm specializing in, among other areas, mergers and acquisitions. During the course of the meeting, Mr. Larsen outlined UTC’s revised $110 per share proposal. The Board received from Jones Day detailed instruction about its fiduciary duties in connection with the receipt of an unsolicited proposal. The Board engaged in an extensive and thorough discussion with management and such financial and legal advisors about UTC’s proposal. The Board was informed of the change of counsel for Goodrich from Wachtell Lipton to Jones Day and asked questions of Mr. Linnert and Jones Day relating to such change, including the fact that no Wachtell Lipton attorneys who had worked with Goodrich in connection with UTC’s prior proposal would be part of the Wachtell Lipton team representing UTC in connection with potential discussions between Goodrich and UTC, and their advice as to what action, if any, should be taken relative to Wachtell Lipton’s withdrawal. While the Board discussed possibly preventing Wachtell Lipton from representing UTC in negotiating the proposed transaction, after an extensive discussion the Board determined to refrain from taking any action at that time. The Board also consulted Credit Suisse and Jones Day as to how to respond to UTC, including the factors that the Board should consider in connection with its review of the proposal, and the potential ramifications to Goodrich depending on the response, including the possibility that UTC may attempt to acquire Goodrich on a hostile basis. After thoroughly considering UTC’s offer, and after taking into account the views of Credit Suisse and Jones Day, the Board unanimously determined that the proposed offer price was inadequate.

 

On June 14, 2011, Mr. Larsen called Mr. Chênevert. Mr. Larsen communicated that the $110 per share offer price was substantially below what the Board viewed as the intrinsic value of Goodrich. Mr. Chênevert asked Mr. Larsen to consider an in-person meeting in order for Mr. Chênevert to have the opportunity to more fully describe UTC’s proposal and his view of the strategic rationale for a transaction between the two companies. After further discussion, Mr. Larsen agreed to a meeting with Mr. Chênevert on July 13, 2011 in Cleveland, Ohio. Mr. Larsen and Mr. Chênevert also agreed that Mr. Linnert and Mr. Charles D. Gill, Senior Vice President and General Counsel of UTC, would attend the meeting.

 

On June 17, 2011, the Board convened a meeting and Mr. Larsen updated the Board on his discussion with Mr. Chênevert. The directors determined that it would be advisable to engage Citigroup Global Markets Inc., which is referred to as Citi, as an additional financial advisor in order to provide the Board with multiple

perspectives on UTC’s new proposal and to provide additional financial advisory assistance. The Board did not specifically consider other financial advisors in connection with a potential transaction with UTC.

 

On July 13, 2011, Mr. Larsen, Mr. Linnert, Mr. Chênevert and Mr. Gill met in Cleveland, Ohio. Mr. Larsen and Mr. Linnert explained that they were not attending the meeting to negotiate a transaction, but instead to afford Mr. Chênevert the opportunity to more fully describe UTC’s proposal. During the course of the discussion, Mr. Chênevert indicated that UTC was prepared to increase its offer from $110 per share to $120 per share, maintaining the same mix of consideration (75% cash and 25% in UTC stock). Mr. Chênevert also indicated that, although the offer was subject to final approval by the UTC board, the UTC board was aware of and supportive of this revised proposal. Mr. Chênevert indicated that, because of the differences between Goodrich’s businesses and products and UTC’s, he would want members of Goodrich’s management team, including Mr. Larsen, to stay on with the business in the event of a transaction. Mr. Larsen told Mr. Chênevert and Mr. Gill that he understood the proposal and UTC’s desire for a transaction with Goodrich, and that, although Goodrich was not for sale, he would inform the Board of UTC’s proposal at Goodrich’s regularly scheduled board meeting on July 21, 2011.

 

Following the July 13, 2011 meeting, the Board convened a meeting, and Mr. Larsen updated the Board, including regarding Mr. Chênevert’s indication that UTC would want members of Goodrich’s management team, including Mr. Larsen, to stay on with the business in the event of a transaction. The Board decided to discuss the proposal in more detail at its upcoming meeting on July 21, 2011.

 

On July 18, 2011, a representative from Credit Suisse received a call from a member of UTC’s Corporate Strategy & Development Department who indicated that the $120 per share offer was a significant premium to Goodrich’s then-trading price. He also noted that UTC might be able to increase its proposal by “a dollar or two” if afforded the opportunity to conduct a due diligence review of Goodrich. The representative from Credit Suisse informed Mr. Linnert, Mr. Kuechle, Citi and Jones Day of the substance of the call.

 

On July 21, 2011, the Board convened a meeting. Present at the meeting were certain of Goodrich’s senior management and representatives from Credit Suisse, Citi, and Jones Day. During the course of the meeting, Mr. Larsen outlined UTC’s revised proposal to acquire Goodrich for $120 per share. The meeting was principally focused on three main subjects: (1) a discussion of various legal considerations in connection with the Board’s evaluation of the proposal and the Board’s potential responses to that proposal, (2) a presentation by Mr. Kuechle of Goodrich’s 2011-2016 financial plan; and (3) a discussion of then current global economic and equity market conditions and certain financial aspects relating to the revised UTC proposal. Jones Day provided the directors with an overview of their fiduciary duties. Following Mr. Kuechle’s presentation regarding Goodrich’s 2011-2016 financial plan, Credit Suisse and Citi reviewed and discussed certain financial aspects relating to the revised UTC proposal. The directors then engaged in an extensive and thorough discussion about the proposal and unanimously determined that the proposed offer price was inadequate. The Board instructed Mr. Larsen to convey this determination to Mr. Chênevert.

 

On July 22, 2011, Mr. Larsen called Mr. Chênevert to communicate the Board’s determination that the $120 per share offer price was inadequate. Mr. Chênevert asked Mr. Larsen to consider an in-person meeting on July 25, 2011, in order for Mr. Chênevert to have the opportunity to more fully discuss UTC’s proposal. Mr. Larsen agreed to a meeting with Mr. Chênevert on July 25, 2011 in New York City. Mr. Larsen and Mr. Chênevert also agreed that Mr. Linnert and Mr. Gill would attend the meeting.

 

On July 25, 2011, Mr. Larsen, Mr. Linnert, Mr. Chênevert and Mr. Gill met in New York City. Mr. Chênevert and Mr. Gill indicated that UTC believed the $120 per share proposal was a very good offer that eliminated the execution risk associated with Goodrich’s strategic plan and was a substantial premium to the then-trading price of Goodrich’s common stock. After further discussion, Mr. Chênevert indicated that, subject to the approval of the UTC board, he was prepared to increase UTC’s offer to $125 per share, maintaining the same mix of consideration (75% cash and 25% in UTC stock). Mr. Chênevert also indicated that with due diligence, and subject to board approval, UTC might be willing to offer more than $125 per share, but not much in excess of this price. Mr. Larsen told Mr. Chênevert that he understood the proposal and that, although Goodrich was not for sale, he would inform the Board of the $125 per share proposal and UTC’s desire to conduct due diligence.

On July 27, 2011, the Board convened a meeting and Mr. Larsen updated the Board on his July 25 meeting. The Board determined that they would discuss the UTC proposal in more detail at its upcoming meeting on August 2, 2011.

 

On August 2, 2011, the Board convened a meeting. Present at the meeting were certain of Goodrich’s senior management and representatives from Credit Suisse, Citi, and Jones Day. During the course of the meeting, Mr. Larsen outlined UTC’s revised $125 per share proposal and UTC’s request for due diligence and UTC’s position that it was unwilling to pay much in excess of $125 per share. The meeting was principally focused on two main subjects: (1) discussion of various legal considerations, including fiduciary duties of the Board, in connection with the Board’s evaluation of the revised $125 per share proposal and the Board’s range of potential responses to that proposal, and (2) discussion of then current global economic and equity market conditions and certain financial aspects of UTC’s revised proposal. Jones Day provided the directors with an overview of their fiduciary duties. Credit Suisse and Citi reviewed and discussed certain financial aspects relating to the revised proposal. The Board discussed with management and the financial advisors the possibility of contacting other third parties that might potentially be interested in a transaction with Goodrich. The financial advisors indicated that, although they thought that there were a small number of parties that might have an interest in acquiring Goodrich, they believed that most of those parties did not currently have an interest or the financial capability to effect an acquisition of Goodrich at a higher price than UTC proposed, including because of prior and anticipated future acquisition activity by those parties. Following these discussions, the directors asked numerous questions of each of the advisors. The directors then engaged in an extensive and thorough discussion and asked numerous questions about UTC’s $125 per share proposal, and, at the conclusion of that discussion, the Board unanimously determined that UTC’s $125 per share proposal was not in the best interests of Goodrich’s shareholders. Since the Board was unwilling to pursue a transaction at UTC’s proposed $125 per share price and other third parties were not considered likely to effect an acquisition at a higher price, the Board determined not to contact other parties. However, the Board unanimously concluded that it would be willing to discuss an all-cash transaction at $135 to $140 per share. The Board’s willingness to engage in discussions with UTC regarding an all-cash transaction at the $135-140 per share range was based on the Board’s then-current assessment of the achievability of Goodrich’s financial forecast. The Board was also of the view that, relative to a transaction consisting of a combination of UTC stock and cash, an all-cash transaction would be more desirable because of the certainty of value it provided Goodrich shareholders, particularly when considering that the expected timing of the closing of any transaction would increase the uncertainty in respect of stock consideration. The Board also determined that such discussions regarding a transaction would only occur following UTC’s agreement on the following points: (i) UTC would bear the regulatory risk related to a transaction, (ii) a transaction would not be subject to a financing contingency, (iii) the deal protection provisions would be consistent with market provisions for a transaction of this type, and (iv) the post-acquisition combined UTC business unit of Goodrich and Hamilton Sundstrand, a subsidiary of UTC, would be headquartered in Charlotte, North Carolina. In addition, the Board required that prior to engaging in such discussions and providing due diligence information to UTC, UTC would be required to enter into a customary confidentiality agreement containing a two-year standstill. At the conclusion of the board meeting, the Board instructed Mr. Larsen to convey these points to Mr. Chênevert.

 

On August 3, 2011, Mr. Chênevert called Mr. Larsen. Mr. Larsen communicated the points outlined by the Board at the August 2, 2011 meeting, including its request for a price in the range of $135 to $140 in cash per share. Mr. Chênevert responded that, while he did not have approval from the UTC board to agree to a transaction in the range of $135 to $140 per share in cash, he was willing to conduct due diligence and, if the results of that due diligence review were favorable, he would discuss with the UTC board about the possibility of increasing the proposed purchase price. Later that day, Jones Day circulated to Wachtell Lipton a draft confidentiality agreement containing, among other terms, a two-year standstill.

 

Also on August 3, 2011, Mr. Larsen convened a conference call among all the members of the Board and updated the Board on his conversation with Mr. Chênevert.

 

Later that evening and during the morning of August 4, 2011, Jones Day and Wachtell Lipton negotiated the terms of the confidentiality agreement. During the course of the negotiations on the confidentiality

agreement, UTC informed Goodrich that UTC owned 770,000 shares of Goodrich’s common stock, which it had purchased using affiliates of Credit Suisse as its broker dealer.

 

Later on August 4, 2011, the parties executed the confidentiality agreement. The confidentiality agreement includes a standstill obligation by UTC, which limits UTC’s ability to take a broad list of actions, including limits on buying Goodrich securities or assets, engaging in a proxy solicitation with respect to Goodrich and becoming part of a group with others with respect to Goodrich’s securities for a period of two years from the date of the confidentiality agreement. The purpose of the standstill provision was to protect Goodrich from unauthorized use by UTC of Goodrich’s non-public information.

 

Also on August 4, 2011, Mr. Greg Hayes, UTC’s Chief Financial Officer, called Mr. Kuechle to outline the due diligence topics that UTC wanted to discuss during the due diligence session scheduled for the following day.

 

On August 5, 2011, representatives of UTC management and Goodrich management met in New York City for a due diligence session. During the course of the meeting, Mr. Kuechle reviewed Goodrich’s 2011-2016 financial forecast with the representatives from UTC.

 

On August 8, 2011, Mr. Chênevert sent an e-mail to Mr. Larsen indicating that he had positive feedback from his management team on the August 5, 2011 due diligence session. Mr. Chênevert suggested that it would be useful for him and Mr. Larsen to have an in-person meeting on August 10, 2011 to discuss potential next steps. Mr. Larsen agreed to an in-person meeting with Mr. Chênevert.

 

On August 10, 2011, Mr. Larsen, Mr. Linnert, Mr. Chênevert and Mr. Gill met in Nantucket, Massachusetts. Mr. Chênevert expressed his appreciation for Goodrich’s efforts in conducting the August 5, 2011 due diligence session. Mr. Chênevert further reiterated his view that a transaction between UTC and Goodrich made excellent strategic sense. Mr. Chênevert indicated that, based on UTC’s due diligence review, he continued to believe a transaction made sense in the $125 to $130 per share range and that he did not have authority from the UTC board to discuss a price above $130 per share. Mr. Larsen reiterated that the Board believed that the intrinsic value of Goodrich was in the range of $135 to $140 per share. The parties then discussed recent developments regarding a number of global economic challenges, including the very serious economic situation facing Europe. Mr. Chênevert told Mr. Larsen and Mr. Linnert that UTC was going to disengage from further work on a potential transaction with Goodrich because of continuing evidence of a slowdown in the global economy. Mr. Chênevert indicated that he believed it was better for both UTC and Goodrich to discuss whether there was a basis to continue discussions after the global financial markets had time to absorb recent developments, including those relating to the United States budget gridlock, downward revisions to consensus estimates of United States and European gross domestic product growth for the second half of 2011 and the financial crisis in Greece and other countries in Europe.

 

On August 12, 2011, the Board convened a meeting and Mr. Larsen updated the Board on the August 10, 2011 meeting.

 

During the evening of September 7, 2011, Mr. Gill called Mr. Linnert. Mr. Gill indicated that the UTC board had met the previous day and authorized Mr. Chênevert and Mr. Gill to attempt to re-engage with Goodrich regarding a possible business combination transaction. Mr. Gill indicated that UTC would require several days of additional due diligence meetings with Goodrich’s senior management. Mr. Linnert indicated that he would discuss UTC’s position with Mr. Larsen and the Board. Mr. Linnert further indicated that he did not believe there would be any opportunity for additional due diligence until the parties had agreed on a price that would form the basis to finalize discussions. Mr. Gill noted that he understood Mr. Larsen and Mr. Chênevert to be attending the same industry conference over the upcoming weekend and that Mr. Chênevert would likely speak with Mr. Larsen at that time.

 

On September 8, 2011, members of senior management of Goodrich held a conference call with Goodrich’s legal and financial advisors to brief them on Mr. Linnert’s discussion with Mr. Gill. During the course of the conference call, a representative of Credit Suisse indicated that earlier that morning, Credit Suisse had received calls from the media inquiring about rumors of a “$20 billion industrial deal” that had not gone forward but was being negotiated again.

 

In early September 2011, persons at Citi who were not involved in advising Goodrich were contacted by UTC about potentially participating in financing for an unspecified transaction. Citi indicated to UTC that it could not engage in such a discussion, and no understandings or agreements regarding transaction financing were had between UTC and Citi prior to the signing of the merger agreement between Goodrich and UTC.

 

On September 10, 2011, Mr. Chênevert saw Mr. Larsen at an industry conference. Mr. Chênevert and Mr. Larsen spoke briefly, and Mr. Chênevert said that he was going to contact Mr. Larsen to schedule a discussion of the status of a potential transaction between UTC and Goodrich, but they did not discuss potential deal terms.

 

On September 12, 2011, Mr. Chênevert called Mr. Larsen to set up a meeting in New York City on September 15, 2011. Mr. Chênevert indicated that the purpose of the meeting was to have further discussion on pricing terms. Mr. Larsen agreed to an in-person meeting, but reiterated his previous statement that the price should be in the range of $135 to $140 in cash per share.

 

On September 15, 2011, Mr. Larsen, Mr. Linnert, Mr. Chênevert and Mr. Gill met in New York City. Mr. Chênevert began the discussion by outlining issues that UTC had identified with respect to Goodrich’s proposed valuation of $135 to $140 per share, including UTC’s view that Goodrich’s five-year forecast was aggressive and, accordingly, may be very difficult to execute, particularly given the deteriorating global economic conditions, and that it expected military expenditures to continue to tighten. Mr. Chênevert indicated that, notwithstanding these concerns, UTC was prepared to continue to pursue a transaction at $125 per share in cash. Mr. Larsen responded that the $125 per share price was not acceptable, explaining that the parties had already discussed a price of $125 per share even before UTC was provided with Goodrich’s five-year forecast. Mr. Chênevert indicated that, subject to the approval of the UTC board, he would be willing to pursue a transaction that was possibly above $125 per share, subject to UTC representatives’ being afforded the opportunity to meet with Goodrich’s three segment presidents and being satisfied with its due diligence findings. Mr. Larsen indicated that he would discuss this proposal with the Board.

 

Later that day, Mr. Larsen held a conference call with Goodrich’s legal and financial advisors to brief them on the meeting among Mr. Chênevert, Mr. Gill, Mr. Linnert and him. During the course of the conference call, representatives from both Credit Suisse and Citi indicated that their respective firms were receiving, but had not responded to, media inquiries about a large industrial transaction that was imminent.

 

During the evening of September 15, 2011, the Board convened a meeting and Mr. Larsen updated the Board on the meeting earlier in the day with Messrs. Chênevert and Gill. The Board agreed to further discuss UTC’s proposal at its meeting scheduled for September 18, 2011.

 

Early on September 16, 2011, Reuters reported that UTC was lining up between $10 billion and $20 billion in financing for a U.S. acquisition. The report mentioned Goodrich as one of a handful of likely targets. Throughout the course of the day, a variety of news reports were issued claiming that UTC and Goodrich were in final negotiations over a potential transaction.

 

On September 17, 2011, Jones Day provided Wachtell Lipton and UTC a draft merger agreement to be negotiated in the event that the parties were able to reach an agreement on price.

 

On September 18, 2011, the Board convened a meeting. Present at the meeting were certain of Goodrich’s senior management and representatives from Credit Suisse, Citi, and Jones Day. During the course of the meeting, Mr. Larsen outlined UTC’s proposal of $125 per share, noting that UTC had indicated that it was possible that the price could be increased slightly, subject to UTC’s meeting with each of Goodrich’s three segment presidents and the results of its due diligence. Jones Day provided the directors with a review of their fiduciary duties. Credit Suisse and Citi reviewed and discussed the current economic and market environment with the Board and certain financial aspects of UTC’s revised proposal. Following these discussions, the directors engaged in an extensive and thorough discussion about UTC’s revised proposal, and the risks and challenges to Goodrich in executing its strategic plan, particularly in light of the further deterioration in the global economic environment and market conditions since early August 2011. At the conclusion of that discussion, the Board unanimously determined that an all-cash transaction in excess of $125 would be in the best interests of Goodrich’s shareholders, and granted Mr. Larsen authority to negotiate a transaction on those terms. The Board further reiterated its position that UTC

would bear the regulatory risk related to a transaction, the transaction would not be subject to a financing contingency, the deal protection provisions would be consistent with market provisions for a transaction of this type, and the combined Goodrich-Hamilton Sundstrand business unit would be headquartered in Charlotte, North Carolina. At the conclusion of the board meeting, the Board instructed Mr. Larsen to convey these points to Mr. Chênevert.

 

After taking into consideration its discussions with Goodrich’s advisors, including those discussions relating to the current economic and market environment and certain financial aspects of UTC’s revised proposal, and based on previous indications by UTC as described above, Mr. Larsen and the Goodrich management team believed that a price of between $127 and $128 per share was most likely the highest per share price UTC would be willing to pay but determined to propose to Mr. Chênevert a price of $130 per share.

 

On the evening of September 18, 2011, Mr. Larsen called Mr. Chênevert to communicate the transaction points outlined by the Board at its meeting earlier that day. After discussion, Mr. Larsen indicated that the Board was supportive of an all-cash transaction at $130 per share, and subject to the transaction points outlined by the Board. Mr. Chênevert responded that UTC would be willing to pursue a transaction at $125 per share. After further discussion, Mr. Larsen and Mr. Chênevert each indicated a willingness to support an all-cash transaction at $127.50 per share. Mr. Larsen and Mr. Chênevert also communicated that the price would be subject to UTC’s satisfactory due diligence findings, as well as the negotiation of the terms and conditions of a mutually agreeable definitive merger agreement, and that each executive would need to discuss the proposal with his respective board of directors.

 

On September 19, 2011, Jones Day and Wachtell Lipton exchanged mark-ups to the merger agreement.

 

On September 20 and 21, 2011, representatives of Goodrich and UTC met in New York City at Jones Day’s offices to conduct further due diligence meetings. Concurrently with those discussions, and in consideration of the agreed upon $127.50 per share price, representatives of Jones Day, Goodrich, Wachtell Lipton and UTC negotiated the terms of the merger agreement, including, but not limited to, deal protection measures, allocation of regulatory risk, and other matters.

 

During a break from a meeting between representatives of UTC and Goodrich on the afternoon of September 21, 2011, Mr. Chênevert discussed with Mr. Larsen that, if a transaction with UTC were to be consummated, Mr. Larsen would be recommended to the UTC board to become a director of UTC at some point in the future and that Mr. Larsen would become chairman and chief executive officer of the UTC Aerospace Systems business unit. Mr. Chénevert and Mr. Larsen did not discuss any other terms or conditions of Mr. Larsen’s post-transaction employment.

 

During the late afternoon of September 21, 2011, the Board convened a special meeting to consider the proposed transaction. Members of Goodrich’s senior management and representatives of Credit Suisse, Citi and Jones Day participated in the meeting. Jones Day discussed a number of aspects of the proposed transaction and related matters, including an overview of the process and discussions with UTC to date, the material terms of the proposed merger agreement and the negotiations over those terms including the amount of the termination fee (which fee had been negotiated by members of senior management and Goodrich’s advisors under the direction of the Board and Mr. Larsen), and the terms of Goodrich’s engagements with each of Credit Suisse and Citi and the fees payable to them under the terms of those engagements. Jones Day also reviewed with the directors their fiduciary duties in the context of the proposed transaction. Jones Day summarized certain merger agreement obligations, conditions and termination rights relating to obtaining regulatory approvals, as well as the provisions and termination fee applicable in situations in which the transaction was made the subject of competitive bids from third parties or in which the directors withdrew the Board recommendation supporting the transaction. The directors discussed the terms of the proposed merger agreement and engaged in a discussion regarding the risks and challenges to Goodrich in executing its strategic plan in a situation where it remained independent. As part of the discussion of terms, the Board and its advisors further discussed the proposed termination fee and determined that it was necessary in order for UTC to agree to permit the Board, subject to compliance with the terms and conditions of the merger agreement, to consider, and under certain conditions, to terminate the merger agreement and accept an unsolicited superior takeover proposal in order to comply with the Board’s fiduciary duties under applicable law. After consultation with Goodrich’s advisors, the Board believed that a termination fee of $500 million was reasonable, consistent with termination fees in similar transactions and not likely to preclude an alternative superior proposal for a business combination with Goodrich. The directors, with the assistance of Goodrich’s legal and financial advisors, again considered whether to contact other potential acquirors to solicit interest for an acquisition

of Goodrich. Credit Suisse and Citi indicated that they believed it was very unlikely that a third party would make an offer at a higher price than UTC had offered. The Board concluded that it would not be in the best interests of the shareholders of Goodrich to solicit other bids for Goodrich instead of entering into a merger agreement with UTC, particularly in light of the fact that the merger agreement did not preclude Goodrich from, upon the terms and subject to the conditions set forth in the agreement, accepting a superior proposal if such proposal were subsequently received. Given the size of the proposed merger and market volatility that could impact the execution and certainty of the merger, Goodrich’s management believed it would be beneficial to Goodrich and its shareholders to permit, and recommended that the Board permit, Goodrich’s financial advisors to provide or otherwise participate in UTC’s acquisition financing, if invited to do so. The Board considered the possible participation of the financial advisors in UTC’s acquisition financing for the merger and had no objections to such participation.

 

At the request of the Board, Credit Suisse then reviewed and discussed its financial analyses with respect to Goodrich and the proposed merger. Thereafter, at the request of the Board, Credit Suisse rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion dated September 21, 2011) to the effect that, as of September 21, 2011 and subject to the assumptions, qualifications, limitations and other matters considered, the merger consideration to be received by the holders of Goodrich common stock other than UTC and its affiliates in the merger was fair, from a financial point of view, to such shareholders. The full text of the written opinion of Credit Suisse, which describes, among other things, the assumptions, qualifications, limitations and other matters considered in connection with its opinion is attached as Annex B.

 

At the request of the Board, Citi then reviewed its financial analyses of the $127.50 per share consideration and delivered Citi’s oral opinion, confirmed by delivery of a written opinion dated September 21, 2011, to the effect that, as of the date of the opinion and based upon and subject to the various assumptions and limitations set forth in its written opinion, the $127.50 per share consideration to be received in the merger by holders of Goodrich common stock (other than UTC, Merger Sub and their respective affiliates) was fair, from a financial point of view, to such holders. The full text of the written opinion of Citi, which describes, among other things, the assumptions made, procedures followed, matters considered and limitations on the review undertaken in connection with its opinion is attached as Annex C.

 

The Board then met in executive session to further consider the proposed transaction with UTC. During the course of the executive session, the directors asked Mr. Larsen to leave the meeting and requested that Mr. Linnert remain in the meeting so that the independent directors could discuss any potential terms of employment for Mr. Larsen should a transaction with UTC occur. Mr. Linnert explained that Mr. Chênevert discussed with Mr. Larsen that, if a transaction with UTC were to be consummated, Mr. Larsen would be recommended to the UTC board to become a director of UTC at some point in the future and that Mr. Larsen would become chairman and chief executive officer of the UTC Aerospace Systems business unit, but that no other terms of employment had ever been discussed. Mr. Larsen and Mr. Kuechle were then asked to rejoin the meeting. Following an extensive and thorough discussion of the matters discussed during the course of the board meeting, all of Goodrich’s directors unanimously determined that the merger agreement and the transactions contemplated thereby were fair to and in the best interests of Goodrich’s shareholders, declared that the merger was advisable, approved the merger agreement and the transactions contemplated thereby, directed that the adoption of the merger agreement be submitted to a vote at a meeting of Goodrich’s shareholders and resolved to recommend to Goodrich’s shareholders that they adopt the merger agreement.

 

Early in the evening of September 21, 2011, the UTC board convened a special meeting to consider the proposed transaction. The UTC board approved the merger agreement that evening.

 

During the evening of September 21, 2011, UTC and Goodrich executed and delivered the merger agreement and announced the signing of the merger agreement through a joint press release.

 

Goodrich’s Reasons for the Merger

 

After careful consideration, the Board, at a special meeting held on September 21, 2011, unanimously:

 

 

In evaluating the merger and the merger agreement, the Board consulted with management as well as Goodrich’s legal and financial advisors. The Board also considered various material factors that are discussed below. The discussion in this section is not intended to be an exhaustive list of the information and factors considered by the Board, although it does include all material factors considered by the Board. In view of the wide variety of factors considered in connection with the merger, the Board did not consider it practicable to, nor did it attempt to, quantify or otherwise assign relative weights to the specific material factors it considered in reaching its decision. In addition, individual members of the Board may have given different weight to different factors. The Board considered this information and these factors as a whole in deciding to recommend the adoption of the merger agreement.

 

The Board considered the following factors as generally supporting its decision to recommend that Goodrich’s shareholders vote in favor of the adoption of the merger agreement:

 

 

 

 

 

 

 

 

 

 

 

 

In addition, the Board considered a number of potential negative factors in its deliberations concerning the merger, including the following:

 

 

 

 

 

 

During its consideration of the merger with Merger Sub, the Board also was aware that the fact that some of Goodrich’s directors and executive officers have interests in the merger that differ from or are in addition to their interests as those of Goodrich’s shareholders generally, as described in “— Interests of Goodrich Directors and Executive Officers in the Merger” beginning on page 43.

 

This summary is not meant to be an exhaustive description of the information and factors considered by the Board but is believed to address the material information and factors considered. In view of the wide variety of factors considered by the Board, it is not possible to quantify or to give relative weights to the various factors. In considering the factors discussed above, individual directors may have given different weights to different factors. After taking into consideration all of the factors set forth above as a whole, as well as other factors not specifically described above, the Board concluded that the merger is fair to and in the best interests of Goodrich’s shareholders, and approved the merger agreement and the transactions contemplated by the merger agreement.

 

Recommendation of the Board

 

At its meeting on September 21, 2011, the Board met to consider the merger agreement and after due consideration, unanimously adopted and approved the merger agreement and determined that the merger agreement and the related transactions are fair to and in the best interests of Goodrich and its shareholders, and the Board unanimously recommends that Goodrich shareholders vote FOR the adoption of the merger agreement.

 

Opinion of Our Financial Advisors

 

Opinion of Credit Suisse Securities (USA) LLC

 

On September 21, 2011, Credit Suisse rendered its oral opinion to the Board (which was subsequently confirmed in writing by delivery of Credit Suisse’s written opinion dated the same date) to the effect that, as of September 21, 2011, the merger consideration to be received by the holders of Goodrich common stock other than UTC and its affiliates in the merger was fair, from a financial point of view, to such shareholders.

 

Credit Suisse’s opinion was directed to the Board and only addressed the fairness, from a financial point of view, to the holders of Goodrich common stock other than UTC and its affiliates of the merger consideration to be received by such shareholders in the merger and did not address any other aspect or implication of the merger. The summary of Credit Suisse’s opinion in this proxy statement is qualified in its entirety by reference to the full text of its written opinion, which is included as Annex B to this proxy statement and sets forth the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Credit Suisse in preparing its opinion. However, neither Credit Suisse’s written opinion nor the summary of its opinion and the related analyses set forth in this proxy statement is intended to be, and they do not constitute, advice or a recommendation to any holder of Goodrich common stock as to how such shareholder should vote or act with respect to any matter relating to the merger.

 

In arriving at its opinion, Credit Suisse:

 

 

 

In connection with its review, Credit Suisse did not independently verify any of the foregoing information and Credit Suisse assumed and relied upon such information being complete and accurate in all material respects. With respect to the financial forecasts for Goodrich that Credit Suisse used in its analyses, the management of Goodrich advised Credit Suisse, and Credit Suisse assumed, that such forecasts were reasonably prepared on bases reflecting the best available estimates and judgments of Goodrich’s management as to the future financial performance of Goodrich, and Credit Suisse assumed no responsibility for the assumptions on which such projections were based. Credit Suisse also assumed, with the Board’s consent, that, in the course of obtaining any regulatory or third party consents, approvals or agreements in connection with the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Goodrich and that the merger would be consummated in accordance with the terms of the merger agreement without waiver, modification or amendment of any material term, condition or agreement thereof. In addition, Credit Suisse was not requested to make, and did not make, an independent evaluation or appraisal of the assets or liabilities (contingent or otherwise) of Goodrich, nor was Credit Suisse furnished with any such evaluations or appraisals.

 

Credit Suisse’s opinion addressed only the fairness, from a financial point of view, to the holders of Goodrich common stock other than UTC and its affiliates of the merger consideration to be received by such shareholders in the merger and did not address any other aspect or implication of the merger or any other agreement, arrangement or understanding entered into in connection with the merger or otherwise, including, without limitation, the fairness of the amount or nature of, or any other aspect relating to, any compensation to any officers, directors or employees of any party to the merger, or class of such persons, relative to the merger consideration or otherwise. The issuance of Credit Suisse’s opinion was approved by an authorized internal committee of Credit Suisse.

 

Credit Suisse’s opinion was necessarily based upon information made available to Credit Suisse as of the date of its opinion and financial, economic, market and other conditions as they existed on the date of its opinion and upon certain assumptions regarding such financial, economic, market and other conditions which were, as of the date of the opinion, subject to unusual volatility and Credit Suisse expressed no opinion or views as to any potential effects of such volatility on Goodrich or the merger. Credit Suisse’s opinion did not address the merits of the merger as compared to alternative transactions or strategies that may have been available to Goodrich, nor did it address the underlying decision to proceed with the merger. Credit Suisse was not requested to, and did not, solicit third party indications of interest in acquiring all or any part of Goodrich.

 

Credit Suisse’s opinion was for the information of the Board in connection with its consideration of the merger and does not constitute advice or a recommendation to any holder of Goodrich common stock as to how such shareholder should vote or act on any matter relating to the proposed merger.

 

In preparing its opinion to the Board, Credit Suisse performed a variety of analyses, including those described below. The summary of Credit Suisse’s financial analyses is not a complete description of the analyses underlying Credit Suisse’s opinion. The preparation of a fairness opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytic methods employed and the adaptation and application of those methods to the unique facts and circumstances presented. As a consequence, neither Credit Suisse’s opinion nor the analyses underlying its opinion are readily susceptible to partial analysis or summary description. Credit Suisse arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, analytic method or factor. Accordingly, Credit Suisse believes that its analyses must be considered as a whole and that selecting portions of its analyses, analytic methods and factors, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

In performing its analyses, Credit Suisse considered business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, business or transaction used in Credit Suisse’s analyses for comparative purposes is identical to Goodrich or the proposed transaction. While the results of each analysis were taken into account in reaching its overall conclusion with respect to fairness, Credit Suisse did not make separate or quantifiable judgments regarding individual analyses. The implied valuation reference ranges and implied enterprise value multiples indicated by Credit Suisse’s analyses are illustrative and not necessarily indicative of actual values nor predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond Goodrich’s control and the control of Credit Suisse. Much of the information used in, and accordingly the results of, Credit Suisse’s analyses are inherently subject to substantial uncertainty.

 

Credit Suisse’s opinion and analyses were provided to the Board in connection with its consideration of the proposed merger and were among many factors considered by the Board in evaluating the proposed merger. Neither Credit Suisse’s opinion nor its analyses were determinative of the merger consideration or of the views of the Board with respect to the proposed merger.

 

The following is a summary of the material financial analyses performed in connection with Credit Suisse’s opinion rendered to the Board on September 21, 2011. The analyses summarized below include information presented in tabular format. The tables alone do not constitute a complete description of the analyses. Considering the data in the tables below without considering the full narrative description of the analyses, as well as the methodologies underlying, and the assumptions, qualifications and limitations affecting, each analysis, could create a misleading or incomplete view of Credit Suisse’s analyses.

 

For purposes of its analyses, Credit Suisse reviewed a number of financial metrics including:

 

 

Unless the context indicates otherwise, share prices for the selected companies used in the selected companies analysis described below were as of September 20, 2011, and estimates of financial performance for Goodrich for the calendar years ending December 31, 2011 to 2016 were based on financial projections provided by Goodrich management. Estimates of financial performance for the selected companies listed below for the calendar years ending December 31, 2011 and 2012 were based on publicly available research analyst estimates for those companies. With respect to Goodrich, estimates of EBITDA and free cash flows for 2011 and 2012 were adjusted based on discussions with Goodrich management to add back one time charges relating to the restructuring of its landing gear business and certain transaction costs and the estimate of Calendar Year, which is referred to as CY, 2016E EBITDA was adjusted to reflect a $51 million reduction in operating expenses relating to its wheel and brake business.

 

Selected Companies Analyses

 

Credit Suisse considered certain financial data for Goodrich and selected companies with publicly traded equity securities Credit Suisse deemed relevant. The selected companies were selected because they were deemed to be similar to Goodrich in one or more respects, including the nature of their business, size, diversification and financial performance. No specific numeric or other similar criteria were used to select the selected companies, and all criteria were evaluated in their entirety without application of definitive qualifications or limitations to individual criteria. In selecting the selected companies, Credit Suisse focused

on public companies in the aerospace and defense sector which were not prime contractors to the Department of Defense and which had significant exposure to commercial and military aerospace end-markets as opposed to industrial end-markets. Credit Suisse identified a sufficient number of companies for purposes of its analysis but may not have included all companies that might be deemed comparable to Goodrich.

 

The financial data reviewed included:

 

 

With respect to the selected companies analysis, the primary selected companies with publicly traded equity securities and corresponding multiples were:

 

 

Credit Suisse also reviewed with the Board financial data with respect to three other companies with publicly traded equity securities that were not deemed as similar to Goodrich as the primary selected companies and were not included in Credit Suisse’s analysis. The corresponding multiples for those other companies were:

 

 

As noted above, no company or business used in Credit Suisse’s selected companies analysis for comparative purposes is identical to Goodrich and an evaluation of the results of the selected companies analysis is not entirely mathematical. As a consequence, mathematical derivations (such as the high, low, mean and median) of financial data are not by themselves meaningful and in selecting the ranges of multiples to be applied were considered in conjunction with experience and the exercise of judgment. Taking into account the results of the selected companies analysis and its experience and judgment, Credit Suisse applied multiple ranges to corresponding financial data for Goodrich based on Goodrich’s management forecasts to calculate implied valuation reference ranges per share of Goodrich common stock. Credit Suisse applied multiples of 7.0x to 9.0x to Goodrich management’s estimate of CY 2011E EBITDA and 6.0x to 8.0x to Goodrich management’s estimate of CY 2012E EBITDA, which resulted in an implied valuation reference range of $70.00 to $100.00 per share of Goodrich common stock as compared to the proposed per share merger consideration of $127.50 per share of Goodrich common stock in the merger.

 

Selected Acquisitions Analysis

 

Credit Suisse also considered the financial terms of certain business combinations and other transactions Credit Suisse deemed relevant. The selected transactions were selected because the target companies were deemed to be similar to Goodrich in one or more respects, including the nature of their business, size, diversification, financial performance and geographic concentration. No specific numeric or other similar criteria were used to select the selected transactions, and all criteria were evaluated in their entirety without application of definitive qualifications or limitations to individual criteria. In selecting the selected transactions, Credit Suisse focused on transactions involving target companies in the aerospace and defense sector since January 1, 2007 with transaction values in excess of $350 million for which data was publicly available. Credit

Suisse identified a sufficient number of transactions for purposes of its analysis, but may not have included all transactions that might be deemed comparable to the proposed transaction. The financial data reviewed included the implied Enterprise Value (based on the purchase price paid in the transaction) as a multiple of the last twelve months EBITDA, or LTM EBITDA. The selected transactions and corresponding multiples were:

 

 

As noted above, no transaction used in Credit Suisse’s selected transactions analysis for comparative purposes is identical to the merger and an evaluation of the results of the selected transactions analysis is not entirely mathematical. As a consequence, mathematical derivations (such as the high, low, mean and median) of financial data are not by themselves meaningful and in selecting the ranges of multiples to be applied were considered in conjunction with experience and the exercise of judgment. Taking into account the results of the selected transactions analysis and its experience and judgment, Credit Suisse applied a multiple range of 11.0x to 14.0x LTM EBITDA to corresponding financial data for Goodrich, which resulted in an implied valuation reference range of $110.00 to $140.00 per share of Goodrich common stock as compared to the proposed per share merger consideration of $127.50 per share of Goodrich common stock in the merger.

 

Discounted Cash Flow Analysis

 

Credit Suisse also performed a discounted cash flow analysis of Goodrich, which is intended to provide an implied total enterprise value of a company by calculating the present value of the estimated future unlevered free cash flows and terminal value of the company. For purposes of this analysis, Credit Suisse relied upon the financial forecasts for Goodrich provided by the management of Goodrich. In performing this analysis, Credit Suisse applied terminal CY2016E EBITDA multiples of 7.5x to 9.5x and, taking into account Goodrich’s weighted average cost of capital, applied discount rates ranging from 8.0% to 10.0%. Goodrich’s implied per share equity value was then calculated as its implied total enterprise value less net debt (based on Goodrich’s outstanding indebtedness, preferred stock, capital lease obligations and non-controlling interests, less cash and cash equivalents on its balance sheet as of June 30, 2011), divided by the number of fully diluted shares of Goodrich common stock as determined utilizing the treasury stock method. This analysis resulted in an implied valuation reference range of $115.00 to $150.00 per share of Goodrich common stock as compared to the proposed per share merger consideration of $127.50 per share of Goodrich common stock in the merger.

 

Miscellaneous

 

Goodrich retained Credit Suisse as its financial advisor in connection with the proposed merger based on Credit Suisse’s qualifications, experience and reputation as an internationally recognized investment banking and financial advisory firm. Credit Suisse will receive a transaction fee of $35 million for its services,

$30 million of which is contingent upon completion of the merger and $5 million of which became payable upon the rendering of its opinion. In addition, Goodrich has agreed to indemnify Credit Suisse and certain related parties for certain liabilities and other items arising out of or related to its engagement.

 

Credit Suisse and its affiliates have provided investment banking and other financial services to Goodrich and its affiliates for which Credit Suisse and its affiliates have received compensation, including, during the past two years, having acted as co-manager in connection with the public offering of 3.60% Senior Notes due 2021 by Goodrich in September 2010; having acted as co-manager in connection with the public offering of 4.875% Senior Notes due 2020 by Goodrich in December 2009; having acted as a counterparty to Goodrich in connection with or having otherwise facilitated certain trading activities by Goodrich; and having provided certain financial advisory services to Goodrich for which transactions Credit Suisse has received aggregate investment banking fees, discounts and commission over the past two years of approximately $1.35 million. Credit Suisse and its affiliates have also provided investment banking and other financial services to UTC for which Credit Suisse and its affiliates have received, and would expect to receive, compensation, including, during the past two years, having acted as a financial advisor to UTC in connection with the sale of certain assets of its Tyler Refrigeration business to Dover Corporation in 2009, for which transaction Credit Suisse received aggregate investment banking fees of approximately $2 million. Although not requested by Credit Suisse, the Board has authorized Credit Suisse or certain of its affiliates to participate in UTC’s financing for the merger, for which services Credit Suisse and such affiliates would expect to receive compensation. As of the date of its opinion and the date of this proxy statement, Credit Suisse had not been invited to participate in the financing of the merger and Credit Suisse had no right or obligation, whether contractual or otherwise, to participate in UTC’s financing for the merger. Credit Suisse and its affiliates may have provided other financial advice and services, and may in the future provide financial advice and services, to Goodrich, UTC and their respective affiliates for which Credit Suisse and its affiliates have received, and would expect to receive, compensation. Credit Suisse is a full service securities firm engaged in securities trading and brokerage activities as well as providing investment banking and other financial services. In the ordinary course of business, Credit Suisse and its affiliates may acquire, hold or sell, for its and its affiliates own accounts and the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of Goodrich, UTC and any other company that may be involved in the merger, as well as provide investment banking and other financial services to such companies.

 

Opinion of Citigroup Global Markets Inc.

 

Goodrich has retained Citi as a financial advisor in connection with the merger. In connection with this engagement, Goodrich requested that Citi evaluate the fairness, from a financial point of view, of the $127.50 per share consideration to be received in the merger by holders of Goodrich’s common stock (other than UTC, Merger Sub and their respective affiliates). On September 21, 2011, at a meeting of the Board at which the merger was approved, Citi rendered to the Board an oral opinion, confirmed by delivery of a written opinion dated September 21, 2011, to the effect that, as of that date and based on and subject to the matters described in its opinion, the $127.50 per share consideration to be received in the merger by holders of Goodrich’s common stock (other than UTC, Merger Sub and their respective affiliates) was fair, from a financial point of view, to such holders.

 

The full text of Citi’s written opinion, dated September 21, 2011, which describes the assumptions made, procedures followed, matters considered and limitations on the review undertaken, is attached to this proxy statement as Annex C and is incorporated into this proxy statement by reference. The description of Citi’s opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of Citi’s opinion. Citi’s opinion was provided for the information of the Board (in its capacity as such) in connection with its evaluation of the merger consideration from a financial point of view and did not address any other aspects or implications of the merger. Citi was not requested to consider, and its opinion did not address, the underlying business decision of Goodrich to effect the merger, the relative merits of the merger as compared to any alternative business strategies that might exist for Goodrich or the effect of any other transaction in which Goodrich might engage. Citi’s opinion is not intended to be and does not constitute a recommendation to any shareholder as to how such shareholder should vote or act on any matters relating to the proposed merger or otherwise.

In arriving at its opinion, Citi:

 

 

In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of Goodrich’s management that it was not aware of any relevant information that was omitted or remained undisclosed to Citi. With respect to the financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Citi relating to Goodrich, Citi was advised by Goodrich’s management, and Citi assumed, with Goodrich’s consent, that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of Goodrich’s management as to the future financial performance of Goodrich.

 

Citi did not make, and it was not provided with, an independent evaluation or appraisal of the assets or liabilities, contingent or otherwise, of Goodrich, and Citi did not make any physical inspection of the properties or assets of Goodrich. Citi assumed, with Goodrich’s consent, that the merger would be consummated in accordance with its terms without waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary regulatory or third party approvals, consents, releases and waivers for the merger, no delay, limitation, restriction or condition would be imposed that would have an adverse effect on Goodrich or the merger.

 

Citi’s opinion did not address any terms (other than the merger consideration to the extent expressly specified in its opinion) or other aspects or implications of the merger, including, without limitation, the form or structure of the merger or any other agreement, arrangement or understanding to be entered into in connection with or contemplated by the merger or otherwise. Citi was not requested to, and it did not, solicit third-party indications of interest in the possible acquisition of all or a part of Goodrich. Citi expressed no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the merger, or any class of such persons, relative to the merger consideration or otherwise. In addition, Citi did not express any opinion as to the prices at which Goodrich’s common stock would trade at any time. Citi’s opinion was necessarily based on information available to Citi, and financial, stock market and other conditions and circumstances existing and disclosed to Citi, as of the date of its opinion. As Goodrich was aware, the credit, financial and stock markets have been experiencing unusual volatility and Citi expressed no opinion or view as to any potential effects of such volatility on Goodrich or the merger. Except as described in this summary,

Goodrich imposed no other instructions or limitations on Citi with respect to the investigations made or procedures followed by Citi in rendering its opinion.

 

In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described below. This summary of the analyses is not a complete description of Citi’s opinion or the analyses underlying, and factors considered in connection with, Citi’s opinion. The preparation of a financial opinion is a complex analytical process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a financial opinion is not readily susceptible to summary description. Citi arrived at its ultimate opinion based on the results of all analyses undertaken by it and assessed as a whole, and did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis for purposes of its opinion. Accordingly, Citi believes that its analyses must be considered as a whole and that selecting portions of its analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the analyses, could create a misleading or incomplete view of the processes underlying its analyses and opinion.

 

In its analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond the control of Goodrich. No company, business or transaction reviewed is identical to Goodrich or the merger. An evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating characteristics and other factors that could affect the public trading or other values of the companies, business segments or transactions reviewed.

 

The estimates contained in Citi’s analyses and the valuation ranges resulting from any particular analysis are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by its analyses. In addition, analyses relating to the value of businesses or securities do not purport to be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, Citi’s analyses are inherently subject to substantial uncertainty.

 

Citi was not requested to, and it did not, recommend the specific consideration payable in the merger. The type and amount of consideration payable in the merger was determined through negotiations between Goodrich and UTC and the decision to enter into the merger agreement was solely that of the Board. Citi’s opinion was only one of many factors considered by the Board in its evaluation of the merger and should not be viewed as determinative of the views of the Board or management with respect to the merger or the merger consideration.

 

The following is a summary of the material financial analyses provided to the Board in connection with Citi’s opinion. The financial analyses summarized below include information presented in tabular format. In order to fully understand Citi’s financial analyses, the tables must be read together with the text of each summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Citi’s financial analyses. For purposes of Citi’s financial analyses described below, certain financial data for Goodrich was adjusted to include the pro forma full-year impact of Goodrich’s acquisition of Microtecnica S.r.l. completed in May 2011 and to exclude certain non-recurring items.

 

Discounted Cash Flow Analysis.  Citi performed a discounted cash flow analysis of Goodrich, which is intended to provide an implied total enterprise value of a company by calculating the present value of the estimated future unlevered free cash flows and terminal value of the company. The estimated present value of the unlevered, after-tax free cash flows that Goodrich was forecasted to generate from the third quarter of fiscal year 2011 through the full fiscal year ending 2016 was calculated based on internal estimates of Goodrich’s management. Citi also calculated terminal values for Goodrich by applying a range of terminal value multiples of 8.0x to 10.0x to Goodrich’s normalized fiscal year 2016 estimated earnings before interest, taxes, depreciation and amortization, which is referred to as EBITDA. The present values (as of June 30, 2011) of the cash flows and terminal values were then calculated using discount rates ranging from 8.8% to

10.9%. Goodrich’s implied per share equity value was then calculated as its implied total enterprise value less net debt (based on Goodrich’s outstanding indebtedness, capital lease obligations and non-controlling interests, less cash and cash equivalents on its balance sheet as of June 30, 2011), divided by the number of fully diluted shares of Goodrich common stock as determined utilizing the treasury stock method. This analysis indicated the following approximate implied per share equity value reference range for Goodrich, as compared to the merger consideration:

 

 

In light of the cyclicality in Goodrich’s business and market volatility, Citi noted for the Board that, for fiscal years 2012 through 2016, each 1% change in Goodrich’s forecasted after-market revenue growth, overall revenue growth and operating margin could impact Goodrich’s implied equity value per share by approximately $4.00 per share, $6.25 per share and $6.25 per share, respectively.

 

Selected Transactions Analysis.  Using publicly available information, Citi reviewed financial data relating to the following nine selected publicly announced transactions announced since January 1, 2007, which transactions generally were selected because, as is the case with the merger, they involved suppliers of aerospace systems and components:

 

 

Citi reviewed, among other information, transaction values of the selected transactions, calculated as the purchase prices paid for the target companies, plus debt, less cash and other adjustments, as a multiple of such target companies’ latest 12 months EBITDA and next 12 months estimated EBITDA. The overall low, mean, median and high EBITDA multiples observed for the selected transactions for the latest 12 months were 8.9x, 12.7x, 13.0x and 15.1x, respectively, and for the next 12 months were 9.5x, 10.8x, 10.9x and 11.8x, respectively. Based on its professional judgment and taking into consideration the observed median multiples for the selected transactions, Citi applied a range of selected multiples of latest 12 months EBITDA of 12.0x to 14.0x and next 12 months estimated EBITDA of 10.0x to 11.5x derived from the selected transactions to Goodrich’s latest 12 months EBITDA (as of June 30, 2011) and next 12 months estimated EBITDA (as of June 30, 2012) calculated, in the case of the next 12 months, based on the second half of calendar year 2011 and 50% of calendar year 2012 estimated EBITDA. Goodrich’s implied per share equity value was then calculated as its implied total enterprise value less net debt (based on Goodrich’s outstanding indebtedness, capital lease obligations and non-controlling interests, less cash and cash equivalents on its balance sheet as of June 30, 2011), divided by the number of fully diluted shares of Goodrich common stock as determined utilizing the treasury stock method. Financial data of the selected transactions were based on publicly available information and, to the extent publicly disclosed, reflected adjustments for non-recurring items. Financial data of Goodrich were based on Goodrich’s public filings and internal estimates of Goodrich’s management. This

analysis indicated the following approximate implied per share equity value reference range for Goodrich, as compared to the merger consideration:

 

 

Selected Public Companies Analysis.  Citi reviewed financial and stock market information of Goodrich and the eight selected publicly traded companies listed below, which companies had enterprise values ranging from approximately $1.8 billion to $24.8 billion. The companies generally were selected because, as is the case with Goodrich, they are U.S.-based suppliers of aerospace systems and components with significant operations in the commercial aerospace industry:

 

• BE Aerospace, Inc.

 

• Esterline Technologies Corporation

 

• HEICO Corporation

 

• Moog Inc.

 

• Precision Castparts Corp.

 

• Rockwell Collins, Inc.

 

• Transdigm Group Incorporated

 

• Woodward, Inc.

 

Citi reviewed, among other things, enterprise values of the selected companies, calculated as equity values based on closing stock prices on September 20, 2011 (or, in the cases of Goodrich and Rockwell Collins, Inc., September 15, 2011, the last trading day prior to market rumors of a potential sale of such companies), plus debt, less cash and other adjustments, as a multiple of calendar years 2011 and 2012 estimated EBITDA. Citi also reviewed closing stock prices of the selected companies on September 20, 2011 (or, in the cases of Goodrich and Rockwell Collins, Inc., September 15, 2011) as a multiple of calendar years 2011 and 2012 estimated earnings per share, which is referred to as EPS. The overall low, mean, median and high estimated EBITDA multiples observed for the selected companies for calendar year 2011 were 6.8x, 9.4x, 8.8x and 12.6x, respectively, and for calendar year 2012 were 6.0x, 8.2x, 7.6x and 10.8x, respectively. The overall low, mean, median and high estimated EPS multiples observed for the selected companies for calendar year 2011 were 11.1x, 16.0x, 15.2x and 22.1x, respectively, and for calendar year 2012 were 9.6x, 13.5x, 12.5x and 19.5x, respectively. Based on its professional judgment and taking into consideration the observed median multiples for the selected companies, Citi applied ranges of selected multiples of calendar years 2011 and 2012 estimated EBITDA of 8.0x to 10.0x and 6.5x to 9.0x, respectively, and calendar years 2011 and 2012 estimated EPS of 14.0x to 17.0x and 11.0x to 15.0x, respectively, derived from the selected companies to corresponding data of Goodrich. Goodrich’s implied per share equity value derived from selected EBITDA multiples was calculated as its implied total enterprise value less net debt (based on Goodrich’s outstanding indebtedness, capital lease obligations and non-controlling interests, less cash and cash equivalents on its balance sheet as of June 30, 2011), divided by the number of fully diluted shares of Goodrich common stock as determined utilizing the treasury stock method. Financial data of the selected companies were based on publicly available research analysts’ estimates, public filings and other publicly available information and, to the extent publicly disclosed, reflected adjustments for non-recurring items. Financial data of Goodrich were based on internal estimates of Goodrich’s management. This analysis indicated the following approximate implied per share equity value reference range for Goodrich, as compared to the merger consideration:

 

Other Information.  Citi also noted for the Board certain additional factors that were not considered part of Citi’s financial analysis with respect to its opinion but were referenced for informational purposes, including, among other things, the following:

 

 

Miscellaneous

 

Under the terms of Citi’s engagement, Goodrich has agreed to pay Citi for its financial advisory services in connection with the merger an aggregate fee of approximately $23.5 million, a portion of which was payable upon delivery of Citi’s opinion and $18.5 million of which is contingent upon completion of the merger. Goodrich also has agreed to reimburse Citi for reasonable expenses incurred by Citi in performing its services, including reasonable fees and expenses of its legal counsel, and to indemnify Citi and related persons against liabilities, including liabilities under the federal securities laws, arising out of its engagement. Citi and its affiliates in the past provided, currently are providing and in the future may provide investment banking services to Goodrich and UTC unrelated to the proposed merger, for which services Citi and its affiliates have received and expect to receive compensation, including from January 1, 2009 through the delivery of Citi’s opinion on September 21, 2011 aggregate fees of approximately $1.5 million and $3.8 million from Goodrich and UTC, respectively, for acting as (i) financial advisor to Goodrich in connection with an acquisition transaction in 2010, (ii) joint lead arranger and joint book manager for, and currently an agent and lender under, a $700 million revolving credit facility of Goodrich in May 2011, (iii) co-manager for a $300 million notes offering of Goodrich in February 2009, (iv) joint book-running manager for a $300 million senior notes offering of Goodrich in December 2009, (v) joint book-running manager for a $600 million senior notes offering of Goodrich in September 2010, (vi) financial advisor to UTC in connection with a divestiture transaction in 2011, (vii) joint lead arranger and syndication agent for, and currently a lender under, a $1.6 billion revolving credit facility of UTC in November 2010 and (viii) joint book-running manager for $1.25 billion and $1.0 billion notes offerings of UTC in February 2010. In addition, from January 1, 2009 through the delivery of Citi’s opinion on September 21, 2011, Citi and certain of its affiliates received approximately $8.1 million and $58.2 million for certain non-investment banking services provided to Goodrich and UTC, respectively, unrelated to the merger, including cash management services, letters of credit, funded lines of credit, foreign exchange transactions and local working capital lending. In its evaluation of the merger, Goodrich’s management discussed with the Board its belief that, given the size of the proposed merger and market volatility that could impact the execution and certainty of the merger, it would be beneficial to Goodrich and its shareholders to permit, and recommended that the Board permit, Goodrich’s financial advisors to provide or otherwise participate in UTC’s acquisition financing if invited to do so and the Board had no objections to such participation. Subsequently, Citi was invited to participate in UTC’s financing for the merger. Citi or certain of its affiliates expect to be among multiple financial institutions participating in UTC’s financing for the merger and would expect to receive compensation therefor. UTC has disclosed that, on November 8, 2011, it entered into a bridge credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, J.P. Morgan Securities LLC, HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint bookrunners, Bank of America, N.A. and HSBC Bank USA, National Association, as syndication agents, Citibank, N.A., Deutsche Bank AG, BNP Paribas, Goldman Sachs Bank USA and The Royal Bank of Scotland PLC, as documentation agents, and other lenders party thereto. The bridge credit agreement provides for a $15.0 billion bridge loan facility (of which Citi’s participation represents less than 5%), which will be available for UTC to pay a portion of the merger consideration and to finance certain related transactions and pay related fees and expenses. UTC has not finalized its financing plans for the merger, including whether and/or how much of the bridge loan facility will be used, or Citi’s role in the financing other than as described above.

In the ordinary course of business, Citi and its affiliates may actively trade or hold the securities of Goodrich and UTC for their own account or for the account of their customers and, accordingly, may at any time hold a long or short position in those securities. Citi and its affiliates, including Citigroup Inc. and its affiliates, may maintain relationships with Goodrich, UTC and their respective affiliates. In addition, a member of the UTC board of directors also serves as a member of the Citigroup International Advisory Board.

 

Goodrich selected Citi as its financial advisor in connection with the merger based on Citi’s reputation and experience and familiarity with Goodrich and its business. Citi is an internationally recognized investment banking firm which regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and valuations for estate, corporate and other purposes. The issuance of Citi’s opinion was authorized by Citi’s fairness opinion committee.

 

Certain Financial Information

 

In the course of the sale process described under “— Background of the Merger,” we provided UTC selected, non-public financial projections prepared by our senior management. Goodrich does not as a matter of course make public projections as to future performance or earnings, and the financial projections summarized below are included in this proxy statement only because this information was provided to UTC on a confidential basis in connection with their respective evaluations of the merger. The projections summarized below were the only set of projections provided to UTC. The projections were also provided to our financial advisors. You should note that these financial projections constitute forward-looking statements. See “Forward-Looking Statements May Prove Inaccurate” on page 12.

 

The financial projections were prepared by Goodrich’s senior management for internal planning purposes and not for public disclosure and such projections are subjective in many respects. The financial projections are based on a variety of estimates and assumptions of our senior management regarding our business, industry performance, general business, economic, market and financial conditions and other matters, all of which are difficult to predict and many of which are beyond our control. Specifically, at the time the financial projections were created, our senior management assumed that: (i) the macroeconomic environment was improving, with global GDP trending upward and global passenger capacity and traffic increasing at consistent rates; (ii) the commercial end markets that Goodrich services were improving, including steady growth in both commercial original equipment production rates and after-market sales; (iii) Goodrich defense and space sales would grow despite a flat to declining defense budget due to Goodrich’s positioning in the growth areas of the budget; (iv) operating margins would continue to improve due to sales growth in the high-margin commercial after-market and through cost reduction and productivity enhancement initiatives; and (v) there would be substantial capital to reinvest for internal and external growth. In addition, the financial projections for fiscal years 2012 through 2016 reflected the assumption that Goodrich would make substantial investments in aircraft development programs. The financial projections also reflect the assumption that spending would decline beyond 2014 as programs are completed and there would be fewer new programs launched during those years. Economic and business environments can and do change quickly, which adds a significant level of uncertainty as to whether the results portrayed in the financial projections will be achieved. In particular, these financial projections were based on numerous assumptions that may now be outdated. Accordingly, there can be no assurance that the assumptions made in preparing the projections will prove accurate. If the assumptions do not prove accurate, the projections will not be accurate. You should not regard the inclusion of these projections in this proxy statement as an indication that Goodrich, UTC or any of their respective affiliates or representatives considered or consider the projections to be necessarily predictive of actual future events, and you should not rely on the projections as such. It is expected that there will be differences between actual and projected results, and actual results may be materially greater or less than those contained in the projections. It is highly likely that the contribution of Goodrich’s business to the consolidated results of UTC will be different from Goodrich’s performance on a standalone basis. In addition, if the merger is not consummated, we may not be able to achieve these financial projections. None of Goodrich, UTC or any of their respective affiliates or representatives has made or makes any representations to any person regarding the ultimate performance of Goodrich compared to the information contained in the projections.

Neither Goodrich’s independent auditors, nor any other independent accountants, have compiled, examined or performed any procedures with respect to the financial projections set forth below, nor have they expressed any opinion or any other form of assurance with respect thereto. The financial projections were not prepared with a view toward public disclosure or compliance with generally accepted accounting principles, which is referred to as GAAP, or the guidelines established by the SEC or the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. Furthermore, the financial projections do not take into account any circumstances or events occurring after the date of their preparation and we do not intend to update these financial projections or to make other projections public in the future.

 

As referred to below, earnings before interest, taxes, depreciation and amortization, which is referred to as EBITDA, and net cash provided by operating activities minus capital expenditures, which is referred to as Free Cash Flow, are financial measures commonly used in the industries in which Goodrich operates but are not defined under GAAP. EBITDA and Free Cash Flow should not be considered in isolation or as a substitute for net income, operating income, cash flows from operating activities or any other measure of financial performance presented in accordance with GAAP or as a measure of a company’s profitability or liquidity. Because and Free Cash Flow EBITDA exclude some, but not all, items that affect net income, these measures may vary among companies. The EBITDA and Free Cash Flow data presented below may not be comparable to similarly titled measures of other companies. Goodrich believes that EBITDA and Free Cash Flow are meaningful measures to investors and provide additional information about its ability to meet future liquidity requirements for debt service, capital expenditures and working capital. In addition, Goodrich believes that EBITDA and Free Cash Flow are useful comparative measures of operating performance and liquidity. For example, debt levels, credit ratings and, therefore, the impact of interest expense on earnings vary significantly between companies. Similarly, the tax positions of individual companies can vary because of their differing abilities to take advantage of tax benefits, with the result that their effective tax rates and tax expense can vary considerably. Finally, companies differ in the age and method of acquisition of productive assets, which can cause the relative costs associated with those assets to differ, and in the method of depreciation or depletion (straight-line, accelerated, units of production), which can result in considerable variability in depletion, depreciation and amortization expense between companies. Thus, for comparison purposes, Goodrich believes that EBITDA and Free Cash Flow can be useful as objective and comparable measures of operating profitability and the contribution of operations to liquidity because they exclude these elements.

 

The financial projections described, and subject to the limitations stated, above included (in millions of dollars):

 

 

Interests of Goodrich Directors and Executive Officers in the Merger

 

In considering the Board’s recommendation to vote for the proposal to adopt the merger agreement and the merger, Goodrich shareholders should be aware that some of the directors and executive officers of Goodrich have interests in the merger that may be different from, or in addition to, the interests of Goodrich shareholders generally and that may create potential conflicts of interest. In addition to the rights described below in this section, the executive officers of Goodrich may be eligible to receive some of the generally applicable benefits described under the heading “The Merger Agreement — Employee Benefit Matters” on page 70. The Board was aware of these interests and considered them, among other matters, in evaluating and negotiating the merger agreement and the merger, and in recommending the adoption of the merger agreement to Goodrich shareholders.

 

Set forth below are descriptions of the interests of directors and executive officers, including interests in equity or equity-based awards, change in control severance arrangements and other compensation and benefit

arrangements. The dates used in the discussions below to quantify certain of these interests have been selected for illustrative purposes only, and they do not necessarily reflect the dates on which certain events will occur.

 

Treatment of Stock Options

 

At the effective time of the merger, each outstanding stock option to purchase Goodrich common stock under Goodrich’s equity compensation plans (whether or not vested and exercisable prior to the effective time of the merger) granted prior to September 21, 2011 will be adjusted under the applicable plan and award agreement and converted into the right of the holder to receive an amount in cash, without interest, less applicable withholding tax, paid within 15 business days following the effective time of the merger, equal to the product of the total number of shares of Goodrich common stock covered by the stock option, multiplied by the excess of $127.50 over the per share exercise price of the stock option.

 

The following table summarizes, as of October 11, 2011, the outstanding vested and unvested stock options held by each of our named executive officers (Marshall Larsen, Scott Kuechle, Terrence Linnert, John Carmola and Cynthia Egnotovich), and all of our other executive officers as a group (which executive officers are Curtis Reusser, Gerald Witowski, Jennifer Pollino and Scott Cottrill), and the consideration that each of them may become entitled to receive in connection with the adjustment of their stock options, assuming continued employment through the effective time of the merger and assuming that the effective time of the merger occurs on February 1, 2012. No outstanding stock options are held by our non-employee directors.

 

 

 

 

Treatment of Time-Based Vesting Restricted Share Units

 

At the effective time of the merger, each outstanding time-based vesting restricted share unit granted prior to September 21, 2011 will be adjusted under the applicable plan and award agreement and converted into the right of the holder to receive an amount in cash, without interest, less any applicable withholding tax, equal to the product of $127.50 multiplied by the number of shares of Goodrich common stock underlying the restricted share unit. The payment in respect of restricted share units will generally be made within 15 business days following the effective time of the merger.

 

The following table summarizes the aggregate number of outstanding time-based vesting restricted share units held by each of the named executive officers and all other executive officers as a group as of October 11, 2011, whether vested or unvested, and the consideration that each of them may become entitled to receive in connection with the adjustment of these awards, assuming continued employment through the effective time of

the merger and assuming the effective time of the merger occurs on February 1, 2012. No outstanding time-based vested restricted share units are held by our non-employee directors.

 

 

Treatment of Performance Units

 

At the effective time of the merger, each outstanding and unvested performance unit granted prior to September 21, 2011 will be adjusted under the applicable plan and award agreement and converted into the right of the holder to receive an amount in cash, less any applicable withholding tax, as determined under the award agreement applicable to the award. The award agreements generally provide that, within five business days after the effective time of the merger, the holder is entitled to receive a prorated cash payment, without interest, based on the greater of (1) the payment for the performance period assuming target performance or (2) an amount determined with respect to the payment made in the most recent performance period. The payment is prorated based on the number of months (rounded upward to the nearest month) elapsed in the performance period as of the effective time of the merger.

 

In addition, if the employment of a holder of performance units is terminated by Goodrich without cause after the effective time of the merger and prior to the earlier of (1) one year following the effective time of the merger or (2) the end of the applicable performance period, then the holder will be entitled to receive a cash payment equal to the full amount of the performance unit payment the holder would have been entitled to receive as described in the previous paragraph, if the payment had not been prorated, less the amount of the prorated payment actually paid to the holder. This additional amount is not reflected in the table below, but is reflected in the table included under the heading “The Merger — Interests of Goodrich Directors and Officers in the Merger — Severance Payments and Benefits.”

 

The following table summarizes the prorated aggregate number of performance units that would be determined for each of the named executive officers and all other executive officers as a group under the applicable plans and award agreements, and the consideration that each of them may become entitled to receive in connection with the adjustment of these awards pursuant to the applicable award agreements, in each case solely as a result of the merger, and assuming continued employment through the effective time of the merger and assuming the effective time of the merger occurs on February 1, 2012. The amounts are determined with reference to the payment made to the executive with respect to the 2008-2010 performance period, which is the most recently determinable amount paid to the executive as of the date of this proxy statement. No outstanding performance units are held by our non-employee directors.

 

 

 

Notwithstanding the foregoing, any equity awards in respect of Goodrich common stock that are granted by Goodrich on or after September 21, 2011, which Goodrich is permitted by the merger agreement to do on certain terms and conditions if the effective time of the merger occurs after August 31, 2012, will be treated upon completion of the merger in the manner set forth in the applicable award agreements as agreed between Goodrich and UTC.

 

Treatment of Deferred Compensation Awards

 

The following table summarizes the aggregate number of notional shares held by each of the non-employee directors, all of which are fully vested as of the date hereof, and the consideration that each of them may become entitled to receive in connection with the adjustment of their awards, assuming continued service as a director through the effective time of the merger, and assuming the effective time of the merger occurs on February 1, 2012.

 

Goodrich — Director Phantom Shares

 

 

At the effective time of the merger, each notional share under any deferred compensation plan (all of which such notional shares are vested but unsettled awards granted to our non-employee directors) will be adjusted under the applicable plan and converted into the right to receive $127.50 in cash, without interest, less any applicable withholding tax, and will be payable in accordance with the terms and conditions of the applicable plan.

 

Management Continuity Agreements

 

Goodrich and UTC have commenced an integration planning process to determine the employment status of the named executive officers and other executive officers following the effective time of the merger. It has been determined that Mr. Larsen will become Chairman and Chief Executive Officer of a combined UTC Aerospace Systems business unit. In addition, while Goodrich has a mandatory retirement policy for executives, UTC does not and Mr. Larsen may benefit from this. Additional decisions regarding these individuals are expected to be made closer to, or after, the closing of the merger.

 

Each of the named executive officers and each of the other executive officers has a Management Continuity Agreement with Goodrich. The Management Continuity Agreements generally provide that, for the two year period following the effective time of the merger, the executives will continue employment with

Goodrich in the same positions and with the same responsibilities and authorities as they possessed immediately prior to the effective time of the merger and generally will receive the same benefits and level of compensation, including average annual increases, as they received prior to the effective time of the merger. On October 13, 2011, Goodrich amended Mr. Linnert’s Management Continuity Agreement to provide that the post-merger protection period under such agreement will not be abridged by his reaching a mandatory retirement age during the protection period.

 

Under the Management Continuity Agreements, upon termination of employment by Goodrich without cause or upon termination of employment by the executive for good reason (as described below), either in anticipation of the merger under certain circumstances or within two years after the effective time of the merger, the executive will receive the following severance payments and benefits:

 

 

In addition, each covered executive is entitled to receive a tax gross-up for any excise tax due under the Internal Revenue Code for any payments subject to the excise tax, whether made pursuant to the Management Continuity Agreement or otherwise.

For purposes of the Management Continuity Agreement, “good reason” means, in summary, (a) any material reduction in the duties, authority or responsibilities of the executive or the person to whom the executive is required to report or (b) any material breach by Goodrich of its obligations under the Management Continuity Agreement.

 

Severance Payments and Benefits

 

The following table summarizes the cash severance payments and other benefits that each named executive officer, and the other named executive officers as a group, would be entitled to receive under the agreements and plans described above (excluding the value of equity awards vesting and paid solely as a result of the merger, which are described above, and any legal fees and expenses that may become payable under the agreements) based on compensation and benefit levels in effect as of October 11, 2011, and assuming the effective time of the merger occurs on February 1, 2012, and that each named executive officer and each other executive officer experiences a simultaneous qualifying termination of employment.

 

The amounts indicated below are estimates based on multiple assumptions that may or may not actually occur, including assumptions described in this proxy statement. Some of these assumptions are based on information currently available and, as a result, the actual amounts, if any, to be received by an executive officer may differ in material respects from the amounts set forth below.

 

 

 

 

Incentive Plans

 

In addition, all of the named executive officers and other executive officers participate in the Senior Executive Management Incentive Plan or the Management Incentive Plan, which we refer to as the incentive plans, and which provide for annual incentive compensation upon the achievement of specified performance objectives. The incentive plans provide that, generally within five days following the effective time of the merger, each participant will receive a lump sum interim payment equal to the product of (1) the number of full and partial months elapsed in the calendar year in which the merger occurs as of the date of completion of the merger and (2) one-twelfth of the greater of (a) the most recent annual bonus paid to the executive under the applicable incentive plan or (b) the target bonus under the applicable incentive plan for the year in which the merger occurs.

 

The following table sets forth the estimated pro-rata portion of the bonus that would be determined for each of the named executive officers and all other executive officers as a group under the terms of the applicable incentive plan, assuming continued employment through the effective time of the merger and assuming the effective time of the merger occurs on February 1, 2012. The estimates are based on the annual bonus paid to the executive in 2011 with respect to the 2010 fiscal year, which is the most recently determinable annual bonus paid to the executive as of the date of this proxy statement.

 

 

Directors’ Retirement Income Plan

 

Mr. Rankin is the only current member of our Board who participates in our Directors’ Retirement Income Plan. Under the transition provisions of the plan, upon his termination of service as a member of our Board, Mr. Rankin will be deemed to retire and will be entitled to receive an annual amount under the plan equal to 70% of the annual retainer in effect at retirement, payable in quarterly installments for his lifetime. Based on our current fixed annual retainer, Mr. Rankin would be entitled to receive a payment of approximately $49,000 per year for the remainder of his lifetime following his termination as a member of our Board.

Indemnification; Directors’ and Officers’ Insurance

 

The merger agreement provides that the surviving corporation must, and UTC must cause the surviving corporation to, to the fullest extent permitted under the NYBCL, honor Goodrich’s obligations existing immediately prior to the date of the merger agreement to indemnify and hold harmless each present and former director and officer of Goodrich and its subsidiaries and each such individual who served at the request of Goodrich or its subsidiaries as a director, officer, trustee, partner, fiduciary, employee or agent of another corporation, partnership, joint venture, trust, pension or other employee benefit plan or enterprise, which are collectively referred to as the indemnified parties, in accordance with the Restated Certificate of Incorporation and By-Laws of Goodrich and all indemnification agreements with indemnified parties, in each case in effect immediately prior to the date of the merger agreement. The merger agreement also provides that the certificate of incorporation and by-laws of the surviving corporation will contain the indemnification provisions set forth in the Restated Certificate of Incorporation and By-Laws of Goodrich, which provisions may not be amended, modified or otherwise repealed for six years from the effective time of the merger in any manner that would adversely affect the rights thereunder as of the effective time of the merger of any individual who is an indemnified party at the effective time of the merger, unless such modification is required after the effective time of the merger by law and then only to the minimum extent required by such law.

 

In addition, Goodrich agreed to purchase a six-year “tail” prepaid officers’ and directors’ liability insurance policy prior to consummation of the merger that will provide, for six years after the consummation of the merger, Goodrich’s current and former directors and officers who are insured under Goodrich’s existing officers’ and directors’ liability insurance policy with insurance and indemnification policy coverage for events occurring at or prior to the effective time of the merger, which is referred to as the D&O insurance, that is no less favorable than Goodrich’s existing policy; however, Goodrich will not pay an aggregate amount for the D&O insurance in excess of 300% of the current aggregate annual premium paid by Goodrich for the existing policy, but in such case will purchase coverage under a six-year “tail” prepaid policy as will then be available at an aggregate cost no greater than 300% of such rate. UTC agreed to honor its obligations under the D&O insurance from and after the effective time of the merger and not to cancel the D&O insurance.

 

Governmental and Regulatory Matters

 

The merger is subject to review under the HSR Act. Under the provisions of the HSR Act, the merger cannot be completed until the companies have made required notifications, given certain information and materials to the FTC and to the Antitrust Division and a required 30-day waiting period has expired or been terminated. Pursuant to the requirements of the HSR Act, Goodrich and UTC completed the filing of the forms with the Antitrust Division and the FTC on October 11, 2011.

 

On November 10, 2011, the Antitrust Division issued a request to Goodrich and UTC for additional information regarding the merger. The waiting period under the HSR Act with respect to the Merger will expire at 11:59 p.m. on the 30th day after both Goodrich and UTC have substantially complied with the requests for additional information or such later time as is agreed among the parties and the Antitrust Division, unless the waiting period is earlier terminated because the Antitrust Division determines to close its review.

 

Further, at any time before or after the consummation of the merger, the Antitrust Division or the FTC could take such action under the antitrust laws as it deems necessary or desirable in the public interest, including seeking to enjoin the merger or seeking divestiture of certain of Goodrich’s or UTC’s assets. Private parties and State Attorneys General may also bring legal actions under the antitrust laws.

 

In addition, Goodrich and UTC are required to make merger control filings, and may be required to make other regulatory filings or submissions, in various jurisdictions with respect to the merger, and in certain circumstances, including (but not limited to) in respect of the EC Merger Regulation, receive their approval prior to consummation of the merger. In that regard, the parties have made regulatory filings in South Korea, Brazil and Mexico, and have received unconditional clearance for the merger in South Korea and Brazil. The parties have also made submissions to the below regulatory agencies, all of which will require clearance by the agency prior to closing of the merger. Clearance for the merger has not been

received from any of these agencies. There can be no assurance that a challenge to the merger on antitrust grounds will not be made or, if such a challenge is made, that it would not be successful.

 

 

We currently expect to complete the merger in mid-2012.

 

Material United States Federal Income Tax Consequences

 

The following is a summary of the material United States federal income tax consequences of the merger to holders of Goodrich common stock whose shares are exchanged for cash pursuant to the merger. This summary is based on provisions of the Internal Revenue Code of 1986, as amended, which is referred to as the Code, United States Treasury Regulations promulgated thereunder, judicial opinions and administrative rulings and published positions of the United States Internal Revenue Service, each in effect as of the date of this proxy statement. These authorities may change, possibly with retroactive effect, and any such change could affect the accuracy of the statements and conclusions set forth in this summary. This discussion does not address any tax consequences arising under the unearned income Medicare contribution tax pursuant to the Health Care and Education Reconciliation Act of 2010, and any state, local or foreign tax consequences, nor does it address any U.S. federal tax considerations other than those pertaining to the U.S. federal income tax.

 

This summary applies only to holders of Goodrich common stock who hold such shares as capital assets within the meaning of Section 1221 of the Code (generally, property held for investment). Further, this summary does not purport to consider all aspects of United States federal income taxation that might be relevant to holders in light of their particular circumstances and does not apply to shareholders subject to special rules under the United States federal income tax laws (including, for example, banks and certain other financial institutions, insurance companies, tax-exempt organizations, dealers or brokers in securities, traders in securities that elect to apply a mark-to-market method of accounting, persons liable for the alternative minimum tax, partnerships or other pass-through entities or investors in partnerships or such other entities, former citizens or residents of the United States, U.S. holders whose functional currency is not the U.S. dollar, holders who hold shares of Goodrich common stock as part of a straddle, hedge, constructive sale, conversion transaction or other integrated investment, and holders who acquired shares of Goodrich common stock pursuant to the exercise of employee stock options or otherwise as compensation. This discussion also assumes that shares of Goodrich common stock are not U.S. real property interests within the meaning of Section 897 of the Code.

 

If a partnership (including for this purpose any entity or arrangement treated as a partnership for United States federal income tax purposes) holds shares of Goodrich common stock, the tax treatment of a partner in that partnership will generally depend on the status of the partner and the activities of the partnership. If you are a partner of a partnership holding shares of Goodrich common stock, we encourage you to consult your tax advisor regarding the tax consequences of exchanging the shares of Goodrich common stock for cash pursuant to the merger.

All holders of Goodrich common stock are encouraged to consult their own tax advisors to determine the particular tax consequences to them of the merger, including the applicability and effect of the alternative minimum tax and any state, local, foreign and other tax laws.

 

U.S. Holders

 

For purposes of this discussion, the term “U.S. holder” means a beneficial owner of shares of Goodrich common stock that is:

 

 

The receipt of cash by U.S. holders in exchange for shares of Goodrich common stock pursuant to the merger will be a taxable transaction for U.S. federal income tax purposes and may also be a taxable transaction under applicable state, local, foreign and other tax laws. In general, a U.S. holder who receives cash in exchange for shares of Goodrich common stock pursuant to the merger will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference, if any, between (1) the amount of cash received in such exchange and (2) the U.S. holder’s adjusted tax basis in such shares. Gain or loss must be determined separately for each block of shares of Goodrich common stock (i.e., shares acquired for the same cost in a single transaction) exchanged pursuant to the merger. Such gain or loss generally will be capital gain or loss and generally will be long-term capital gain or loss if the U.S. holder’s holding period for such shares is more than one year as of the date of the merger. Long-term capital gains of certain non-corporate U.S. holders, including individuals, are generally subject to U.S. federal income tax at preferential rates. The deductibility of capital losses is subject to limitations.

 

Non-U.S. Holders

 

The term “non-U.S. holder” means a beneficial owner of shares of Goodrich common stock that is not a U.S. holder or a partnership.

 

Payments made to a non-U.S. holder in exchange for shares of Goodrich common stock pursuant to the merger generally will not be subject to U.S. federal income tax unless:

 

 

Information Reporting and Backup Withholding

 

Payments made to U.S. holders in exchange for shares of Goodrich common stock pursuant to the merger will be subject to information reporting and may be subject to backup withholding (currently at a rate of 28%). To avoid backup withholding, U.S. holders that do not otherwise establish an exemption should complete and return Internal Revenue Service Form W-9, certifying that such U.S. holder is a U.S. person, the taxpayer identification number provided is correct and such U.S. holder is not subject to backup withholding.

 

Payments made to non-U.S. holders in exchange for shares of Goodrich common stock pursuant to the merger effected through a U.S. office of a broker generally will be subject to information reporting and backup withholding (currently at a rate of 28%) unless such non-U.S. holder provides a properly executed IRS Form W-8BEN (or other applicable IRS Form W-8) certifying such non-U.S. holder’s non-U.S. status or by otherwise establishing an exemption. Payments made to non-U.S. holders in exchange for shares of Goodrich common stock pursuant to the merger effected through a non-U.S. office of a U.S. broker or of a non-U.S. broker with certain specified U.S. connections generally will be subject to information reporting (but not backup withholding) unless such non-U.S. holder provides a properly executed IRS Form W-8BEN (or other applicable IRS Form W-8) certifying such non-U.S. holder’s non-U.S. status or by otherwise establishing an exemption.

 

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be refunded or credited against a holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

 

No Dissenters’ Rights

 

Pursuant to Section 910 of the NYBCL, Goodrich’s shareholders will not be entitled to exercise dissenters’ rights if the merger is adopted and consummated because our common stock was listed on the NYSE on the record date. Section 910 of the NYBCL provides that a dissenting shareholder’s right to receive payment of the fair value of his, her or its shares under Section 623 of the NYBCL is not available to a holder of shares of any class or series of stock, which shares or depository receipts in respect thereof, were listed on a national securities exchange or designated as a national market system security on an interdealer quotation system by the National Association of Securities Dealers, at the record date fixed to determine the shareholders entitled to receive notice of the meeting of shareholders to vote upon the merger agreement.

 

Termination of Listing of Shares of Goodrich Common Stock

 

Shares of Goodrich common stock are currently authorized for listing on the NYSE under the symbol “GR.” Following the consummation of the merger, the listing of shares of Goodrich common stock on the NYSE will terminate.

 

Certain Litigation Related to the Merger

 

Eleven putative class-action complaints have been filed in the Supreme Court of the State of New York relating to the merger. Nine of these complaints were filed in the County of New York: Rice v. Goodrich Corp., et al., Index No. 652619/2011, New Jersey Carpenters Annuity Fund v. Goodrich Corp., et al., Index No. 652637/2011, Louisiana Municipal Police Employees’ Retirement Sys. v. Goodrich Corp., et al., Index No. 652649/2011, Pill v. Goodrich Corp., et al., Index No. 652655/2011, IUE-CWA Local 475 Pension Plan v. Goodrich Corp., et al., Index No. 652661/2011, Mass. Laborers’ Pension Fund v. Goodrich Corp., et al., Index No. 652664/2011, Pifko v. Goodrich Corp., et al., Index No. 11111146, Ruschel v. Goodrich Corp., et al., Index No. 652695/2011, and Astor BK Realty Trust v. Larsen, et al., Index No. 652706/2011. Two additional putative class-action complaints were filed in Nassau County: Casey v. Larsen, et al., Index No. 13699/2011, and Minneapolis Retail Meat Cutters and Food Handlers Pension Fund v. Goodrich Corp., et al., Index No. 14366/2011. On November 7, 2011, upon plaintiffs’ motions, all eleven actions were consolidated into In re Goodrich Shareholders Litigation, Index No. 13699/2011 in the Supreme Court for Nassau County and, on November 9, plaintiffs filed a Consolidated Amended Class Action Complaint, which is referred to as the Consolidated Complaint, in that court.

 

The Consolidated Complaint purports to be brought on behalf of a putative class of Goodrich shareholders and each names Goodrich, its directors, UTC and Merger Sub as defendants. The Consolidated Complaint

generally alleges that, in approving the proposed transaction, the Goodrich directors breached their fiduciary duties of care, good faith and fair dealing and loyalty owed to the putative class. The Consolidated Complaint further alleges that UTC, Merger Sub and Goodrich aided and abetted the Goodrich directors in the breach of their fiduciary duties. In addition to damages, the Consolidated Complaint seeks, among other things, injunctive relief barring the named defendants from consummating the merger, as well as attorneys’ fees and costs.

 

The parties to the consolidated action have reached an agreement in principle, which is intended to resolve all issues in that litigation. On February 6, 2012, the parties entered into a Memorandum of Understanding memorializing the key terms of that agreement, which is referred to as the MOU.

 

Pursuant to the MOU, Goodrich is making additional disclosures as part of this Definitive Proxy Statement and UTC has agreed to forebear from exercising certain rights under the merger agreement. The effect of UTC’s forbearance is to shorten the period of written notice Goodrich must give to UTC prior to making a Company Adverse Recommendation Change or terminating the merger agreement pursuant to Section 8.1(c) in light of a Company Superior Proposal (as those terms are defined in the merger agreement) from five calendar days to three business days, and the period of prior written notice Goodrich must give to UTC of its intention to make a Company Adverse Recommendation Change or terminate the merger agreement in light of any change to the financial or other material terms of a subsequent Company Superior Proposal from the longer of (i) three business days or (ii) the period remaining under the initial five calendar-day notice, to the longer of (i) two business days or (ii) the period remaining under the initial three business-day notice (see “The Merger Agreement — Covenants and Agreements — No Solicitation; Board Recommendation” beginning on page 63).

 

The MOU will not affect the merger consideration to be paid to shareholders of Goodrich pursuant to the merger agreement or the timing of the special meeting of Goodrich’s shareholders scheduled for March 13, 2012 to vote upon a proposal to adopt the merger agreement. The settlement is subject to approval by the New York Supreme Court for Nassau County.

 

UTC Financing

 

UTC has informed Goodrich that it anticipates financing the merger with a combination of the issuance of new debt, equity and/or equity-linked securities and existing cash on UTC’s balance sheet. In addition, UTC has disclosed that on November 8, 2011, UTC entered into a bridge credit agreement with JPMorgan Chase Bank, N.A., as administrative agent, J.P. Morgan Securities LLC, HSBC Securities (USA) Inc. and Merrill Lynch, Pierce, Fenner & Smith Incorporated, as joint lead arrangers and joint bookrunners, Bank of America, N.A. and HSBC Bank USA, National Association, as syndication agents, Citibank, N.A., Deutsche Bank AG, BNP Paribas, Goldman Sachs Bank USA and The Royal Bank of Scotland PLC, as documentation agents, and other lenders party thereto. The bridge credit agreement provides for a $15.0 billion bridge loan facility, which will be available for UTC to pay a portion of the merger consideration and to finance certain related transactions and pay related fees and expenses.

 

 

The following description of the merger agreement describes the material provisions of the merger agreement but does not purport to describe all of the terms of the merger agreement. The full text of the merger agreement is attached to this proxy statement as Annex A and incorporated by reference into this proxy statement. You are urged to read the merger agreement in its entirety because it is the legal document that governs the merger. You should also review the section titled “Additional Information” beginning on page 78.

 

The merger agreement has been included for your convenience to provide you with information regarding its terms, and we recommend that you read it in its entirety. The merger agreement is a contractual document that is intended to govern the contractual rights and relationships, and to allocate risks, among Goodrich, UTC and Merger Sub.

 

Following the completion of the merger, each Goodrich shareholder is entitled to enforce the provisions of the merger agreement to the extent necessary to receive the merger consideration to which such Goodrich shareholder is entitled. In the event of termination of the merger agreement, a party to the merger agreement may on behalf of its security holders seek damages under the merger agreement in the case of a willful and material breach of the merger agreement by the other party or parties.

 

The merger agreement contains representations and warranties made by UTC and Merger Sub, on the one hand, and Goodrich, on the other hand, that are qualified in several important respects, which you should consider as you read them in the merger agreement. The representations and warranties are qualified in their entirety by certain information of UTC, on the one hand, and Goodrich, on the other hand, filed with the SEC by UTC and Goodrich, respectively, before the date of the merger agreement, and after January 1, 2011. In addition, the representations, warranties and covenants of the parties are qualified by confidential disclosure letters that each party prepared and delivered to the other party immediately before signing the merger agreement.

 

In addition, certain of the representations and warranties made by UTC and Merger Sub, on the one hand, and Goodrich, on the other hand, were made as of a specified date, and may have been used for the purpose of allocating risk between the parties to the merger agreement rather than as establishing matters as facts. Moreover, certain of the representations, warranties and covenants of the parties may be subject to a contractual standard of materiality different from what might be viewed as material to shareholders.

 

None of the representations or warranties will survive the closing of the merger and they will therefore have no legal effect under the merger agreement after the closing of the merger. The parties will not be able to assert the inaccuracy of the representations and warranties as a basis for refusing to close unless all such inaccuracies as a whole would reasonably be expected to have or result in, individually or in the aggregate, a material adverse effect on Goodrich, in the case of the representations and warranties made by Goodrich, or a material adverse effect on the ability of UTC and Merger Sub to consummate the merger, in the case of the representations and warranties made by UTC and Merger Sub, except for certain limited representations and warranties that must be true and correct in all respects, excluding any de minimis inaccuracies. Investors are not third-party beneficiaries under the merger agreement and should not rely on the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or condition of Goodrich, UTC or Merger Sub, or any of their respective subsidiaries or affiliates.

 

Information concerning the subject matter of the representations and warranties may have changed since the date of the merger agreement. Goodrich will provide additional disclosure, if any, in its public reports of any material information necessary to provide Goodrich’s shareholders with a materially complete understanding of the disclosures relating to the merger agreement. Other than as disclosed in this proxy statement and the documents incorporated in this proxy statement by reference, as of the date of this proxy statement, Goodrich is not aware of any material facts that are required to be disclosed under the federal securities laws that would contradict the representations, warranties or covenants in the merger agreement. The representations, warranties and covenants in the merger agreement and the description of them in this proxy statement should not be read alone but instead should be read in conjunction with the other information contained in the reports, statements and filings Goodrich publicly files with the SEC. Such information can be found elsewhere in this

proxy statement and in the public filings Goodrich makes with the SEC, as described in the section titled “Additional Information” beginning on page 78.

 

The Merger

 

At the effective time of the merger, Merger Sub, a wholly owned subsidiary of UTC, will be merged into Goodrich. The separate corporate existence of Merger Sub will cease, and Goodrich will continue as the surviving corporation, which is referred to as the surviving corporation. As a result, Goodrich will become a wholly owned subsidiary of UTC. Merger Sub was created solely for purposes of the merger and has no material assets or operations of its own.

 

Closing and Effective Time of the Merger

 

The closing of the merger will take place at 10:00 a.m. on the third business day after the satisfaction or waiver of all of the conditions described below under “— Conditions of the Merger” beginning on page 71 (other than any condition that by its nature cannot be satisfied until the closing of the merger, but subject to satisfaction or waiver of any such condition), unless Goodrich, UTC and Merger Sub agree to another time in writing.

 

The merger will become effective at the time a certificate of merger is filed with the Department of State of the State of New York or such later time as is specified in the certificate of merger and as is agreed to by Goodrich and UTC in writing, which is referred to as the effective time of the merger.

 

Consideration to be Received in the Merger

 

The merger agreement provides that, at the effective time of the merger, each then issued and outstanding Goodrich common share (other than any Goodrich common stock (1) held in the treasury of Goodrich, (2) owned by UTC, and (3) owned by any direct or indirect wholly owned subsidiary of Goodrich or UTC (including Merger Sub)) will be cancelled and extinguished and converted into the right to receive $127.50 in cash, without interest, which is referred to as the merger consideration. Following the effective time of the merger, each holder of Goodrich common stock will cease to have any rights with respect to such Goodrich common stock, except for the right to receive the merger consideration therefor, without interest.

 

Cancellation of Shares

 

Each share of Goodrich common stock held by Goodrich as a treasury share and each share of Goodrich common stock owned by UTC or Merger Sub immediately before the effective time of the merger will be automatically cancelled and extinguished and will not be entitled to any merger consideration.

 

Conversion of Shares

 

Each share of Goodrich common stock held by any direct or indirect wholly owned subsidiary of Goodrich, any direct or indirect wholly owned subsidiary of UTC (other than Merger Sub) or any direct or indirect wholly owned subsidiary of Merger Sub immediately before the effective time of the merger will be automatically converted into such number of shares of common stock of the surviving corporation such that the ownership percentage of any such subsidiary in the surviving corporation immediately after the effective time of the merger will equal the ownership percentage of that subsidiary in Goodrich immediately before the effective time of the merger.

 

Goodrich Equity and Equity-Based Awards

 

Stock Options

 

At the effective time of the merger, each outstanding stock option to acquire shares of Goodrich common stock under Goodrich’s equity compensation plans granted prior to September 21, 2011, whether or not vested

or exercisable, will be adjusted under the applicable plan and converted into the right of the holder to receive an amount in cash, without interest, less any applicable withholding tax, equal to the product of:

 

 

Restricted Share Units

 

At the effective time of the merger, each outstanding time-based vesting restricted share unit granted prior to September 21, 2011 will be adjusted under the applicable plan and converted into the right of the holder to receive an amount in cash, without interest, less any applicable withholding tax, equal to the product of $127.50 multiplied by the number of shares of Goodrich common stock underlying the restricted share unit.

 

Performance Units

 

At the effective time of the merger, each outstanding performance unit award granted prior to September 21, 2011 will be adjusted under the applicable plan and converted into the right of the holder to receive an amount in cash, without interest, determined under the award agreement for such award, less any applicable withholding tax.

 

Deferred Compensation Awards

 

At the effective time of the merger, each notional share under any deferred compensation plan will be adjusted under the applicable plan and converted into the right to receive $127.50 in cash, without interest, less any applicable withholding tax.

 

Notwithstanding the foregoing, any equity awards in respect of Goodrich common stock that are granted by Goodrich on or after September 21, 2011, which Goodrich is permitted by the merger agreement to do on certain terms and conditions if the effective time of the merger occurs after August 31, 2012, will be treated upon completion of the merger in the manner set forth in the applicable award agreements as agreed between Goodrich and UTC.

 

Payment for Shares

 

Before the effective time of the merger, UTC will designate a national bank or trust company that is reasonably satisfactory to Goodrich, to act as paying agent for the holders of Goodrich common stock in connection with the merger. Promptly after the effective time of the merger (but not later than two business days after the effective time of the merger), UTC or Merger Sub will deposit, or cause to be deposited, with the paying agent funds sufficient to pay the aggregate merger consideration to which holders of Goodrich common stock will be entitled to receive following the effective time of the merger.

 

As soon as reasonably practicable after the effective time of the merger (but no later than five business days after the effective time of the merger), UTC will cause the paying agent to mail to all record holders of certificates or book-entry shares representing Goodrich common stock whose shares were converted into the right to receive the merger consideration a letter of transmittal and instructions on how to surrender certificates or book-entry shares representing Goodrich common stock in exchange for the merger consideration. The certificates or book-entry shares may be surrendered to the paying agent until the first anniversary of the effective time of the merger. Upon delivery of a duly completed and validly executed letter of transmittal and the surrender of certificates or book-entry shares representing Goodrich common stock on or before the first anniversary of the effective time of the merger, Merger Sub will cause the paying agent to pay the holder of such certificates or book-entry shares, in exchange therefor, cash in an amount equal to the merger consideration multiplied by the number of shares of Goodrich common stock represented by such certificates or book-entry shares, without interest. Each certificate or book-entry share representing Goodrich common stock that is surrendered will be cancelled. You should not send in your Goodrich common share certificates until you receive a letter of transmittal with instructions from the paying agent. Do not send Goodrich common share certificates with your proxy card.

Payment of the merger consideration may be made to a person other than the person in whose name a surrendered Goodrich common share certificate is registered if:

 

 

The merger consideration paid upon the surrender of certificates will be deemed to have been paid in full satisfaction of all rights pertaining to the Goodrich common stock previously represented by those certificates, except that the surviving corporation will still be obligated, provided that the applicable record date is before the effective time of the merger, to pay any dividends or make any other distributions that have been declared or made by Goodrich on such Goodrich common stock but not yet paid.

 

At the effective time of the merger, the stock transfer books of Goodrich will be closed and there will not be any further registration of transfers of any shares of Goodrich’s capital stock thereafter on the records of Goodrich. From and after the effective time of the merger, the holders of certificates and book-entry shares will cease to have any rights with respect to any Goodrich common stock, except as otherwise provided for in the merger agreement or by applicable law. If, after the effective time of the merger, certificates or book-entry shares (other than certificates or book-entry shares representing shares of Goodrich common stock held by UTC, Merger Sub, or any direct or indirect wholly owned subsidiary of UTC (other than Merger Sub), direct or indirect wholly owned subsidiary of Goodrich or direct or indirect wholly owned subsidiary of Merger Sub, and Goodrich common stock held in the treasury of Goodrich) are presented to the surviving corporation, they will be cancelled and exchanged for merger consideration. No interest will accrue or be paid on any cash payable upon the surrender of certificates or book-entry shares which immediately before the effective time of the merger represented the Goodrich common stock.

 

Promptly following the date which is one year after the effective time of the merger, the surviving corporation will be entitled to require the paying agent to deliver to it any cash, including any interest received with respect to such cash, and any certificates or other documents made available to the paying agent and not yet disbursed to holders of certificates or book-entry shares or previously delivered to the surviving corporation. Afterward, holders of certificates or book-entry shares will be entitled to look to the surviving corporation (subject to abandoned property, escheat or similar laws) only as general creditors of the surviving corporation with respect to the merger consideration payable upon due surrender of their certificates or book-entry shares, without any interest on such merger consideration. Notwithstanding the foregoing, none of UTC, the surviving corporation, any other subsidiary of UTC or the paying agent will be liable to any holder of certificates or book-entry shares for merger consideration delivered to a governmental entity pursuant to any applicable abandoned property, escheat or similar law.

 

Notwithstanding any provision in the merger agreement to the contrary, UTC, the surviving corporation and the paying agent will be entitled to deduct and withhold from amounts payable under the merger agreement, such amounts as are required to be withheld or deducted under any provision of the Code, the rules and regulations promulgated thereunder, or any provision of state, local or foreign tax law with respect to the making of such payment. To the extent that amounts are so withheld or deducted and paid over to the applicable governmental entity, such withheld or deducted amounts will be treated for all purposes of the merger agreement as having been paid to the person in respect of which such deduction and withholding was made.

 

If any certificate has been lost, stolen or destroyed, the paying agent will issue, in exchange for any lost, stolen or destroyed certificate, the merger consideration to be paid in respect of the Goodrich common stock represented by that certificate, provided that the person claiming such certificate to be lost, stolen or destroyed makes an affidavit of that fact and, if required by UTC or the surviving corporation, that person posts a bond in such reasonable amount as UTC or the surviving corporation, as the case may be, may direct as indemnity against any action that may be made against it with respect to such certificate.

If at any time during the period between the date of the merger agreement and the effective time of the merger, any change in the outstanding shares of capital stock, or securities convertible or exchangeable into or exercisable for shares of capital stock, of Goodrich occurs as a result of any merger, business combination, reclassification, recapitalization, stock split (including a reverse stock split) or subdivision or combination, exchange or readjustment of shares, or any stock dividend or stock distribution with a record date during such period, the merger consideration will be appropriately adjusted to provide UTC and the holders of Goodrich common stock the same economic benefit as contemplated by the merger agreement before such event. Goodrich may not take any action with respect to its securities that is prohibited by the terms of the merger agreement.

 

Representations and Warranties

 

The merger agreement contains a number of representations and warranties made by Goodrich, including representations and warranties relating to:

 

 

 

The merger agreement also contains a number of representations and warranties made by UTC and Merger Sub, including representations and warranties relating to:

 

 

Significant portions of the representations and warranties of Goodrich, UTC and Merger Sub are qualified as to “materiality” or “material adverse effect.” Under the merger agreement, a material adverse effect means, with respect to Goodrich, any event, occurrence, state of facts, condition, effect or change that is, or would reasonably be expected to become, individually or in the aggregate, a material adverse effect on (1) the ability of Goodrich to consummate the merger and the other transactions contemplated by the merger agreement or (2) the business, assets, results of operations or condition (financial or otherwise) of Goodrich and its subsidiaries, taken as a whole, except to the extent such material adverse effect under this clause (2) results from:

 

 

 

Under the merger agreement, a material adverse effect means, with respect to UTC and Merger Sub, a material adverse effect on the ability of UTC and Merger Sub to consummate the merger and the other transactions contemplated by the merger agreement.

 

Covenants and Agreements

 

Operating Covenants

 

Goodrich has agreed, except (a) as expressly required by the merger agreement, (b) as set forth in Goodrich’s disclosure letter that accompanied the merger agreement, (c) as required by applicable law, or (d) as consented to in writing by UTC (which consent cannot be unreasonably withheld or delayed under certain specified circumstances), that during the period from the date of the merger agreement until the effective time of the merger, with certain exceptions:

 

 

 

 

No Solicitation; Board Recommendation

 

Goodrich agreed to, and to cause each of its subsidiaries and their respective representatives to, immediately cease any solicitations, encouragements, discussions or negotiations with any parties that may be ongoing with respect to a takeover proposal and immediately instruct any party (and any such party’s representatives) to whom confidential information about Goodrich was furnished in connection with any actual or potential takeover proposal to return or destroy all such information or documents or material incorporating

such information. Goodrich has also agreed that it will not, and will cause each of its subsidiaries and their respective representatives not to, directly or indirectly:

 

 

The merger agreement provides that, notwithstanding the restrictions described above, if, at any time from the date of the merger agreement until the approval of Goodrich shareholders described in this proxy statement has been obtained, Goodrich receives a bona fide, unsolicited written takeover proposal from any party, under circumstances not involving any breach of the no solicitation section of the merger agreement, and if the Board determines in good faith, after consultation with outside financial advisors and outside legal counsel, that the received takeover proposal constitutes or would reasonably be expected to lead to a superior proposal, then Goodrich may, directly or indirectly:

 

 

Except as described above, Goodrich and its subsidiaries have agreed not to waive, amend or modify any provision of, or grant permission under, any confidentiality or standstill provision in any agreement to which any of them is a party. Goodrich has also agreed to, and to cause its subsidiaries to, enforce the standstill provisions of any such agreement, and Goodrich will, and will cause its subsidiaries to, immediately take all steps necessary to terminate any waiver that may have been granted prior to the date of the merger agreement under any such provisions.

 

Goodrich has also agreed to promptly (but not later than 24 hours after receipt) notify UTC orally and in writing of any takeover proposal, including the party making the takeover proposal, and provide copies to UTC of any proposals or documents relating to such takeover proposal. Goodrich has also agreed to keep UTC reasonably informed of any material developments, discussion or negotiations regarding any takeover proposal (including by promptly (but not later than 24 hours) providing copies of any additional or revised documents) and, upon request, to apprise UTC of the status of such takeover proposal. Goodrich and its subsidiaries will not enter into any agreement after the date of the merger agreement, which prohibits Goodrich from providing any information to UTC as described above.

 

Subject to the provisions described below, the Board has unanimously agreed to recommend that Goodrich’s shareholders adopt the merger agreement. Notwithstanding the foregoing restrictions, the Board may make an adverse recommendation change or terminate the merger agreement in accordance with its terms if, after receiving a bona fide, unsolicited takeover proposal, the Board determines in good faith, after consultation with its outside financial advisors and outside legal counsel, that:

 

 

however, before making an adverse recommendation change or terminating the merger agreement:

 

 

Any purported termination of the merger agreement will be void unless Goodrich terminates in accordance with the terms of the merger agreement and, as a condition precedent to any such Goodrich termination, Goodrich must pay UTC the applicable termination fee before or concurrently with the termination, as described below.

 

Notwithstanding the restrictions discussed above and not in response to any takeover proposal or superior proposal, the Board may also change or publicly propose to change, in a manner adverse to UTC, its recommendation regarding adoption of the merger agreement, if, in response to an intervening event that occurs after the date of the merger agreement and does not relate to a takeover proposal or superior proposal and that was not known by the Board as of the date of the merger agreement, but which becomes known by the Board prior to approval of the merger agreement by Goodrich’s shareholders, the Board has determined in good faith, after consultation with its outside financial advisors and outside legal counsel, that failure to change its recommendation would be reasonably likely to be a violation of its fiduciary duties to Goodrich’s shareholders under applicable law; however, before taking such action:

 

 

 

Nothing in the merger agreement prohibits Goodrich or the Board from taking and disclosing to Goodrich’s shareholders a position contemplated by Rule 14e-2(a) or Rule 14d-9 promulgated under the Exchange Act or from making any other similar disclosure to Goodrich’s shareholders if, in the Board’s determination in good faith after consultation with outside counsel, the failure to so disclose would be inconsistent with the Board’s fiduciary duties to Goodrich’s shareholders under applicable law or its obligations under applicable federal securities law. However, any such position or disclosure will be deemed to be an adverse recommendation change unless the Board expressly and concurrently reaffirms its prior recommendation in favor of adopting the merger agreement.

 

For purposes of this proxy statement and the merger agreement, a “takeover proposal” means (1) any inquiry, proposal or offer for or with respect to a merger, consolidation, business combination, recapitalization, binding share exchange, liquidation, dissolution, joint venture or other similar transaction involving Goodrich, (2) any inquiry, proposal or offer (including tender or exchange offers) to acquire in any manner, directly or indirectly, more than 20% of the outstanding Goodrich common stock or securities of Goodrich representing more than 20% of the voting power of Goodrich or (3) any inquiry, proposal or offer to acquire in any manner (including the acquisition of stock in any subsidiary of Goodrich), directly or indirectly, assets or businesses of Goodrich or its subsidiaries, including pursuant to a joint venture, representing more than 20% of the consolidated assets, revenues or net income of Goodrich, in each case, other than the merger and the transactions contemplated by the merger agreement.

 

For the purpose of this proxy statement and the merger agreement, a “superior proposal” means a bona fide, unsolicited written takeover proposal (1) that if consummated would result in a third party (or in the case of a direct merger between such third party and Goodrich, the shareholders of such third party) acquiring, directly or indirectly, more than 80% of the outstanding Goodrich common stock or all or substantially all the assets of Goodrich and its subsidiaries, taken as a whole, for consideration consisting of cash and/or securities, (2) that the Board determines in good faith, after consultation with its outside legal counsel and its outside financial advisor, is reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal, including all conditions contained therein and the person making such takeover proposal, (3) that the Board determines in good faith, after consultation with its outside legal counsel and its outside financial advisor (taking into account any changes to the merger agreement proposed by UTC in response to such takeover proposal, and all financial, legal, regulatory and other aspects of such takeover proposal, including all conditions contained therein and the party making such proposal, and the merger agreement), is more favorable to the shareholders of Goodrich from a financial point of view than the merger, and (4) the definitive documentation in respect of which does not contain any due diligence or financing condition.

 

For purposes of this proxy statement and the merger agreement, an “adverse recommendation change” means any action by Goodrich such that it (1) fails to include the Board’s recommendation to Goodrich’s shareholders in favor of adopting the merger agreement in this proxy statement, (2) changes, qualifies, withholds, withdraws or modifies, or authorizes or publicly proposes to change, qualify, withhold, withdraw or modify, in a manner adverse to UTC, the Board’s recommendation to Goodrich’s shareholders in favor of adopting the merger agreement, (3) takes any formal action or makes any recommendation or public statement in connection with a tender offer or exchange offer (other than a recommendation against such offer or a customary “stop, look and listen” communication of the type contemplated by Rule 14d-9(f) under the Exchange Act, in each case that includes a reaffirmation of the Board’s recommendation to Goodrich’s shareholders in favor of adopting the merger agreement) or (4) adopts, approves or recommends, or publicly proposes to adopt, approve or recommend to its shareholders a takeover proposal.

Meeting of Our Shareholders

 

We have agreed to, as promptly as practicable after the date of the merger agreement, duly call, set a record date for, give notice of, convene and hold a special meeting of our shareholders for the purpose of considering and taking action upon the adoption of the merger agreement, which meeting is the subject of this proxy statement.

 

Reasonable Best Efforts and Certain Pre-Closing Obligations

 

UTC, Merger Sub and Goodrich have agreed to use their respective reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary, proper or advisable under any applicable laws to consummate and make effective in the most expeditious manner possible the transactions contemplated by the merger agreement, including using reasonable best efforts in:

 

 

In addition, UTC and Goodrich have each agreed to:

 

 

 

Furthermore, UTC and Goodrich have each agreed to take all actions necessary to eliminate every impediment under any regulatory laws so as to enable the closing of the merger to occur as soon as reasonably possible (and in any event no later than the outside date), including:

 

 

however, any such action will be conditioned upon the consummation of the merger, and notwithstanding anything to the contrary set forth in the merger agreement, UTC will not be required to take, or agree or commit to take, any such action that, in the reasonable judgment of UTC, would constitute or reasonably be expected to result in the sale, divestiture or disposal of, or the holding separate of or direct or indirect operational or ownership restrictions on, businesses, product lines or assets of Goodrich, UTC or their respective subsidiaries generating revenues (including for both UTC and its subsidiaries and Goodrich and its subsidiaries) for the fiscal year ended December 31, 2010 in excess of $900 million in the aggregate (excluding any revenues of Goodrich from the Aero Engine Controls joint venture, as constituted on the date of the merger agreement, if Goodrich’s interest in that joint venture is sold pursuant to a contractual obligation of Goodrich existing as of the date of the merger agreement).

Notwithstanding the agreements of UTC, Merger Sub and Goodrich discussed above, the parties have agreed that it is UTC’s sole right to devise the strategy for any filing, notice, petition, statement, registration, submission of information, application or similar filing discussed above.

 

Access to Information; Confidentiality

 

Subject to the confidentiality agreement and applicable law relating to the sharing of information, Goodrich has agreed to:

 

 

However, nothing in the merger agreement requires Goodrich or any of its subsidiaries to disclose any information to UTC or its representatives that would cause a violation of any material contract to which Goodrich or any of its subsidiaries is a party, would cause a risk of a loss of privilege to Goodrich or any of its subsidiaries, or would constitute a violation of applicable laws. However, no investigation of Goodrich’s business will affect any representation or warranty given by Goodrich under the merger agreement or certain ancillary documents, or otherwise limit or affect the remedies available under the merger agreement to UTC; and competitively sensitive material (reasonably designated by Goodrich as such) may be provided in accordance with heightened confidentiality procedures. UTC will and will cause UTC’s controlled affiliates and representatives to keep confidential any non-public information received from Goodrich, its affiliates or representatives, directly or indirectly, pursuant to the terms of the merger agreement in accordance with the confidentiality agreement.

 

Indemnification and Insurance

 

Under the merger agreement, from the effective time of the merger, the surviving corporation must, and UTC must cause the surviving corporation to, to the fullest extent permitted under the NYBCL, honor Goodrich’s obligations existing immediately prior to the date of the merger agreement to indemnify and hold harmless each indemnified party, in accordance with the terms of Goodrich’s Restated Certificate of Incorporation and By-laws and all indemnification agreements with indemnified parties, in each case in effect immediately before the date of the merger agreement.

 

Before the closing of the merger, Goodrich must purchase a six-year “tail” prepaid officers’ and directors’ liability insurance policy, providing, for a period of six years after the effective time of the merger, Goodrich’s current and former directors and officers (as defined to mean those persons insured under Goodrich’s existing officers’ and directors’ liability insurance policy) with insurance and indemnification policy coverage for events occurring at or before the effective time of the merger that is no less favorable than the existing policy (including that such purchase does not result in any gaps or lapses in coverage with respect to matters occurring before the effective time of the merger). However, Goodrich will not pay an aggregate amount for the officers’ and directors’ liability insurance policy in excess of 300% of the current aggregate annual premium paid by Goodrich for the existing policy, but in such case will purchase such coverage under a six-year “tail” prepaid policy as will then be available at an aggregate cost no greater than 300% of such rate). From and after the effective time of the merger, UTC will continue to honor its obligations under the officers’ and directors’ liability insurance policy and will not cancel nor take any action or omit to take any action that would result in the cancellation thereof.

 

The certificate of incorporation and by-laws of the surviving corporation will contain the provisions with respect to indemnification set forth in the Restated Certificate of Incorporation and By-Laws of Goodrich. The

surviving corporation has agreed that those provisions will not be amended, modified or otherwise repealed for a period of six years from the effective time of the merger in any manner that would adversely affect any individual who at the effective time of the merger is an indemnified party, unless such modification is required after the effective time of the merger by law and then only to the minimum extent required by such law.

 

The rights of each indemnified party under the merger agreement are in addition to any rights conveyed by the Restated Certificate of Incorporation and By-Laws (or other governing documents) of Goodrich and any of its subsidiaries, the NYBCL, any other applicable laws or any agreement of any indemnified party with Goodrich or any of its subsidiaries. These rights will survive consummation of the merger and are intended to benefit, and will be enforceable by, each indemnified party.

 

In the event that UTC or Goodrich or any of their respective successors or assigns consolidates with or merges into any other person and is not the continuing or surviving corporation or entity of such consolidation or merger or transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision will be made so that the successors and assigns of Goodrich assume the indemnification obligations set forth in the merger agreement.

 

Employee Benefits Matters

 

The merger agreement provides that for one year following the effective time of the merger, employees of Goodrich and its subsidiaries, other than employees subject to a collective bargaining agreement, will receive compensation and benefits (excluding equity compensation) that are substantially equivalent in the aggregate to the compensation and benefits (excluding equity compensation) provided to those employees immediately prior to the effective time of the merger.

 

The merger agreement also provides that if the employment of an employee of Goodrich or its subsidiaries is terminated within one year following the effective time of the merger, the employee will receive severance payments and benefits determined under the severance arrangement applicable to the employee as of September 21, 2011. However, employees subject to a Management Continuity Agreement would instead receive severance payments and benefits as set forth in the applicable Management Continuity Agreement, and employees subject to a collective bargaining agreement would receive severance payments and benefits under the applicable collective bargaining agreement.

 

The merger agreement also provides that with certain exceptions service credit will be provided to Goodrich employees for purposes of vesting, eligibility to participate and benefit accrual under the employee benefit plans of UTC and its subsidiaries.

 

In addition, pursuant to the merger agreement, UTC will grant equity awards in respect of UTC’s common stock to the Goodrich employees who were granted equity awards in respect of Goodrich common stock in the first quarter of 2011, on terms and conditions generally consistent with the UTC equity compensation program for grants made by UTC in the first quarter of 2012. However, if the closing of the merger does not occur on or prior to August 31, 2012, in lieu of the grants contemplated by the prior sentence, Goodrich may make similar grants of equity-based or cash-based awards, so long as (1) the aggregate grant date fair value of those awards does not exceed the aggregate grant date fair value of the equity-based awards granted to Goodrich employees in the first quarter of 2011, and (2) the vesting and allocations of those awards is substantially equivalent to the vesting and allocations of the equity-based awards of Goodrich granted to those Goodrich employees in the first quarter of 2011, but the awards will not provide for vesting or payment in connection with the transactions contemplated by the merger agreement.

 

The provisions described above are solely for the benefit of the parties to the merger agreement and do not confer upon any individual any rights or remedies, including any right to employment or compensation or benefits of any nature or kind whatsoever. Nothing in the merger agreement amends any plan or arrangement of Goodrich or UTC or limits the rights of Goodrich or UTC to amend or terminate any of their respective plans or arrangements.

Additional Agreements

 

The merger agreement contains additional agreements between Goodrich and UTC relating to, among other things:

 

 

Conditions of the Merger

 

The obligation of each party to the merger agreement to effect the merger is subject to the satisfaction or waiver on or before the closing date of the merger of each of the following conditions:

 

 

The obligation of UTC and Merger Sub to effect the merger is further subject to the satisfaction, or waiver by UTC and Merger Sub, on or before the closing date of the merger of the following conditions:

 

 

 

The obligation of Goodrich to effect the merger is further subject to the satisfaction or waiver by Goodrich, on or before the closing date of the merger, of the following conditions:

 

 

Termination

 

Goodrich, UTC and Merger Sub may mutually agree in writing, at any time before the effective time of the merger, to terminate the merger agreement and abandon the merger. Also, either UTC or Goodrich may terminate the merger agreement and abandon the merger without the consent of the other before the effective time of the merger if:

 

 

must have used all reasonable best efforts to obtain the relevant consent, permit or termination, or to prevent the entry of the relevant permanent injunction or other order consistent with that party’s obligations as described in “— Reasonable Best Efforts and Certain Pre-Closing Obligations,” beginning on page 67; or

 

 

Goodrich can additionally terminate the merger agreement:

 

 

 

UTC can additionally terminate the merger agreement if:

 

 

 

A terminating party must provide written notice of termination to the other parties specifying with particularity the reason for such termination. If more than one reason for termination discussed above is available to a terminating party in connection with a termination, that terminating party may rely on any or all available reasons for any such termination.

 

Termination Fee

 

Pursuant to the merger agreement, Goodrich will be required to pay UTC a termination fee equal to $500 million, if the merger agreement is terminated:

 

 

 

If UTC terminates the merger agreement because Goodrich breaches any of its representations, warranties, agreements or covenants contained in the merger agreement, such that the breach gives rise to the failure of the related condition and is not cured as described above, then Goodrich must reimburse UTC, up to an aggregate of $50 million, for all of the documented out-of-pocket fees and expenses incurred by UTC or its affiliates, including (1) all fees and expenses of accountants, counsel, investment banking firms or financial advisors (and their respective counsel and representatives), experts and consultants and (2) all fees and expenses payable to banks, investment banking firms and other financial institutions (and their respective counsel and representatives) in connection with arranging or providing financing, and any other expenses otherwise allocated to UTC, in connection with the merger agreement and the transactions contemplated in the merger agreement.

 

If we fail to pay in a timely manner any amount due as described above, then (1) Goodrich will reimburse UTC for all costs and expenses (including disbursements and reasonable fees of counsel) incurred in the collection of such overdue amount, including in connection with any related actions commenced by or against UTC and (2) Goodrich will pay to UTC interest on such amount from and including the date payment of such amount was due to but excluding the date of actual payment at the prime rate set forth in the Wall Street Journal in effect on the date such payment was required to be made plus 2%.

 

Effect of Termination

 

If the merger agreement is terminated by us or UTC in accordance with its terms, the merger agreement will become void and of no effect, with no liability on the part of any party (or any stockholder, director, officer, employee, agent, consultant or representative of such party) to the other party to the merger agreement. If such termination, however, results from a willful and material breach of the merger agreement by any party, such party will not be relieved of any liability to the other parties as a result of such willful and material breach. In the event the merger agreement is terminated, certain provisions of the merger agreement, including but not limited to those related to publicity and termination fees, and the provisions pursuant to the confidentiality agreement will survive the termination.

 

Amendment

 

Subject to applicable law, the merger agreement may be amended by the parties to the merger agreement by action taken or authorized by or on behalf of their respective boards of directors, at any time prior to the closing of the merger, whether before or after adoption of the merger agreement by the shareholders of Goodrich and Merger Sub. The merger agreement may only be amended by a written instrument signed by the parties to the merger agreement.

Extension; Waiver

 

At any time before the effective time of the merger, any party to the merger agreement may (1) extend the time for the performance of any of the obligations or other acts of the other parties to the merger agreement, (2) waive any inaccuracies in the representations and warranties by the other party contained in the merger agreement or in any document delivered pursuant to the merger agreement, and (3) subject to the requirements of applicable law, waive compliance by the other party with any of the agreements or conditions contained in the merger agreement. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by the party or parties to be bound thereby. The failure of any party to the merger agreement to assert any of its rights under the merger agreement or otherwise will not constitute a waiver of such rights.

 

Shares of Goodrich common stock are listed for trading on the NYSE under the Symbol “GR.” The following table sets forth, for the fiscal quarters indicated, on a per share basis, the high and low sale prices for Goodrich common stock for the periods indicated as reported on the NYSE composite transactions reporting system, and the cash dividends declared on Goodrich common stock for these periods. As of January 30, 2012, the most recent practicable date before this proxy statement was printed, there were approximately 6,568 holders of Goodrich common stock.

 

 

The closing price of the shares of Goodrich common stock on the NYSE on September 15, 2011, the last full trading day prior to the first published report of a rumor that UTC was considering a possible transaction involving Goodrich, was $86.48 per share, and on September 21, 2011, the last full trading day prior to the announcement of the merger, was $109.49 per share. On January 30, 2012, the most recent practicable date before this proxy statement was printed, the closing price for the shares of Goodrich common stock on the NYSE was $124.67 per share.

 

In connection with the merger, Goodrich agreed not to declare or pay any dividend or other distribution with respect to its capital stock, except for Goodrich’s regular quarterly cash dividend for its common stock consistent with past practice and not in excess of $0.29 per share.

 

Following the merger there will be no further market for Goodrich common stock.

 

Security Ownership of Directors and Named Executive Officers

 

The following table contains information with respect to the number of shares of common stock beneficially owned by our directors and executive officers as of January 30, 2012:

 

 

 

 

 

 

 

 

 

 

Security Ownership of Certain Owners

 

The following table contains information known to us with respect to persons who are the beneficial owners of more than 5% of our Common Stock as of January 30, 2012.