<PAGE>
[LOGO] COLTEC INDUSTRIES INC
430 PARK AVENUE
NEW YORK, NEW YORK 10022
- - --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS -- JUNE 21, 1994
To the Shareholders of Coltec Industries Inc:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Coltec
Industries Inc ("Coltec") will be held at the Peabody, 149 Union Avenue,
Memphis, Tennessee, on Tuesday, June 21, 1994, at 9:00 a.m., local time, for the
following purposes and for the transaction of such other business as may be
properly brought before the meeting:
1. Electing a Board of Directors consisting of nine members. [Proposal 1]
2. Acting upon a proposal to approve and authorize the 1994 Long-Term
Incentive Plan.
[Proposal 2]
3. Acting upon a proposal to approve an amendment to Coltec's 1992 Stock
Option and Incentive Plan. [Proposal 3]
4. Acting upon a proposal to approve and authorize the amended and restated
Annual Incentive Plan. [Proposal 4]
5. Acting upon a proposal to approve and authorize the 1994 Stock Option
Plan for Outside Directors. [Proposal 5]
6. Ratifying the appointment of Arthur Andersen & Co. as the independent
auditors of Coltec to serve as such at the pleasure of the Board of
Directors. [Proposal 6]
Only holders of record of Common Stock of Coltec at the close of business on
May 3, 1994, are entitled to notice of the meeting and to vote thereat and at
any and all adjournments thereof.
By order of the Board of Directors
Anthony J. diBuono
SECRETARY
May 25, 1994
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD
AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
<PAGE>
[LOGO] COLTEC INDUSTRIES INC
430 PARK AVENUE
NEW YORK, NEW YORK 10022
- - --------------------------------------------------------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS -- JUNE 21, L994
This Proxy Statement is furnished in connection with the solicitation on
behalf of the Board of Directors of Coltec Industries Inc ("Coltec") of proxies
for use at the Annual Meeting of Shareholders of Coltec to be held on June 21,
1994, and at any adjournments thereof. The approximate date on which this Proxy
Statement and the accompanying form of proxy will first be sent to Coltec's
shareholders is May 26, 1994. Any proxy being solicited herewith may be revoked
at any time prior to its exercise, but the revocation of the proxy shall not be
effective until notice thereof has been given to the Secretary of Coltec.
Appearance in person at the Annual Meeting will not constitute a revocation of
an otherwise valid proxy. In the event that shares are represented by more than
one properly executed proxy, the proxy bearing the most recent date will be
voted at the Annual Meeting.
Each shareholder of record on May 3, 1994 is entitled to vote every share
held in his or her name on the books of Coltec. On May 3, l994, there were
outstanding 69,802,681 shares of Coltec's Common Stock, par value $.01 per share
(not including 140,660 shares held in treasury and 25,000,000 shares held by a
wholly owned subsidiary) (the "Common Stock"). Coltec's transfer books will not
be closed. Each share that may be voted at the Annual Meeting is entitled to one
vote on all matters to be considered. Votes will be counted and certified by the
Inspector of Election, who is an employee of Chemical Bank, Coltec's independent
Transfer Agent and Registrar. Under Securities and Exchange Commission rules,
boxes and designated blank spaces are provided on the accompanying form of proxy
for shareholders to mark if they wish either to abstain on one or more of the
proposals or to withhold authority to vote for one or more nominees for
director. Votes withheld in connection with the election of one or more of the
nominees for director will not be counted as votes cast for such individual. In
accordance with Pennsylvania law, abstentions are not counted in determining the
votes cast in connection with Proposals 2, 3, 4, 5 and 6. Under New York Stock
Exchange rules, the election of directors and appointment of independent
auditors are considered "discretionary" items upon which brokerage firms may
vote in their discretion on behalf of their clients if such clients have not
furnished voting instructions within ten days of the shareholders' meeting.
The presence at the meeting, in person or by proxy, of the holders of a
majority of the outstanding shares of stock entitled to vote is the required
quorum for the transaction of business at the meeting.
PROPOSAL 1 -- ELECTION OF DIRECTORS
One purpose of the meeting is to elect nine directors to serve until the
next Annual Meeting or until their successors are elected and qualified. The
nine nominees receiving the greatest number of votes cast by the holders of the
Common Stock entitled to vote at the meeting will be elected directors of Coltec
(assuming a quorum is present). All proxies will be voted in accordance with
instructions contained thereon. If no specific instructions are given, the
persons named as proxies in the accompanying form of proxy will vote for the
nine nominees named by the Board of Directors of Coltec and listed below. In the
event that, by reason of death or other unexpected occurrence, any one or more
of such nominees shall not be available for election, the persons named as
proxies in the form of proxy have advised that they will vote for such
substitute nominees as the Board of Directors of Coltec may propose. A vote FOR
the nominees includes discretionary authority to vote for a substitute nominee
if any of the nominees listed becomes unable or unwilling to serve.
<PAGE>
Two current members of the Board of Directors have not been nominated for
election as directors of Coltec by the Board of Directors. They are Salvatore J.
Cozzolino and Andrew C. Hilton, each of whom retired from Coltec in January
1994. Paul G. Schoen was elected a director of Coltec in April 1994. The persons
named below have been so nominated by the Board of Directors of Coltec:
<TABLE>
<CAPTION>
DIRECTOR OF
COLTEC (OR
PREDECESSOR)
NAME, AGE AND BUSINESS EXPERIENCE DURING PAST FIVE YEARS SINCE
- - ------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Donald P. Brennan, 53............................................................................ l991
Member of the Stock Option and Compensation Committee of Coltec. Managing Director of Morgan
Stanley & Co. Incorporated ("Morgan Stanley") since prior to 1989; head of Morgan Stanley
Merchant Banking Division; member of Morgan Stanley Operating Committee. Chairman, President
and a director of Morgan Stanley Leveraged Equity Fund II, Inc., Morgan Stanley Equity
Investors Inc. and Morgan Stanley Capital Partners III, Inc. Mr. Brennan also serves as a
director of Agricultural Minerals and Chemicals Inc., Agricultural Minerals Corporation, A/S
Bulkhandling, Beaumont Methanol Corporation, Container Corporation of America, Fort Howard
Corporation, Hamilton Services Limited, Jefferson Smurfit Corporation, Jefferson Smurfit
Corporation (U.S.), PSF Finance Holdings Inc., Shuttleway and Stanklav Holdings, Inc. Mr.
Brennan is Deputy Chairman and a director of Waterford Wedgwood plc and a director of
Waterford Wedgwood U.K. plc.
John W. Guffey, Jr., 56.......................................................................... 1991
President and Chief Operating Officer of Coltec since May 1991. From prior to 1989 to May 1991
he was the President of the Mechanical Packing Division of Garlock Inc, a wholly owned
subsidiary of Coltec, and served as a Group President.
Howard I. Hoffen, 30............................................................................. 1990
Member of the Stock Option and Compensation Committee of Coltec. Vice President of Morgan
Stanley since January 1994. Associate of Morgan Stanley from September 1989 to January 1994.
Mr. Hoffen also serves as a director of Amerin Guaranty Corporation and Interstate Natural Gas
Company.
David I. Margolis, 64............................................................................ l963
Chairman of the Board and Chief Executive Officer of Coltec since prior to 1989. President of
Coltec from prior to 1989 to May 1991. Director of Burlington Industries, Inc.
J. Bradford Mooney, Jr., 63...................................................................... 1992
Chairman of the Audit Committee and member of the Stock Option and Compensation Committee of
Coltec. Rear Admiral, United States Navy (retired). President and Managing Director of Harbor
Branch Oceanographic Institution, Inc. from January 1989 to March 1992. Consultant in ocean
engineering and research management following retirement from the U.S. Navy in September 1987.
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
DIRECTOR OF
COLTEC (OR
PREDECESSOR)
NAME, AGE AND BUSINESS EXPERIENCE DURING PAST FIVE YEARS SINCE
- - ------------------------------------------------------------------------------------------------- -----------------
<S> <C>
Joel Moses, 52................................................................ 1992
Chairman of the Stock Option and Compensation Committee and member of the
Audit Committee of Coltec. Dean, School of Engineering and D.C. Jackson
Professor of Computer Science and Engineering, Massachusetts Institute of
Technology ("MIT"), since January 1991. Head of the Department of
Electrical Engineering and Computer Science of MIT from prior to 1989 to
August 1989. Visiting Professor, Harvard Graduate School of Business
Administration from September 1989 to June 1990. Director of Analog
Devices, Inc.
Paul G. Schoen, 50............................................................ 1994
Executive Vice President, Finance, Treasurer and Chief Financial Officer of
Coltec since January 1994. Senior Vice President, Finance, Treasurer and
Chief Financial Officer of Coltec from May 1991 to December 1993. Senior
Vice President and Controller of Coltec from January 1991 to May 1991. Vice
President-Accounting of Coltec from prior to 1989 to December 1990.
Frank V. Sica, 43............................................................. 1991
Managing Director of Morgan Stanley since prior to 1989 and a director of
Morgan Stanley Leveraged Equity Fund II, Inc., Morgan Stanley Equity
Investors Inc. and Morgan Stanley Capital Partners III, Inc. He also serves
as a director of ARM Financial Group, Inc., Consolidated Hydro, Inc., EMMIS
Broadcasting Corporation, Fort Howard Corporation, Integrity Life Insurance
Company, Interstate Natural Gas Company, Kohl's Corporation, National
Integrity Life Insurance Company, PageMart, Inc., Southern Pacific Rail
Corporation and Sullivan Communications, Inc.
Richard A. Stuckey, 62........................................................ --
Chief Economist, E.I. du Pont de Nemours and Company, since prior to 1989.
</TABLE>
In March 1994, Coltec filed a registration statement with the Securities and
Exchange Commission relating to a proposed public secondary offering (the
"Offering") of all the shares of Common Stock of Coltec currently held by The
Morgan Stanley Leveraged Equity Fund II, L.P. ("MSLEF II"; such shares currently
held by MSLEF II being the "MSLEF II Shares") and certain of its affiliates and
by certain other selling stockholders named in such registration statement. On
May 23, 1994, Coltec announced that the Offering had been postponed. Due to
uncertain market conditions, representatives of MSLEF II informed Coltec of the
decision not to proceed with the Offering at that time. MSLEF II's
representatives also said that they were considering several alternatives,
including recommencing the Offering if market conditions improved or effecting a
distribution of MSLEF II's shares to its partners. If, before the 1995 annual
meeting of shareholders, some or all of the MSLEF II Shares are sold,
distributed or otherwise disposed of by MSLEF II, then, in connection with such
sale, distribution or other disposition one or more of Messrs. Brennan, Sica and
Hoffen (assuming they are elected as Directors at the Annual Meeting) may
determine to resign from the Board. In the event that at any time after the
Annual Meeting each of Messrs. Brennan, Sica and Hoffen shall have resigned from
the Board, Coltec anticipates that thereafter the size of the Board will be
reduced to seven members and, as soon as practicable thereafter, an additional
Director having no other affiliation with Coltec will be appointed to the Board
with the result that the Board would then be comprised of a majority of members
having no other affiliation with Coltec.
3
<PAGE>
BOARD OF DIRECTORS, COMMITTEES AND ATTENDANCE AT MEETINGS
The Board of Directors of Coltec held 11 meetings during 1993. The Board of
Directors of Coltec has standing audit and compensation committees and does not
have a nominating committee.
The Audit Committee, which consists of Mr. Mooney (Chairman) and Professor
Moses, held two meetings during 1993. This Committee meets with representatives
of Coltec's independent auditors and meets with Coltec's internal auditors and
representatives of the financial departments to consider matters relating to the
annual audit (including objectives, scope and fees) and such other matters as
such auditors and representatives wish to raise for consideration. This
Committee also reviews with representatives of the financial departments and
internal auditors and representatives of Coltec's independent auditors
recommendations of any of such auditors to improve internal accounting
procedures and controls. This Committee reports to the Board of Directors and
serves as liaison between the Board of Directors and Coltec's independent
auditors.
The Stock Option and Compensation Committee, which consists of Professor
Moses (Chairman) and Messrs. Brennan, Hoffen and Mooney, held six meetings
during 1993. This Committee prescribes salaries, incentive awards and other
compensation of the executive officers of Coltec. This Committee also
administers certain of Coltec's compensation plans.
During 1993, each director attended 75% or more of the aggregate of (i) the
total number of meetings of the Board of Directors and (ii) the total number of
meetings held by all committees on which he served.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Set forth below is certain information (as of May 3, 1994) with respect to
persons known to Coltec to be the beneficial owners of more than five percent of
the Common Stock. This information is based on statements on Schedules 13D or
13G filed by beneficial owners with the Securities and Exchange Commission and
other information available to Coltec.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP CLASS (A)
- - -------------------------------------------------- ----------- ------------
<S> <C> <C>
Morgan Stanley Group Inc.......................... 19,074,406 27.3(b)
1251 Avenue of the Americas
New York, NY 10020
Oppenheimer Group, Inc............................ 7,770,760 11.1(c)
Oppenheimer Tower
World Financial Center
New York, NY 10281
The Equitable Companies Incorporated.............. 7,258,920 10.4(d)
787 Seventh Avenue
New York, NY 10019
The Capital Group, Inc............................ 4,420,450 6.3(e)
333 South Hope Street
Los Angeles, CA 90071
<FN>
- - ------------------------
(a) The percentage is calculated on the basis of 69,802,681 shares of Common
Stock outstanding on May 3, 1994.
(b) In its Amendment No. 1 to Schedule 13G dated February 14, 1994, Morgan
Stanley Group Inc. reported that it may be deemed to have shared voting
and investment power for 16,539,263
</TABLE>
4
<PAGE>
<TABLE>
<S> <C>
shares held by affiliates and has sole investment power for 2,535,143
shares. In the same Amendment No. 1, The Morgan Stanley Leveraged Equity
Fund II, L.P., the general partner of which is a wholly owned subsidiary
of Morgan Stanley Group Inc., reported shared voting and investment power
for 14,898,000 shares.
(c) In its Amendment No. 2 to Schedule 13G dated February 1, 1994, Oppenheimer
Group, Inc. reported that it has shared voting power and shared investment
power (with certain of its affiliates) with respect to all of such shares
and that it had filed such Schedule 13G on its behalf and on behalf of
certain of its affiliates as a parent holding company.
(d) In its Amendment No. 2 to Schedule 13G dated February 9, 1994, The
Equitable Companies Incorporated reported that with respect to the Common
Stock it had sole voting power for 4,953,320 shares, shared voting power
for 108,000 shares, sole investment power for 7,258,920 shares and that it
had filed such 13G on its behalf and on behalf of certain of its
affiliates as a parent holding company.
(e) The Capital Group, Inc. reported that certain of its operating
subsidiaries exercised investment discretion over various institutional
accounts which held as of December 31, 1993, 4,420,450 shares of Coltec
Common Stock (6.3% of the outstanding class). CAPITAL GUARDIAN TRUST
COMPANY, a bank, and one of such operating companies, exercised investment
discretion over 3,077,450 of said shares. CAPITAL RESEARCH AND MANAGEMENT
COMPANY, a registered investment adviser, and CAPITAL INTERNATIONAL, S.A.,
another operating subsidiary, had investment discretion with respect to
1,211,000 and 132,000 shares, respectively, of the above shares.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
Set forth below is information as of May 3, 1994, concerning ownership of
Common Stock by all directors and nominees, individually, the executive officers
named in the Summary Compensation Table below and all present executive officers
and directors of Coltec as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT OF
NAME OWNERSHIP CLASS(A)
- - -------------------------------------------------- ------------ -----------
<S> <C> <C>
Donald P. Brennan................................. 0 0
Salvatore J. Cozzolino............................ 465,916 *
Anthony J. diBuono(b)(c).......................... 97,049 *
John W. Guffey, Jr.(b)............................ 159,558 *
Andrew C. Hilton.................................. 465,916 *
Howard I. Hoffen.................................. 0 0
David I. Margolis(b).............................. 1,133,501 1.6
J. Bradford Mooney, Jr............................ 0 0
Joel Moses........................................ 200 *
Paul G. Schoen(b)................................. 51,037 *
Frank V. Sica..................................... 0 0
Richard A. Stuckey................................ 0 0
All directors and present executive officers as a
group, consisting of 16 persons.................. 2,640,212 3.8
<FN>
- - ------------------------
* Less than 1%.
</TABLE>
5
<PAGE>
<TABLE>
<S> <C>
(a) The percentages are calculated on the basis of 69,802,681 shares of Common
Stock outstanding on May 3, 1994, plus, for any individual or the group,
that number of shares deemed to be outstanding because the indicated
persons or certain members of the group, respectively, have the right to
acquire beneficial ownership within 60 days.
(b) Messrs. diBuono, Guffey, Margolis and Schoen share certain voting power of
2,468,982 shares (as of May 3, 1994) as trustees of the Coltec Retirement
Savings Plan for Salaried Employees (the "Savings Plan"). They disclaim
beneficial ownership as to such shares. However, as participants in the
Savings Plan, they have the following shares of Common Stock credited to
their individual accounts as of March 31, 1994 and such shares are
included in the table above: Mr. diBuono, 2,056 shares; Mr. Guffey, 4,362
shares; Mr. Margolis, 3,110 shares and Mr. Schoen, 4,221 shares.
(c) 50,660 shares of the 97,049 shares of Common Stock are owned by Mr.
diBuono's wife and he disclaims beneficial ownership of such shares.
</TABLE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
SUMMARY OF CASH AND CERTAIN OTHER COMPENSATION
The following table provides certain summary information concerning
compensation of Coltec's Chief Executive Officer and each of the four other most
highly compensated executive officers of Coltec (determined as of December 31,
1993) (hereinafter referred to as the "named executive officers") for the fiscal
years ended December 31, 1993, 1992 and 1991:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
---------------------------------------
AWARDS
-------------------------- PAYOUTS
ANNUAL COMPENSATION ----------
---------------------------------------- (F) (G)
(E) ---------- -------------- (H) (I)
(A) (C) (D) ------------ RESTRICTED SECURITIES ---------- --------------------
- - ------------------------- (B) -------- ---------- OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL ---- SALARY BONUS COMPENSATION AWARDS OPTIONS PAYOUT COMPENSATION
POSITION YEAR ($) ($)(1) ($) ($)(2) (#) ($) ($)(3)
- - ------------------------- ---- -------- ---------- ------------ ---------- -------------- ---------- --------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David I. Margolis........ 1993 $643,920 $1,545,500 $ $ -- -- $ -- $120,535
Chairman of the Board and 1992 599,040 1,717,500 1,426,788 300,000 144,242
Chief Executive Officer 1991 599,040 1,478,500 -- --
John W. Guffey, Jr....... 1993 471,960 1,125,500 -- -- -- 113,529
President and Chief 1992 410,040 1,166,900 637,200 225,000 97,047
Operating Officer 1991 318,615 500,000 -- --
Salvatore J. Cozzolino... 1993 353,040 696,750 -- -- -- 64,123
Vice Chairman of the 1992 353,040 815,800 494,388 165,000 78,685
Board 1991 353,040 701,500 -- --
Andrew C. Hilton......... 1993 353,040 696,750 -- -- -- 60,770
Vice Chairman of the 1992 353,040 815,800 494,388 165,000 75,332
Board 1991 353,040 701,500 -- --
Anthony J. diBuono....... 1993 249,540 394,300 -- -- -- 40,987
Executive Vice President, 1992 236,520 433,850 221,994 80,000 47,436
Chief Legal Officer and 1991 236,520 365,600 -- --
Secretary
<FN>
- - ------------------------------
(1) Includes the following annual amounts accrued but not paid under the 1977
Long-Term Performance Plan (the "Performance Plan") for each of the named
executive officers: Mr. Margolis, 1993, $465,500; 1992, $577,500; 1991,
$528,500; Mr. Guffey, 1993, $332,500; 1992, $412,500; Messrs. Cozzolino
and Hilton, each, 1993, $177,750; 1992, $247,500; 1991, $226,500; and Mr.
diBuono, 1993, $79,800; 1992, $98,850; 1991, $90,600. Effective as of
December 31, 1993, subject to the approval of the Coltec 1994 Long-Term
Incentive Plan by the shareholders (SEE Proposal 2 below), Coltec has
terminated the Performance Plan. For periods after 1993, no additional
performance awards will accrue under the Performance Plan. Accrued amounts
for periods prior to 1994 will be credited with annual interest from
January 1, 1994 to the date of payment to the named executive at a rate of
interest (adjusted annually) equal to Coltec's cost of U.S. borrowings,
and will be paid in accordance with the original payment provisions of the
plan.
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
(2) The restricted stock owned by each of the named executive officers at
December 31, 1993 and the values thereof based on the closing price of the
Common Stock on December 31, 1993 were as follows: Mr. Margolis, 79,266
shares, $1,486,238; Mr. Guffey, 35,400 shares, $663,750; Messrs. Cozzolino
and Hilton, 27,466 shares, $514,988 each; and Mr. diBuono, 12,333 shares,
$231,244. Restrictions on one third of the number of such shares of
restricted stock are scheduled to lapse on each of January 2, 1995, 1996
and 1997. Any dividends payable on the Common Stock would also be payable
on such restricted stock.
(3) Pursuant to the Retirement Savings Plan for Salaried Employees, the
amounts credited by Coltec for 1993 and 1992 for each of the named
executive officers were $8,994 and $8,728, respectively, and such amounts
are included in the amounts in column (i) above. Pursuant to the defined
contribution portion of the Benefits Equalization Plan, the amounts
credited by Coltec for 1993 and 1992 for each of the named executive
officers were as follows: Mr. Margolis, 1993, $111,541; 1992, $135,514;
Mr. Guffey, 1993, $85,168; 1992, $72,874; Messrs. Cozzolino and Hilton,
1993, $51,776 each; 1992, $66,604 each; and Mr. diBuono, 1993, $30,098;
1992, $36,813, and such amounts are included in the amounts in column (i)
above. The cost to Coltec for 1993 and 1992 for whole life insurance,
measured by the excess of premiums paid over the cash surrender value,
pursuant to arrangements wherein Coltec is the sole owner and beneficiary
of the insurance policy with an obligation to make certain payments to a
beneficiary over a 15-year period in the event of an executive officer's
death while employed for the named executive officers were as follows: Mr.
Guffey, 1993, $19,367; 1992, $15,445; Mr. Cozzolino, 1993, $3,353; 1992,
$3,353; and Mr. diBuono, 1993, $1,895; 1992, $1,895, and such amounts are
included in the amounts in column (i) above.
</TABLE>
STOCK OPTIONS
The following table contains information concerning 1993 grants of stock
options under Coltec's 1992 Stock Option and Incentive Plan to the named
executive officers and the potential realizable value of these option grants
based on assumed rates of stock appreciation of 5% and 10% per year over the
10-year term of the options.
OPTION GRANTS IN 1993
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED ANNUAL
- - --------------------------------------------------------------------------------------------- RATES OF STOCK
(B) (C) APPRECIATION FOR OPTION
NUMBER OF % OF TOTAL TERM
SECURITIES OPTIONS (D) -------------------------
UNDERLYING GRANTED TO EXERCISE OR
(A) OPTIONS EMPLOYEES IN BASE PRICE (E) (F) (G)
NAME GRANTED(#)(1) 1993 ($/SH) EXPIRATION DATE 5%($) 10%($)
- - ------------------------- -------------- -------------- ------------ ----------------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. diBuono....... 40,000 13.8 $18.75 December 16, 2003 $ 471,700 $1,195,300
<FN>
- - ------------------------------
(1) The options are nonqualified options exercisable to the extent of 20% of
the total, cumulatively, commencing December 17, 1994 and annually
thereafter until fully exercisable on December 17, 1998. Exercise of an
option may be by cash, negotiable certificates representing whole shares of
Coltec Common Stock (or, subject to the approval of the Compensation
Committee (the "Compensation Committee"), through withholding of Common
Stock which would otherwise have been received upon exercise of the option)
or any combination thereof. The option agreements contain change-in-control
provisions. See "Employment Contracts and Termination of Employment and
Change-In-Control Arrangements" for additional information.
</TABLE>
7
<PAGE>
OPTION EXERCISES AND HOLDINGS
The following table provides information with respect to the named executive
officers concerning the options held as of December 31, 1993 (none of the named
executive officers exercised options during 1993):
AGGREGATED OPTION EXERCISES IN 1993
AND DECEMBER 31, 1993 OPTION VALUES
<TABLE>
<CAPTION>
(C)
(B) -----------------------------
---------------------------
VALUE OF
NUMBER OF SECURITIES UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS AT OPTIONS AT
(A) DECEMBER 31, 1993 DECEMBER 31, 1993
- - ------------------------- --------------------------- -----------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - ------------------------- ----------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
David I. Margolis........ 60,000 240,000 $ 225,000 $900,000
John W. Guffey, Jr....... 45,000 180,000 168,750 675,000
Salvatore J. Cozzolino... 33,000 132,000 123,750 495,000
Andrew C. Hilton......... 33,000 132,000 123,750 495,000
Anthony J. diBuono....... 16,000 104,000 60,000 240,000
</TABLE>
PENSION PLAN
The following table shows the estimated annual pension benefits payable to a
covered participant at normal retirement age (age 65) on a single life annuity
basis under Coltec's qualified defined benefit plan, as well as nonqualified
supplemental pension plans that provide benefits that would otherwise be denied
participants by reason of certain Internal Revenue Code limitations on qualified
plan benefits, based for the most part on five-year average final compensation
(salary and bonus during the 60 highest-paid consecutive months out of the last
120 months) and years of service with Coltec and its subsidiaries and not
subject to deduction for Social Security or other payments:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
FIVE-YEAR AVERAGE --------------------------------------------------------
ANNUAL COMPENSATION 15 20 25 30 35
- - --------------------------- -------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
$ 400,000.................. $ 99,400 $ 132,600 $ 165,700 $ 198,900 $ 232,000
600,000.................. 150,400 200,600 250,700 300,900 351,000
800,000.................. 201,400 268,600 335,700 402,900 470,000
1,000,000................. 252,400 336,600 420,700 504,900 589,000
1,200,000................. 303,400 404,600 505,700 606,900 708,000
1,400,000................. 354,400 472,600 590,700 708,900 827,000
1,600,000................. 405,400 540,600 675,700 810,900 946,000
1,800,000................. 456,400 608,600 760,700 912,900 1,065,000
2,000,000................. 507,400 676,600 845,700 1,014,900 1,184,000
2,200,000................. 558,400 744,600 930,700 1,116,900 1,303,000
2,400,000................. 609,400 812,600 1,015,700 1,218,900 1,422,000
2,600,000................. 660,400 880,600 1,100,700 1,320,900 1,541,000
2,800,000................. 711,400 948,600 1,185,700 1,422,900 1,660,000
3,000,000................. 762,400 1,016,600 1,270,700 1,524,900 1,779,000
3,200,000................. 813,400 1,084,600 1,355,700 1,626,900 1,898,000
</TABLE>
As of December 31, 1993, the five-year average final compensation and
current years of credited service for each of the following persons were: Mr.
Margolis, $2,620,816 and 31 years; Mr. Guffey, $877,655 and 15 years (including
7 years of additional credited service as an employee of one of
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<PAGE>
Coltec's subsidiary corporations); Mr. Cozzolino, $1,363,302 and 24 years; Dr.
Hilton, $1,363,302 and 31 years; and Mr. diBuono, $722,680 and 23 years.
Compensation covered under the pension plans includes amounts reported in
columns (c) and (d) of the Summary Compensation Table (other than accrued but
unpaid amounts under the Performance Plan reported in column (d) of the table).
Coltec has agreed to calculate Mr. Guffey's pension benefits as if his prior
credited service with the subsidiary were provided under the plan (the benefits
of which are set forth in the above table) with payments to be made to him from
the qualified plan, non-qualified plans and from Coltec.
COMPENSATION OF DIRECTORS
Directors who are not also employees of Coltec or of Morgan Stanley receive
a retainer at the annual rate of $25,000 ($30,000 if Chairperson of a Committee)
and receive $1,250 per meeting for attendance at meetings of the Board of
Directors and its committees with a maximum of $2,000 for more than one meeting
on the same day ($2,500 if Chairperson of one of the meetings). The Board of
Directors of Coltec has established a retirement age policy which provides that
a director shall not be eligible for nomination to the Board of Directors if
such person has attained the age of 70. In connection therewith, the Board of
Directors also established a pension arrangement for directors who are not
affiliated with Morgan Stanley or not entitled to a pension from Coltec or any
subsidiary thereof, with payments for life commencing at the later of retirement
or age 70. The annual amount of such payment is calculated on the basis of the
number of years of service as a director and would equal $10,000 for five years
of service plus an additional $2,000 for each additional year of service up to a
maximum annual amount of $20,000.
A director may defer payment of any portion of any retainer, committee or
attendance fees in any year, upon advance notice to Coltec, to such time as he
or she may determine. Balances of such deferred compensation accrue additional
compensatory amounts quarterly at the average cost of United States borrowings
of Coltec and its consolidated subsidiaries during the preceding calendar year.
Such borrowing cost in 1992 was 7.2%. There are no amounts being deferred at the
present time.
In addition to the foregoing amounts, the Board of Directors has adopted,
and the shareholders of Coltec are being asked to approve, the 1994 Stock Option
Plan for Outside Directors of Coltec Industries Inc pursuant to which members of
the Board of Directors of Coltec who are not employees of Coltec or its
subsidiaries will receive an initial grant of an option to purchase 10,000
shares of Common Stock and subsequent option grants to purchase 2,000 shares of
Common Stock during their service on the Board of Directors. For a general
discussion of the terms of the plan, SEE Proposal 5 -- Approval of the 1994
Stock Option Plan for Outside Directors.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND
CHANGE-IN-CONTROL ARRANGEMENTS
All currently outstanding agreements granting restricted stock or stock
options to the named executive officers in the Summary Compensation Table above
contain change-in-control provisions. In the case of the restricted stock, in
the event of a change-in-control, all restrictions on assignment, transfer or
other disposition of the restricted stock lapse. In the case of stock options,
in the event of a change-in-control, the options become fully exercisable or, in
the alternative, the executive officer may surrender all or part of the option
to Coltec during a one-year period after the change-in-control in exchange for a
cash payment for each option surrendered equal to the excess of the fair market
value of the Common Stock on the date of surrender over the option price. Fair
market value for this purpose equals the last sales price of the Common Stock on
the exercise date on the New York Stock Exchange Composite Tape (or, if no such
sale occurred on such date, the last date preceding such date on which a sale
was reported), except that in the case of a change of ownership of more than 35%
of the outstanding shares of Common Stock, it shall mean the amount of cash and
fair market value of other consideration tendered for such outstanding shares.
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<PAGE>
As of June 10, 1988, Coltec entered into an employment contract (the
"Employment Contract") with Mr. Margolis which by its terms is scheduled to
terminate on January 24, 1995. The Employment Contract provides for certain
severance payments and continuation of benefits for the remaining term of the
Employment Contract following termination of employment. The amount of the
payments that may be made will vary depending upon the level of compensation and
benefits at the time employment terminates and whether such employment is
terminated prior to the end of the term by Coltec for "cause" or by Mr. Margolis
for "good reason" or otherwise during the term of the contract. In the event
that termination of employment is by Mr. Margolis for "good reason" or by Coltec
without "cause", such payments are to consist of amounts equal to full salary,
bonus payments on each January based on an average of the three prior annual
bonus payments (pro rated for partial years), an additional one-time payment at
the time of termination of the bonus amount (pro rated for a partial year),
either continuation of participation in compensation and benefit plans or the
provision of comparable benefits, reimbursement for any legal fees expended in
connection with the termination of employment and gross-up payments for any
golden parachute excise taxes paid. Mr. Margolis is required to seek other
employment and any amounts paid as a result of such employment offset amounts
otherwise payable under the Employment Contract. The Employment Contract
includes multi-year non-compete provisions.
As of July 1, 1991, Coltec entered into employment agreements with Messrs.
Guffey and diBuono. Mr. Guffey's agreement expires on July 1, 1996 and Mr.
diBuono's agreement expires on October 13, 1995. Compensation payable thereunder
is at salary rates not less than those in effect on July 1, 1991 and with
comparable participation in incentive and employee benefit plans at the
discretion of the Board of Directors. However, if during the term of the
agreement a change of control (as defined in the agreement) occurs, (a) the
executive's functions, duties and responsibilities shall not be subject to
change, (b) in the event the executive in good faith determines that his
functions, duties or responsibilities or any aspect of his employment has been
changed adversely, he may elect to serve for a terminal employment period of two
years or, if earlier, until the executive attains age 65, and (c) the terminal
employment period is followed by a consulting period of two years. During the
terminal employment period, the executive is entitled to salary not less than
that in effect prior to this period and comparable participation in benefits
plans. During the consulting period, the executive is entitled to consulting
fees at an annual rate no less than the annual rate of his salary on July 1,
1991 and to participation in all Coltec life and medical insurance programs or
comparable benefits.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Stock Option and Compensation Committee are Joel Moses
(Chairman), Donald P. Brennan, Howard I. Hoffen and J. Bradford Mooney, Jr. None
of the members was formerly an officer of Coltec or any of its subsidiaries. Mr.
Brennan was an officer and director and Mr. Hoffen was a director of Coltec
Holdings Inc. ("Holdings") before it became a wholly owned subsidiary of Coltec
in November 1993.
Mr. Brennan is a managing director and Mr. Hoffen is a vice president of
Morgan Stanley and they along with another managing director of Morgan Stanley,
Frank V. Sica, constituted all of the directors of Holdings, the owner of 100%
of the outstanding shares of Common Stock from June 1988 to the recapitalization
of Coltec effected in April 1992, which included the public offering by Coltec
of 44,275,000 shares of Common Stock (the "1992 Recapitalization"). At the time
of the 1992 Recapitalization, Holdings owned 36.1% of the outstanding shares of
Common Stock.
In the 1992 Recapitalization, Morgan Stanley was sole underwriter of a debt
offering for which it received an underwriting commission of $11,250,000 and was
one of several underwriters of an equity offering for which it received a
portion of the total underwriting commission of $36,527,000. Also, as one of the
dealer managers for a tender offer by Holdings for the outstanding Holdings
14 3/4% senior discount debentures, a part of the 1992 Recapitalization, Morgan
Stanley received fees of $1,049,000 from Holdings. In October 1992, Morgan
Stanley acted as sole underwriter in connection with the
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<PAGE>
issuance by Coltec of $150 million of its 9 3/4% Senior Notes due 1999 for which
it received an underwriting commission of $2,625,000. In connection with an
industrial revenue bond refinancing in 1993, Morgan Stanley received a fee of
$309,000.
As of November 18, 1993, pursuant to a Reorganization Agreement, Coltec and
Holdings completed a stock-for-stock exchange that resulted in Holdings'
stockholders holding directly shares of Coltec Common Stock and Holdings became
a wholly owned subsidiary of Coltec.
STOCK OPTION AND COMPENSATION COMMITTEE
REPORT ON EXECUTIVE COMPENSATION
In establishing and monitoring the executive compensation program for
Coltec, the Stock Option and Compensation Committee (the "Committee") considers
the total compensation program (and each component thereof) to assure that it
takes into account individual and Coltec performance and is competitive. This
policy has been in effect for several years and the present Committee members
consider it fair and equitable. The Committee has engaged a recognized expert in
the field of executive compensation who meets regularly with the Committee to
advise it on whether Coltec's total compensation program is properly reflective
of Coltec's financial performance and consistent with the Committee's
objectives.
It has been Coltec's historical approach that all senior corporate officers,
including the five highest paid executive officers included in the Summary
Compensation Table, are treated as a team. The Committee implements this
approach by applying the same performance factor in determining the incentive
compensation for each executive officer. The amount of an executive's incentive
compensation is also a function of each executive's position level and
experience in the position. Thus, the specific rationale regarding the 1993
compensation program for Mr. Margolis has equal application to Coltec's other
executive officers. Therefore, no separate general discussion for the
compensation arrangements for these other executives is provided.
Mr. Margolis' annual base salary is reviewed by the Committee annually
taking into account the following factors:
-- Mr. Margolis' experience in his position at Coltec and his
performance over a sustained period of time.
-- Median base salary levels for other chief executive officers in
companies of similar size, business and complexity. In reviewing the base
salary of other chief executive officers, the Company relies on a number of
recognized executive compensation surveys. These compensation surveys
include hundreds of companies which may include, but are not necessarily
limited to, companies included in the Standard & Poor's 500 and/or the Dow
Jones Industrials.
It is Coltec's normal policy to adjust base salaries on an annual basis.
Such adjustments reflect the salary range applicable to the executive and, as
noted above, the Committee's assessment of the executive's contribution to
Coltec's profitability and the salaries paid to executives in similarly-situated
positions in other companies. Mr. Margolis' base salary was increased January 1,
1993 from $599,040 to $643,920. This was Mr. Margolis' first salary increase
since January 1, 1990. In setting base salary levels for other executive
officers, the Committee takes into account -- in substantially the manner
described above with respect to Mr. Margolis -- the median salaries paid to
comparably situated officers in companies whose size, business and complexity
are similar to that of Coltec.
Incentive compensation reflects Coltec's annual performance as compared to
other manufacturing companies in terms of return on sales, return on assets and
return on capital, and Coltec's historical performance. The Committee has
established competitive target bonus levels that are payable for good
performance. In determining competitive target bonus levels, the same recognized
executive compensation surveys were used as were used for base salaries. If
actual performance
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<PAGE>
exceeds the established performance level, actual incentive compensation can
significantly exceed these targets. Conversely, if actual performance does not
meet expectations, actual incentive compensation can be reduced or eliminated,
as warranted.
Mr. Margolis' 1993 incentive compensation reflects Coltec's outstanding 1993
performance as compared to both a traditional peer group of manufacturing
companies and a group of manufacturing companies with above-average financial
performance. The traditional peer group of companies includes those Fortune 500
companies whose business and/or organizational structures are similar to that of
Coltec. The above-average group also includes Fortune 500 companies, but the
companies in this group rank in the top twenty-five percent of the Fortune 500
companies in terms of return on assets, return on equity, return on sales and
ten-year total return to shareholders. The level of Mr. Margolis' incentive
compensation for 1993 was determined on the basis of a comparison of Coltec's
performance with Coltec's historical performance and the performance of these
two groups of companies during the first nine months of 1993. This comparison
was based on return on sales, return on assets and return on capital. As
compared to the traditional peer group, Coltec's results were the highest of all
companies in each category and, as compared to the above-average group, Coltec
was in the top 30% in return on sales and in the top 10% in return on assets and
return on capital. Most, but not all, of these traditional peer and high
performing companies may be included in the Standard & Poor's 500 Index and/or
the Dow Jones Industrials.
Coltec also has established a long-term compensation program whose objective
is to measure and reward the accomplishment of those longer term business goals
that may increase shareholder value. This program consists of two plans, the
1992 Stock Option and Incentive Plan (the "Option Plan") and the 1977 Long-Term
Performance Plan (the "Performance Plan").
The Option Plan provides for granting of stock options at an exercise price
equal to the market price of the Common Stock on the date of grant. Accordingly,
the option recipient accrues value in these options only to the extent that
Coltec's stock price increases above the exercise price.
The only named executive officer who received a stock option grant in 1993
was Mr. diBuono who was granted an option for 40,000 shares of Common Stock in
connection with his election as Executive Vice President.
The Performance Plan has been established because certain financial goals on
which management should focus for the long-term benefit of shareholders may not
be reflected in Coltec's stock price. To encourage management to focus on these
goals, the Performance Plan provides reward opportunities based on the
accomplishment of these financial goals which, over the long-term, may increase
shareholder value. Performance shares awarded to executives under the
Performance Plan accrue value depending on Coltec's Operating Profit (defined as
net earnings of Coltec and its consolidated subsidiaries, plus interest expense
and provisions for income taxes, minus interest income and excluding
extraordinary items and discontinued operations), in each fiscal year which
elapses from the Commencement Date for such shares to the earlier of termination
of employment with Coltec, retirement or the expiration of 10 years. Under the
formula of the Performance Plan, each performance share accrued a value of
$13.30 for the year 1993 based on 1993 Operating Profit of $213,586,000.
The shareholders of Coltec are being requested to approve, effective January
1, 1994, a new 1994 Long-Term Incentive Plan which is intended to replace the
Performance Plan for periods after 1993. As part of the transition to the new
plan, the Compensation Committee has recommended to the Board, and the Board has
approved, an amendment to outstanding awards under the Performance Plan that
will provide for the crediting of interest on amounts accrued under the Plan
from January 1, 1994 to the date of payment of these accrued amounts. The rate
of interest will be based on the cost of Coltec's U.S. borrowings and will be
adjusted annually.
Mr. Margolis participates in the Performance Plan at a level deemed
competitive and appropriate by the Committee. His interest in the Performance
Plan accrues a value based on certain operating
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<PAGE>
income levels. These amounts, however, are not paid to him for a period of ten
years following the year in which the award was granted. It is contemplated that
Mr. Margolis will also participate in the 1994 Long-Term Incentive Plan.
Coltec also maintains certain benefit programs in which the executive group
participates. The compensation attributed to the named executive officers for
1993 from these programs is detailed in this proxy statement. Mr. Margolis'
participation in these programs reflects what the Committee believes is the
participation that other executives at his level in similar organizations would
receive.
During 1993, Congress enacted legislation that could have the effect of
limiting the deductibility for executive compensation paid to each of the five
highest paid executive officers. This legislation provides that compensation
paid to any one executive in excess of $1 million will not be deductible. The
legislation, however, provides an exception to the $1 million limit for
compensation that is both performance-based and paid under a plan that has been
approved by shareholders.
The Compensation Committee believes that Coltec's executive compensation
program is performance-based and that the process by which compensation levels
and payments are made is sound and should be continued. However, in an effort to
assure that incentive payments made to executive officers are deductible for
federal income tax purposes, the Compensation Committee has adopted the amended
and restated Annual Incentive Plan and the 1994 Long-Term Incentive Plan which
the shareholders of Coltec are being requested to approve at the 1994 annual
meeting of shareholders. For the same reason, the Compensation Committee and the
Board of Directors have adopted an amendment to the 1992 Stock Option and
Incentive Plan (subject to shareholder approval) which limits the number of
options and stock appreciation rights that may be awarded to an employee in any
36-month period. To the extent reasonably possible and consistent with the
Compensation Committee's other compensation objectives, the Compensation
Committee currently intends to take reasonable steps to permit the incentive
compensation paid to executive officers to qualify as performance-based
compensation that is exempt from the $1 million limit on compensation which may
be deducted by Coltec for federal income tax purposes.
Joel Moses, Chairman, Stock Option and Compensation Committee
Howard I. Hoffen, Member
Donald P. Brennan, Member
J. Bradford Mooney, Jr., Member
13
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PERFORMANCE GRAPH
The following is a line graph presentation comparing Coltec's cumulative
total shareholder return on the Common Stock with the Standard & Poor's 500
Stock Index and the Dow Jones Industrials Index for the period since March 25,
1992, the date when trading began in connection with the initial public offering
on April 1, 1992, to December 31, 1993 (assuming an investment of $100 in each
on March 25, 1992):
[GRAPHIC]
PROPOSAL 2 -- APPROVAL OF 1994 LONG-TERM INCENTIVE PLAN
On January 12, 1994, the Compensation Committee and the Board of Directors
adopted the 1994 Long-Term Incentive Plan (the "1994 Incentive Plan"), subject
to the approval of the 1994 Incentive Plan by the shareholders of Coltec at the
1994 annual meeting of shareholders. The shareholders of Coltec are asked to
consider and act upon the matter of approving the 1994 Long-Term Incentive Plan.
Approval of this Proposal 2 will require the affirmative vote of the holders of
a majority of the shares of Common Stock voting at the meeting (assuming a
quorum is present). The Board of Directors recommends approval of this Proposal
2. All proxies will be voted in accordance with the instructions contained
thereon. If no specific instructions are given, the persons named as proxies in
the accompanying form will vote FOR Proposal 2.
DESCRIPTION OF THE 1994 INCENTIVE PLAN. The summary of the 1994 Incentive
Plan which follows is not intended to be complete and is qualified in its
entirety by reference to the text of the 1994 Incentive Plan which is attached
to this Proxy Statement as Exhibit A.
The 1994 Incentive Plan provides for annual grants of performance units
("Units") to officers and senior operations management employees of Coltec who
are selected for grants of Units by the Compensation Committee. Approximately 15
officers and senior operations management employees of Coltec and its
subsidiaries are eligible to participate in the 1994 Incentive Plan. If approved
by shareholders, the 1994 Incentive Plan will replace the 1977 Long-Term
Performance Plan. SEE Note 1 to the Summary Compensation Table. Amounts paid
under the 1994 Incentive Plan are generally intended to qualify as
"performance-based compensation" which is excluded from the $1 million limit
14
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on deductible compensation set forth in Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code"). SEE "Stock Option and Compensation
Committee Report on Executive Compensation."
The value of each Unit is determined on the basis of Coltec's cumulative
operating profit measured over a three-year performance cycle. Operating profit
for each fiscal year in a performance cycle is generally defined as the net
earnings of Coltec and its consolidated subsidiaries, plus interest expense and
provisions for income taxes, minus interest income and excluding nonrecurring
items, extraordinary items, accounting principle changes and discontinued
operations (as such terms are defined under United States generally accepted
accounting principles).
For each three-year performance cycle, the threshold target for cumulative
operating profit is $600 million. If that target is achieved, each Unit will
have an award value of $36.00 (for the performance cycle beginning January 1,
1994) (the "1994 Cycle") and $12.00 (for each performance cycle beginning after
1994). The award value of each Unit granted for a performance cycle will
increase by $.10 (with respect to the 1994 Cycle) and by $0.333 (with respect to
later cycles) for each $1 million that cumulative operating profit for the award
cycle exceeds $600 million. There is no maximum limit on the award value which
may be earned for a Unit. No amounts are payable for a Unit if cumulative
operating profit for the performance cycle is less than $600 million.
The 1994 Incentive Plan provides that no more than 300,000 Units may be
awarded for any performance cycle, and that no more than 50,000 Units may be
awarded to any participant for a given cycle. The 1994 Incentive Plan is
administered by the Compensation Committee which has responsibility for the
selection of participants, for construing the terms of the 1994 Incentive Plan
and for certifying that the targets for each performance cycle have been
achieved. Under the terms of the 1994 Incentive Plan, the Compensation Committee
also has the discretion to adjust the targets for operating profit prior to the
inception of a performance cycle or to adjust the targets after the inception of
a cycle to take into account extraordinary corporate transactions.
The award value earned in respect of Units is generally payable following
the press release announcing Coltec's unaudited annual financial results for the
last fiscal year in the applicable performance cycle. Two-thirds of the award
value of the Units will generally be paid in cash; and one-third of such award
value will be paid in shares of Common Stock (the "Restricted Shares"). The 1994
Incentive Plan permits participants to elect, prior to the start of the third
year of a performance cycle, to have some or all of the portion of the award
value that would otherwise be paid in cash, be paid in Restricted Shares. As an
incentive to encourage participants to make share elections, the 1994 Incentive
Plan increases by 15% the number of Restricted Shares which would otherwise have
been awarded to a participant in lieu of the foregone cash payment. The 1994
Incentive Plan limits the number of Restricted Shares that may be awarded in any
calendar year to .5% (1% for 1997) of the number of shares of Common Stock
issued and outstanding on January 1 of such year.
Performance Units are forfeited if a participant's employment ends for any
reason other than death, disability or retirement. In the event a participant's
employment ends as a result of death, disability or retirement, a pro rata
portion of the award value will generally be paid to the participant (or, in the
event of death, the participant's beneficiary) following the completion of the
performance cycle (although, in appropriate circumstances, the Compensation
Committee may accelerate the payment in settlement of these outstanding Units).
Restricted Shares awarded in payment of Units vest in one-third increments
on each of the first through third anniversaries of the end of the applicable
performance cycle. Unvested Restricted Shares are forfeited if a participant's
employment ends for any reason other than death, disability or retirement.
Subject to certain limited exceptions set forth in the 1994 Incentive Plan, a
participant will be fully vested in all Restricted Shares in the event the
participant's employment ends as a result of death, disability or retirement.
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<PAGE>
NEW PLAN BENEFITS
1994 INCENTIVE PLAN
<TABLE>
<CAPTION>
NUMBER OF UNITS
FOR 1994
PERFORMANCE
NAME AND POSITION CYCLE*
- - -----------------------------------------
<S> <C>
Mr. Margolis............. 35,000
Chairman of the Board
and Chief Executive
Officer
Mr. Guffey............... 25,000
President and Chief
Operating Officer
Mr. diBuono.............. 10,000
Executive Vice
President, Chief Legal
Officer and Secretary
All Current Executive
Officers as a Group..... 113,000
All Employees (other than
executive officers)..... 0
<FN>
- - ------------------------
* Awards for performance cycles beginning after 1994 have not yet been
determined.
</TABLE>
PROPOSAL 3 -- APPROVAL OF AMENDMENT TO THE 1992
STOCK OPTION AND INCENTIVE PLAN
On January 12, 1994, the Board of Directors authorized an amendment to the
1992 Stock Option and Incentive Plan (the "1992 Stock Plan") to increase the
number of shares of Common Stock that may be issued under the 1992 Stock Plan
from 3,000,000 to 7,360,000. The amendment further provides that no employee may
be awarded in any 36-month period beginning on or after January 1, 1994, options
or stock appreciation rights in excess of 15% of the number of shares of Common
Stock which are authorized for awards under the 1992 Stock Plan immediately
after the 1994 annual meeting of shareholders. Both changes are subject to the
approval of the amendment to the 1992 Stock Plan by the shareholders of Coltec
at the 1994 annual meeting of shareholders. The full text of the amendment is
attached to this proxy statement as Exhibit B.
The shareholders of Coltec are asked to consider and act upon the matter
approving the amendment to the 1992 Stock Plan. Approval of this Proposal 3 will
require the affirmative vote of the holders of a majority of the shares of
Common Stock voting at the meeting (assuming a quorum is present). The Board of
Directors recommends approval of this Proposal 3. All proxies will be voted in
accordance with the instructions contained thereon. If no specific instructions
are given, the persons named as proxies in the accompanying form will vote FOR
Proposal 3.
DESCRIPTION OF THE 1992 STOCK PLAN. The summary of the 1992 Stock Plan
which follows is not intended to be complete and is qualified in its entirety by
reference to the text of the 1992 Stock Plan which was filed as Exhibit 10.24 to
Coltec's 1991 Form 10-K.
The 1992 Stock Plan is administered by the Compensation Committee. The
Compensation Committee has authority under the 1992 Stock Plan to adopt rules
and regulations with respect thereto, to select the employees to whom awards
will be made, to determine the nature and size of each award and to interpret,
construe and implement the 1992 Stock Plan. Approximately 250 employees of
Coltec and its subsidiaries are eligible to participate in the 1992 Stock Plan.
The 1992 Stock Plan provides for grants of stock options, restricted shares,
incentive stock rights, stock appreciation rights and dividend equivalents, the
making of loans to participants to accomplish the purposes of the 1992 Stock
Option Plan and other equity incentive awards established under the plan. The
number of stock options, restricted shares, incentive stock rights, stock
appreciation rights,
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<PAGE>
dividend equivalents or other incentive benefits granted to any individual, the
periods during which they vest or otherwise become exercisable or remain
outstanding, and the other terms and conditions with respect to awards under the
1992 Stock Plan are set by the Compensation Committee.
Shares issued under the 1992 Stock Plan may be in whole or in part, as the
Compensation Committee shall from time to time determine, authorized and
unissued shares or issued shares that may have been reacquired by Coltec. The
closing price on the New York Stock Exchange Composite Tape for a share of
Common Stock on May 3, 1994 was $18.75 per share.
Awards under the 1992 Stock Plan may be made only to salaried employees who
are officers or who are employed in an executive, administrative, operations,
sales or professional capacity by Coltec or its subsidiaries or to those other
employees with potential to contribute to the future success of Coltec or its
subsidiaries. Such awards may be made to a director of Coltec provided that the
director is also an officer or salaried employee of Coltec or a subsidiary
thereof.
The 1992 Stock Plan provides for equitable adjustments with respect to
awards made thereunder upon the occurrence of any increase in, decrease in or
exchange of the outstanding shares of Common Stock through merger,
consolidation, recapitalization, reclassification, stock split, stock dividend
or similar capital adjustment. In addition, the 1992 Stock Plan allows the
Compensation Committee, in the event of a Change in Control (as defined in the
1992 Stock Plan), to protect the holders of awards granted under the 1992 Stock
Plan by taking certain actions which it deems equitable and in the best
interests of Coltec.
Grants under the 1992 Stock Plan are authorized by the Compensation
Committee in its sole discretion. For this reason it is not possible to
determine the benefits or amounts that will be received by any particular
employees or group of employees in the future.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a discussion of certain federal income tax consequences of
the issuance and exercise of stock options under the 1992 Stock Plan to the
recipient and to Coltec. The discussion does not purport to be complete and does
not cover, among other things, the state and local tax consequences in
connection with the grant and exercise of options.
In general, an optionee will not be subject to tax at the time a
nonqualified stock option is granted. Upon exercise of a nonqualified stock
option, the optionee generally must include in ordinary income at the time of
exercise an amount equal to the excess, if any, of the fair market value of the
Common Stock at the time of exercise over the exercise price, and will have a
tax basis in such shares equal to the cash paid upon exercise plus the amount
taxable as ordinary income to the optionee. In addition, special rules apply
under the Code which may delay the recognition of income upon exercise of
nonqualified stock options by executive officers who are subject to the
reporting rules under Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act") and would be subject to liability under Section
16(b) of the Exchange Act.
Coltec generally will be entitled to a deduction in the amount of an
optionee's ordinary income at the time such income is recognized by the optionee
upon the exercise of a nonqualified stock option. Income and payroll taxes are
required to be withheld on the amount of ordinary income resulting from the
exercise of a nonqualified stock option.
No taxable income will be realized by an option holder upon the grant or
exercise of an incentive stock option. If shares are issued to an option holder
pursuant to the exercise of an incentive stock option granted under the 1992
Stock Plan and if a disqualifying disposition of such shares is not made by such
option holder (i.e., no disposition is made within two years after the date of
grant or within one year after the receipt of such shares by such option
holder), then (i) upon sale of such shares, any amount realized in excess of the
exercise price of the incentive stock option will be taxed to such option holder
as a long-term capital gain and any loss sustained will be a long-term capital
loss and (ii) no deduction will be allowed to Coltec. However, if shares
acquired upon the exercise of an incentive stock
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<PAGE>
option are disposed of prior to the expiration of either holding period
described above, generally (x) the option holder will realize ordinary income in
the year of disposition in an amount equal to the excess (if any) of the fair
market value of the shares at the time of exercise (or, if less, the amount
realized on the disposition of the shares), over the exercise price thereof, and
(y) Coltec will be entitled to deduct an amount equal to such income. Any
additional gain recognized by the option holder upon a disposition of such
shares prior to the expiration of the holding period described above will be
taxed as a short-term or long-term capital gain, as the case may be, and will
not result in any deduction by Coltec.
The amount by which the fair market value of the Common Stock on the
exercise date of an incentive stock option exceeds the exercise price generally
will constitute an item which increases the option holder's "alternative minimum
taxable income".
PROPOSAL 4 -- APPROVAL OF THE AMENDED AND RESTATED ANNUAL INCENTIVE PLAN
On March 15, 1994, the Compensation Committee and the Board of Directors
adopted an amended and restated version of the Coltec Annual Incentive Plan (the
"Annual Incentive Plan"), subject to the approval of the Annual Incentive Plan
by the shareholders of Coltec at the 1994 annual meeting of shareholders. The
shareholders of Coltec are asked to consider and act upon the matter of
approving the Annual Incentive Plan. Approval of this Proposal 4 will require
the affirmative vote of the holders of a majority of the shares of Common Stock
voting at the meeting (assuming a quorum is present). The Board of Directors
recommends approval of this Proposal 4. All proxies will be voted in accordance
with the instructions contained thereon. If no specific instructions are given,
the persons named as proxies in the accompanying form will vote FOR Proposal 4.
DESCRIPTION OF THE ANNUAL INCENTIVE PLAN. The summary of the Annual
Incentive Plan which follows is not intended to be complete and is qualified in
its entirety by reference to the text of the Annual Incentive Plan which is
attached to this Proxy Statement as Exhibit C.
The Annual Incentive Plan is an amended and restated version of the prior
Coltec annual incentive plan which was previously approved by the shareholders
of Coltec in 1965 and, as amended, in 1986. The principal purpose of the amended
and restated version of the Annual Incentive Plan is to permit amounts paid
under the plan to qualify as performance-based compensation which is deductible
for federal income tax purposes. Under recently enacted federal tax law changes,
a public company is generally precluded from deducting annual compensation in
excess of $1 million that is paid to an executive officer named in the summary
compensation table of the proxy statement for that year unless, among other
things, the compensation qualifies as performance-based compensation. Amounts
paid under the amended and restated Annual Incentive Plan are generally intended
to qualify as performance-based compensation, which is excluded from the $1
million limit on deductible compensation. SEE "Stock Option and Compensation
Committee Report on Executive Compensation."
The Annual Incentive Plan provides for an annual bonus pool for cash
incentive awards for any year equal to 6% of operating profit of Coltec and its
consolidated subsidiaries. For purposes of the Annual Incentive Plan, operating
profit is generally defined in the same manner as in the 1994 Long-Term
Incentive Plan. SEE Proposal 2 -- Approval of the 1994 Long-Term Incentive Plan.
The Annual Incentive Plan provides that no award may be paid to executive
officers of Coltec unless operating profit for the year exceeds $100 million and
that the two executive officers at the end of such year who have the highest
base salary for such year may each receive no more than 20% of the bonus pool
for any year. As the bonus pool is determined as a percentage of operating
profit, there is no maximum limit on the size of the pool for any year.
Only officers of Coltec and senior executive employees who are not covered
by an annual incentive plan of one of Coltec's divisions or subsidiaries are
eligible to participate in the Annual Incentive Plan. Approximately 50 officers
and senior executive employees of Coltec and its subsidiaries are eligible to
participate in the Annual Incentive Plan. The Annual Incentive Plan is
administered by the Compensation Committee, which has discretion under the plan
to select plan participants from among the
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class of eligible persons and, subject to the limits noted above, to determine
the amount of the award paid to plan participants. The Compensation Committee
may require that the payment of some or all of an award be deferred until a
later date or dates specified by the committee.
Amounts paid under the Annual Incentive Plan (as in effect for 1993) are
included in column (d) of the Summary Compensation Table. Amounts payable for
1994 will be determined by the Compensation Committee based on the size of the
bonus pool for 1994 and the limits noted above. For these reasons, it is not
possible to determine the benefits or amounts that will be received by any
particular employees or group of employees in 1994 or later years.
PROPOSAL 5 -- APPROVAL OF 1994 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
On March 15, 1994, the Board of Directors adopted the 1994 Stock Option Plan
for Outside Directors (the "1994 Directors Option Plan"), subject to the
approval of the 1994 Directors Option Plan by the shareholders of Coltec at the
1994 annual meeting of shareholders. The shareholders of Coltec are asked to
consider and act upon the matter of approving the 1994 Directors Option Plan.
Approval of this Proposal 5 will require the affirmative vote of the holders of
a majority of the shares of Common Stock voting at the meeting (assuming a
quorum is present). The Board of Directors recommends approval of this Proposal
5. All proxies will be voted in accordance with the instructions contained
thereon. If no specific instructions are given, the persons named as proxies in
the accompanying form will vote FOR Proposal 5.
DESCRIPTION OF THE 1994 DIRECTORS OPTION PLAN. The summary of the 1994
Directors Option Plan which follows is not intended to be complete and is
qualified in its entirety by reference to the text of the 1994 Directors Option
Plan which is attached to this Proxy Statement as Exhibit D.
The 1994 Directors Option Plan provides for automatic grants of stock
options to each member of the Board of Directors who is not an employee of
Coltec or any of its subsidiaries ("Outside Directors"). Each individual elected
as an Outside Director at the 1994 annual shareholders meeting (or who is
initially elected as a director by the shareholders at an annual or special
meeting of shareholders occurring after the 1994 annual meeting) will be granted
an option to purchase 10,000 shares of Common Stock (an "Initial Option"). On
each subsequent Alternate Re-Election Date, as defined in the 1994 Directors
Option Plan, each Outside Director will be granted an additional option to
purchase 2,000 shares of Common Stock (a "Subsequent Option"). The date of grant
of each Initial or Subsequent Option will be the date of the applicable annual
or special meeting. The per share exercise price of each option will be the
average closing price of a share of Common Stock as reported on the New York
Stock Exchange Composite Trading Tape for the date of grant and the four
preceding trading days.
The Initial Options will vest 20% per year beginning on the first
anniversary date of the date of grant. The Subsequent Options will vest 50% per
year beginning on the first anniversary date of the date of grant. Each option
granted under the 1994 Directors Option Plan will terminate on the tenth
anniversary of the date of grant of the option. In the event of an Outside
Director's resignation, removal (other than for cause) or termination as a
member of the Board, the unvested portion of any option granted to an Outside
Director will terminate as of the date of such event, but the vested portion of
the option will remain exercisable until the first anniversary of the date of
such event. In the event of the removal of the Outside Director from the Board
of Directors for cause, the option (including the vested portion thereof) will
terminate in its entirety as of the date of such removal.
The maximum number of shares of Common Stock that may be awarded under the
1994 Directors Option Plan will not exceed 108,000 shares. The 1994 Directors
Option Plan is administered by the Chief Executive Officer ("CEO") of Coltec.
The CEO has authority under the 1994 Directors Option Plan to interpret,
administer and apply the Plan, and to execute and deliver option certificates on
behalf of Coltec.
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Subject to certain limitations set forth in the plan document, the Board of
Directors has the right to amend or terminate the 1994 Directors Option Plan at
any time. Unless earlier terminated by the Board of Directors, the 1994
Directors Option Plan will terminate on July 1, 2004 and no further options
under the plan will be awarded after that date.
If the 1994 Directors Option Plan is approved by the shareholders of Coltec
at the 1994 annual shareholders meeting, each Outside Director serving on the
Board immediately following the date of such meeting will receive an option to
purchase 10,000 shares of Common Stock and will be eligible, in accordance with
the terms and provisions of the 1994 Directors Option Plan, for subsequent
grants of options to purchase 2,000 shares of Common Stock. No other individuals
other than Outside Directors are eligible for grants under the 1994 Directors
Option Plan.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The federal income tax consequences related to the grant and exercise of
options to Outside Directors under the 1994 Directors Option Plan are
substantially similar to the federal income tax consequences described above
with respect to the grant of nonqualified stock options under the 1992 Stock
Plan (SEE Proposal 3 -- Certain Federal Income Tax Consequences), except that
income and payroll taxes are not required to be withheld by Coltec in connection
with the ordinary income recognized by Outside Directors upon exercise of the
options.
PROPOSAL 6 -- RATIFICATION OF APPOINTMENT OF AUDITORS
The Board of Directors has appointed Arthur Andersen & Co., independent
public accountants, as the auditors of Coltec, to serve at the pleasure of the
Board of Directors for 1994. A member of that firm will be present at the Annual
Meeting with the opportunity to make a statement and respond to appropriate
questions by shareholders.
The shareholders of Coltec are asked to consider and act upon the matter of
ratifying the appointment of Arthur Andersen & Co. Approval of this Proposal 6
by the shareholders will require the affirmative votes of the holders of a
majority of the shares of Common Stock voting at the meeting (assuming a quorum
is present). The Board of Directors recommends approval of this Proposal 6. All
proxies will be voted in accordance with instructions contained thereon. If no
specific instructions are given, the persons named as proxies in the
accompanying form will vote FOR Proposal 6.
OTHER MATTERS
In addition to the use of the mails, proxies may be solicited, at the
expense of Coltec, by employees and directors of Coltec personally or by
telephone, facsimile transmission, telegram or other means of communication. In
addition, Kissel-Blake Inc. has been retained by Coltec as soliciting agent and
will be paid a fee of $5,500 by Coltec for this service. Coltec will reimburse
brokerage firms, banks, trustees, nominees and other persons for their
out-of-pocket expenses in forwarding proxy material to beneficial owners of
Common Stock.
As of the date of this Proxy Statement, management has no knowledge of any
business other than that described herein that will be presented for
consideration at the meeting. In the event any other business is presented at
the meeting, it is intended that the persons named in the enclosed proxy will
have authority to vote such proxy in accordance with their judgment on such
business.
SHAREHOLDER PROPOSALS
Shareholder proposals intended to be presented at the 1995 Annual Meeting of
Shareholders must be received by November 30, 1994, by the Secretary of Coltec
(at the address set forth on page one of this Proxy Statement) for inclusion in
the Proxy Statement and form of proxy relating to that meeting.
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ANNUAL REPORTS
Coltec's 1993 Annual Report to Shareholders, which contains financial
statements for the year ended December 31, 1993, accompanies this proxy
statement. Coltec's Annual Report on Form 10-K for its fiscal year ended
December 31, 1993, will be made available (without exhibits), free of charge, to
interested shareholders upon written request to the Secretary of Coltec (at the
address set forth on page one of this Proxy Statement).
By order of the Board of Directors
David I. Margolis
CHAIRMAN OF THE BOARD
AND CHIEF EXECUTIVE OFFICER
New York, New York
May 25, 1994
YOUR VOTE IS IMPORTANT
TO VOTE YOUR SHARES, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY CARD
AND MAIL IT PROMPTLY IN THE ENCLOSED POSTAGE-PAID RETURN ENVELOPE.
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EXHIBIT A
1994 LONG-TERM INCENTIVE PLAN
OF
COLTEC INDUSTRIES INC
EFFECTIVE JANUARY 1, 1994
(AS ADOPTED JANUARY 12, 1994)
<PAGE>
1994 LONG-TERM INCENTIVE PLAN
OF
COLTEC INDUSTRIES INC
1. PURPOSE. The purpose of the 1994 Long-Term Incentive Plan of Coltec
Industries Inc (the "PLAN") is to benefit and advance the interests of Coltec
Industries Inc, a Pennsylvania corporation ("COLTEC"), by rewarding certain
officers and key employees of Coltec and its direct and indirect Subsidiaries
(collectively, the "COMPANY") for their contributions to the financial success
of the Company and thereby motivate them to continue to make such contributions
in the future. The Plan provides for grants of Performance Units, the value of
which is based upon the achieved level of Cumulative Operating Profit (as
hereinafter defined) over the Performance Cycle (as hereinafter defined)
applicable to such units. Subject to certain limits and exceptions set forth in
the Plan, Performance Units are generally settled by the payment to Participants
of a combination of cash and Restricted Stock (as hereinafter defined) equal to
the Award Value (as hereinafter defined) of such units following the end of the
applicable Performance Cycle.
2. DEFINED TERMS. For purposes of the Plan, capitalized terms used herein,
and not otherwise defined herein, shall have the meanings assigned to such terms
in Section 13 hereof.
3. ADMINISTRATION OF THE PLAN.
(a) MEMBERS OF THE COMMITTEE. The Plan shall be administered, and
Performance Units shall be granted hereunder, by the Committee, which shall
consist of two or more members of the Board, duly appointed by the Board. Each
member of the Committee shall be a "disinterested person" within the meaning of
Rule 16b-3 under the Exchange Act and, for periods on and after the date of the
first annual meeting of shareholders to occur after July 1, 1994 at which
directors are elected, an "outside director" within the meaning of Section
162(m) of the Code.
(b) AUTHORITY OF THE COMMITTEE. The Committee may adopt such rules as it
may deem appropriate in order to carry out the purpose of the Plan. Following
the end of each Performance Cycle, the Committee shall determine and certify in
the manner required by Section 162(m) of the Code the extent to which the
Performance Targets applicable to the Performance Cycle have been achieved. All
questions of interpretation, administration and application of the Plan shall be
determined by a majority of the members of the Committee then in office, except
that the Committee may authorize any one or more of its members, or any officer
of Coltec, (i) to execute and deliver documents on behalf of the Committee or
(ii) to serve as the designated person or persons to receive notices, elections
or other communications to the Committee under the Plan. The determination of
such majority shall be final and binding in all matters relating to the Plan,
including, without limitation, any grant of Performance Units or any Award under
the Plan.
(c) LIABILITY OF COMMITTEE MEMBERS. No member of the Committee shall be
liable for anything whatsoever in connection with the administration of the Plan
except such member's own willful misconduct. Under no circumstances shall any
member of the Committee be liable for any act or omission of any other member of
the Committee. In the performance of its functions with respect to the Plan, the
Committee shall be entitled to rely upon information and advice furnished by
Coltec's officers, Coltec's accountants, Coltec's legal counsel and any other
party that the Committee deems necessary, and no member of the Committee shall
be liable for any action taken or not taken in reliance upon any such advice.
4. ELIGIBLE PERSONS; DETERMINATION OF GRANTS. Performance Units may be
awarded only to officers of Coltec and to senior operations management employees
of the Company. The Committee shall have the authority to select the
Participants from among such class of eligible persons to whom Performance Units
may be granted.
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5. AGGREGATE AND INDIVIDUAL LIMITS.
(a) MAXIMUM NUMBER OF PERFORMANCE UNITS AND RESTRICTED SHARES. A maximum
of 300,000 Performance Units may be awarded under the Plan for any Performance
Cycle. The number of Restricted Shares that may be paid to Participants in any
Payment Year shall not exceed 0.5% of the number of issued and outstanding
shares of Common Stock on the first day of such Payment Year; PROVIDED, HOWEVER,
that 1% shall be substituted for .5% for the Payment Year beginning January 1,
1997. A Performance Unit that is forfeited for a given Performance Cycle may not
be subsequently awarded with respect to that Performance Cycle. A Restricted
Share that is forfeited under the terms of the Plan may not be subsequently
reawarded under the Plan.
(b) INDIVIDUAL LIMIT ON PERFORMANCE UNITS. The maximum number of
Performance Units that may be granted to any Participant for a given Performance
Cycle shall not exceed 50,000.
6. PERFORMANCE UNITS.
(a) IN GENERAL. The Committee shall grant Performance Units to eligible
persons prior to the inception of the Performance Cycle to which such units
relate; PROVIDED, HOWEVER, that, for the Performance Cycle beginning January 1,
1994, the grants may be made at any time prior to March 15, 1994. In the event
(i) a new employee is hired by the Company who is otherwise eligible to
participate in the Plan as of the date of hire or (ii) an employee of the
Company (whether or not a current Participant in the Plan) is promoted to a more
senior position with the Company and is otherwise eligible as of the date of the
promotion to participate in the Plan, the Committee may make an interim or
supplemental grant of Performance Units to such individual following the
inception of a Performance Cycle to which such units relate, subject to the
provisions of Section 5 above and to such equitable adjustments as the Committee
may deem necessary or advisable to take into account the lapse of time between
the start of the Performance Cycle and the date of such interim or supplemental
grant. A Participant may receive grants of Performance Units under the Plan for
more than one Performance Cycle.
Performance Units granted under the Plan to a Participant shall be credited
to a Performance Unit Account to be maintained for such Participant. With
respect to each grant of Performance Units to a Participant, the Performance
Unit Account for such Participant shall reflect:
(i) the number of Performance Units granted;
(ii) the Performance Cycle with respect to which the Performance Units
have been granted;
(iii) the Performance Targets applicable to such Performance Units;
(iv) the Award Value to be earned with respect to a Performance Unit if
the Performance Targets are achieved; and
(v) the Award Value Schedule applicable to such Performance Units.
(b) AWARD CERTIFICATE. At the time of grant of Performance Units under the
Plan, the Committee shall notify the Participant of the grant of such
Performance Units in the form of an Award Certificate which shall state (i) the
number of Performance Units granted, (ii) the principal terms of the grant as
enumerated in Section 6(a) above, (iii) that the grant of Performance Units is
subject to all of the terms and conditions of the Plan and (iv) such other
information and such other terms and conditions as the Committee shall determine
to be necessary or advisable.
(c) THRESHOLD TARGET; PERFORMANCE TARGETS; AND AWARD VALUE SCHEDULE. The
Threshold Target, the Performance Targets and Award Value Schedule for a given
Performance Cycle shall be the applicable targets and schedule specified in
Appendix A to the Plan unless, prior to the inception of a Performance Cycle,
the Committee approves a Threshold Target, Performance Target and Award Value
Schedule for that Performance Cycle which vary in whole or in part from the
targets and schedule set forth in Appendix A. In no event will any Award Value
be payable for a Performance Unit
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granted in respect of a Performance Cycle unless the Threshold Target for the
Performance Cycle has been achieved. Unless the Committee determines otherwise,
there shall be no upper limit on the amount of Award Value that may be earned
with respect to a Performance Unit.
(d) PAYMENT OF AWARDS APPLICABLE TO PERFORMANCE UNITS. Subject to Sections
6(e), 7 and 8, the Award Value of a Performance Unit granted with respect to
such Performance Cycle shall be determined by the Committee as soon as
practicable following the end of the Performance Cycle, and a Participant who
has been granted Performance Units for the Performance Cycle shall receive an
Award from the Company equal to the Award Value as so determined multiplied by
the number of Performance Units granted to such Participant for the Performance
Cycle. Subject to Section 9 below, such Award shall be paid by the Company to
the Participant on (or as soon as practicable following) the Payment Date
applicable to the Performance Cycle.
(e) FORM OF PAYMENT. Subject to the provisions of this Section 6(e) and
Section 7 below, two-thirds of the Award payable for a Performance Cycle will be
paid in cash (including check or bank draft) (the "CASH PORTION") and one-third
shall be paid in Restricted Shares (the "SHARE PORTION"). The number of
Restricted Shares payable in respect of the Share Portion shall be determined by
dividing the dollar value of the Share Portion by the Value of a share of Common
Stock on the business day immediately preceding the Payment Date. Any partial
Restricted Share resulting from this calculation will be settled in cash. In the
event that Coltec is precluded from issuing some or all of the Restricted Shares
in settlement of the Share Portion as a result of the limit in Section 5(a)
above on the number of Restricted Shares that may be issued under the Plan in
any Payment Year, the Committee may elect (i) to pay all Participants a reduced
number of Restricted Shares and to settle the remaining amount of the Share
Portion that is not paid in Restricted Shares in cash, (ii) to delay the payment
of a portion of the Restricted Shares payable to all Participants until January
of the next Payment Year or (iii) to take such other action as the Committee
deems equitable. Any action taken by the Committee in accordance with the
previous sentence shall be applied ratably to all Participants who are entitled
to receive a portion of their Award for the applicable Performance Cycle in
Restricted Shares in the proportion that the number of Restricted Shares that
such Participant would have been entitled to receive if the limit in Section
5(a) of the Plan did not apply bears to the total number of Restricted Shares
that would have been awarded to all Participants for such Performance Cycle
without regard to such limit. If the Committee elects the alternative described
in clause (ii) above and Coltec is precluded in the subsequent Payment Year from
paying some or all of the deferred Restricted Shares to a Participant in that
year, the Participant shall receive by no later than January 31 of that Payment
Year a cash payment equal to the Value (determined as of the last business day
in January before the scheduled date of payment) of the deferred Restricted
Shares which Coltec is precluded from paying to the Participant.
(f) ADJUSTMENTS TO AWARD VALUE SCHEDULE OR THE DURATION OF A PERFORMANCE
CYCLE. Anything in the Plan to the contrary notwithstanding, in the event of a
change in the Fiscal Year of Coltec, the Committee may make such adjustments to
the terms and provisions of outstanding grants of Performance Units as the
Committee deems necessary or advisable to take into account such change,
including, without limitation, (i) adjusting the applicable Award Values,
Performance Targets or both, (ii) changing the duration of the affected
Performance Cycles, or (iii) providing that any short Fiscal Year occurring in a
Performance Cycle (and the Company's Operating Profit attributable to such short
Fiscal Year) shall be disregarded for purposes of measuring the duration of the
applicable Performance Cycle and the Company's achievement of the Performance
Targets related to such Performance Cycle. The Committee shall also have the
right to elect at any time prior to the end of a Performance Cycle to terminate
such Performance Cycle on 30 days prior written notice to all affected
Participants (a "SPECIAL TERMINATION"). In the event of a Special Termination,
the Awards payable to Participants in respect of such Performance Cycle shall be
paid to Participants at the time and in the manner provided in Sections 6(d) and
6(e) above, but the amount of each such Award shall be determined in accordance
with the formula [(X) X (Y)], where "X" equals the Award that would have been
payable to a Participant if the Special Termination had not occurred and "Y"
equals a fraction (not greater than 1),
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the numerator of which is the number of days in the Performance Cycle up to and
including the date of the Special Termination and the denominator of which is
the number of days that would have been in the Performance Cycle if the Special
Termination had not occurred. Unless the Committee determines otherwise, a
Special Termination shall not affect any Share Elections previously made by
Participants.
(g) ACQUISITIONS AND DISPOSITIONS. Anything in the Plan to the contrary
notwithstanding, in the event that (i) the Company makes a material acquisition
or divestiture, (ii) the Company materially expands its operations into new
businesses or markets, (iii) Coltec merges with or into, or consolidates with,
any entity (other than a Subsidiary), (iv) the Company undertakes a
recapitalization or reorganization or (v) the Company undertakes any other
transaction which substantially affects the Performance Targets applicable to
outstanding grants of Performance Units, the Committee may make such equitable
adjustments to the terms and provisions of such outstanding grants of
Performance Units to take into account such event, including, without
limitation, any of the adjustments described in clause (i) or (ii) of the first
sentence of Section 6(f) above.
(h) CANCELLATION OF PERFORMANCE UNITS. Upon payment of an Award in respect
of a Performance Unit to a Participant (or the early settlement of Performance
Units in the manner provided in Section 7(b) below in the event of the
termination of a Participant's employment with the Company as a result of death,
Disability or Retirement), the Performance Unit shall terminate and be of no
further force and effect.
7. TERMINATION OF EMPLOYMENT.
(a) GENERAL RULE APPLICABLE TO EMPLOYMENT TERMINATIONS. Except as may be
provided to the contrary in Section 7(b) below, a Participant who ceases to be
employed by the Company shall forfeit as of the date of the Participant's
termination or resignation of employment all Performance Units granted to such
Participant for which the Payment Date has not occurred.
(b) EXCEPTION FOR TERMINATIONS OF EMPLOYMENT AS A RESULT OF DEATH,
DISABILITY OR RETIREMENT. Notwithstanding Section 7(a) above, unless the
Committee determines otherwise, if a Participant's employment with the Company
ceases as a result of his death, Disability or Retirement, the Performance Units
granted to such Participant shall remain outstanding and the Award Value thereof
shall be paid to such Participant (or in the case of the Participant's death, to
the Participant's Beneficiary) on (or as soon as practicable after) the Payment
Date applicable to the Performance Cycle in the manner provided in Section 6(d)
above, except that (i) the Award in respect thereof shall be paid entirely in
cash and (ii) such Award shall be determined in accordance with the formula [(X)
X (Y)], where "X" equals the Award that would have been payable to a Participant
if such termination or resignation of employment had not occurred, and "Y"
equals a fraction (not greater than 1), the numerator of which is the number of
days in the Performance Cycle up to and including the date of such termination
or resignation of employment and the denominator of which is the number of days
that would have been in the Performance Cycle if such termination or resignation
of employment had not occurred. Notwithstanding the previous sentence, in the
event a Participant's employment with the Company ends as a result of death,
Disability or Retirement, the Committee may elect to accelerate the settlement
of outstanding Performance Units for which the applicable Performance Cycle has
not been completed to any date after the Participant's termination of employment
with the Company and prior to the last fiscal quarter of the last Fiscal Year in
such Performance Cycle. The Committee's decision to accelerate (or not to
accelerate) the settlement of outstanding Performance Units with respect to a
Performance Cycle shall not be controlling with respect to the Committee's
decision with regard to any other Performance Units granted to the affected
Participant or to any other Participant. In the event that the Committee elects
to accelerate the settlement of outstanding Performance Units as provided
herein, the Committee shall calculate the amount payable to the Participant to
take into account such factors as the Committee deems appropriate, including,
without limitation, (i) the circumstances resulting in the termination or
resignation of employment, (ii) a discount to reflect the time value of the
early payment, (iii) the period of time during the Performance Cycle during
which the Participant was in the employ of the Company and (iv) the Committee's
estimate of the likelihood that the
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Performance Targets would have been achieved for the Performance Cycle. Any such
action by the Committee may be taken without the consent of the Participant or
the Participant's Beneficiary, shall be subject to such terms and conditions as
the Committee deems appropriate, and shall be final and binding for all purposes
of the Plan.
8. ELECTION TO RECEIVE ADDITIONAL RESTRICTED SHARES.
(a) IN GENERAL. Subject to the approval of the Compensation Committee, a
Participant may make a Share Election to receive some or all of the Cash Portion
of an Award in the form of Restricted Shares (the "ELECTIVE SHARES"); PROVIDED,
HOWEVER, that, if Coltec is unable to pay the full amount of the Share Portion
to all Participants in any Payment Year as a result of the limit in Section 5(a)
above on Restricted Shares that may be issued under the Plan in such Payment
Year, then the amount of the Cash Portion subject to the Share Election shall be
paid to the Participant in cash in the manner provided in Section 6(e) above and
the corresponding Share Election shall be deemed void and of no further force
and effect; and PROVIDED FURTHER that, if, after paying the Share Portion for a
given Payment Year, Coltec is prohibited by the limit in Section 5(a) above from
issuing in such year the full number of Elective Shares for which Share
Elections have been made, then the amount of the Cash Portion subject to all
such Share Elections shall be reduced ratably (in substantially the same manner
as described in Section 6(e) above) until the limit on the number of Restricted
Shares that may be issued in the Payment Year is satisfied. The amount of the
Cash Portion subject to such reduction described in the previous sentence shall
be paid to the Participant in cash in the manner provided in Sections 6(d) and
6(e) above, and the Share Election shall be deemed void and of no further force
and effect with respect to the portion so paid. The Committee shall have the
authority at any time prior to payment of Elective Shares to a Participant to
disallow such Participant's Share Election in whole or in part, and any action
by the Committee shall be final and binding on all interested persons. A Share
Election shall immediately terminate and be of no further force and effect if a
Participant's employment with the Company ends for any reason prior to the
payment of the Award subject to the election.
(b) FORM AND TIMING OF SHARE ELECTIONS. A Share Election with respect to
the Award payable for a given Performance Cycle (i) shall be in writing and
shall be received by the Committee prior to beginning of the third Fiscal Year
in the Performance Cycle to which the election relates, (ii) shall state that it
may not be revoked by the Participant after the beginning of the third Fiscal
Year of the Performance Cycle to which the election relates without the prior
consent of the Committee, and (iii) shall specify the percentage (in multiples
of 10%, but not greater than 100%) of the Cash Portion subject to the Election.
A Share Election may apply to more than one Performance Cycle and, unless the
Committee determines otherwise, may be revoked in writing by a Participant with
respect to the Award payable for a given Performance Cycle if the written
revocation is delivered to the Committee prior to the beginning of the third
Fiscal Year of such Performance Cycle.
(c) NUMBER OF ELECTIVE SHARES. The number of Elective Shares awarded to a
Participant as a result of a Share Election shall be determined by the formula:
[(W x X) x Z], where
-------
Y
"W" equals the value of the Cash Portion of the Award subject to the
Share Election;
"X" equals the percentage of the Cash Portion specified in the written
Share Election form (as such percentage may have been reduced by the
Committee in accordance with Section 8(a) above);
"Y" equals the Value of a share of Common Stock on the business day prior
to the Payment Date applicable to the Award; and
"Z" equals 1.15.
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Any partial Elective Share resulting from this formula shall be rounded to
the next nearest whole number (with .50 being rounded down to the next lowest
whole number).
(d) DELIVERY OF ELECTIVE SHARES. Elective Shares shall be paid to the
Participant at the same time as the balance of the Award for the applicable
Performance Cycle is paid to the Participant.
9. RESTRICTED SHARES.
(a) VESTING. The Restricted Shares awarded to a Participant (whether under
Section 6(e) or 8 above) shall vest and become nonforfeitable in accordance with
the following vesting schedule:
<TABLE>
<CAPTION>
ANNIVERSARY OF THE FIRST
JANUARY 1ST FOLLOWING THE
END OF THE APPLICABLE CUMULATIVE PERCENT
PERFORMANCE CYCLE VESTED VESTED
- - ----------------------------------- ------------------
<S> <C>
First 33 1/3
Second 66 2/3
Third 100
</TABLE>
Any partially vested Restricted Share resulting from the schedule above
shall be rounded to the next nearest whole number (with .50 being rounded down
to the next lowest whole number). Notwithstanding the foregoing, a Participant
shall be 100% vested in his Restricted Shares (including his then nonvested
Elective Shares) if his employment with the Company ends as a result of his
death, Disability or Normal Retirement. If a Participant's employment with the
Company ends as a result of Early Retirement, then the Participant will be 100%
vested in his Restricted Shares (other than his then nonvested Incremental
Elective Shares), and will forfeit, unless the Committee determines otherwise,
all nonvested Incremental Elective Shares as of the date of such Early
Retirement. If a Participant's employment with the Company ends for any reason
other than a reason specified in the two preceding sentences, then, unless the
Committee determines otherwise, the Participant will forfeit all nonvested
Restricted Shares as of the date of his termination or resignation of
employment.
(b) DELIVERY AND OWNERSHIP OF RESTRICTED SHARES. A Participant shall be
the beneficial owner of the Restricted Shares granted to him under the Plan and,
except for the risk of forfeiture noted above and the restrictions on transfer
described below (which risk of forfeiture and restrictions may apply to any
dividends, distributions or other rights related to such Restricted Shares, as
determined by the Committee), a Participant shall be entitled to all rights of
ownership, including, without limitation, the right (i) to vote such Restricted
Shares and (ii) to receive cash or stock dividends thereon. Upon the request of
a Participant, Coltec shall deliver to the person or persons designated by the
Participant certificate(s) representing those Restricted Shares which have
vested. The certificates so delivered may contain such legends as the Committee
determines to be necessary or advisable. Until such time as a Participant makes
a valid disposition of his vested Restricted Shares or requests delivery of the
vested Restricted Shares in accordance with the previous sentence, the Company
shall maintain possession of the certificates representing the vested Restricted
Shares.
(c) RESTRICTION ON TRANSFER. Prior to the vesting of the Restricted Shares
as provided in Section 9(a) above, none of the Restricted Shares may be sold,
assigned, exchanged, transferred, pledged, hypothecated, mortgaged, or otherwise
disposed of or encumbered, directly or indirectly, whether or not for value, and
whether or not voluntarily, except that the Participant shall be entitled to
designate a Beneficiary to receive his Restricted Shares, if any, in the event
of the Participant's death.
(d) COMPLIANCE WITH LAW. As a condition to the delivery of Restricted
Shares to a Participant, Coltec may require the Participant (i) to furnish
evidence satisfactory to Coltec (including a written and signed representation
letter) to the effect that all such Restricted Shares are being acquired for
investment only and not for resale or distribution, (ii) to agree that all such
Restricted Shares shall only be sold by the Participant following registration
under the Securities Act or pursuant to an exemption therefrom and (iii) that,
following the vesting of the Restricted Shares, any subsequent sale, assignment,
transfer, pledge, mortgage, encumbrance or other disposition, directly or
indirectly,
A-6
<PAGE>
whether or not for value, and whether or not voluntarily, of such Restricted
Shares shall be made in compliance with any applicable Federal or state
securities laws and the rules or regulations of any exchange or automated
quotation system on which the Common Stock is listed.
10. MISCELLANEOUS PROVISIONS.
(a) RESTRICTIONS ON TRANSFER. The rights of a Participant with respect to
Performance Units may not be assigned or transferred, otherwise than by will or
by the laws of descent and distribution, except that the Participant shall be
entitled to designate the Beneficiary to receive payments, if any, under the
Plan in the event of the Participant's death.
(b) NO RIGHTS TO GRANTS OR CONTINUED EMPLOYMENT. No employees of the
Company or other person shall have any claim or right to be granted Performance
Units under the Plan. Neither the Plan nor any action taken hereunder shall be
construed as giving any employee any right to be retained in the employ of the
Company.
(c) SHAREHOLDER RIGHTS. Except as expressly provided in Section 9(b)
above, the grant of Performance Units under the Plan shall not entitle a
Participant or Beneficiary thereof to any dividend or distribution rights, any
voting rights or any other rights of a shareholder with respect to the Common
Stock.
(d) TAX WITHHOLDING AND TAX ELECTION. The Company shall have the right to
withhold any amounts required by Federal, state or local law to be withheld in
connection with the payment of an Award or the vesting or delivery of Restricted
Shares. The Committee may, as a condition to the delivery of Restricted Shares
to a Participant, require the Participant to agree to make (or to refrain from
making) an election with respect to such Restricted Shares under Section 83(b)
of the Code. If the Committee so determines, Participants will have the right to
elect to have a portion of the Restricted Shares awarded to them delivered to
the Company to satisfy any Federal, state or local tax liability incurred by
them in connection with the vesting of such shares. Any such election by a
Participant shall be subject to the approval of the Committee and shall be made
in accordance with the procedures established by the Committee from time to
time.
(e) NO FUNDING OF THE PLAN. The Plan shall not be funded, the Company
shall not be required to segregate any funds representing Performance Units
awarded to Participants or amounts payable to any Participant in respect of any
Award, and nothing in the Plan should be construed as providing for such
segregation. A Participant's rights to payment under the Plan shall be those of
a general creditor of the Company.
(f) NO RESTRICTION ON RIGHT OF COMPANY TO EFFECT CORPORATE CHANGES. The
Plan shall not affect in any way the right or power of Coltec or its
shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of stock
or of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect the
Common Stock or the rights thereof or which are convertible into or exchangeable
for Common Stock, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
(g) HEADINGS. The headings of Sections and subsections herein are included
solely for convenience of reference and shall not affect the meaning of any of
the provisions of the Plan.
(h) GOVERNING LAW. The Plan and all rights hereunder shall be construed in
accordance with and governed by the laws of the State of New York.
11. AMENDMENTS AND TERMINATION. The Board may at any time alter, amend,
suspend or terminate the Plan in whole or in part. No termination or amendment
of the Plan may, without the consent of the Participant to whom any Performance
Units shall previously have been granted,
A-7
<PAGE>
adversely affect the rights of such Participant in such Performance Units;
PROVIDED, HOWEVER, that nothing in this Plan shall limit the right of the
Committee in accordance with Section 6(f) above to terminate as of any date
selected by the Committee the Performance Cycles then in effect.
12. EFFECTIVE DATE OF THE PLAN. The Plan shall be effective as of January
1, 1994, subject to the approval of the Plan by the shareholders of Coltec at
the first annual meeting of shareholders to be held after the Effective Date. If
the Plan is not approved by the shareholders of Coltec at such annual meeting,
the Plan and any grants of Performance Units made under the Plan on or prior to
the date of such annual meeting shall be void AB INITIO and of no further force
and effect.
13. DEFINITIONS.
AWARD: the payment made to a Participant, pursuant to Sections 6(d), 6(f),
7(b) and 8 of the Plan in respect of the Participant's Performance Units
following the end of a Performance Cycle. An Award for a given Performance Cycle
shall include the Cash Portion, the Share Portion and any applicable Elective
Shares.
AWARD CERTIFICATE: the certificate from Coltec to the Participant notifying
the Participant in accordance with Section 6(b) of the terms and conditions of a
grant of Performance Units under the Plan.
AWARD VALUE: the amount payable in respect of a Performance Unit,
determined by the Committee on the basis of the Award Value Schedule and the
extent to which the Performance Targets applicable to such Performance Unit has
been achieved over the Performance Cycle.
AWARD VALUE SCHEDULE: the schedule determined by the Committee in
accordance with Section 6(c) of the Plan which specifies the Award Value of a
Performance Unit based on the achievement of the Performance Targets over a
Performance Cycle. Subject to Section 6(c) above, the Award Value Schedule for
each Performance Cycle is attached as Appendix A.
BENEFICIARY: the person designated in writing from time to time by the
Participant on a form specified by the Committee for this purpose to receive
payments, if any, under the Plan in the event of such Participant's death or, if
no such person has been designated, the Participant's estate; PROVIDED, HOWEVER,
no written Beneficiary designation shall be effective unless it is received by
the Company prior to the date of death of the Participant.
BOARD: the Board of Directors of Coltec.
CASH PORTION: the portion of the Award for a Performance Cycle paid in cash
in accordance with Section 6(e).
CODE: the Internal Revenue Code of 1986, as amended, and the applicable
rulings and regulations thereunder.
COLTEC: Coltec Industries Inc.
COMPANY: Coltec and its Subsidiaries.
COMMITTEE: the Stock Option and Compensation Committee of the Board.
COMMON STOCK: the common stock, par value $0.01 per share, of Coltec.
CUMULATIVE OPERATING PROFIT: the sum of the Operating Profit for each
Fiscal Year in a Performance Cycle.
DISABILITY: illness or incapacity as a result of which the Participant is
entitled to receive, and actually receives, payments under the long-term
disability policy of the Company applicable to the Participant at the time of
the participant's termination of employment. All determinations as to the date
and extent of disability of any Participant shall be made by the Committee, upon
the basis of such evidence as the Committee deems necessary and desirable.
A-8
<PAGE>
EARLY RETIREMENT: resignation or termination of employment after attainment
of an age required for payment of an immediate pension pursuant to the terms of
the qualified defined benefit pension plan of the Company in which the
Participant participates; PROVIDED, HOWEVER, that no resignation prior to a
Participant's 55th birthday or which qualifies as a Normal Retirement shall be
deemed an Early Retirement.
ELECTIVE SHARES: Restricted Shares (including Incremental Elective Shares)
awarded to a Participant as a result of a Share Election made in accordance with
Section 8 above.
EXCHANGE ACT: the Securities Exchange Act of 1934, as amended, and the
applicable rulings and regulations thereunder.
FISCAL YEAR: the fiscal year of Coltec as determined by the Board from time
to time. As of the Effective Date, the Fiscal Year is the calendar year.
INCREMENTAL ELECTIVE SHARES: that number of the Elective Shares granted to
a Participant as a result of a Share Election equal to the difference which
results from subtracting "A" from "B", where "A" equals the number of Elective
Shares that would have been granted to the Participant in connection with such
Share Election if "Z" in the formula set forth in Section 8(c) above were equal
to 1, and "B" equals the total number of Elective Shares actually granted to the
Participant in connection with such Share Election. For purposes of Section 9(a)
above, the Incremental Elective Shares shall vest ratably on each applicable
vesting date.
NORMAL RETIREMENT: resignation or termination of employment after
attainment of an age required for payment of an immediate pension pursuant to
the terms of the qualified defined benefit pension plan of the Company in which
the Participant participates; PROVIDED, HOWEVER, that no resignation or
termination prior to a Participant's 65th birthday shall be deemed a Normal
Retirement unless the Committee so determines in its sole discretion.
OPERATING PROFIT: with respect to any full Fiscal Year, the net earnings of
Coltec and its consolidated subsidiaries, plus interest expense and provisions
for income taxes, minus interest income and excluding nonrecurring items,
extraordinary items, accounting principle changes and discontinued operations
(as such terms are defined under United States generally accepted accounting
principles ("GAAP") as in effect from time to time) in such Fiscal Year, as
determined by the Committee from the Consolidated Statement of Earnings of
Coltec and its consolidated subsidiaries for such Fiscal Year reported on by
Coltec's independent public accountants and after taking account of accruals for
such year with respect to then outstanding Performance Units. Nonrecurring items
are material events or transactions that are unusual in nature or occur
infrequently. Accounting principle changes result from the adoption of GAAP
different from the GAAP at the start of a Performance Cycle.
PARTICIPANTS: the individuals selected by the Committee from the group of
eligible persons specified in Section 4 for a grant of Performance Units under
the Plan.
PAYMENT DATE: with respect to a Performance Cycle, the tenth business day
following the press release announcing the Company's unaudited annual financial
results for the last Fiscal Year of such Performance Cycle.
PAYMENT YEAR: the calendar year in which the Payment Date applicable to a
Performance Cycle occurs.
PERFORMANCE CYCLE: subject to Section 6(f) above, a period of 3 consecutive
Fiscal Years, as designated by the Committee pursuant to Section 7(b) of the
Plan. Subject to Section 12 above, the first Performance Cycle under the Plan
shall commence on January 1, 1994.
PERFORMANCE TARGETS: the goals for Cumulative Operating Profit established
by the Committee for a given Performance Cycle.
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<PAGE>
PERFORMANCE UNIT: a contractual right to receive Award Value based on the
realization of the Performance Targets for a given Performance Cycle, subject to
such terms and conditions of the Plan and the Award Certificate.
PERFORMANCE UNIT ACCOUNT: the account established in respect of the grant
of Performance Units to a Participant in accordance with Section 6(a) above.
RESTRICTED SHARE: a forfeitable share of Common Stock granted to a
Participant in accordance with Section 6(e) or 8 above.
RETIREMENT: Early Retirement or Normal Retirement.
SECURITIES ACT: the Securities Act of 1933, as amended, and the applicable
rulings and regulations thereunder.
SHARE ELECTION: an election by a Participant in accordance with Section 8
above to receive a percentage of the Cash Portion of an Award in Restricted
Shares.
SHARE PORTION: the portion of the Award for a Performance Cycle paid in
Restricted Shares in accordance with Section 6(e).
SUBSIDIARY: any corporation of which 50% or more of the issued and
outstanding voting securities are beneficially owned by Coltec. For purposes of
this definition and the other provisions of the Plan, "beneficial ownership"
shall be determined in accordance with Section 13(d) of the Exchange Act.
THRESHOLD TARGET: the minimum Performance Target which must be achieved in
order for an Award to be paid in respect of a Performance Unit. Subject to
Section 6(c) above, the Threshold Target for each Performance Cycle will be
Cumulative Operating Profit of $600 million.
VALUE: the "Value" of a share of Common Stock on a given date shall be the
average closing price of a share of Common Stock on such national securities
exchange as may be designated by the Committee or, in the event that the Common
Stock is not listed for trading on a national securities exchange but is quoted
on an automated quotation system, the average closing bid price per share of
Common Stock on such automated quotation system or, in the event that the Common
Stock is not quoted on any such system, the average of the closing bid prices
per share of Common Stock as furnished by a professional marketmaker making a
market in the Common Stock designated by the Committee (the "AVERAGE CLOSING
PRICE"), for the 30-day period ending on such date. The Average Closing Price of
a share of Common Stock shall be determined by dividing (X) by (Y), where (X)
shall equal the sum of the closing prices for the Common Stock on each day that
the Common Stock was traded and a closing price was reported on such national
securities exchange or on such automated quotation system or by such
marketmaker, as the case may be, during such period, and (Y) shall equal the
number of days on which the Common Stock was traded and a closing price was
reported on such national securities exchange or on such automated quotation
system or by such marketmaker, as the case may be, during such period.
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<PAGE>
APPENDIX A
AWARD VALUE SCHEDULES
THREE-YEAR PERFORMANCE CYCLE
BEGINNING JANUARY 1, 1994
<TABLE>
<CAPTION>
PERFORMANCE TARGETS FOR CUMULATIVE OPERATING PROFIT AWARD VALUE
- - ------------------------------------------------------ ------------------------------------------------------
<S> <C>
Less than $600 million* $ 0.00
$600 million $36.00
Over $600 million $36.00 plus $0.10 for each $1 million over $600
million
<FN>
- - ------------------------
* Threshold Target
</TABLE>
THREE-YEAR PERFORMANCE CYCLES
BEGINNING AFTER DECEMBER 31, 1994
<TABLE>
<CAPTION>
PERFORMANCE TARGETS FOR CUMULATIVE OPERATING PROFIT AWARD VALUE
- - ------------------------------------------------------ ------------------------------------------------------
<S> <C>
Less than $600 million* $ 0.00
$600 million $12.00
Over $600 million $12.00 plus $0.0333 for each $1 million over $600
million
<FN>
- - ------------------------
* Threshold Target
</TABLE>
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<PAGE>
EXHIBIT B
AMENDMENT NO. 1
TO THE
COLTEC INDUSTRIES INC
1992 STOCK OPTION AND INCENTIVE PLAN
1. The first sentence of Section 4. SHARES OF STOCK SUBJECT TO THE
PLAN. is hereby amended to read as follows:
"The number of shares of Common Stock under the Plan that may be issued
pursuant to Incentive Stock Rights, Stock Options (including any Stock
Options granted pursuant to Section 12(b) hereof), Stock Appreciation Rights
and Restricted Stock grants shall not exceed in the aggregate, 7,360,000
shares of Common Stock."
2. Section 7. ADMINISTRATION OF THE PLAN. is hereby amended by adding the
following at the end thereof:
"No employee may be granted Stock Options or Stock Appreciation Rights
under the Plan in any thirty-six month period beginning on or after January
1, 1994 with respect to a number of shares of Common Stock which is in
excess of fifteen percent (15%) of the total number of shares of Common
Stock authorized to be issued pursuant to the Plan immediately following the
date of the annual meeting of shareholders in 1994."
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<PAGE>
EXHIBIT C
ANNUAL INCENTIVE PLAN
FOR CERTAIN EMPLOYEES OF COLTEC INDUSTRIES INC
AND ITS SUBSIDIARIES
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1994)
1. PURPOSE OF THE PLAN.
The purpose of this Annual Incentive Plan (the "PLAN") is to provide an
incentive and reward to employees of Coltec Industries Inc (the "CORPORATION")
and its subsidiaries who are in a position to make substantial contributions to
the management, growth and success of the business by making such employees
participants in the profits from the business through the medium of incentive
awards.
2. ADMINISTRATION OF THE PLAN.
(a) This Plan shall be administered by a committee which shall consist of
not less than two members of the Board of Directors of the Corporation and shall
be designated the Stock Option and Compensation Committee of the Board of
Directors (the "COMMITTEE"). Each member of the Committee shall be a
"DISINTERESTED PERSON" within the meaning of Rule 16b-3 under the Securities
Exchange Act of 1934, as amended, and, for periods on and after the date of the
first annual meeting of shareholders to occur after July 1, 1994 at which
directors are elected, an "OUTSIDE DIRECTOR" within the meaning of Section
162(m) of the Internal Revenue Code of 1986, as amended (the "CODE"). The
Committee shall be appointed by the Board of Directors, which may from time to
time appoint members to the Committee in substitution for or in addition to
members previously appointed and may fill vacancies, however caused, in the
Committee. The Board of Directors shall also designate one of the members of the
Committee as its Chairman. The Committee shall hold its meetings at such times
and places as it may determine. A majority of its members shall constitute a
quorum. All determinations of the Committee shall be made by a majority of its
members. Any decision or determination of the Committee reduced to writing and
signed by all the members shall be fully as effective as if it had been made by
a majority vote at a meeting duly called and held. The Committee may appoint a
secretary (who need not be a member of the Committee) and may make such rules
and regulations for the conduct of its business as it shall deem advisable. No
member of the Committee shall be liable, in the absence of bad faith, for any
act or omission with respect to his service on the Committee. Service on the
Committee shall constitute service as a director of the Corporation so that the
members of the Committee shall be entitled to indemnification and reimbursement
as directors of the Corporation pursuant to its By-laws.
(b) The Committee is authorized to interpret this Plan and may from time to
time adopt such rules and regulations for carrying out this Plan as it may deem
best. Decisions of the Committee shall be final, conclusive and binding upon all
parties, including the Corporation, the shareholders and the employees, except
that the Committee shall rely upon the amount of Operating Profit (as
hereinafter defined) which the independent public accountants of the Corporation
determine and report for each year.
3. PLAN LIMIT.
No awards to Executive Officers shall be made under this Plan for any year
unless Operating Profit for such year exceeds $100 million (the "THRESHOLD
TARGET").
4. MAXIMUM AMOUNT AVAILABLE FOR INCENTIVE AWARDS UNDER THE PLAN FOR ANY YEAR.
(a) The maximum amount available for incentive awards under this Plan for
any year (the "BONUS POOL") shall be six percent of Operating Profit.
(b) The maximum amount that may be paid to a Named Executive (as
hereinafter defined) under the Plan for any year shall not exceed 20% of the
Bonus Pool for such year (the "NAMED
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EXECUTIVE LIMIT"). For purposes of the previous sentence, a "NAMED EXECUTIVE"
for a given year refers to each of the two executive officers at the end of such
year who have the highest annual base salary for such year as compared to all
other executive officers of the Corporation at the end of such year.
5. DEFINITIONS.
(a) The term "OPERATING PROFIT" as used herein shall mean, for each year,
the net earnings of the Corporation and its consolidated subsidiaries, plus
interest expense and provisions for income taxes, minus interest income and
excluding nonrecurring items, extraordinary items, accounting principle changes
and discontinued operations (as such terms are defined under United States
generally accepted accounting principles ("GAAP") as in effect from time to
time) in such year, as determined from the Consolidated Statement of Earnings of
the Corporation and its consolidated subsidiaries for such year reported on by
the Corporation's independent public accountants, less the amount of any
provision for awards under this Plan or any other incentive plan or arrangement
of the Corporation or any subsidiary (if not previously deducted in computing
Operating Profit) for such year, plus the amount of any deferred award under
this Plan which shall have become forfeited during such year (if not previously
included in computing Operating Profit) which was deducted in computing
Operating Profit for any prior year. Nonrecurring items are material events or
transactions that are unusual in nature or occur infrequently. Accounting
principle changes result from the adoption of GAAP different from the GAAP at
the start of a year.
(b) The term "EXECUTIVE OFFICERS" shall mean all officers of the
Corporation, but shall not include assistant officers.
6. PARTICIPATION IN THE PLAN.
(a) Participation in this Plan for each year shall be limited to those
employees of the Corporation and its subsidiaries who, in the opinion of the
Committee, are in a position to influence the overall success of the Corporation
and who are selected by the Committee.
(b) The term "EMPLOYEES" shall include officers as well as other senior
executives of the Corporation and its subsidiaries who are not covered by an
annual bonus plan of one of the Corporation's divisions or subsidiaries, and
shall include directors who are also employees of the Corporation or a
subsidiary. The term "SUBSIDIARY" as used in this Section 6(b) shall mean any
subsidiary of the Corporation which is designated by the Committee as a
participating subsidiary for purposes of this Plan.
7. DETERMINATION OF INCENTIVE AWARDS.
(a) As promptly as practicable after the close of each year, the
independent public accountants of the Corporation shall determine the Operating
Profit for such year and report the amount thereof to the Committee.
(b) The Committee may make awards for each year totaling any amount not
greater than the amount of the Bonus Pool for such year; PROVIDED that, with
respect to awards to Executive Officers, the Threshold Target has been achieved;
and PROVIDED FURTHER that the maximum amount of the award to any Named Executive
shall not exceed the Named Executive Limit for such year specified in Section
4(b). If a Named Executive's award for a given year is less than the Named
Executive Limit for such year, the difference between the amount paid to the
Named Executive and the Named Executive Limit shall not be paid or otherwise
reallocated under the Plan to any other participants. The Committee shall not be
obligated to make awards for the maximum amount available nor to make any awards
at all if, in the sole discretion of the Committee, awards are not appropriate
in a given year. Any unawarded balance of the maximum amount available for
awards in any year shall not be carried forward or made available for awards in
any future year.
(c) The Committee shall have absolute discretion to determine the employees
who are to receive awards under this Plan for any year and to determine the
amount of such awards. Recommendations as to the employees who are to receive
awards under this Plan for any year and as to the amount of such awards may be
made to the Committee by the Chief Executive Officer of the Corporation.
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<PAGE>
(d) A person whose employment terminates during the year or who is granted
a leave of absence during the year may, in the discretion of the Committee and
under such rules as the Committee may from time to time prescribe, receive an
award with respect to the period of his services during such year.
(e) The amount determined and reported by the independent public
accountants of the Corporation as the Operating Profit for a given year shall be
final, conclusive and binding upon all parties, including the Corporation, the
shareholders and the employees, notwithstanding any subsequent special item or
surplus charge or credit which may be considered applicable in whole or in part
to such year; PROVIDED, HOWEVER, that, if the maximum amount determined and
reported by the independent public accountants of the Corporation as the
Operating Profit for any year shall later be held by final judgment of a court
of competent jurisdiction to have been more than the actual Operating Profit for
such year, the amounts subsequently available for awards under this Plan shall
be reduced by the amount of any excess paid under the Plan as a result of the
overstatement of Operating Profit, except that, if the amount awarded for such
year was less than the recalculated Bonus Pool for such year, the amount of the
reduction in future awards shall be decreased by such difference. Any such
overstatement of Operating Profit and resulting excess awards shall be corrected
exclusively by adjustment of the amounts subsequently available for awards and
not by recourse to any person.
8. METHOD AND TIME OF PAYMENT OF AWARDS.
(a) Following the completion of each year, the Committee shall certify the
amount of the Bonus Pool in the manner required by Section 162(m) of the Code.
Upon final determination of awards for each year by the Committee, the Committee
shall have sole authority to determine the method of payment of each award.
(b) Awards for any year shall be paid in cash.
(c) Awards shall be paid in full, as soon as practicable after the end of
the year for which the award is made, except that, subject to such rules and
regulations as may be adopted by the Committee, the Committee shall have
discretion, with respect to any class or classes of employees, to defer, in full
or in part, payment of awards, or to defer, in full or in part, payment of
awards in specific cases.
(d) Awards deferred under this Plan shall become payable to the recipient
or his beneficiary in such manner, at such time or times (which may be either
before or after retirement or other termination of service), and subject to such
conditions, as the Committee in its sole discretion shall determine. A person to
whom an award has been made shall not have any interest in the cash awarded to
him until the cash has been paid to him in accordance with the determination of
the Committee.
Any forfeited deferred awards shall be included in Operating Profit if such
forfeited awards have previously been charged against Consolidated Net Income.
9. OTHER INCENTIVE PLANS.
Any division or subsidiary of the Corporation may have a separate incentive
plan or arrangement for the employees of that division or subsidiary.
Awards under any such separate incentive plans or arrangements shall not be
included in or considered a part of the maximum amount available for awards
under this Plan. However, awards made in any division or subsidiary of the
Corporation which may heretofore or hereafter have any such separate incentive
plan or arrangement shall be deducted from the income of such division or
subsidiary before computation of Operating Profit.
10. MODIFICATION, SUSPENSION OR TERMINATION.
While it is contemplated that awards will be made annually, the Board of
Directors of the Corporation may at any time terminate or from time to time
modify or suspend, in whole or in part, and if suspended, may reinstate, any or
all of the provisions of this Plan, except that no modification of this Plan by
the Board of Directors without the approval of shareholders shall increase the
maximum
C-3
<PAGE>
amount available for awards under this Plan for any year or render any member of
the Committee eligible for an award under this Plan or under any other incentive
plan of the Corporation or any subsidiary.
11. MISCELLANEOUS.
In the event of a change in the Corporation's fiscal year, this Plan shall
apply, with PRO RATA adjustment in Operating Profit to be applied, for any
intermediate period not consisting of twelve months, and shall then apply to
each fiscal year following.
This Plan shall be submitted to the shareholders of the Corporation at the
annual meeting of shareholders in 1994, and if approved by the shareholders
shall become effective as of January 1, 1994. Any approval of shareholders under
this Plan shall require the affirmative vote of the holders of a majority of the
outstanding voting stock of the Corporation present in person or by proxy at the
meeting and voting on the proposal.
C-4
<PAGE>
EXHIBIT D
1994 STOCK OPTION PLAN FOR OUTSIDE DIRECTORS
OF
COLTEC INDUSTRIES INC
ARTICLE I
PURPOSE
The purpose of the 1994 Stock Option Plan for Outside Directors of Coltec
Industries Inc (the "PLAN") is to retain the services of qualified persons who
are not employees of the Company to serve as members of the Board of Directors
of the Company and to secure for the Company the benefits of the incentives
inherent in increased stock ownership by paying such persons a portion of their
compensation for such service through the grant of stock options to purchase
shares of Common Stock.
ARTICLE II
DEFINITIONS
"ALTERNATE RE-ELECTION DATE" means any date (i) which is the date of an
individual's election as an Outside Director by the shareholders of the Company
and (ii) which is either (A) the second annual meeting of shareholders to occur
after an individual's initial election as an Outside Director by the
shareholders or (B) the second annual meeting of shareholders to occur after any
prior Alternate Re-Election Date; PROVIDED, HOWEVER, that no Alternate
Re-Election Date shall occur after the Termination Date.
"BENEFICIARY" means the person or persons designated by an Outside Director
to exercise an Option in the event of an Outside Director's death or, if no such
person is designated, the Outside Director's estate.
"BOARD" means the Board of Directors of the Company.
"COMMON STOCK" means the common stock of the Company, par value $.01 per
share.
"COMPANY" means Coltec Industries Inc, a Pennsylvania corporation.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"FAIR MARKET VALUE" means, with respect to the Common Stock, the average of
the closing prices as reported on the New York Stock Exchange Composite Trading
Tape for the date of determination and the four preceding trading days.
"OPTION" means an option to purchase shares of Common Stock granted under
the Plan to an Outside Director, and includes the Initial Options and the
Subsequent Options.
"OUTSIDE DIRECTOR" means a member of the Board who is not an employee of the
Company or any of its subsidiaries.
"TERMINATION DATE" means July 1, 2004.
ARTICLE III
SHARES AVAILABLE
Subject to the provisions of Article XII of the Plan, no more than 108,000
shares of Common Stock shall be issued pursuant to the exercise of Options
granted under the Plan. If an Option is forfeited or expires without being
exercised, the shares of Common Stock subject to the Option shall be available
D-1
<PAGE>
for additional Option grants under the Plan. Either authorized and unissued
shares of Common Stock or issued and re-acquired shares of Common Stock may be
delivered pursuant to the exercise of Options granted under the Plan.
ARTICLE IV
PARTICIPATION
All Outside Directors shall participate in the Plan. Grants of Options to
purchase Common Stock may be made pursuant to the Plan only to Outside
Directors.
ARTICLE V
GRANTS OF OPTIONS
5.01 INITIAL GRANTS. Each individual (i) who is elected as an Outside
Director at the 1994 annual meeting of shareholders, or (ii) who is initially
elected as an Outside Director to the Board at any annual or special meeting of
shareholders held after the 1994 annual meeting of shareholders shall be granted
an Option to purchase 10,000 shares of Common Stock, effective as of the date of
such individual's election to the Board (the "INITIAL OPTION").
5.02 PERIODIC GRANTS. Each Outside Director who is reelected to the Board
by the shareholders of the Company on an Alternate Re-Election Date shall be
awarded, effective as of such date, an additional Option to purchase 2,000
shares of Common Stock (the "SUBSEQUENT OPTION").
ARTICLE VI
TERMS AND CONDITIONS OF OPTION GRANTS
6.01 VESTING. The Initial Options granted to Outside Directors hereunder
shall vest in accordance with the following schedule; PROVIDED, HOWEVER, that
the Initial Options shall vest on an anniversary date of grant only if the
Outside Director is a member of the Board on such date:
<TABLE>
<CAPTION>
ANNIVERSARY OF CUMULATIVE
DATE OF GRANT PERCENTAGE VESTED
- - -------------------- --------------------
<S> <C>
1 20
2 40
3 60
4 80
5 100
</TABLE>
The Subsequent Options granted to Outside Directors hereunder shall vest in
accordance with the following schedule; PROVIDED, HOWEVER, that the Subsequent
Options shall vest on an anniversary date of grant only if the Outside Director
is a member of the Board on such date:
<TABLE>
<CAPTION>
ANNIVERSARY OF CUMULATIVE
DATE OF GRANT PERCENTAGE VESTED
- - -------------------- --------------------
<S> <C>
1 50
2 100
</TABLE>
6.02 EXERCISABILITY. Options shall not be exercisable until they have
vested in accordance with the vesting schedules set forth in Section 6.01.
6.03 TERMINATION OF OPTION. Options shall terminate on the tenth
anniversary of the date of grant of the Option unless subject to earlier
termination in accordance with this Section. In the event of an Outside
Director's resignation, removal or termination as a member of the Board
(including any termination by reason of the death of the Outside Director), the
unvested portion of any Options
D-2
<PAGE>
granted to such Outside Director hereunder shall terminate as of such date and
be of no further force and effect, but the vested portion of such Options shall
not terminate and shall be exercisable until the first anniversary of the date
of an Outside Director's resignation, removal or termination as a member of the
Board. Notwithstanding the previous sentence, in the event the removal of the
Outside Director is for "cause," the Options granted to such Outside Director,
including any vested portion thereof, shall immediately terminate and cease to
be exercisable as of the date of the Outside Director's removal from the Board.
Whether an Outside Director has been removed from the Board for "cause" shall be
determined in accordance with the By-Laws of the Company.
6.04 EXERCISE PRICE. The per share exercise price of each Option shall be
the Fair Market Value of a share of Common Stock as of the date of grant of the
Option.
6.05 PAYMENT OF OPTION EXERCISE PRICE. An Outside Director may pay the
exercise price of an Option by tendering to the Company cash (including a
certified check, teller's check or wire transfer of funds), previously owned
shares of Common Stock or any combination thereof.
6.06 CERTIFICATE. The terms and provisions of an Option shall be set forth
in an option certificate which shall be delivered to the Outside Director
reasonably promptly following the date of grant of the Option.
6.07 NONTRANSFERABLE. Options shall be nontransferable other than by will
or the laws of descent and distribution and, during the life of the Outside
Director, such Options shall be exercisable only by the Outside Director;
PROVIDED, HOWEVER, that this sentence shall not preclude the Outside Director
from designating a Beneficiary who shall be entitled to exercise the Option in
the event of the Outside Director's death during the exercise period specified
in Section 6.03 above.
ARTICLE VII
REGISTRATION OF SHARES; LIMITS ON EXERCISABILITY
7.01 SECURITIES ACT. No Option shall be exercisable and no transfer of the
shares of Common Stock underlying such Option (the "UNDERLYING SHARES") may be
made to any Outside Director, and any attempt to exercise any Option or to
transfer any Underlying Shares to any Outside Director shall be void and of no
effect, unless and until (i) a registration statement under the Securities Act
of 1933, as amended (the "SECURITIES ACT"), has been duly filed and declared
effective pertaining to the Underlying Shares and the Underlying Shares have
been duly qualified under applicable state securities or blue sky laws or (ii)
the Board, in its sole discretion after securing the advice of counsel,
determines, or the Outside Director provides an opinion of counsel satisfactory
to the Board, that such registration or qualification is not required as a
result of the availability of an exemption from registration or qualification
under such laws.
7.02 LIMIT ON EXERCISE. Without limiting the foregoing, if at any time the
Board shall determine in its discretion that the listing, registration or
qualification of the Underlying Shares under any state or federal law or on any
securities exchange, or the consent or approval of any governmental regulatory
body, is necessary or desirable as a condition of, or in connection with, the
granting of Options or the delivery or purchase of Underlying Shares, such
Options may not be granted or exercised unless such listing, registration,
qualification, consent or approval shall have been effected or obtained free of
any conditions not acceptable to the Board. In addition, if at any time the
Board shall determine in its discretion that the grant or exercise of Options
would violate any securities laws, then such Options may not be granted or
exercised until such time as the Board shall determine that such grant or
exercise may be effected other than in violation of such laws. Any restrictions
imposed on the exercise of Options under this Section 7.02 shall be effective
immediately upon notice to the Outside Director.
D-3
<PAGE>
ARTICLE VIII
EFFECTIVE DATE
The Plan shall become effective only if approved by the affirmative vote of
a majority of the shares of Common Stock present or represented by proxy at the
1994 annual meeting of shareholders of the Company. If such shareholder approval
is obtained, the effective date of the Plan shall be the date of the 1994 annual
meeting of shareholders. In the event shareholder approval is not obtained, the
Plan and any prior grant of Options automatically made under the Plan shall be
void AB INITIO and of no further force and effect.
ARTICLE IX
ADMINISTRATION
The Plan shall be administered by the Chief Executive Officer of the
Company. All questions of interpretation, administration and application of the
Plan shall be determined by the Chief Executive Officer of the Company. The
Chief Executive Officer of the Company may authorize any officer of the Company
to execute and deliver an option certificate on behalf of the Company to an
Outside Director. The Chief Executive Officer shall not be liable for anything
whatsoever in connection with the administration of the Plan except for the
Chief Executive Officer's own willful misconduct.
ARTICLE X
AMENDMENTS AND TERMINATION
10.01 AMENDMENTS. Subject to Section 10.02 below, the Plan may be altered,
amended, suspended or terminated at any time by the Board; PROVIDED, HOWEVER,
that in no event may the provisions of the Plan respecting eligibility to
participate or the timing or amount of grants be amended more frequently than
once every six months, other than to comport with changes in the Internal
Revenue Code of 1986, as amended, the Employee Retirement Income Security Act of
1974, as amended, or any rules or regulations thereunder; and PROVIDED, FURTHER,
that any amendment which under the requirements of applicable law must be
approved by the shareholders of the Company shall not be effective unless and
until such shareholder approval has been obtained in compliance with such law;
and PROVIDED, FURTHER, that any amendment that must be approved by the
shareholders of the Company in order to maintain the continued qualification of
the Plan under Rule 16b-3(c)(2)(ii) under the Exchange Act, or any successor
provision, shall not be effective unless and until such shareholder approval has
been obtained in compliance with such rule.
10.02 CONSENTS TO PLAN CHANGES. No termination or amendment of the Plan
may, without the consent of the Outside Director, affect any such individual's
rights under the provisions of the Plan with respect to awards of Options which
were made prior to such action.
10.03 TERMINATION. Unless terminated earlier in accordance with Section
10.01 above, the Plan shall terminate on, and no further Options may be granted
hereunder after, the Termination Date.
ARTICLE XI
ADJUSTMENTS AFFECTING THE COMMON STOCK
In the event of any merger, consolidation, recapitalization,
reclassification, stock dividend, distribution of property, special cash
dividend or other change in corporate structure affecting the Common Stock,
adjustments shall be made by the Board to prevent dilution or enlargement of
rights in the number and class of shares of Common Stock granted or authorized
to be granted hereunder.
D-4
<PAGE>
ARTICLE XII
NO RIGHT TO REELECTION
Nothing in the Plan shall be deemed to create any obligation on the part of
the Board to nominate any of its members for reelection by the Company's
shareholders, nor confer upon any Outside Director the right to remain a member
of the Board for any period of time, or at any particular rate of compensation.
ARTICLE XIII
GOVERNING LAW
The Plan and all rights hereunder shall be construed in accordance with and
governed by the laws of the State of Pennsylvania.
ARTICLE XIV
NO RESTRICTION ON RIGHT OF COMPANY
TO EFFECT CORPORATE CHANGES
The Plan shall not affect in any way the right or power of the Company or
its shareholders to make or authorize any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of stock
or of options, warrants or rights to purchase stock or of bonds, debentures,
preferred or prior preference stocks whose rights are superior to or affect the
Common Stock or the rights thereof or which are convertible into or exchangeable
for Common Stock, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other corporate
act or proceeding, whether of a similar character or otherwise.
ARTICLE XV
MISCELLANEOUS
15.01 EXPENSES. All expenses and costs in connection with the
administration of the Plan or the issuance of Options hereunder shall be borne
by the Company.
15.02 HEADINGS. The headings of sections herein are included solely for
convenience of reference and shall not affect the meaning of any of the
provisions of the Plan.
D-5
<PAGE>
COLTEC INDUSTRIES COLTEC INDUSTRIES INC
430 PARK AVENUE
NEW YORK, NEW YORK
THIS PROXY IS SOLICITED
ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints DAVID I. MARGOLIS and JOHN W. GUFFEY, JR.,
and each of them, with full power of substitution, as proxy or proxies to vote
all stock of Coltec Industries Inc owned by the undersigned, with like effect as
if the undersigned were personally present and voting at the annual meeting of
shareholders of Coltec Industries Inc to be held at 9:00 a.m., local time, on
Tuesday, June 21, 1994 at the Peabody, 149 Union Avenue, Memphis, Tennessee,
and at any adjournment or adjournments thereof, on the items of business set
forth on the reverse side hereof and on such other business as may properly come
before the meeting and hereby revokes any proxy or proxies heretofore given.
THIS PROXY IS CONTINUED ON THE REVERSE SIDE. PLEASE SIGN ON THE REVERSE
SIDE AND RETURN PROMPTLY.
See Reverse Side
<PAGE>
/X/ PLEASE MARK YOUR CHOICES LIKE THIS
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
SHAREHOLDER. IF NO DIRECTION IS GIVEN WHEN THE DULY EXECUTED PROXY IS RETURNED,
SUCH SHARES WILL BE VOTED "FOR" THE NOMINEES IN PROPOSAL 1 AND "FOR" PROPOSALS
2, 3, 4, 5 AND 6.
- - --------------------
COMMON
The Board of Directors recommends a vote "FOR" the nominees in Proposal 1 and
"FOR" Proposals 2, 3, 4, 5 and 6.
FOR ALL NOMINEES / / WITHHELD FOR ALL / /
STANDING FOR ELECTION
Proposal 1 - Election of the following nominees as Directors:
Donald P. Brennan J. Bradford Mooney, Jr.
David I. Margolis Frank V. Sica
Joel Moses Paul G. Schoen
John W. Guffey, Jr. Richard A. Stuckey
Howard I. Hoffen
Withhold for the following only
(Write the name of the nominee(s) in the space below)
- - -----------------------------------------------------
A vote FOR the nominees includes discretionary authority to vote for a
substitute nominee if any of the nominees listed becomes unable or unwilling to
serve.
FOR / / AGAINST / / ABSTAIN / /
Proposal 2 - 1994 Long-Term Incentive Plan
Proposal 3 - Amendment to 1992 Stock Option and Incentive Plan
Proposal 4 - Annual Incentive Plan
Proposal 5 - 1994 Stock Option Plan for Outside Directors
Proposal 6 - Appointment of Independent Auditors
Date: , 1994
--------------------------------------------------------------------
- - --------------------------------------------------------------------------------
Signature
- - --------------------------------------------------------------------------------
Signature
Note: Please sign as name appears above. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title.
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
------------
Common Stock
The shares to which these instructions relate will be voted as directed. If no
direction is given when the duly executed instructions are returned, the shares
will be voted in the same proportion as instructions are received for shares
credited to the accounts of participants in the Walbar Canada Inc. Employee
Savings and Profit Sharing Plan.
PLEASE MARK YOUR CHOICE LIKE THIS: / / IN BLUE OR BLACK INK
The undersigned hereby instructs the Trustees of the Walbar Canada Inc.
Employee Savings and Profit Sharing Plan, to vote all stock of Coltec
Industries Inc credited to my account in the Walbar Canada Inc. Employee
Savings and Profit Sharing Plan at the annual meeting of shareholders of Coltec
Industries Inc to be held at 9:00 am, local time, on Tuesday, June 21, 1994, at
the Peabody, 149 Union Avenue, Memphis, Tennessee, and at any adjournment or
adjournments thereof, on the items of business set forth below and on such
other business as may properly come before the meeting.
PROPOSAL 1 - Election of the following nominees as Directors: Donald P. Brennan,
John W. Guffey, Jr., Howard I. Hoffen, David I. Margolis,
J. Bradford Mooney, Jr., Joel Moses, Paul G. Schoen,
Frank V. Sica and Richard A. Stuckey.
Instructions to vote for the nominees includes discretionary authority to vote
for a substitute nominee if any of the nominees listed becomes unable or
unwilling to serve.
FOR ALL NOMINEES STANDING FOR ELECTION / /
WITHHELD FOR ALL NOMINEES / /
Withheld for the following only (write the
name of the nominee(s) in the space below)
- - ------------------------------------------
PROPOSAL 2 - 1994 Long-Term Incentive Plan
For Against Abstain
/ / / / / /
PROPOSAL 3 - Amendment to 1992 Stock Option and Incentive Plan
For Against Abstain
/ / / / / /
PROPOSAL 4 - Annual Incentive Plan
For Against Abstain
/ / / / / /
PROPOSAL 5 - 1994 Stock Option Plan for Outside Directors
For Against Abstain
/ / / / / /
PROPOSAL 6 - Appointment of Independent Auditors
For Against Abstain
/ / / / / /
DATE:
-----------------------------------------------------
SIGNATURE:
------------------------------------------------
<PAGE>
CONFIDENTIAL VOTING INSTRUCTIONS
------------
Common Stock
The shares to which these instructions relate will be voted as directed. If no
direction is given when the duly executed instructions are returned, the shares
will be voted in the same proportion as instructions are received for shares
credited to the accounts of participants in the Walbar Savings Plan.
PLEASE MARK YOUR CHOICE LIKE THIS: / / IN BLUE OR BLACK INK
The undersigned hereby instructs the Trustees of the Walbar Stock Fund of the
Walbar Savings Plan, to vote all stock of Coltec Industries Inc credited to my
account in the Walbar Stock Fund of the Walbar Savings Plan at the annual
meeting of shareholders of Coltec Industries Inc to be held at 9:00 am, local
time, on Tuesday, June 21, 1994, at the Peabody, 149 Union Avenue, Memphis,
Tennessee, and at any adjournment or adjournments thereof, on the items of
business set forth below and on such other business as may properly come before
the meeting.
PROPOSAL 1 - Election of the following nominees as Directors: Donald P. Brennan,
John W. Guffey, Jr., Howard I. Hoffen, David I. Margolis,
J. Bradford Mooney, Jr., Joel Moses, Paul G. Schoen,
Frank V. Sica and Richard A. Stuckey.
Instructions to vote for the nominees includes discretionary authority to vote
for a substitute nominee if any of the nominees listed becomes unable or
unwilling to serve.
FOR ALL NOMINEES STANDING FOR ELECTION / /
WITHHELD FOR ALL NOMINEES / /
Withheld for the following only (write the
name of the nominee(s) in the space below)
- - ------------------------------------------
PROPOSAL 2 - 1994 Long-Term Incentive Plan
For Against Abstain
/ / / / / /
PROPOSAL 3 - Amendment to 1992 Stock Option and Incentive Plan
For Against Abstain
/ / / / / /
PROPOSAL 4 - Annual Incentive Plan
For Against Abstain
/ / / / / /
PROPOSAL 5 - 1994 Stock Option Plan for Outside Directors
For Against Abstain
/ / / / / /
PROPOSAL 6 - Appointment of Independent Auditors
For Against Abstain
/ / / / / /
DATE:
-----------------------------------------------------
SIGNATURE:
------------------------------------------------
