UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
(X) Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended March 30, 1997
or
( ) Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from __________________ to
__________________
Commission file number: 1-7568
COLTEC INDUSTRIES INC
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 13-1846375
(State or other jurisdiction of incorporation (IRS
Employer
or organization)
Identification No.)
3 Coliseum Centre
2550 West Tyvola Road
Charlotte, North Carolina 28217 28217
(Address of principal executive offices) (Zip code)
(704)423-7000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Sections 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (X) No ( )
________________________________________
On April 30, 1997, there were outstanding 65,665,068 shares of
common stock, par value $.01 per share.
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
Three Months Ended
------------------
March 30, March 31,
1997 1996
-------- --------
(In thousands, except per share data)
Net sales $309,172 $281,198
Cost of sales 211,675 208,016
Gross profit 97,497 73,182
Selling and administrative 52,569 51,851
Operating income 44,928 21,331
Interest expense, net 12,364 21,126
Earnings from continuing operations
before income taxes and
extraordinary item 32,564 205
Income taxes 11,072 78
Earnings from continuing operations
before extraordinary item 21,492 127
Discontinued operations (net of tax) - 7,649
Extraordinary item (net of tax) - (1,822)
Net earnings $21,492 $5,954
Earnings per common share
Before extraordinary item $ .32 $ -
Discontinued operations - .11
Extraordinary item - (.02)
Net earnings $ .32 $ .09
Weighted average number of common
and common equivalent shares 67,731 70,187
See notes to consolidated financial statements.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 30, Dec. 31,
1997 1996
--------- -------
(In thousands)
A S S E T S
Current assets:
Cash and cash equivalents $7,813 $15,029
Accounts and notes receivable, net of
allowance of $2,053 in 1997 and $2,007 in 1996 195,365 190,325
Inventories
Finished goods 46,336 48,813
Work in process and finished parts 136,271 122,817
Raw materials and supplies 27,930 32,568
210,537 204,198
Deferred income taxes 11,616 10,524
Other current assets 16,469 12,769
Total current assets 441,800 432,845
Property, plant and equipment, net 219,679 214,790
Costs in excess of net assets acquired, net 131,484 132,872
Other assets 58,924 58,869
$851,887 $839,376
See notes to consolidated financial statements.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 30, Dec. 31,
1997 1996
--------- -------
(In thousands, except share data)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $527 $2,528
Accounts payable 68,365 55,410
Accrued expenses 145,160 145,104
Current portion of liabilities oF
discontinued operations 10,529 14,229
Total current liabilities 224,581 217,271
Long-term debt 730,752 717,722
Deferred income taxes 57,274 50,646
Other liabilities 89,299 100,004
Liabilities of discontinued operations 163,690 170,740
Commitments and contingencies
Shareholders' equity:
Preferred stock, $.01 par value,
2,500,000 shares authorized,
shares outstanding - none - -
Common stock, $.01 par value,
100,000,000 shares authorized, 70,447,919 and
70,398,661 shares issued at March 30, 1997
and December 31, 1996, respectively (excluding
25,000,000 shares held by a wholly owned
subsidiary) 704 704
Capital surplus 644,248 643,221
Retained deficit (985,411) (1,006,903)
Unearned compensation (2,828) (2,136)
Minimum pension liability (3,200) (3,200)
Foreign currency translation adjustments (2,261) (1,151)
(348,748) (369,465)
Less cost of 3,961,753 and 3,182,822 shares
of common stock in treasury at
March 30, 1997 and December 31, 1996,
respectively (64,961) (47,542)
(413,709) (417,007)
$851,887 $839,376
See notes to consolidated financial statements.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
Three Months Ended
------------------
March 30, March 31,
1997 1996
--------- --------
Cash flows from operating activities:
Net earnings $21,492 $5,954
Adjustments to reconcile net earnings to cash
provided by operating activities:
Extraordinary item - 2,759
Depreciation and amortization 8,511 11,167
Deferred income taxes 5,536 886
Payments of liabilities of discontinued
operations (10,750) (246)
Other operating items (10,033) (3,349)
Changes in assets and liabilities:
Accounts and notes receivable (5,040) (20,386)
Inventories (6,339) (1,916)
Other current assets (3,700) (295)
Accounts payable 12,995 2,993
Accrued expenses 56 35,086
Cash provided by operating activities 12,728 32,653
Cash flows from investing activities:
Capital expenditures (13,554) (11,188)
Cash used in investing activities (13,554) (11,188)
Cash flows from financing activities:
Increase in revolving facility, net 14,000 32,000
Purchase of treasury stock (17,419) -
Repayment of long-term debt (2,971) (50,823)
Cash used in financing act (6,390) (18,823)
Increase (decrease)in cash and cash equivalents (7,216) 2,642
Cash and cash equivalents - beginning of period 15,029 3,971
Cash and cash equivalents - end of period $7,813 $6,613
Supplemental cash flow data:
Cash paid for interest $11,024 $6,825
Cash paid (refunded) for income taxes (11,140) 2,689
See notes to consolidated financial statements.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands)
1.SUMMARY OF ACCOUNTING POLICIES
Financial Information: The unaudited consolidated financial
statements included herein reflect in the opinion of management
of Coltec Industries Inc (the Company) all normal recurring
adjustments necessary to present fairly the consolidated
financial position and results of operations for the periods
indicated. The unaudited consolidated financial statements
have been prepared in accordance with the instructions to Form
10-Q and do not include all of the information and footnotes
required by generally accepted accounting principles for
complete financial statements. The Consolidated Balance Sheet
as of December 31, 1996 has been extracted from the audited
consolidated financial statements as of that date. For further
information, refer to the consolidated financial statements and
footnotes included in the Company's annual report to
shareholders for the year ended December 31, 1996.
2. DISCONTINUED OPERATIONS
In June 1996, the Company sold Holley Automotive, Coltec
Automotive and Performance Friction Products to Borg-Warner
Automotive, Inc. In December 1996, the Company sold Farnam
Sealing Systems Division to Meillor SA. The sale of these
businesses represented a disposal of the Company's Automotive
Segment. Accordingly, the Consolidated Statement of Earnings
for the first quarter of 1996 has been restated to reflect the
operations of the automotive original equipment components
businesses as a discontinued operation.
Liabilities of discontinued operations at March 30, 1997 of
$174,219 relate to contingent contractual obligations,
environmental matters, reserves for postretirement benefits and
other future estimated costs for various discontinued
operations.
3.EXTRAORDINARY ITEM
The Company incurred an extraordinary charge of $1,822, net of
income taxes of $937, in the first quarter of 1996 in
connection with early retirement of debt.
4. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries are defendants in
various lawsuits, including actions involving asbestos-
containing products and certain environmental proceedings.
With respect to asbestos product liability and related
litigation costs, as of March 30, 1997, two subsidiaries of the
Company were among a number of defendants (typically 15 to
40)in approximately 96,800 actions (including approximately
3,300 actions in advanced stages of processing) filed in
various states by plaintiffs alleging injury or death as a
result of exposure to asbestos fibers. During the first three
months of 1997, two subsidiaries of the Company received
approximately 7,300 new actions compared to approximately
10,500 new actions received during the first three months of
1996. Through March 30, 1997, approximately 181,000 of the
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands)
approximately 277,800 total actions brought have been settled
or otherwise disposed of.
The damages claimed for personal injury or death vary from case
to case, and in many cases plaintiffs seek $1,000 or more in
compensatory damages and $2,000 or more in punitive damages.
Although the law in each state differs to some extent, it
appears, based on advice of counsel, that liability for
compensatory damages would be shared among all responsible
defendants, thus limiting the potential monetary impact of such
judgments on any individual defendant.
Following a decision of the Pennsylvania Supreme Court, in a
case in which neither the Company or any or its subsidiaries
were parties, that held insurance carriers are obligated to
cover asbestos-related bodily injury actions if any injury or
disease process, from first exposure through manifestation,
occurred during a covered policy period (the "continuous
trigger theory of coverage"), the Company settled litigation
with its primary and most of its first-level excess insurance
carriers, substantially on the basis of the Court's ruling.
The Company has negotiated a final agreement with most of its
excess carriers that are in the layers of coverage immediately
above its first layer. The Company is currently receiving
payments pursuant to this agreement. The Company believes
that, with respect to the remaining carriers, a final agreement
can be achieved without litigation and on substantially the
same basis that it has resolved the issues with its other
carriers. Settlements are generally made on a group basis with
payments made to individual claimants over periods of one to
four years. Payments were made with respect to asbestos
liability and related costs aggregating $20,191 and $15,187 for
the first three months of 1997 and 1996, respectively,
substantially all of which were covered by insurance. Related
to payments not covered by insurance, the Company recorded
charges to operations amounting to $2,000 and $2,375 for the
first three months of 1997 and 1996, respectively.
In accordance with the Company's internal procedures for the
processing of asbestos product liability actions and due to the
proximity to trial or settlement, certain outstanding actions
have progressed to a stage where the Company can reasonably
estimate the cost to dispose of these actions. As of March 30,
1997, the Company estimates that the aggregate remaining cost
of the disposition of the settled actions for which payments
remain to be made and actions in advanced stages of processing,
including associated legal costs, is approximately $57,404 and
the Company expects that this cost will be substantially
covered by insurance.
With respect to the 93,500 outstanding actions as of March 30,
1997, which are in preliminary procedural stages, the Company
lacks sufficient information upon which judgments can be made
as to the validity or ultimate disposition of such actions,
thereby making it difficult to estimate with reasonable
certainty the potential liability or costs to the Company.
When asbestos actions are received, they are typically
forwarded to local counsel to ensure that the appropriate
preliminary procedural response is taken. The complaints
typically do not contain sufficient information to permit a
reasonable evaluation as to their merits at the time or
receipt, and in jurisdictions encompassing a majority of the
outstanding actions, the
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands)
practice has been that little or no discovery or other action
is taken until several months prior to the date set for trial.
Accordingly, the Company generally does not have the
information necessary to analyze the actions in sufficient
detail to estimate the ultimate liability or costs to the
Company, if any, until the actions appear on a trial calendar.
A determination to seek dismissal, to attempt to settle or
proceed to trial is typically not made prior to the receipt of
such information.
It is also difficult to predict the number of asbestos lawsuits
that the Company's subsidiaries will receive in the future.
The Company has noted that, with respect to recently settled
actions or actions in advanced stages of processing, the mix of
the injuries alleged and the mix of the occupations of the
plaintiffs have been changing from those traditionally
associated with the Company's asbestos-related actions. The
Company is not able to determine with reasonable certainty
whether this trend will continue. Based upon the foregoing,
and due to the unique factors inherent in each of the actions,
including the nature of the disease, the occupation of the
plaintiff, the presence or absence of other possible causes of
a plaintiff's illness, the availability of legal defenses, such
as the statute of limitations or state of the art, and whether
the lawsuit is an individual one or part of a group, management
is unable to estimate with reasonable certainty the cost of
disposing of outstanding actions in preliminary procedural
stages or of actions that may be filed in the future. However,
the Company believes that its subsidiaries are in a favorable
position compared to many other defendants because, among other
things, the asbestos fibers in its asbestos-containing products
were encapsulated. Considering the foregoing, as well as the
experience of the Company's subsidiaries and other defendants
in asbestos litigation, the likely sharing of judgments among
multiple responsible defendants, and the substantial amount of
insurance coverage that the Company expects to be available
from its solvent carriers, the Company believes that pending
and reasonably anticipated future actions are not likely to
have a material effect on the Company's consolidated results of
operations and financial condition.
Although the insurance coverage which the Company has is
substantial, it should be noted that insurance coverage for
asbestos claims is not available to cover exposures initially
occurring on and after July 1, 1984. The Company's
subsidiaries continue to be named as defendants in new cases,
some of which allege initial exposure after July 1, 1984.
In addition to claims for personal injury, the Company's
subsidiaries have been involved in an insignificant number of
property damage claims based upon asbestos-containing materials
found in schools, public facilities and private commercial
buildings. Based upon proceedings to date, the overwhelming
majority of these claims have been resolved without a material
adverse impact on the Company. Likewise, the insignificant
number of claims remaining to be resolved are not expected to
have a material effect on the Company's consolidated results of
operations and financial condition.
The Company has recorded an accrual for its liabilities for
asbestos-related matters that are deemed probable and can be
reasonably estimated (settled actions and actions in advanced
stages of processing), and has separately
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Dollars in thousands)
recorded an asset equal to the amount of such liabilities that
is expected to be recovered by insurance. In addition, the
Company has recorded a
receivable for that portion of payments previously made for
asbestos product liability actions and related litigation costs
that is recoverable from its insurance carriers. Liabilities
for asbestos-related matters and the receivable from insurance
carriers included in the Consolidated Balance Sheets are as
follows:
March 30, Dec. 31,
1997 1996
_________________________________________________________________
Accounts and notes receivable $57,545 $67,012
Other assets 16,621 18,728
Accrued expenses 49,292 60,659
Other liabilities 8,112 10,879
With respect to environmental proceedings, the Company has been
notified that it is among the Potentially Responsible Parties
under federal environmental laws, or similar state laws, relative
to the costs of investigating and in some cases remediating
contamination by hazardous materials at several sites. Such
laws impose joint and several liability for the costs of
investigating and remediating properties contaminated by
hazardous materials. Liability for these costs can be imposed
on present and former owners or operators of the properties or
on parties who generated the wastes that contributed to the
contamination. The Company's policy is to accrue environmental
remediation costs when it is both probable that a liability has
been incurred and the amount can be reasonably estimated.
While it is often difficult to reasonably quantify future
environmental-related expenditures, the Company currently
estimates its future non-capital expenditures related to
environmental matters to range between $27,000 and $52,000. In
connection with these expenditures, the Company has accrued
$33,862 at March 30, 1997, representing management's best
estimate of probable non-capital environmental expenditures.
These non-capital expenditures are estimated to be incurred
over the next 10 to 20 years. In addition, capital
expenditures aggregating $5,000 may be required during the next
two years related to environmental matters. Although the
Company is pursuing insurance recovery in connection with
certain of these matters, no receivable has been recorded with
respect to any potential recovery of costs in connection with
any environmental matters.
5. Subsequent Event
In April 1997, the Company signed a letter of intent to acquire
AMI Industries Inc. (AMI), a Colorado-based manufacturer of
flight attendant and cockpit seats for commercial aircraft.
The transaction, subject to normal closing conditions, is
expected to close in June 1997. AMI expects 1997 sales to
approach $30 million.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following table shows financial information by industry
segment for the three months ended March 30, 1997 and March 31,
1996.
Three Months Ended
--------------------
March 30, March 31,
1997 1996
-------- --------
(In thousands)
Sales:
Aerospace $119,140 $93,293
Industrial 190,099 188,406
Intersegment elimination (67) (501)
Total $309,172 $281,198
Operating income:
Aerospace $18,303 $(4,221)
Industrial 36,270 36,878
Total segments 54,573 32,657
Corporate unallocated (9,645) (11,326)
Operating income $44,928 $21,331
Operating income for the first quarter 1996 included a charge of
$14.2 million relating to the bankruptcy of a major aerospace
customer (Fokker). Excluding this charge, first quarter 1996
operating income for the Aerospace Segment and the Company would
have been $10.0 million and $35.6 million, respectively.
Results of Operations - First Quarter 1997 Compared to First
Quarter 1996
Company Review
Net sales for the first quarter of 1997 increased 9.9% to
$309.2 million from $281.2 million for the first quarter of
1996 primarily driven by increases in the Aerospace Segment.
Gross profit increased to $97.5 million for the first
quarter 1997 from $73.2 million in first quarter 1996. The
increase in gross profit margin to 31.5% in the first
quarter 1997 from 26.0% in the first quarter 1996 resulted
from higher margins in the Aerospace Segment and the first
quarter 1996 impact of the bankruptcy of Fokker. Selling
and administrative expenses totaled $52.6 million, or 17.0%
of sales, in first quarter of 1997 compared to $51.9
million, or 18.4% of sales (16.2% excluding the Fokker
impact), in first quarter 1996.
Operating income increased to $44.9 million in first quarter
1997 from $21.3 million in the first quarter of 1996. The
1996 amount includes the effect of the $14.2 million charge
relating to the Fokker bankruptcy. Operating margin for
first quarter 1997 was 14.5% compared to 7.6% for the first
quarter 1996 (12.7% excluding the effect of
COLTEC INDUSTRIES INC AND SUBSIDIARIES
Fokker). The margin increase related to the same reasons as
those stated to explain the increase in gross profit margin.
Interest expense decreased to $12.4 million in the first
quarter 1997 from $21.1 million for the first quarter 1996.
The 41% decrease was a direct result of significant debt
reduction in June 1996 and the December 1996 refinancing of
substantially all of the Company's high-cost fixed-rate debt
with lower-cost, variable-rate bank debt.
The results of discontinued operations for first quarter
1996 reflect the net earnings for that period for the
automotive original equipment components operations which
were sold in 1996.
The first quarter 1996 extraordinary item represents the net
charge for refinancing a portion of the Company's fixed-
rate debt with lower-cost, variable-rate bank debt.
As a result of the foregoing, net earnings were $21.5
million in first quarter 1997, or $0.32 per share, compared
to net earnings of $6.0 million, or $0.09 per share, in
first quarter 1996. 1997 earnings from continuing
operations were $21.5 million versus $127,000 for 1996. The
1996 charge related to Fokker decreased net earnings by
$0.13 per share while the decrease in interest expense
increased 1997 earnings by $0.09 per share.
Segment Review - Aerospace
Sales in first quarter 1997 for the Aerospace Segment
totaled $119.1 million increasing 27.7% from $93.3 million
in the first quarter 1996. At Menasco, sales increased
significantly due to rising commercial aircraft production
as well as improved military sales. Menasco deliveries of
main landing gear systems for the Boeing 737 increased from
8 shipsets in first quarter 1996 to 30 shipsets in first
quarter 1997 while military sales benefited primarily from
higher shipset deliveries for the F-15 and F-16 programs.
At Chandler Evans, significantly higher sales were primarily
due to higher sales of spare parts and increased shipments
of spare engine control units for Boeing Chinook helicopters
used by the Royal Air Force while original equipment sales
also improved. Walbar's Arizona facility experienced
significant sales increases due to a change in the billing
practices for consigned inventory, which had no effect on
profitability, while also benefiting from increased
commercial aircraft production.
Operating income for the Aerospace Segment increased to
$18.3 million in first quarter 1997 from an operating loss
of $4.2 million in first quarter of 1996. The 1996 amount
includes the effect of the $14.2 million charge relating to
the Fokker bankruptcy. Excluding such charge, operating
margin for first quarter 1996 would have been 10.8%
compared to 15.4% for the first quarter 1997. At Menasco's
Aerospace Division, operating margin was impacted by a
favorable mix of landing gear systems for certain commercial
airline programs as well as improved
manufacturing efficiencies due to higher production.
Chandler Evans realized higher margins due to a higher
profit sales mix and selling price increases for certain
products. The increase was also driven
COLTEC INDUSTRIES INC AND SUBSIDIARIES
by generally higher sales volumes and improved margins for
the Segment's other businesses.
Segment Review - Industrial
Industrial sales increased slightly to $190.1 million in
first quarter 1997 from $188.4 million in first quarter
1996. The Garlock Bearings, Stemco, Delavan Commercial,
France Compressor Products and Quincy Compressor Divisions
all experienced solid sales volume increases. Sales for
Garlock Sealing Technologies increased slightly primarily
due to selling price increases and new product sales.
Fairbanks Morse Engine sales decreased due to a large
nonrecurring engine order in first quarter 1996. Holley
Performance Products sales also decreased due to curtailed
orders by two major customers.
Operating income for the Industrial Segment was essentially
unchanged at $36.3 million in first quarter 1997 compared to
$36.9 million in first quarter 1996. Operating income
increased for the Stemco, Delavan Commercial and Quincy
Compressor Divisions due to higher sales volumes. Operating
results at Fairbanks Morse Engine and Holley Performance
Products were lower due to decreased sales volumes while
Garlock Sealing Technologies was impacted by increased costs
related to various international initiatives.
Liquidity and Capital Resources
The Company generated $12.7 million of operating cash flows
in first quarter 1997 compared with $32.7 million for the
first quarter 1996. The lower operating cash flows in 1997
were primarily due to increased payments related to
liabilities of discontinued operations and payments related
to asbestos claims. The change in assets and liabilities
generated negative cash flow of $2.0 million in first
quarter 1997 compared to positive cash flow of $15.5
million in first quarter 1996. Increased 1997 net earnings
of $15.5 million helped to partially offset the
aforementioned decreases. The current ratio of current
assets to current liabilities at March 30, 1997 was 1.97,
virtually unchanged from 1.99 at December 31, 1996. Cash
and cash equivalents decreased to $7.8 million at March 30,
1997 from $15.0 million at December 31, 1996.
In first quarter 1997 the Company invested $13.6 million in
capital expenditures compared to $11.2 million during the
same prior year period. Debt increased by $11.0 million at
March 31, 1997 compared to December 31, 1996 through
additional borrowings under the Company's revolving credit
facility. The increased borrowings were used to repurchase
916,500 shares of the Company's common stock at a cost of
$17.4 million.
COLTEC INDUSTRIES INC AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
The Company and certain of its subsidiaries are
defendants in various lawsuits involving asbestos-
containing products. In addition, the Company has
been notified that it is among Potentially
Responsible Parties under federal environmental
laws, or similar state laws, relative to the costs
of investigating and in some cases remediating
contamination by hazardous materials at several
sites. See note 4 to consolidated financial
statements.
Item 6. Exhibits and Reports on Form 8-K.
(a) 10.1 First Restated Employment Agreement between Coltec
and Robert J. Tubbs dated as of January 10, 1997.
27.1 Consolidated Financial Data Schedule.
(b) No reports on Form 8-K were filed by the Company
during the quarter ended March 30, 1997.
S I G N A T U R E
Pursuant to the requirements of the Securities Exchange Act
of 1934, the Registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
COLTEC INDUSTRIES INC
(Registrant)
by David D. Harrison
David D. Harrison
Executive Vice President
and Chief Financial Officer
Date: May 12, 1997
Exhibit 10.1
FIRST RESTATED EMPLOYMENT AGREEMENT
This Agreement between Robert J. Tubbs ( the "Executive")
and Coltec Industries Inc, a Pennsylvania corporation (the
"Corporation"), is restated as of this 10th day of January,
1997 (the Restatement Date") as if originally entered into
and effective as of June 1, 1995,
WHEREAS, the Executive and the Corporation entered into
an Employment Agreement dated June 1 1995 (the "Employment
Agreement"), and
WHEREAS, the Executive received a promotion and change
of position and title by election of the Board of Directors
of the Corporation on January 9, 1997, which change of
position necessitates the making of certain changes to the
Employment Agreement to reflect the Executive's new position
and title, and
WHEREAS, the Corporation and the Executive wish to
modify the Employment Agreement to reflect the changes to
Executive's position and title and do hereby do so by
incorporating all such changes thereto herein in this First
Restated Employment Agreement to be effective as if
originally entered into on June 1, 1995 (the "Effective
Date" ).
NOW, THEREFORE, in consideration of the foregoing and the
mutual promises herein contained, the parties agree as
follows:
1.Employment Term
The Corporation agrees to employ the Executive and the
Executive agrees to be employed by the Corporation,
upon the terms and conditions contained in this
Restated Agreement, for a period of four years
commencing on the Effective Date and terminating on the
fourth anniversary of the Effective Date (the "Contract
Period") The Contract Period shall be subject to
earlier termination in accordance with the provisions
set forth in Section 5 below.
2.Duties
2.1 The Executive shall serve, subject to the
supervision and control of the Corporation's Chief
Executive Officer, as Executive Vice President, General
Counsel and Secretary of the Corporation with the
responsibilities and authority, and status and
perquisites which have consistent with past practice,
been delegated or granted by the Corporation to an
employee holding such position(s) or which are
customarily delegated or granted by similarly situated
corporations to an employee holding such position(s).
If Executive is appointed to additional offices by the
Corporation during the Contract Period, the Executive
shall have the responsibilities and authority, and
status and perquisites consistent with the past
practices of the Corporation or which are customarily
delegated or granted by similarly situated corporations
to an employee holding such position(s). Executive
shall also perform any additional lawful services and
assume any reasonable additional responsibilities,
not inconsistent with his position, as shall from time
to time be assigned to him by the Board of Directors of
the Corporation (the "Board") or the Chief Executive
Officer.
2.2 Executive agrees that during the Contract Period,
he shall devote substantially all of his full working
time and attention and give his best effort, skill and
abilities exclusively to the business and interests of
the Corporation; provided, however, that the foregoing
shall not be construed to prohibit Executive's service
as a (i) director or officer of any trade association,
civic, educational or charitable organization or
governmental entity or, subject to approval by the
Board, as (ii) a director of any corporation which is
not a competitor of the Corporation, provided that such
service by Executive does not materially interfere with
the performance by Executive of the responsibilities
delegated under Section 2.1 above.
2.3 Executive shall carry out all responsibilities
delegated in Section 2.1 above at the Company's
headquarters at 3 Coliseum Centre, 2550 West Tyvola
Road, Charlotte, NC 28217 or at such other office or
location within the continental United States as the
Board may, from time to time, deem appropriate after
consultation with Executive, except for travel
reasonably required in the performance of Executive's
responsibilities.
3.Compensation and Benefits
Throughout the term hereof, unless otherwise
specifically provided elsewhere herein:
3.1 Executive shall receive an annual salary which is
not less than his annual salary on the Resatement Date
and shall have the opportunity for periodic increases
in accordance with the Corporation's regular practices.
3.2 Executive shall be entitled to participate, to the
extent determined by the Board, in all currently
existing (as of the Restatement Date) and future
incentive compensation plans of the Corporation
including, but not limited to: the Annual Incentive
Plan for Certain Employees of Coltec Industries Inc
and Its Subsidiaries, the 1994 Long-Term Incentive Plan
of Coltec Industries Inc and the Coltec Industries Inc
1992 Stock Option and Incentive Plan (the "Incentive
Compensation Plans"), provided, however, that the
Executive's participation in all incentive compensation
plans shall be at a level customarily approved by the
Board for an employee with Executive's responsibilities
and shall not in any case be less than
Executive's level of participation in such plans on
the Restatement Date. Any payment to Executive under an
Incentive Compensation Plan shall be calculated and
made in accordance with the provisions of the
respective plan, except as elsewhere provided for in
this Restated Agreement.
3.3 Executive shall be entitled to receive all employee
benefits, fringe benefits and perquisites (including
but not limited to the use of company cars, club
memberships and financial planning services ("Company
Perquisites")) customarily made available to an
employee with Executive's responsibilities, and
Executive shall be entitled to participate in all
applicable group, life, health, disability and
accident insurance plans and programs including, and
not limited to, the Retirement Savings Plan, the
Retirement Program, Benefits Equalization Plan (the "BE
Plan") and Family Protection Plan as well as any other
applicable Corporation benefit plans and programs
maintained currently upon terms and at levels no less
favorable than exist as of the Restement Date or that
shall be established or maintained in the future for
employees generally or for the Corporation's
executives.
3.4 Executive shall be entitled to annual vacation and
holidays in accordance with the Corporation's
established practice for its employees.
3.5 The Executive shall be entitled to receive
reimbursement for all reasonable out-of-pocket expenses
incurred in performing his responsibilities delegated
in Section 2.1 above, provided that the Executive
properly accounts for such expenses in accordance with
the Corporation's established policies and the
requirements of the Internal Revenue Code of 1986, as
amended.
4.Indemnification
The Executive shall be entitled to indemnification by
the Corporation to the fullest extent permitted by law
in respect of any actions or omissions which Executive
has taken or has failed to take as an employee, officer
or director of the Corporation while carrying out the
responsibilities delegated under Section 2.1 above.
5.Termination of Employment
The Contract Period shall terminate prior to its term
on the Date of Termination as defined in Sections 5,2
or 5.3 below following receipt by the Executive or the
Corporation, as the case may be, of a Notice of
Termination as defined in Section 5.1 below.
5.1 "Notice of Termination" shall mean any purported
termination of Executive's employment by the
Corporation or by Executive which shall be communicated
by written notice to the other party hereto in
accordance with Section 8 of this Restated Agreement,
and which shall (1) indicate the specific
termination provision in this Restated Agreement relied
upon, (2) set forth in reasonable detail the facts and
circumstances claimed to provide a basis for
termination of Executive's employment under the
provision so indicated, and (3) set forth the date on
which the Executive's employment with the Corporation
shall terminate.
5.2 "Date of Termination" shall mean:
a)thirty (30) days after Notice of Termination is given for
termination of employment due to Disability; provided that
Executive shall not have returned to the full-time
performance of his duties during such thirty (30) day
period;
b)the date of death in the event of Executive's death;
c)at least thirty days (30) but not more than sixty (60)
days after Notice of Termination is given for termination of
employment for Good Reason in respect of a termination
covered by Sections 6.6 or 6.7 below;
d)at least fifteen days (15) after Notice of Termination is
given for termination of employment for Cause;
e)at least fifteen days (15) after Notice of Termination
is given for retirement after the age of 55 years but before
the age of 65 years to the extent such retirement is
permitted under the Retirement Savings Plan, the
Retirement Program or the BE Plan ("Early Retirement"); or
f)the date specified in the Notice of Termination
for termination of employment for any other reason.
5.3 This Restated Agreement shall automatically
terminate upon the earlier of Executive's 65th birthday
or the receipt by the Corporation of a Notice of
Termination for Early Retirement as provided in
Paragraph 5.2(e) above ("Retirement Termination")
6. Compensation Upon Termination or During Disability
6.1 For purposes of this Restated Agreement,
"Disability", "Cause", "Good Reason" and "Change-in-
Control'' shall have the meanings set forth below:
a)Disability - If, as a result of Executive's incapacity
due to physical or mental illness, Executive shall have
become eligible for benefits under the applicable long-term
disability plan or policy of the Corporation, Executive 's
employment may be terminated by the Corporation for
"Disability".
b)Cause - Termination by the Corporation of Executive's
employment for "Cause" shall mean termination upon:
i.the prolonged or repeated absence from duty without the
consent of the Board for reasons other than the Executive's
incapacity due to physical or mental illness;
ii. the acceptance by Executive of a position with another
employer which conflicts with his duties as an employee of
the Corporation without the consent of the Board;
iii. the willful engaging by Executive in conduct
relating to the Corporation which is demonstrably and
materially injurious to the Corporation after a written
demand for cessation of such conduct is delivered to
Executive by the Board, which demand specifically identifies
the manner in which the Board believes the Executive has
engaged in such conduct and the injury to the Corporation;
iv. a willful material breach of an established written
policy or procedure of the Corporation;
v. Executive's conviction for a crime involving moral
turpitude; or
vi) the breach of Executive's Restated Agreement set
forth in Section 10.1 below.
For purposes of this Paragraph, no act, or failure to
act, on Executive's part shall be deemed "willful"
unless knowingly done, or omitted to be done, by
Executive not in good faith and without reasonable
belief that Executive's action or omission was in the
best interests of the Corporation.
a)Good Reason - Executive shall be entitled to terminate
his employment for Good Reason. For purposes of this
Restated Agreement , "Good Reason" shall mean the
occurrence, without Executive's express written consent, of
any of the following circumstances unless such circumstances
are fully corrected prior to the Date of Termination (as
defined in Section 5.2 above), specified in the Notice of
Termination :
i.the terms of this Restated Agreement are materially
adversely altered by action of the Corporation or the
Corporation breaches in any material respect any of its
agreements set forth herein;
ii. the failure of the Corporation to obtain a
satisfactory agreement, required in Section 8 below,
from any successor to assume and perform this Restated
Agreement (a copy of the agreement evidencing such
assumption shall be provided by the Corporation to
Executive);
iii. any purported termination of Executive's employment
which is not effected pursuant to a Notice of Termination
satisfying the requirements set forth in Section 5 above;
for purposes of this Restated Agreement, no such purported
termination shall be effective; or
iv. Executive makes a determination in good faith that the
cumulative effect of actions by the Chief Executive Officer
of the Corporation or one or more of the members of the
Board or their agents or associates constitutes harassment
or unreasonable interference with the performance of
Executive's day-to-day duties under this Restated Agreement
(after a written demand for cessation of such actions is
delivered by Executive to the Chief Executive Officer
and to the Board which demand specifically identifies the
manner in which Executive believes that such Chief Executive
Officer or Board members (Or their agents or associates)
have harassed Executive or unreasonably interfered
with Executive's ability to perform his day-to-day
duties) ; provided, however, that appropriate
involvement of the Chief Executive Officer or the Board
members in regular reviews of those items which have,
consistent with the Corporation's past practices, been
normally within the purview of the Chief Executive Officer
or Board's responsibilities as well as any bona fide
business disagreements between the Executive and the
Corporation shall not be taken into account by Executive in
making his determination under this Restated Agreement.
v.Relocation of the Executive's place of employment to a
location outside the continental United States or
relocation of the Executive 's place of employment
within the continental United States without reimbursing
Executive his cost of relocation at a level at least as
favorable as that provided under the Corporation' s
policy and practice in effect on the date of this Restated
Agreement.
Executive's right to terminate his employment pursuant
to this Paragraph shall not be affected by his
incapacity due to physical illness . In addition,
Executive ' s continued employment with the Corporation
shall not constitute waiver of Executive's rights
under this Paragraph (c) nor constitute consent to any
act or omission by the Corporation constituting Good
Reason.
d)Change-in-Control - A Change-in-Control shall be deemed
to occur as of the date on which any of the following occur:
i.the acquisition, other than from the Corporation, by any
individual, entity or group (within the meaning of Section
13 (d) (3) or 14 (d) (2) of the Securities and Exchange
Act of 1934, as amended (the "Exchange Act") of
beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 20 percent or more of
either the then outstanding shares of common stock of the
Corporation or the combined voting power of the then
outstanding voting securities of the Corporation
entitled to vote generally in the election of directors;
or
ii. individuals who, as of the date of this Restated
Agreement, constitute the Board (the "Incumbent Board")
cease for any reason to constitute at least a majority of
the Board, provided that any individual becoming a director
subsequent to the Effective Date whose election, or
nomination for election by the Corporation's
shareholders, was approved by a vote of at least a majority
of the directors then comprising the Incumbent Board shall
be considered as though such individual as a member of the
Incumbent Board, but excluding, for this purpose, any such
individual whose initial assumption of office is in
connection with an actual or threatened election
contest relating to the election of the directors of the
Corporation (as such terms are used in Rule 14a-ll of
Regulation 14A promulgated under the Exchange Act); or
iii. approval by the shareholders of the Corporation of (1)
a reorganization, merger or consolidation, in each case,
with respect to which the individuals and entities who were
the respective beneficial owners of the common stock and
voting securities of the Corporation immediately prior
to such reorganization, merger or consolidation do not,
following such reorganization, merger or
consolidation, beneficially own, directly or indirectly,
more than 50 percent of, respectively, the then outstanding
shares of common stock, and the combined voting power of the
then outstanding voting securities entitled to vote
generally in the election of directors, as the case may be,
of the corporation resulting from such reorganization,
merger or consolidation; (2) a complete liquidation or
dissolution of the Corporation; or of (3) the sale or other
disposition of all or substantially all of the assets of the
Corporation.
6.2 During any period of Disability and until the
earlier of the end of the Contract Period or
Executive's death, Executive shall receive all accrued
but unpaid salary plus all amounts or benefits payable
or due to him (including a pro rata share under
Incentive Compensation Plans earned during the year in
which the Disability occurs) under the
Corporation ' s compensation and benefit plans and
programs in which Executive is participating at the
commencement of any such period, plus an additional
payment from the Corporation (if necessary) such that
the aggregate amount received by Executive in the
nature of salary continuation from all sources equals
Executive's base salary at the rate in effect at the
commencement of any such period . Thereafter,
Executive shall be entitled to participate in all
applicable group, life, Family Protection Plan, health,
disability and accident insurance plans and programs as
well as any other applicable Corporation benefit plans
and programs (including, but not limited to the 1992
Stock Option and Incentive Plan) in accordance with the
terms of such plans and programs; provided that such
terms shall not be less advantageous to Executive than
the terms in effect as of the Restatement Date.
6.3 If Executive's employment shall be terminated by
reason of Executive 's death, the Executive shall be
entitled to the benefits provided below:
a)The Corporation shall pay to Executive's estate as soon
as practicable after the date of Executive's death,
Executive's full base salary through the date of
Executive's death, at the rate in effect at the time of
Executive ' s death, plus all other amounts to which
Executive is entitled under any benefit or compensation plan
of the Corporation including, but not limited to, a pro rata
share under Incentive Compensation Plans earned during the
year in which Employee's death occurs.
b)After Executive's death, Executive's beneficiaries shall
be entitled to participate in all applicable group, life,
health, disability and accident insurance plans and
programs as well as any other applicable Corporation benefit
plans and programs including, but not limited to, the 1992
Stock Option and Incentive Plan, in accordance with the
terms of such plans and programs.
6.4 If Executive's employment shall be terminated as a
result of a Retirement Termination or as a result of a
voluntary resignation for other than Good Reason
("Resignation"), then Executive shall receive all
accrued but unpaid salary plus all amounts payable to
him under the Corporation's compensation (including,
but not limited to a pro rata share under Incentive
Compensation Plans earned during the year the
Retirement Termination or Resignation occurs) and
benefit plans and programs in which Executive is
participating at the time the Retirement Termination or
Resignation becomes effective. In the event of a
Retirement Termination, Executive shall be entitled to
participate in all retirement and other plans and
programs effective on the Date of Termination to which
he is eligible in accordance with their terms .
6.5 If Executive's employment shall be terminated
by the Corporation for Cause, then Executive shall be
entitled to the following benefits:
a)The Corporation shall pay Executive's full base salary
through the Date of Termination at the rate in effect at the
time Notice of Termination is given plus all other amounts
to which Executive is entitled under any benefit or
compensation plan of the Corporation, excluding any bonus,
other incentive compensation and vacation pay, if any,
otherwise payable to Executive pursuant to the terms of the
applicable plan or program of the Corporation, at the time
such payments are due.
b)Executive shall be entitled to participate in all
applicable group, life, health, disability and accident
insurance plans and programs, only to the extent required by
the terms of such plans, or only to the extent required by
Federal or state law.
6.6 If Executive's employment shall be terminated (1)
by the Corporation for other than Cause, (2) by
Executive for Good Reason other than Good Reason as
specified in Section 6.7 below ("Section 6.7 Good
Reason") then Executive shall be entitled to the
following benefits:
a)The Corporation shall pay Executive, as soon as
practicable following the Date of Termination a sum equal to
Executive's full base salary through the Date of Termination
at the rate in effect at the time Notice of Termination is
given plus all other amounts to which Executive is entitled
under any benefit or compensation plan of the Corporation
(including but not limited to a pro rata share under
Incentive Compensation Plans earned during the year in which
employment is terminated).
b)The Corporation shall pay Executive as soon as
practicable following the Date of Termination an
additional payment equal to the sum of Executive's full base
salary plus the highest annual bonus received by the
Executive or by any individual serving as Executive Vice
President, General Counsel and Secretary of the Corporation
during any of the three previous years multiplied by the
higher of two (2) or the number of years (including
fractions thereof) remaining under the Contract Period.
c)At Executive's option and as soon as practicable after
his request, the Corporation shall pay to Executive a sum of
money equal to the value of Executive' s accrued balance of
the BE Plan.
d)For the longer of two years from the Date of Termination
or until the end of the Contract Period the Corporation
shall continue to make available to Executive all Company
Perquisites, or, in the alternative, the Corporation shall
pay to Executive as soon as practicable after Date of
Termination a sum of money reasonably approximating the cash
value of the Company Perquisites. Additionally, for such
period of time Executive shall, subject to Section 6.9, be
allowed to participate in all applicable group, life,
health, disability and accident insurance plans and programs
as well as any other applicable Corporation benefit plans
and programs (including but not limited to the 1992 Stock
Option and Incentive Plan) as if he were an active employee
(limited, in the case of coverage under life insurance
plans, to the leve1 of coverage that the Corporation is able
to obtain on Executive's behalf based upon the annual
premium cost of providing Executive with life insurance
during Executive's last twelve months of employment with the
Corporation), in which Executive was participating 30 days
prior to the time Notice of Termination is given or
comparable plans substituted therefor; provided, however,
that if Executive is ineligible (e.g., by operation of law
or the terms of the applicable plan) to continue to
participate in any such plan, the Corporation will provide
Executive with a comparable level of compensation or
benefit.
6.7 If Executive's employment by the Corporation
shall be terminated by Executive for Good Reason where
Executive has given Notice of Termination to the
Corporation within two years from the occurrence of an
event constituting a Change-of-Control, then Executive
shall be entitled to the benefits provided below.
a)The Corporation shall pay Executive his full base salary
through the Date of Termination at the rate in effect at the
time Notice of Termination is given, plus all other amounts
to which Executive is entitled under any benefit or
compensation plan of the Corporation (including but not
limited to a pro rata share under Incentive
Compensation Plans earned during the year in which
employment is terminated)
b)In lieu of any further base salary payments to Executive
for period subsequent to the Date of Termination, the
Corporation shall pay to Executive as severance pay a lump
sum equal to four times (4x) the sum of Executive's full
base salary for one calendar year at the rate in effect
immediately prior to the time Notice of Termination is
given plus the highest annual bonus received by the
Executive or any individual serving as Executive Vice
President, General Counsel and Secretary of the
Corporation during any of the three preceding calendar
years.
c)In lieu of any further participation by Executive in the
Family Protection Plan, the Corporation shall transfer to
Executive a fully paid up insurance policy or policies then
insuring the life of the Executive pursuant to the terms of
the Family Protection Plan, plus an amount of money (the
"Tax Adjustment") calculated to reimburse Executive for any
local, state or Federal income or other taxes which he may
be liable as a result of receiving the insurance policy or
policies and the Tax Adjustment amount.
d)At Executive's option and as soon, as practicable after
his request, the Corporation shall pay Executive a sum of
money equal to the value of Executive's accrued balance of
the BE Plan.
e)For four years from the Date of Termination
the Corporation shall continue to make available to
Executive all Company Perquisites, or, in the alternative ,
the Corporation shall pay to Executive as soon as
practicable after the Date of Termination a sum of money
reasonably approximating the cash value of the Company
Perquisite. Additionally, Executive shall, subject to
Section 6.9, be allowed to participate in all applicable
group, life, health, disability and accident insurance plans
and programs as well as any other applicable Corporation
benefit plans and programs (including, but not limited to
the 1992 Stock Option and Incentive Plan) as if he were an
active employee (limited, in the case of coverage under life
insurance plans, to the level of coverage that the
Corporation is able to obtain on Executive's behalf based
upon the annual premium cost of providing Executive with
life insurance during Executive's last twelve months of
employment with the Corporation), in which Executive was
participating 30 days prior to the time Notice of
Termination is given or comparable plans substituted
therefor; provided, however, that if Executive is ineligible
(e.g., by operation of law or the terms of the applicable
plan) to continue to participate in any such plan, the
Corporation will provide Executive with a comparable level
of compensation or benefit.
6.8 In addition to the benefits set forth in Sections
6.6 and 6.7, in the event that Executive's employment
shall be terminated (1) by the Corporation for other
than Cause, (2) by Executive for Good Reason other
than Section 6.7 Good Reason, or (3) by Executive for
Section 6.7 Good Reason then:
a)The Company shall also pay to Executive all reasonable
legal fees and expenses incurred by Executive as a result of
such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any
such termination (including cost associated with legal
consultation even if no actual contest or dispute results)
or in seeking to obtain or enforce any right or benefit
provided by this Restated Agreement or in connection with
any tax audit or proceeding to the extent attributable to
the application of Section 4999 of the Internal Revenue Code
of 1986, as amended (the "Code"), to any payment or benefit
provided hereunder), except any such fees or expenses
incurred by Executive in seeking to enforce a claim which is
determined by an arbitrator, pursuant to Section 14 below,
to have been frivolous in nature or not brought or pursued
in good faith.
b)In the event that Executive becomes entitled to payments
under the provisions of either Section 6.6 or 6.7 (the
"Severance Payments"), if Executive will be subject to the
tax (the "Excise Tax") imposed by Section 4999 of the Code,
the Corporation shall pay to Executive at the time or times
specified in Paragraph (h) below, an additional amount (the
"Gross-Up Payment") such that the net amount retained by
Executive, after deduction of (i) any additional Excise Tax
payable by Executive as a result of Executive's receipt of
the Severance Payments and (ii) any additional federal,
state and local income tax and Excise tax payable by
Executive as a result of Executive's receipt of the
Gross-Up Payments shall be equal to the Severance Payments.
For purposes of determining whether any of the Severance
Payments will be subject to the Excise Tax and the amount of
such Excise Tax, (i) the Severance Payments, payments
provided for in this paragraph and any other payments or
benefits received or to be received by Executive in
connection with a Change - in- Control of the
Corporation or Executive's termination of employment
(whether pursuant to the terms of this Restated Agreement or
any other plan, arrangement or agreement with the
Corporation, any person whose actions result in a Change-in-
Control or any person affiliated with the Corporation or
such person) shall be treated as "parachute payments" within
the meaning of Section 280G(b) (2) of the Code, and all
"excess parachute payments" within the meaning of Section
280G(b) (1) shall be treated as subject to the Excise Tax,
unless and to the extent that in the opinion of tax counsel
selected by the Corporation's independent auditors and
acceptable to Executive, such other payments or benefits (in
whole or in part) do not constitute parachute payments, or
such excess parachute payments (in whole or in part) and
represent reasonable compensation for services actually
rendered within the meaning of Section 280G(b) (4) of the
Code in excess of the base amount within the meaning of
Section 280G(b) (3) of the Code, or are otherwise not
subject to the Excise Tax, (ii) the amount of the
Severance Payments which shall be treated as subject to the
Excise Tax shall be equal to the lesser of (A) the total
amount of the Severance Payments or (B) the amount of
excess parachute payments within the meaning of Section
280G(b) (1) (after applying clause (i) above), (iii) any
payment pursuant to this Paragraph shall be treated as
subject to the Excise Tax in its entirety and (iv) the
value of any non-cash benefits or any deferred payment of
benefit shall be determined by the Corporation's
independent auditors in accordance with the principles of
Sections 280G(d) (3)'and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Executive
shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state
and local income taxes at the highest marginal rate of
taxation in the state and locality of Executive residence
on the Date of Termination, not of the maximum reduction
in federal income taxes which could be obtained from
deduction of such state and local taxes. In the event that
the Excise Tax is subsequently determined to be less than
the amount taken into account hereunder at the time of
termination of Executive's employment, Executive shall repay
to the Corporation at the time that the amount of such
reduction in Excise Tax is finally determined, the portion
of the Gross-Up Payment attributable to such reduction (plus
the portion of the Gross-Up Payment attributable to the
Excise Tax and federal and state and local income tax
imposed on the Gross-Up Payment being repaid by
Executive) plus interest accrued from the date such Gross-
Up Payment is made to Executive to the date of such
repayment on the amount of such repayment at the rate
provided in Section 1274(b) (2) (B) of the Code. In the
event that the Excise Tax is determined to exceed the amount
taken into account hereunder at the time of the termination
of Executive's employment (including by reason of any
payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), the
Corporation shall make an additional gross up payment in
respect of such excess (plus any interest payable with
respect to such excess) at the time that the amount of such
excess is finally determined.
c)The payments provided for in Paragraph (b) above shall be
made at any time during the 90 day period preceding each due
date for making payment of such Excise Taxes ; provided,
however, that if the amounts of such payments cannot be
finally determined on or before each such date, the
Corporation shall pay to Executive on such date an estimate,
as determined in good faith by the Corporation, of the
minimum amount of such payments and shall pay the remainder
of such payments then due as soon as the amount thereof can
be determined. In the event that the amount of the
estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a
loan by the Corporation to Executive on the fifth day after
demand by the Corporation (together with interest at the
rate provided in Section 1274 (b) (2) (B) of the Code).
6.9 Executive shall be required immediately after the
Date of Termination to take reasonable steps to seek
appropriate employment elsewhere; provided, however,
that if Executive obtains employment that would result
in a violation of the non-competition provisions of
Section 10 of this Restated Agreement and if Executive
is unable to accept such employment because the
Corporation will not release Executive from Executive's
non-competition obligation, Executive shall
nevertheless be deemed to have satisfied the
requirement of this Section to seek other employment.
Upon receipt of written notice from Executive that
Executive has been reemployed by another company or
entity on a full-time basis (or would have been
reemployed but for the non-competition provisions of
Section 10 of this Restated Agreement) benefits
otherwise receivable by Executive pursuant to
Subsections 6.6(d) or 6.7(e) shall be reduced to the
extent comparable benefits are made available to
Executive at his new employment and any such benefits
actually received by Executive shall be reported to the
Corporation. Nothing herein contained shall obligate
Executive to accept employment elsewhere, where the
duties, status, responsibilities, compensation and
benefits are not at least equal to that of his current
position.
7. Successors; Binding Agreement
The Corporation will require any successor (whether
direct or indirect, by purchase, merger, consolidation
or otherwise) to all or substantially all of the
business and/or assets of the Corporation to expressly
assume and agree to perform this Restated Agreement in
the same manner and to the same extent that the
Corporation would be required to perform it if no such
succession had taken place. Failure of the Corporation
to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach
of this Restated Agreement and shall entitle Executive
to terminate this Restated Agreement for Good Reason.
As used in this Restated Agreement, "Corporation" shall
mean the Corporation and any successor to its business
and or assets as aforesaid which assumes and agrees to
perform this Restated Agreement by operation of law, or
otherwise.
8.Notice
For the purpose of this Restated Agreement, notices
and all other communications provided for in the
Restated Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed
by United States registered mail, return receipt
requested, postage prepaid, addressed to the Executive
at 6405 Mitchell Hollow Road, Charlotte, NC 28277, and
to the Corporation at 3 Coliseum Centre, 2550 West
Tyvola Road, Charlotte, NC 28217 to the attention of
the Board with a copy to the Secretary of the
Corporation or to such other address as either party
may have furnished to the other in writing in
accordance herewith, except that notice of change of
address shall be effective only upon receipt.
9. Modification - Waiver
No provision of this Restated Agreement may be
modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing and
signed by Executive and such officer of the Corporation
as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any
condition or provision of this Restated Agreement to be
performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
10. Non-Competition
10.1 Until the Date of Termination, Executive agrees
not to enter into competitive endeavors and not to
undertake any commercial activity which is contrary to
the best interests of the Corporation or its
affiliates, including becoming an employee, owner
(except for passive investments of not more than three
percent of the outstanding shares of, or any other
equity interest in, any company or entity listed or
traded on a national securities exchange or in an
over-the-counter securities market), officer, agent or
director of (a) any firm or person engaged in the
operation of a business engaged in the acquisition of
industrial businesses or (b) any firm or person which
either directly competes with a line or lines of
business of the Corporation accounting for ten percent
(10%) or more of the Corporation's gross revenues or
earnings before taxes or derives ten percent (10%) or
more of such firm's or person's gross revenues or
earnings before taxes from a line or lines of
business which directly compete with the
Corporation. Notwithstanding any provision of this
Restated Agreement to the contrary, Executive agrees
that his breach of the provisions of this Section 10.1
shall permit the Corporation to terminate Executive's
employment for Cause in accordance with Section 5.l(b)
hereof.
10.2 After the Date of Termination and for a period of
time equal in years to the multiple of annual salary
received by Executive pursuant to Sections 6.6(b) and
6.7(b) (the "Non-Competition Period"), Executive
agrees not to become an employee, owner (except for
passive investments of not more than three percent of
the outstanding shares of, or any other equity interest
in, any company or entity listed or traded on a
national securities exchange or in an over-the-counter
securities market), officer, agent or director of any
firm or person which directly and substantially
competes with a business of the Corporation accounting
for ten percent (10%) or more of the Corporation's
gross revenues or earnings before taxes. During the Non-
Competition Period, Executive will be available to
answer questions and provide advice to the Corporation;
provided, however, that such requirement shall not
unreasonably interfere with any other of Executive's
activities which Executive is then pursuing and which
are not otherwise prohibited by this Section 10. Also,
during the Non-Competition Period, Executive will
retain in confidence any and all confidential
information known to him concerning the Corporation and
its business and shall not use or disclose such
information without the approval of the Corporation
except to the extent such information becomes public or
as may be required by law.
10.3 Executive acknowledges and agrees that damages for
breach of the covenant not to compete in this Section
10 will be difficult to determine and will not afford a
full and adequate remedy, and therefore Executive
agrees that the Corporation, in addition to seeking
actual damages pursuant to the procedures set forth
in Section 13 below, may seek specific enforcement of
the covenant not to compete in any court of competent
jurisdiction, including, without limitation, by the
issuance of a temporary or permanent injunction,
without the necessity of a bond. Executive and the
Corporation agree that the provisions of this covenant
not to compete are reasonable. However, should any
court or arbitrator determine that any provision of
this covenant not to compete is unreasonable, either in
period of time, geographical area, or otherwise, the
parties agree that this covenant not to compete should
be interpreted and enforced to the maximum extent which
such court or arbitrator deems reasonable.
11. Validity
The invalidity or unenforceability of any provision of
this Restated Agreement shall not affect the validity
or enforceability of any other provision of this
Restated Agreement, which shall remain in full force
and effect.
12. Counterparts
This Restated Agreement may be executed in several
counterparts, each of which shall be deemed to be an
original but all of which together will constitute one
and the same instrument.
13. Arbitration
Except as contemplated by Section 10.3 of this Restated
Agreement, any dispute or controversy arising under or
in connection with this Restated Agreement shall be
settled exclusively by arbitration in New York, New
York, or other location mutually agreed upon by the
parties to the arbitration, in accordance with rules of
the American Arbitration Association, and judgment upon
such award rendered by the arbitrator may be entered in
any court having jurisdiction over such proceeding.
14. Governing Law
This Restated Agreement shall be governed by and
construed and enforced in accordance with the laws of
the State of New York.
15. Entire Agreement; Survival of Certain Provisions
This Restated Agreement constitutes the whole
agreement of the Corporation and the Executive.
No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter
of this Restated Agreement have been made by either
party which are not expressly set forth in this
Restated Agreement. The Employment Agreement dated June
1, 1995 between the Corporation and the Executive is
hereby superseded by this Restated Agreement.
The obligations of the Corporation under Section 9
above and the Executive's obligations under Section 10
above shall survive the expiration of the term of this
Restated Agreement.
16. Withholding
Any payments made to Executive under this Restated
Agreement shall be paid net of any applicable
withholding required under Federal, state or local law.
IN WITNESS WHEREOF, the parties hereto have executed
this Restated Agreement as of January 10, 1997 to be
effective as of the Effective Date.
COLTEC INDUSTRIES INC
By: John W. Guffey, Jr
Chairman, President and
Chief Executive Officer
Robert J. Tubbs
Executive
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
30, 1997 CONSOLIDATED BALANCE SHEET AND STATEMENT OF EARNINGS FOR THE THREE
MONTHS ENDED MARCH 30, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH CONSOLIDATED FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-30-1997
<CASH> 7,813
<SECURITIES> 0
<RECEIVABLES> 197,418
<ALLOWANCES> (2,053)
<INVENTORY> 210,537
<CURRENT-ASSETS> 441,800
<PP&E> 597,761
<DEPRECIATION> (378,082)
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<CURRENT-LIABILITIES> 224,581
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0
0
<COMMON> 704
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<TOTAL-LIABILITY-AND-EQUITY> 851,887
<SALES> 309,172
<TOTAL-REVENUES> 309,172
<CGS> 211,675
<TOTAL-COSTS> 264,244
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 12,364
<INCOME-PRETAX> 32,564
<INCOME-TAX> 11,072
<INCOME-CONTINUING> 21,492
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