Coltec Industries, Inc. 1992 Stock Option

1992 STOCK OPTION
AND INCENTIVE PLAN


COLTEC INDUSTRIES INC
1992 STOCK OPTION AND INCENTIVE PLAN


1. Purpose. The purpose of the Plan is to provide an additional incentive
to officers and other eligible key employees, upon whom
responsibilities for the successful operation, administration and
management of Coltec Industries Inc (the "Corporation") rest and whose
present or potential contributions are important to the continued
success of the Corporation, and to enable the Corporation to attract
and retain in its employ highly qualified persons for the successful
conduct of its business. It is intended that this purpose will be
effected through the granting of Incentive Stock Rights, Stock Options,
Stock Appreciation Rights, Restricted Stock and Dividend Equivalents,
as provided herein, and the making of loans to accomplish the purposes
of the Plan.


2. Definitions. For purposes of this Plan:


a) "Award" means an Incentive Stock Right, Stock Option, Stock
Appreciation Right, Restricted Stock grant and/or Dividend
Equivalent.


b) "Award Agreement" means an agreement granting an Award.


c) "Board of Directors" means the Board of the Directors of the
Corporation.


d) "Change in Control" means the occurrence of an event described
in Section 13(a) hereof.


e) "Code" means the Internal Revenue Code of 1986, as amended.


f) "Committee" means the Stock Option and Compensation Committee
appointed by the Board of Directors to administer the Plan.


g) "Common Stock" means the Common Stock, par value $.01 per
share, of the Corporation.


h) "Corporation" means Coltec Industries Inc, a Pennsylvania
corporation.


i) "Dividend Equivalent" means the right to receive, on a current
or deferred basis, and subject to such conditions as may be
imposed by the Board of Directors, cash payments from the
Corporation equal to the amount which would have been received
had a person owned a specified number of shares of Common
Stock.


j) "Exercise Date" means the date upon which a Stock Option or
Stock Appreciation Right is exercised.


k) "Fair Market Value" means the fair market value of the Common
Stock as determined by the Committee in its sole discretion;
provided, however, that (A) if


Restated as of May 7, 1998 1


the Common Stock is admitted to trading on a national
securities exchange, Fair Market Value on any date shall be
the last sale price reported for the Common Stock on such
exchange on such date or on the last date preceding such date
on which a sale was reported; (B) if the Common Stock is
admitted to quotation on the National Association of
Securities Dealers Automated Quotation System ("NASDAQ") or
other comparable quotation system and has been designated as a
National market System ("NMS") security, Fair Market Value on
any date shall be the last sale price reported for the Common
Stock on such system on such date or, if no sale occurred on
such date, on the last day preceding such date on which a sale
was reported, or (C) if the Common Stock is admitted to
quotation on NASDAQ and has not been designated a NMS
security, Fair Market Value on any date shall be the average
of the highest bid and lowest asked prices of Common Stock on
such system on such date.


l) "Incentive Stock Option" means an option to acquire stock
within the meaning of Section 422 of the Code.


m) "Incentive Stock Right" means the right to receive, without
payment to the Corporation, shares of Common Stock, subject to
the terms, conditions and restrictions described in Section 8
hereof.


n) "Nonqualified Stock Option" means a Stock Option, which is not
an Incentive Stock Option.


o) "Public Offering" means the initial underwritten public
offering of Common Stock.


p) "Restricted Stock" means shares of Common Stock issued to a
participant, without payment to the Corporation, subject to
the terms, conditions and restrictions described in Section 10
hereof.


q) "Right" means a Stock Appreciation Right or an Incentive Stock
Right.


r) "Stock Appreciation Right" means a right to receive, without
payment to the Corporation, a number of shares of Common Stock
and/or cash, determined pursuant to a formula based upon the
difference between a price determined in accordance with
Section 9(b)(ii) and the Fair Market Value of a share of
Common Stock on the date of exercise of such Stock
Appreciation Right.


s) "Stock Option" means an Incentive Stock Option or Nonqualified
Stock Option providing the holder thereof with the right to
purchase Common Stock at a price to be determined in
accordance with Section 9(a)(i) of the Plan.


t) "Subsidiary" means any future or present corporation which
would be a "subsidiary corporation" of the Corporation as the
term is defined in Section 424 of the Code.


Restated as of May 7, 1998 2


3. Duration of Plan. The Plan shall remain in effect until terminated by
the Board of Directors and thereafter until all Incentive Stock Rights,
Stock Options, Stock Appreciation Rights, Restricted Stock and Dividend
Equivalents granted under the Plan are satisfied by the issuance of
shares of Common Stock or the payment of cash or are terminated under
the terms of the Plan or under the Award Agreements entered into in
connection with the grant thereof.


4. Shares of Stock Subject to the Plan. 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, 12,160,000 shares of the
Common Stock. Such shares may be in whole or in part as the Board of
Directors shall from time to time determine authorized and unissued
shares or issued shares, which may have been reacquired by the
Corporation. In no event shall the number of shares of Restricted Stock
issued hereunder after May 6, 1998 be in excess of forty percent (40%)
of any increase in the number of shares authorized to be issued under
the plan above 7,360,000 shares. Any share subject to an Incentive
Stock Right, Stock Option, Stock Appreciation Right or Restricted Stock
grant which for any reason is forfeited due to expiration, cancellation
or termination while unexercised may again be available for purposes of
the Plan if the forfeiting participant received no benefit of ownership
(not including voting rights) from such shares. The number of Dividend
Equivalents which may be granted under the Plan will be as determined
by the Committee in its discretion.


5. Awards Under the Plan. Awards under the Plan may be of five types,
namely, "Incentive Stock Rights", "Stock Options", "Stock Appreciation
Rights", "Restricted Stock" and "Dividend Equivalents". Awards may be
granted in conjunction with each other, at the same time or at
different times, and may provide for the exercise of one to reduce
proportionately or cancel the other.


6. Eligible Employees. Awards may be granted only to salaried employees
who are officers or who are employed in an executive, administrative,
operational, sales or professional capacity by the Corporation or its
Subsidiaries. Awards may be granted to a director of the Corporation
provided that the director is also an officer or salaried employee of
the Corporation or Subsidiary. In determining the employees to whom
Awards shall be granted and the number of such Awards to be granted,
the Committee shall take into account the duties of the employees,
their present and potential contributions to the success of the
Corporation, their other compensation provided pursuant to any plan or
as salary or otherwise and such other factors as it shall deem relevant
in connection with accomplishing the purposes of the Plan.


Awards shall not be affected by any change of duties or positions so
long as the holder continues to be an employee of the Corporation or of
a Subsidiary. Nothing in the plan or in any Award or in any agreement
with respect thereto entered into pursuant to the Plan shall confer
upon any employee any right to continue in the


Restated as of May 7, 1998 3


employ of the Corporation or of any of its Subsidiaries, or interfere
in any way with the right of the Corporation or any such Subsidiary to
terminate such employee's employment at any time.


7. Administration of the Plan. Within the limitations described herein,
the Committee shall administer the Plan, select the employees to whom
Awards will be granted, determine the number of Awards to be granted to
each such employee and interpret, construe and implement the provisions
of the Plan. The Committee shall consist of no fewer than two members
of the Board of Directors who shall serve at the pleasure of the Board
of Directors. The Committee shall have authority to adopt rules and
regulations for administering the Plan. Decisions of the Committee
shall be binding on the Corporation and on all employees eligible to
participate in the Plan. The Board of Directors may from time to time
appoint members of the Committee in substitution for or in addition to
members previously appointed and may fill vacancies, however caused, in
the Committee. All determinations of the Committee at a meeting shall
be made by a majority of the members in attendance. Any decision or
determination 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. No member of the Committee shall be
personally liable for any action, determination or interpretation made
in good faith with respect to the Plan, and all members of the
Committee shall be fully indemnified by the Corporation with respect to
any such action, determination or interpretation. 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
twenty-five percent (25%) 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.


8. Incentive Stock Rights. Incentive Stock Rights shall be evidenced by
Incentive Stock Rights Agreements in such form and not inconsistent
with the Plan as the Committee shall approve from time to time, which
Award Agreements shall contain in substance the following terms and
conditions:


a) Number of Shares, Incentive Period.


An Incentive Stock Rights Agreement shall specify the number
of shares of Common Stock to which it pertains and shall
specify that the holder is entitled to receive, without
payment to the Corporation, such shares of Common Stock in
consideration for services performed for the Corporation or
for its benefit by the person receiving the Right upon the
lapse of a specified period of time (the "Incentive Period")
and upon compliance with any other terms contained in such
Award Agreement.


b) Termination of Employment, Leave of Absence. The Incentive
Stock Rights Agreement shall contain such provisions
concerning termination of employment (by reason of death,
disability or otherwise) and leaves of absence as shall be


Restated as of May 7, 1998 4


determined by the Committee. Such provisions may include, but
are not limited to, granting the right to receive all or a
portion of the shares of Common Stock covered by the Incentive
Stock Rights, partial or complete acceleration of the time
periods in relation to which the right to receive shares is
granted, the waiver of forfeiture provisions for leaves of
absence and other periods when not employed by the Corporation
and the receipt of shares by personal representatives, heirs
or legatees.


c) Issuance of Shares. Upon the lapse of an Incentive Period, the
Corporation shall, without transfer or issue tax to the person
entitled to receive the shares of Common Stock, deliver to
such person a certificate or certificates for the number of
shares as to which such Incentive Period has lapsed.


9. Stock Options and Stock Appreciation Rights.


a) Stock Options. Stock Options shall be evidenced by Stock
Option Agreements in such form and not inconsistent with the
Plan as the Committee shall approve from time to time, which
Award Agreements shall contain in substance the following
terms and conditions:


i. Price. The purchase price per share of Common Stock
deliverable upon the exercise of a Stock Option shall
be the Fair Market Value of such Common Stock on the
date the Stock Option is granted, but in no event
less than the par value of such Common Stock (the
"Exercise Price").


ii. Number of Shares, Exercise Period. The Stock Option
Agreement shall specify the number of shares of
Common Stock to which it pertains. The number of
shares subject to a Stock Option shall be reduced on
a share-for-share basis to the extent that shares
under such Stock Option are used to calculate the
shares of Common Stock or cash to be received by
exercise of a related Stock Appreciation Right, if
any. At the time a Stock Option is granted, the
Committee shall fix the terms and conditions upon
which Stock Options can be exercised, including
fixing the periods during which such Stock Option or
any portion thereof may be exercised, which period
shall not be more than 10 years nor less than one
year (such period referred to as the "Exercise
Period"). The Committee, in the Stock Option
Agreement or otherwise, may allow partial exercise
from time to time during the Exercise Period.


iii. Method of Exercise, Medium and Time of Payment. An
Option shall be exercised by giving written notice of
such exercise to the Corporation. The purchase price
of shares of Common Stock purchased pursuant to a
Stock Option Agreement shall be paid for at the time
of purchase in full in cash or, in the discretion of
the Committee, in whole shares of Common Stock with a
Fair Market Value (as of the date immediately
preceding the Exercise Date) at least equal to the
purchase price (or in a combination of


Restated as of May 7, 1998 5


cash and whole shares of Common Stock). Such whole
shares of Common Stock may be previously owned shares
...