Exhibit 10.5
ENPRO INDUSTRIES, INC. LONG-TERM INCENTIVE PLAN
20___-20___
AWARD GRANT
(Performance Shares and Cash)
THIS DOCUMENT CONSTITUTES PART OF A PROSPECTUS COVERING
SECURITIES THAT HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
Name:
TARGET LTIP AWARD
You have been granted by EnPro Industries, Inc. (the “Company”) a Target LTIP
Award under the Company’s Long-Term Incentive Plan for the three-year
performance period 20___ through 20___, comprised of the following:
Target Performance Shares Award:
Target Cash LTIP Award:
Each Performance Share will be equivalent to one share of EnPro common stock.
Your award is subject to the terms and conditions of the Long-Term Incentive
Plan and, with respect to your Performance Shares Award, the Company’s 2002
Equity Compensation Plan (2005 Amendment and Restatement) (collectively, the
“Plan Documents”). If this award agreement varies from the terms of the Plan
Documents, the Plan Documents will control. Attached as Appendix A is a copy of
the Long-Term Incentive Plan, and attached as Appendix B is a copy of the
prospectus for the Equity Compensation Plan.
PERFORMANCE GOALS
The number of Performance Shares and amount of Cash LTIP award you earn will
depend on the performance of the Company relative to certain performance goals
for the three-year performance cycle from January 1, 20___ through December 31,
20___ (the “Performance Cycle”). The performance goals and their relative
weightings with respect to the Performance Shares and with respect to the Cash
LTIP award are attached as Appendix C hereto.
The determination of whether the performance goals have been met will be made by
the Compensation Committee following the end of the Performance Cycle.
OTHER IMPORTANT INFORMATION

•   Performance Shares will receive dividend equivalents accrued in cash
(without interest) which will be subject to the performance goals and vesting
provisions described above.

•   You will not earn any Performance Shares or any amount of Cash LTIP award if
the Company’s performance during the 20___-20___ period is below minimum
performance.

•   If actual performance equals or exceeds minimum performance, the number of
Performance Shares earned will range from ___% to ___% of your Target
Performance Share award

 

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    based on attainment against the performance goals. Likewise, the amount of
Cash LTIP earned will range from ___% to ___% of your Target Cash LTIP award.

•   In order to receive any Performance Shares or LTIP Cash award, you must
remain employed with the Company through December 31, 20___, except in the case
of death, disability or retirement as discussed below. If your employment
terminates prior to December 31, 20___ for any reason other than death,
disability or retirement, you will forfeit all Performance Shares and any Cash
LTIP award.

•   Performance Shares earned at the end of the Performance Cycle, if any, will
be paid in actual shares of Company common stock, less the number of shares to
satisfy applicable withholding taxes. Any Performance Shares earned will be
issued on or as soon as administratively practicable after February 15, 20_.
Notwithstanding the foregoing, the Company reserves the right in its sole
discretion to pay the value of any Performance Shares in cash instead of issuing
actual shares of Company common stock. The amount of the Cash LTIP award earned
at the end of the Performance Cycle, if any, will also be reduced to satisfy
applicable withholding taxes and will be paid as soon as administratively
practicable after February 15, 20___.

•   If you become totally disabled under the Company’s Long-Term Disability Plan
or retire under the Company’s Salaried Pension Plan (or a similar pension plan
maintained by a subsidiary) during the Performance Cycle, you will receive a pro
rata payout at the end of the Performance Cycle, based upon the time portion of
the cycle during which you were employed. The actual payout will not occur until
after the end of the Performance Cycle, at which time the financial performance
for the entire Performance Cycle will be used to determine the size of the award
in that event.

•   If you die during the Performance Cycle, any beneficiary you have designated
by will (or, if you do not so designate a beneficiary or your designated
beneficiary fails to survive you, your estate) will receive a pro rata payout
based upon the financial results calculated for the portion of the Performance
Cycle through the end of the fiscal quarter following your death.

•   The performance factors and weightings applicable to your award are
determined based upon your position with the Company.

•   The Compensation Committee retains the right in its sole discretion to
reduce any award which would otherwise be payable, unless there has been a
Change in Control, as defined in the Equity Compensation Plan.

•   Any income you derive from a payout of Performance Shares or Cash LTIP award
will not be considered eligible earnings for Company or subsidiary pension
plans, savings plans, profit sharing plans or other benefit plans.

FOR MORE INFORMATION
If you have any questions about the Performance Shares, the LTIP or need
additional information, contact Steve Spradling at (704) 731-1516.

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APPENDIX A
ENPRO INDUSTRIES, INC.
LONG-TERM INCENTIVE PLAN
(2007 AMENDMENT AND RESTATEMENT)
PURPOSE
     The EnPro Industries, Inc. Long-Term Incentive Plan (the “Plan”) was
established effective as of January 1, 2003 (the “Effective Date”) to provide
long-term incentive compensation to key employees who are in a position to
influence the performance of EnPro Industries, Inc. (the “Company”), and thereby
enhance shareholder value over time. The Plan provides a significant additional
financial opportunity and complements other parts of the Company’s total
compensation program for key employees.
ELIGIBILITY AND PERFORMANCE PERIODS
     The Committee (as defined in the “Plan Administration” section of the Plan)
will determine which employees of the Company are eligible to participate in the
Plan from time to time. Participants will be selected within 90 days after the
beginning of each multi-year performance cycle (“Performance Period”). Each
Performance Period will be of two or more years duration as determined by the
Committee and will commence on January 1 of the first year of the Performance
Period. A new Performance Period will commence each year unless the Committee
determines otherwise.
TARGET AWARDS
     At the time a Participant is selected for participation in the Plan for a
Performance Period, the Committee will assign the Participant a Target LTIP
Award to be earned if the Company’s target performance levels are met for the
Performance Period (the “Target LTIP Award”). The Target LTIP Award may be
expressed as a dollar amount, a number of Performance Shares under the Company’s
Equity Compensation Plan, or a combination of a dollar amount and a number of
Performance Shares. Any portion of the Target LTIP Award made in the form of
Performance Shares will be evidenced by a Performance Shares award agreement
consistent with the provisions of the Equity Compensation Plan.
MAXIMUM AND THRESHOLD AWARDS
     At the time a Participant is selected for participation in the Plan for a
Performance Period, the Participant will be assigned maximum and threshold award
levels, expressed as a percentage of the Target LTIP Award. Maximum award level
represents the maximum percentage of the Target LTIP Award that may be paid to a
Participant for a Performance Period based on performance above target
performance levels. Threshold award level represents the minimum percentage of
the Target LTIP Award that may be paid to a Participant for a Performance Period
based on performance below target performance levels. Performance below the
threshold performance award level will earn no incentive payments.

 

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     Under no circumstances will any Participant earn an award for a Performance
Period expressed in dollars exceeding $2,500,000. In addition, any award of
Performance Shares hereunder shall be subject to the individual award limit
applicable under the Equity Compensation Plan.
PERFORMANCE MEASURES
     The Committee may use any quantitative or qualitative performance measure
or measures that it determines to use to measure the level of performance of the
Company or any individual participant during a Performance Period.
     Performance measures that may be used under the Plan include, but are not
limited to, the following, which shall be considered “qualifying performance
measures” and which may be used individually, alternatively, or in any
combination, applied to the Company as a whole or to a division or business unit
or related company, and measured either annually or cumulatively over a period
of years, on an absolute basis or relative to a pre-established target, to a
previous year’s results or to a designated comparison group, in each case as
specified by the Committee in the award. Each performance measure is subject to
adjustment by the Committee in its discretion at the time of the award to remove
the effect of charges for asbestos, restructurings, discontinued operations, and
any other items deemed by the Committee to be non-recurring in nature or
otherwise not reflective of operating performance. In addition, awards may be
determined on a pre-tax or after tax basis, as specified by the Committee at the
time of the award:
     Revenue-related measures:

  •   Total sales     •   Sales growth     •   Sales growth excluding
acquisitions     •   Other specific revenue-based measures for particular
products, product lines or product groups

     Income-based measures:

  •   Net income     •   Earnings per share     •   EPS before or after asbestos
and/or other selected items     •   Net income before or after asbestos charges
and/or other selected items     •   Pretax income before or after asbestos
charges and/or other selected items     •   Consolidated operating income before
or after asbestos charges and/or other selected items     •   Pretax
consolidated operating income before or after asbestos charges and/or other
selected items     •   Segment operating income before or after asbestos charges
and/or other selected items     •   Pretax segment operating income before or
after asbestos charges and/or other selected items     •   Earnings before
interest and taxes (EBIT) before or after asbestos charges and/or other selected
items     •   EBITDA before or after asbestos charges and/or other selected
items

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     Cash flow-based measures:

  •   Free cash flow before or after asbestos charges and/or other selected
items     •   Pretax free cash flow before or after asbestos charges and/or
other selected items     •   Asbestos-related cash outflow (or changes in
asbestos-related cash outflow)     •   Pretax asbestos-related cash outflow (or
changes in asbestos-related cash outflow)     •   New asbestos commitments (or
changes in new asbestos commitments)

     Return-based measures:

  •   Return on equity, assets, investment, invested capital, capital, total or
net capital employed, or sales before or after asbestos charges and/or other
selected items     •   Pretax return on equity, assets, investment, invested
capital, capital, total or net capital employed, or sales before or after
asbestos charges and/or other selected items     •   Total shareholder return  
  •   Share price increase     •   Total business return before or after
asbestos charges and/or selected items     •   Economic value added or similar
“after cost of capital” measures     •   Return on sales or margin rate, in
total or for a particular product, product line or product group

     Other measures:

  •   Working capital (or any of its components or related metrics, e.g. DSO,
DSI, DWC, working capital to sales ratio)     •   Working capital improvement  
  •   Market share     •   Measures of customer satisfaction (including survey
results or other measures of satisfaction)     •   Safety (determined by
reference to recordable or lost time rates, first aids, near misses or a
combination of two or more such measures or other measures)     •   Measures of
operating efficiency, e.g. productivity, cost of non-conformance or cost of
quality, on time delivery, efficiency ratio (controllable expenses divided by
operating income or other efficiency metric)     •   Strategic objectives with
specifically identified areas of emphasis, e.g. cost reduction, acquisition
assimilation synergies, acquisitions, organization restructuring

PERFORMANCE GOALS
     The Committee will designate, within 90 days of the beginning of each
Performance Period:

  •   The performance measures and calculation methods to be used for the
Performance Period;     •   A schedule for each performance measure relating
achievement levels for the performance measure to incentive award levels as a
percentage of Participants’ Target LTIP Awards; and     •   The relative
weightings of the performance measures for the Performance Period.

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     The performance goals established by the Committee for a Performance Period
are intended to satisfy the “objective compensation formula” requirements of
Treasury Regulations Section 1.162-27(e) (2).
PERFORMANCE CERTIFICATION
     As soon as practicable following the end of each Performance Period and
prior to any award payments for the Performance Period, the Committee will
certify the Company’s performance with respect to each performance measure used
for that Performance Period.
AWARD CALCULATION AND PAYMENT
     For each Performance Period, individual incentive awards will be calculated
and paid to each Participant who is still employed with the Company (subject to
the special provisions below for employees who terminate employment due to
death, disability or retirement) as soon as practicable following the
Committee’s certification of performance for the Performance Period. The amount
of a Participant’s incentive award to be paid based on each individual
performance measure will be calculated based on the following formula:

                          Participant’s
Target LTIP Award   X   Percentage of
target award to be
paid based on
performance measure
results   X   Relative weighting
of performance
measure   =   Amount of incentive
award based on
performance measure
results

     The incentive amounts to be paid to the Participant based on each
performance measure will be summed to arrive at the Participant’s total
incentive award payment for the Performance Period.
     Payments from the Plan to a Participant, if any, will be made in cash (less
any amount necessary to satisfy applicable withholding taxes); provided,
however, that (i) if any portion of the award is in the form of Performance
Shares, the applicable Performance Shares award agreement will specify whether
the award will be settled in cash, shares of the Company’s common stock or a
combination of cash and stock; and (ii) at the Participant’s election, receipt
of all or part of an award may be deferred under the terms of the EnPro
Industries, Inc. Deferred Compensation Plan (or other deferred compensation plan
of the Company).
TERMINATION OF EMPLOYMENT DUE TO DEATH, DISABILITY, RETIREMENT
     If a Participant becomes totally disabled under the Company’s Long-Term
Disability Plan, or retires (or is deemed to retire) under the Company’s
Salaried Retirement Plan during a Performance Period, the Participant will
receive a pro rata payout at the end of the Performance Period, based upon the
time portion of the Performance Period during which he or she was employed. The
actual payout will not occur until after the end of the Performance Period, at
which time the financial performance for the entire Performance Period will be
used to determine the amount of the award prior to proration.
     If a Participant dies during a Performance Period, the Participant will
receive a pro rata payout based upon financial results calculated for the
portion of the Performance Period through the end of the fiscal quarter
following the Participant’s death.

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OTHER TERMINATION OF EMPLOYMENT
     If a Participant’s employment terminates prior to the end of a Performance
Period for any reason (whether voluntary or involuntary) other than death,
disability or retirement, the Participant will forfeit all rights to
compensation under the Plan, unless the Committee determines otherwise.
NEW HIRES OR PROMOTIONS INTO ELIGIBLE POSITIONS
     Participants will become eligible for participation in the Plan at their
new position level beginning with the Performance Period which begins on the
January 1 immediately following their hire or promotion date. No new performance
awards or adjustments to awards for Performance Periods that commenced prior to
a Participant’s hire or promotion date will be made.
PAYMENT UPON CHANGE IN CONTROL
     Anything to the contrary notwithstanding, if a Change in Control occurs
prior to the end of a Performance Period, within five days following the
occurrence of the Change in Control each Participant will receive a pro rata
payout of the Participant’s award for that Performance Period based upon the
portion of the Performance Period completed through the date of the Change in
Control and the performance results calculated for that period (the “Interim
LTIP Payment”). The Participant shall also remain entitled to a payout upon
completion of the Performance Period based on performance results for the entire
Performance Period, such payout to be offset be the amount of the Interim LTIP
Payment (if any); provided, however, that the Participant will not be required
to refund to the Company, or have offset against any other payment due to the
Participant from or on behalf of the Company, in the event the amount of the
Interim LTIP Payment exceeds the amount of the payout upon completion of the
Performance Period.
     For purposes of the Plan, a “Change in Control” shall mean:
     (i) The acquisition by any individual, entity or group (within the meaning
of Section 13(d)(3) or 14(d)(2) of the Securities 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% or more of either (A) the
then outstanding shares of common stock of the Company (the “Outstanding Company
Common Stock”) or (B) the combined voting power of the then outstanding voting
securities of the Company entitled to vote generally in the election of
directors (the “Outstanding Company Voting Securities”); provided, however, that
the following acquisitions shall not constitute a Change in Control: (A) any
acquisition directly from the Company (other than by exercise of a conversion
privilege), (B) any acquisition by the Company or any of its subsidiaries,
(C) any acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any of its subsidiaries or (D) any acquisition by
any company with respect to which, following such acquisition, more than 70% of,
respectively, the then outstanding shares of common stock of such company and
the combined voting power of the then outstanding voting securities of such
company entitled to vote generally in the election of directors is then
beneficially owned, directly or indirectly, by all or substantially all of the
individuals and entities who were the beneficial owners, respectively, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities
immediately prior to such acquisition in substantially the same proportions as
their ownership, solely in their capacity

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as shareholders of the Company, immediately prior to such acquisition, of the
Outstanding Company Common Stock and Outstanding Company Voting Securities, as
the case may be; or
     (ii) individuals who, as of the Effective Date, constitute the Board of
Directors (the “Incumbent Board”) cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election, or
nomination for election by the Company’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 were a member of the Incumbent Board,
but excluding, for this purpose, any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election contest; or
     (iii) consummation of a reorganization, merger or consolidation, in each
case, with respect to which all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities immediately prior
to such reorganization, merger or consolidation, do not, following such
reorganization, merger or consolidation, beneficially own, directly or
indirectly, solely in their capacity as shareholders of the Company, more than
70% 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 company
resulting from such reorganization, merger or consolidation in substantially the
same proportions as their ownership, immediately prior to such reorganization,
merger or consolidation of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, as the case may be; or
     (iv) consummation of (A) a complete liquidation or dissolution of the
Company or (B) a sale or other disposition of all or substantially all of the
assets of the Company, other than to a company, with respect to which following
such sale or other disposition, more than 70% of, respectively, the then
outstanding shares of common stock of such company and the combined voting power
of the then outstanding voting securities of such company entitled to vote
generally in the election of directors is then beneficially owned, directly or
indirectly, by all or substantially all of the individuals and entities, solely
in their capacity as shareholders of the Company, who were the beneficial
owners, respectively, of the Outstanding Company Common Stock and Outstanding
Company Voting Securities immediately prior to such sale or other disposition in
substantially the same proportion as their ownership, immediately prior to such
sale or other disposition, of the Outstanding Company Common Stock and
Outstanding Company Voting Securities, as the case may be.
PLAN ADMINISTRATION
     The Plan will be administered by the Compensation and Human Resources
Committee of the Company’s Board of Directors (or a subcommittee of that
committee consisting only of those members of that committee who are “outside
directors” within the meaning of Section 162(m) of the Internal revenue Code if
any members of the committee are not “outside directors”) (the “Committee”). In
administering the Plan, the Committee shall be empowered to interpret the
provisions of the Plan and to perform and exercise all of the duties and powers
granted to it under the terms of the Plan by action of a majority of its members
in office from time to time. The Committee is empowered to set preestablished
performance targets, measure the results and determine the amounts payable
according to the Formula. While the Committee may not increase the amounts
payable under the Plan formula for a Performance Period, it retains
discretionary authority to reduce the amount of compensation that would
otherwise be

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payable to the Participants if the goals are attained. The Committee may also
adopt such rules and regulations for the administration of the Plan as are
consistent with the terms hereof and shall keep adequate records of its
proceedings and acts. All interpretations and decisions made (both as to law and
fact) and other action taken by the Committee with respect to the Plan shall be
conclusive and binding upon all parties having or claiming to have an interest
under the Plan. Not in limitation of the foregoing, the Committee shall have the
discretion to decide any factual or interpretative issues that may arise in
connection with its administration of the Plan (including without limitation any
determination as to claims for benefits hereunder), and the Committee’s exercise
of such discretion shall be conclusive and binding on all affected parties as
long as it is not arbitrary or capricious.
MISCELLANEOUS
     (i) Amendment and Termination. The Board of Directors of the Company may
amend, modify, or terminate the Plan at any time, provided that no amendment,
modification or termination of the Plan shall reduce the amount payable to a
Participant under the Plan as of the date of such amendment, modification or
termination.
     (ii) Shareholder Approval. No amounts shall be payable hereunder unless the
material terms of the Plan are first approved by the shareholders of the Company
consistent with the requirements of Section 162(m) of the Internal Revenue Code.
In accordance with Section 162(m)(4)(C)(ii) of the Internal Revenue Code, the
continued effectiveness of the Plan is subject to its approval by the
shareholders of the Company at such other times as required by
Section 162(m)(4)(C)(ii).
     (iii) Coordination With Other Company Benefit Plans. Any income
participants derive from Plan payouts will not be considered eligible earnings
for Company or subsidiary pension plans, savings plans, profit sharing plans or
any other benefit plans.
     (iv) Participant’s Rights. A Participant’s rights and interests under the
Plan may not be assigned or transferred by the Participant. To the extent the
Participant acquires a right to receive payments from the Company under the
Plan, such right shall be no greater than the right of any unsecured general
creditor of the Company. Nothing contained herein shall be deemed to create a
trust of any kind or any fiduciary relationship between the Company and the
Participant. Designation as a Participant in the Plan for a Performance Period
shall not entitle or be deemed to entitle the Participant to be designated as a
Participant for any subsequent Performance Periods or to continued employment
with the Company.
     (v) Applicable Law. The Plan shall be governed and construed in accordance
with the laws of the State of North Carolina, except to the extent such laws are
preempted by the laws of the United States of America.

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APPENDIX B
PROSPECTUS
3,600,000 SHARES
ENPRO INDUSTRIES, INC.
COMMON STOCK
 
2002 EQUITY COMPENSATION PLAN
(2005 AMENDMENT AND RESTATEMENT)
 
     This Prospectus relates to the offer and sale of up to 3,600,000 shares of
our common stock to eligible employees under the 2002 Equity Compensation Plan
(2005 Amendment and Restatement) (the “Plan”). The Plan was approved by our
Board of Directors at its February 2005 meeting and by our shareholders at the
May 10, 2005 annual meeting. The Plan terminates on May 22, 2012, unless
terminated earlier by our Board of Directors.
     The purpose of the Plan is to promote the interests of the shareholders by
providing stock-based incentives to selected employees and “Outside Directors”
to align their interests with shareholders and to motivate them to put forth
maximum efforts toward the continued growth, profitability and success of our
company.
     The Plan is generally administered by the Compensation and Human Resources
Committee of our Board (the “Committee”). See “Administration” below. The Plan
is not a qualified pension, profit-sharing or stock bonus plan within the
meaning of Section 401(a) of the Internal Revenue Code of 1986, as amended (the
“Code”). Further, in our view, the Plan is not subject to the provisions of the
Employee Retirement Income Security Act of 1974.
     For additional information concerning awards made under the Plan, please
contact Steve Spradling at 704-731-1516.
     This document constitutes part of a prospectus covering securities that
have been registered under the Securities Act of 1933, as amended (the
“Securities Act”).
 
     The date of this Prospectus is February 15, 2008.

 

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SUMMARY OF PLAN
     The following summary of the Plan is subject to, and qualified in its
entirety by reference to, all the provisions of the Plan, a copy of which may be
obtained upon request.
Eligibility
     Salaried, full-time employees of us or of our subsidiaries may participate
in the Plan. The Committee, in its discretion, will select the award recipients
and the nature and amount of any awards. The Committee may delegate to our CEO
and other senior officers authority to make such award determinations within
certain limits.
     In addition, members of our Board of Directors and any of our subsidiary
corporations of which we own more than 50% of the voting stock, excluding
directors who are employees or former employees of us or our subsidiaries within
five years after their termination of employment (“Outside Directors”) are
eligible to receive awards of phantom shares as described below.
Number of Shares
     There are 3,600,000 shares of our common stock available for issuance under
the Plan. If an award made under the Plan terminates, expires, lapses or is
canceled, the shares covered by that award remain available for issuance under
the Plan. Likewise, shares used to pay any option exercise price or to satisfy a
tax withholding obligation remain available for issuance under the Plan. Shares
of our common stock issued pursuant to the Plan may be original issue shares or
treasury shares.
Awards to Eligible Employees
     Pursuant to the Plan, the Committee may award eligible employees incentive
stock options (“ISOs”), nonqualified stock options (“NQSOs”), stock appreciation
rights (“SARs”), performance shares, restricted stock shares and other awards.
Each award will be evidenced by an award document setting forth the terms and
provisions applicable to the award.
     Stock Options and Stock Appreciation Rights. The Plan provides for the
grant of options to purchase shares of our common stock at option prices which
are not less than the fair market value of shares of our common stock at the
close of business on the grant date. The Plan also provides for the grant of
SARs, which entitle holders upon exercise to receive shares of our common stock
with a value equal to the difference between (i) the fair market value on the
exercise date of the shares with respect to which an SAR is exercised and
(ii) the fair market value of such shares on the grant date.
     In making an option award, the Committee determines whether the award will
be either an ISO or NQSO. The Committee also establishes all of the other terms
and conditions of each option award and of any SAR at the time of grant,
including any vesting requirements.
     The applicable award document will specify the term of the option or SARs
(although ISOs may not have a term exceeding 7 years from the date of grant),
the extent to which options and SARs may be exercised during their respective
terms, including in the event of your death, disability or termination of
employment. You may pay the option exercise price either in cash or by

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tendering shares of our common stock with a fair market value at the date of the
exercise equal to the portion of the exercise price which you do not pay in
cash. In addition, the Committee may from time to time allow cashless exercises
by any means which it determines to be consistent with the Plan’s purposes and
applicable law.
     You will have no rights as a shareholder until you become the holder of
record of shares of our common stock issued upon exercise of such stock options.
     Performance Shares. The Committee may make awards of performance shares
(which may be actual shares of our common stock or phantom shares) subject to
conditions established by the Committee that may include attainment of specific
performance objectives. Performance share awards may include the awarding of
additional shares upon attainment of the specified performance objectives.
     Restricted Shares. A restricted share is an actual share of our common
stock issued in your name that is subject to certain vesting requirements and
which we hold until the applicable vesting date, at which time the share is
released to you. The Committee establishes all of the terms and conditions of
each award at the time of grant, including any vesting requirements, which are
set forth in an award document. Restricted share awards that vest based on
continued employment generally have a minimum three year vesting period. Prior
to vesting, you may vote and receive cash dividends with respect to restricted
shares as specified in your award document.
     Other Awards. The Committee may make other awards under the Plan in units
or phantom shares, the value of which is based, in whole or in part, on the
value of our common stock. The Committee may provide that such awards to be paid
in cash, in shares, or in a combination of both cash and shares, under such
terms and conditions as the Committee may establish, which are set forth in an
award document.
Awards of Phantom Shares to Outside Directors
     Pursuant to the Plan, each Outside Director receives an annual grant of
phantom shares on each “Grant Date” (as defined below) equal in value to $25,000
(based on the fair market value of the our common stock as of the date
immediately preceding the applicable Grant Date). Such grants take place at the
first meeting of the Board of Directors each year or, if earlier, the date in
each year when stock options or performance share awards are granted to eligible
employees (the “Grant Date”). Each Outside Director receives annual grants
commencing in the year following the Outside Director’s election to the Board
and continuing through the Outside Director’s tenth year of service as a
Director. For Outside Directors first elected to the Board of Directors
following the effective date of the Plan, the Outside Director also receives
upon initial election to the Board of Directors a one-time grant of phantom
shares equal in value to $30,000 (based on the fair market value of the our
common stock as of such date of initial election to the Board of Directors).
     The terms and provisions of the phantom shares are as follows:
     Vesting. Phantom shares granted to Outside Directors are fully vested at
grant.
     Dividend Equivalents. Dividend equivalents accrue on all phantom shares
granted to Outside Directors. Upon the payment date of each dividend declared on
the our common stock, that number of additional phantom shares will be credited
to each Outside Director’s award which has an equivalent fair market value to
the aggregate amount of dividends which would be paid if

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the number of the Outside Director’s phantom shares were actual shares of the
common stock. Dividend equivalents are vested at the time the dividend is paid.
     Payment. Upon termination of service of an Outside Director as a member of
the Board of Directors (the “termination date”), we will pay to the Outside
Director all phantom shares credited to the Outside Director on the termination
date in the form of one share of our common stock for each whole phantom share,
with cash for any fractional phantom share based on the fair market value of our
common stock on the applicable date. The shares of common stock are paid and
delivered as soon as administratively practicable after the termination date.
Award Limits
     The following limits apply to awards made under the Plan:

  •   In no event may any individual receive awards under the Plan for a given
calendar year covering in excess of 500,000 shares of our common stock.     •  
We will not grant ISOs covering in the aggregate more than 1,000,000 shares of
our common stock during the term of the Plan.     •   We will not issue more
than 1,000,000 shares of our common stock is respect of performance share awards
or other equity-based awards.     •   We will not issue more than 150,000 shares
of our common stock is respect of restricted share awards.

Transferability of Awards
     You may not transfer any award granted under this Plan other than by will
or the laws of descent and distribution or by such other means as the Committee
may approve from time to time.
Withholding for Payment of Taxes
     The Committee will have the right to determine the amount of any Federal,
state or local required withholding tax, and may require that any such required
withholding tax be satisfied by withholding shares of our common stock or other
amounts which would otherwise be payable under this Plan.
Changes in Capitalization and Similar Changes
     In the event of any change in the outstanding shares of our common stock by
reason of any stock dividend, stock split, spin-off, recapitalization, merger,
consolidation, combination, exchange of shares or otherwise, the aggregate
number of shares of our common stock with respect to which awards may be made
under the Plan, and the terms, types of shares and number of shares of any
outstanding awards under the Plan may be equitably adjusted by the Committee in
its discretion to preserve the benefit of the award for both you and us.

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Change in Control
     The Plan provides that, in the event of a change in control of our company
(as defined in the Plan), all options and SARs will be fully exercisable as of
the date of the change in control and will remain exercisable for a period of
two years thereafter (not to exceed the original award term). The Committee may
also take actions with respect to outstanding awards of performance shares or
restricted shares or other awards.
Amendment and Termination of Plan
     Our Board of Directors has the power to amend, modify or terminate the Plan
on a prospective basis, provided that the Board of Directors may condition any
amendment to the Plan on shareholder approval if it deems shareholder approval
to be necessary or appropriate.
Administration
     The Plan is administered by the Committee. Under the Plan, the Committee
has the authority to (i) select the employees to receive awards from time to
time, (ii) make awards in such amounts as it determines, (iii) impose
limitations, restrictions and conditions upon awards as it deems appropriate,
(iv) establish performance targets and allocation formulas for awards of
performance shares, restricted shares or other awards intended to be “qualified
performance-based compensation” under Code Section 162(m), (v) certify the
attainment of performance goals, if applicable, as required by Code
Section 162(m), (vi) interpret the Plan and adopt, amend and rescind
administrative guidelines and other rules and regulations relating to the Plan,
(vii) correct any defect or omission or reconcile any inconsistency in the Plan
or any award granted thereunder and (viii) make all other determinations and
take all other actions necessary or advisable for the implementation and
administration of the Plan. The Committee may delegate its authority under the
Plan to the extent permitted by applicable law. All determinations and decisions
made by the Committee pursuant to the Plan will be final, conclusive and
binding.
Code Section 162(m)
     Because stock options and SARs granted under the Plan must have an exercise
price equal at least to fair market value at the date of grant, compensation
from the exercise of stock options and SARs should be treated as “qualified
performance-based compensation” for Code Section 162(m) purposes.
     In addition, the Plan authorizes the Committee to make awards of
performance shares, restricted shares and other awards that are conditioned on
the satisfaction of certain performance criteria. For awards intended to result
in “qualified performance-based compensation,” the Committee will establish
prior to or within 90 days after the start of the applicable performance period
the applicable performance conditions. The Committee may select from the
following performance measures for such purpose: (i) net income, (ii) pretax
income, (iii) consolidated operating income, (iv) segment operating income,
(v) return on equity, (vi) operating income return on net capital employed,
(vii) return on assets, (viii) cash flow (with or without regard to asbestos),
(ix) working capital, (x) share appreciation, (xi) total shareholder return,
(xii) total business return (calculated utilizing earnings before interest,
taxes, depreciation and amortization and cash flow) and (xiii) earnings per
share of common stock. The Committee will state the performance conditions in
the form of an objective, nondiscretionary formula and will certify in writing
the attainment of such performance conditions prior to any payout with respect
to

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such awards. The Committee in its discretion may adjust downward the permissible
amount of any such award, even if the performance objective is achieved.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
     This section contains only a general discussion of the potential United
States federal income tax consequences to you under the Plan. State or local tax
rules, and tax rules applicable in jurisdictions outside the United Sates, are
not discussed. The federal income tax consequences relating to the Plan are
complex. You should consult with your personal tax advisor regarding such
consequences.
     Incentive Stock Options. ISOs granted under the Plan are subject to the
applicable provisions of the Code, including Code Section 422. If shares of our
common stock are issued to you upon the exercise of an ISO, and if you make no
“disqualifying disposition” of such shares within one year after the exercise of
the ISO or within two years after the date the ISO was granted, then (i) you
will recognize no income at the time of the grant of the ISO, (ii) you will
recognize no income, for regular income tax purposes, at the date of exercise,
(iii) upon sale of the shares acquired by exercise of the ISO, any amount
realized in excess of the option price will be taxed to you, for regular income
tax purposes, as a capital gain and any loss sustained will be a capital loss,
and (iv) we will not be allowed to take any deduction for federal income tax
purposes. The applicable capital gain tax rate will depend on how long the
shares were held and on your income tax bracket. If you make a “disqualifying
disposition” of such shares, you will realize taxable ordinary income in an
amount equal to the excess of the fair market value of the shares purchased at
the time of exercise over the option price (the “bargain purchase element”) and
we will be entitled to a federal income tax deduction equal to such amount. The
amount of any gain in excess of the bargain purchase element realized upon a
“disqualifying disposition” will be taxable as capital gain to the holder (for
which we will not be entitled a federal income tax deduction). Upon exercise of
an ISO, you may be subject to alternative minimum tax.
     Nonqualified Stock Options. With respect to NQSOs granted under the Plan,
(i) you will recognize no income at the time the NQSO is granted, (ii) at
exercise, you will recognize ordinary income in an amount equal to the
difference between the option price and the fair market value of the shares on
the date of exercise, and we will receive a tax deduction for the same amount,
and (iii) on disposition, appreciation or depreciation after the date of
exercise is treated as a capital gain or loss, in which case the applicable
capital gain tax rate will depend on how long you held the shares and on your
income tax bracket.
     Stock Appreciation Rights. SARs granted under the Plan are taxed much like
NQSOs: (i) you will recognize no income at the time the SAR is granted, (ii) at
exercise, you will recognize ordinary income in an amount equal to the numbers
of shares in respect of which the SAR is exercised multiplied by the difference
between the fair market value of the shares on the date of exercise and the fair
market value of the shares on the date of grant, and we will receive a tax
deduction for the same amount, and (iii) on disposition of shares acquired upon
exercise of the SAR, appreciation or depreciation after the date of exercise is
treated as a capital gain or loss, in which case the applicable capital gain tax
rate will depend on how long you held the shares and on your income tax bracket.
     Performance Shares. Generally, you are not taxed on performance shares
until the date on which you become entitled to a payout of the earned
performance shares. On the date you become entitled to receive the earned shares
following completion of a performance cycle, the fair market value of the shares
at that time is considered to be ordinary income and you will be

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taxed on that amount. If you hold the shares and later sell them, any
appreciation over the market value of the shares when you received them at the
end of the performance cycle will be taxed based on capital gains tax rules. We
generally will be entitled to a deduction equal to the amount that is taxable as
ordinary compensation income to you.
     Restricted Shares. Upon becoming entitled to receive shares at the end of
the applicable restriction period without a forfeiture, you will have ordinary
income in an amount equal to the fair market value of the shares at that time.
However, if you make an election under Code Section 83(b) within 30 days of the
date of the grant, you will have ordinary taxable income on the date of the
grant equal to the fair market value of the restricted shares as if the shares
were unrestricted and could be sold immediately. If you forfeit the shares
subject to such election, you will not be entitled to any deduction, refund or
loss for tax purposes. Upon sale of the shares after the forfeiture period has
expired, the holding period to determine whether you have long-term or
short-term capital gain or loss begins when the restriction period expires, and
the tax basis will be equal to the fair market value of the shares when the
restriction period expires. However, if you timely elect to be taxed as of the
date of grant, the holding period commences on the date of the grant and the tax
basis will be equal to the fair market value of the shares on the date of the
grant as if the shares were then unrestricted and could be sold immediately. We
generally will be entitled to a deduction equal to the amount that is taxable as
ordinary compensation income to you.
     Phantom Shares for Outside Directors. Generally, you will have ordinary
compensation income upon payment of the phantom shares in an amount equal to the
fair market value of the shares of common stock delivered (plus cash for any
fractional phantom shares). As an Outside Director, this will be self-employment
income subject to self-employment taxes. The holding period to determine whether
you have long-term or short-term capital gain or loss for a subsequent sale of
the shares of common stock received in payment of the phantom shares begins when
the shares are delivered, and the tax basis in the shares will be equal to the
fair market value of the shares on the payment date. We generally will be
entitled to a deduction equal to the amount that is taxable as ordinary
compensation income to you.
RESTRICTIONS ON RESALE
     If you are one of our “affiliates” as defined in Rule 405 under the
Securities Act, resales of shares of our common stock that you acquire under
awards under the Plan will be subject to the volume, manner of sale and
reporting requirements of Rule 144 under the Securities Act unless we register
your shares under the Securities Act for resale pursuant to a separate
prospectus. If you have been designated as one of our reporting officers for
purposes of Section 16(b) of the Securities Exchange Act of 1934 (the “Exchange
Act”), resales of shares of our common stock that you acquire under awards
pursuant to the Plan may be “matched” with nonexempt purchases of our common
stock within the previous or following six months for purposes of the
“short-swing profits” recovery provisions of Section 16(b). Further, in no event
may you sell shares of our common stock, whether acquired pursuant to the Plan
or otherwise, if you are in possession of material information regarding our
company that has not been publicly disclosed.
     You are advised to consult with counsel regarding your status as an
affiliate and as a Section 16(b) reporting officer and the application of other
federal and state securities laws to resales of shares of our common stock that
you acquire pursuant to the Plan.

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ADDITIONAL INFORMATION
     We have filed a registration statement with respect to the shares of our
common stock offered under the Plan with the Securities and Exchange Commission
under the Securities Act. This registration statement incorporates by reference
certain documents including our most recent Annual Report on Form 10-K and all
subsequent reports on Form 10-K, Form 10-Q and Form 8-K, our proxy statements,
and a description of our common stock filed under the Exchange Act, which
documents are also incorporated by reference in this Prospectus.
     We will promptly furnish, without charge, on your request, a copy of any of
the documents incorporated by reference in the registration statement and in
this Prospectus (other than exhibits to such documents which are not
specifically incorporated by reference in such documents), as well as our most
recent Annual Report to Shareholders, if any, and any and all documents
supplementing or updating the information contained in this Prospectus
(including Plan information previously delivered, if requested). Such requests
should be addressed to: EnPro Industries, Inc., 5605, Carnegie Boulevard,
Suite 500, Charlotte, North Carolina, 28209-4674, Attn: Norma Wheeler.

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APPENDIX C

                          20___- 20___
 
               
 
      _______   _______   _______
Metrics
      _______   _______   _______
 
  —%   $______M   $_____M   $______M
 
               
Payout Percentage (Minimum, Target, Maximum)
  100%   $______M   $_____M   $______M
 
  —%   $______M   $_____M   $______M
 
               
Weightings
      —%   —%   —%