<PAGE>
                       FIRST RESTATED EMPLOYMENT AGREEMENT

     The Employment Agreement dated June 1, 1995 (the "Employment Agreement")
between Laurence H. Polsky (the "Executive") and Coltec Industries Inc, a
Pennsylvania corporation (the "Corporation"), is amended, clarified and restated
as of this 18th day of December, 1997 (the Restatement Date") as if originally
entered into and effective as of June 1, 1995 (the "Effective Date"),

     WHEREAS, the Employment Agreement has been amended from time to time since
its original execution, and

     WHEREAS, the Corporation and the Executive desire to further modify the
Employment Agreement in order to clarify certain provisions thereof, and

     WHEREAS, the Executive and the Corporation desire to combine all new and
previous amendments to the Employment Agreement into this First Restated
Employment Agreement setting forth the terms and conditions upon which the
Executive shall be employed by the Corporation to be effective as if originally
entered into on 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 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 Chairman and Chief Executive Officer as the Executive
     Vice, Administration 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 similar 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 



<PAGE>

     reasonable additional responsibilities, not inconsistent with his then

     current position, as shall from time to time be assigned to him by the
     Board of Directors of the Corporation (the "Board") or by the Chairman and
     Chief Executive Officer of the Corporation.

     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 Chairman and Chief
     Executive Officer 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 such location within the continental United States as the Chairman
     and Chief Executive Officer may from time to time, after consultation with
     Executive, deem appropriate, except for travel reasonably required in the
     performance of Executive's responsibilities.

3.   Compensation and Benefits

     Throughout the contract period hereof, unless otherwise specifically
     provided elsewhere herein:

     3.1 Executive shall receive an annual base salary which is not less than
     his annual base salary on the Effective 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 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 not
     less than the 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 Effective 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 Agreement.

                                       2

<PAGE>

     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, the Benefits Equalization Plan (collectively the
     "Retirement Plan") and the 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 now exist 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 described in Section 2.1 above, provided that the
     Executive properly accounts for such expenses in accordance with the
     Corporation's established policies.

4.   Indemnification

     The Executive shall be entitled to indemnification by the Corporation to
     the fullest extent permitted by law and the By- Laws of the Corporation 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 the completion of 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 Agreement, and which shall (1) indicate the specific
     termination provision in this 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.

                                       3

<PAGE>

     5.2 "Date of Termination" shall mean:

          a. thirty (30) days after Notice of Termination is given by the
          Corporation 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 by Executive 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 by
          the Corporation for termination of employment for Cause;

          e. at least fifteen days (15) after Notice of Termination is given by
          Executive 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 Agreement shall automatically terminate upon the earlier of
     Executive's 65th birthday or the date set forth in the 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 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;

                                       4

<PAGE>

               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 Chairman and
                    Chief Executive Officer;

               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 which breach is materially
                    injurious to the Corporation;

               v.   Executive's conviction for a crime involving moral
                    turpitude; or

               vi.  the breach of Executive's 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.

          c. Good Reason - Executive shall be entitled to terminate his
          employment for Good Reason. For purposes of this 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 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 7 below, from any successor
                    to assume and perform this 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 by the
                    Corporation which is not effected pursuant to a Notice of
                    Termination satisfying the requirements set forth in Section
                    5

                                       5

<PAGE>

                    above; for purposes of this Agreement, no such purported
                    termination shall be effective;

               iv.  Executive makes a determination in good faith that the
                    cumulative effect of actions by one or more of the members

                    of the Board, the Chairman and Chief Executive Officer, the
                    President and Chief Operating Officer or their respective
                    agents or associates constitutes harassment or unreasonable
                    interference with the performance of Executive's day-to-day
                    duties under this Agreement (after a written demand for
                    cessation of such actions is delivered by Executive to the
                    President and Chief Operating Officer, the Chairman and
                    Chief Executive Officer or to the Board which demand
                    specifically identifies the manner in which Executive
                    believes that such President and Chief Operating Officer,
                    Chairman and 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 President and Chief Operating Officer,
                    the Chairman and 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 President and Chief
                    Operating Officer, the Chairman and Chief Executive Officer
                    or the 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 Agreement;

               v.   the Corporation or any successor during the two year period
                    following a Change-in-Control delivers to the Executive a
                    Notice of Termination other than for Cause or takes any
                    other action or actions, including, but not limited to, a
                    material decrease in duties or authority or change in
                    reporting relationships, which may have an adverse effect
                    upon Executive's employment or which purport to terminate
                    Executive's employment other than for Cause;

               vi.  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 Agreement; or

               vii. after a Change-in-Control as hereafter defined, the
                    Corporation a) reduces Executive's annual salary, b) impairs
                    Executive's

                                       6

<PAGE>

                    opportunity to earn incentive compensation on a basis
                    comparable to that before the Change-in-Control, c) reduces
                    the Company perquisites made available to Executive before
                    the Change-in-Control or d) eliminates or impairs

                    Executive's ability to participate in the Retirement Plans;

              viii. the Executive chooses to terminate his employment with the
                    Corporation for any reason during the thirty (30) day period
                    immediately preceding either, at the option of the
                    Executive, the twelve (12) month anniversary or the
                    twenty-four (24) month anniversary of a Change-in-Control as
                    hereafter defined.

          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 a waiver of Executive's rights under
          this Paragraph (c) nor constitute a 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 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 date hereof 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

                                       7

<PAGE>

               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 base salary plus all amounts or benefits payable or due to him
     (including a pro rata share under Incentive Compensation Plans targeted for
     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 date hereof.

     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 accrued
          but unpaid 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

                                       8

<PAGE>

          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 base 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 targeted for 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,
          but only to the extent required by the terms of such plans, or only to
          the extent specifically 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 accrued
          but unpaid 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 targeted for the
          year in which Executive's employment is terminated).

          b. The Corporation shall pay Executive as soon as practicable
          following the Date of Termination an additional payment equal to the

                                       9

<PAGE>

          sum of Executive's annual base salary plus the highest annual bonus

          received by the Executive or, if the Executive has not received an
          annual bonus while serving as a Executive Vice President, by any
          individual serving as Executive Vice President for the Corporation
          during any of the three previous calendar years multiplied by the
          higher of two (2) or the number of years (including fractions thereof)
          remaining under the Contract Period.

          c. In accordance with a valid election on file with the Corporation,
          the Corporation shall pay to Executive a sum of money equal to the
          value of Executive' s accrued balance of the Benefits Equalization
          Plan (the "BE Plan").

          d. For the longer of two years from the Date of Termination or until
          the end of the Contract Period (the "Relevant Damage 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 the 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 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.

          e. For purposes of Section 6.6(d), Executive's participation in
          respect to the Corporation's 1994 Long Term Incentive Plan (the
          "LTIP") shall be as follows (the defined terms within this section and
          not otherwise defined within this Agreement being the same as defined
          in the LTIP as in effect on the date hereof):

               i.   all of the Executive's Restricted Shares previously issued
                    under the LTIP and not yet vested by the Date of Termination
                    shall become 100% vested, nonforfeitable and fully
                    transferable as of such date; and

               ii.  the Corporation will pay the Executive as soon as
                    practicable following the Date of Termination an amount in
                    cash equal to three

                                       10

<PAGE>


                    times the product of (x) the number of Performance Units
                    previously granted under the LTIP to the Executive and still
                    outstanding, times (y) the Award Value at the Threshold
                    Target level.

          f. For purposes of Section 6.6(d), Executive's benefits with respect
          to the Corporation's Retirement Plan for Salaried Employees and the BE
          Plan or any equivalent or superior plans or arrangements in which the
          Executive participated prior to the Date of Termination (any such Plan
          or arrangement, the "Pension Plans") and the Corporation's welfare
          benefit plans in which the Executive participates on the date hereof
          or any equivalent or superior successor plans or arrangements in which
          the Executive participates prior to the Date of Termination ("Welfare
          Benefit Plans") the contemplated continued participation shall require
          the Corporation to pay or provide the executive with the benefits,
          earnings credits for benefits and service credits for benefits which
          the Executive would have received under the Pension Plans and Welfare
          Benefit Plans if (x) the Executive's employment and his coverage under
          the Pension Plans and the Welfare Benefit Plans had continued during
          the Relevant Damage Period, and (y) the compensation described in
          Section 6.6 (b) which would have been credited under the Pension Plans
          and/or the Welfare Plans were paid to the Executive ratably over the
          Relevant Damage Period.

          g. All restrictions, if any, on shares of restricted stock previously
          granted to Executive which would have lapsed if Executive had been
          employed throughout the Relevant Damage Period shall immediately lapse
          as of the Date of Termination, and Executive shall be entitled to the
          possession of the shares of such stock as of such date upon the
          payment of any applicable withholding taxes.

     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
     following benefits in lieu of the benefits under the Section 6.6:

          a. The Corporation shall pay Executive his accrued but unpaid 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 a lump sum equal to four times (4x) the sum of Executive's
          annual base salary at the rate in effect immediately prior to the time
          Notice of Termination is given plus the highest annual bonus received
          by

                                       11


<PAGE>

          the Executive or, if the Executive has not received an annual bonus
          while serving as a Executive Vice President,                      ,any
          individual serving as Executive Vice President,                    for
          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, employment 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 Perquisites. 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.

          f. For purposes of Section 6.7(e), Executive's participation in
          respect to the LTIP shall be as follows (the defined terms within this
          section and not otherwise defined within this agreement being the same
          as defined in the LTIP):

               i.   all of the Executive's Restricted Shares previously issued
                    under the LTIP and not yet vested by the Date of Termination
                    shall become 100% vested, nonforfeitable and fully
                    transferable as of such date; and

                                       12


<PAGE>

               ii.  all LTIP awards issued prior to the Date of Termination
                    ("Existing Awards") of Performance Units ("Existing Units")
                    shall be deemed to have been outstanding throughout the
                    Performance Cycle to which each relates; and

               iii. the Executive shall be deemed to have received an LTIP award
                    in each of the four years following the Date of Termination
                    ("Deemed Awards") in an amount equal in units to the highest
                    number of Performance Units received by the Executive in any
                    of the three years prior to the Date of Termination ("Deemed
                    Units") and all of the Deemed Units shall be deemed to have
                    been outstanding throughout the Performance Cycle to which
                    each relates; and

               iv.  except as set forth in Section 6.7(f)(v), the Corporation
                    will pay the Executive as soon as practicable following the
                    Date of Termination an amount in cash equal to th e number
                    of Existing and Deemed Units to which he is entitled
                    multiplied by an Award Value the result of which is further
                    multiplied by 1.10 (the "LTIP Payout"). The Operating Income
                    Threshold Target for each Deemed Award shall be that
                    established for the Existing Award issued just prior to the
                    Date of Termination. The Award Value shall be calculated in
                    accordance with the provisions of the LTIP applying actual
                    operating profit of the Corporation whenever such has
                    actually been achieved and applying those projections of
                    operating profit contained in the Corporation's Coltec 2000
                    Plan for those years which do not have actual results. If
                    any Performance Cycle of any Existing or Deemed Unit shall
                    extend beyond the projections contained in the Corporation's
                    Coltec 2000 Plan, then the operating profit contained in the
                    Coltec 2000 Plan for the year ending December 31, 1999 shall
                    be the operating profit applied to each year of any
                    Performance Cycle for which actual operating profit cannot
                    be calculated increased for each year after 1999 at the
                    average rate of annual increase of operating profit actually
                    realized for the period between January 1, 1997 and December
                    31, 1999.

               v.   in the event that the independent accountants of the
                    Corporation shall determine that if the payment of the LTIP
                    Payout is made entirely in cash it shall prevent the
                    Corporation from consummating any business combination
                    approved by the Board of Directors which combination is
                    intended to be accounted for under the pooling of interests
                    method of accounting ("Pooling"), then the LTIP Payout shall
                    be made 2/3 in cash and 1/3 in the Corporation's Common
                    Stock (the "Share Portion"). If a merger or acquisition of
                    the Corporation has taken place prior to the time that the
                    Executive has given Notice of Termination setting forth his
                    intent to terminate his employment for Good Reason and the
                    Common Stock of the Corporation is no longer traded on a

                    national

                                       13

<PAGE>

                    securities exchange then the Share Portion of the LTIP
                    Payout shall be made in the common stock of the
                    Corporation's parent or successor corporation (collectively,
                    a "Successor"), which stock is traded on a national
                    securities exchange or on an over the counter securities
                    market. The number of shares payable in respect to the Share
                    Portion shall be determined by dividing the dollar value of
                    the Share Portion by the price of a share of the Common
                    Stock of the Corporation, or a Successor, as the case may
                    be, on the last business day immediately preceding the date
                    of the Notice of Termination.

          g. For purposes of Section 6.7(e), Executive's benefits with respect
          to the Pension Plans and the Welfare Benefit Plans, the contemplated
          continued participation shall require the Corporation to pay or
          provide the Executive with the benefits, earnings credits for benefits
          and service credits for benefits which the Executive would have
          received under the Pension Plans and Welfare Benefit Plans if (x) the
          Executive's employment and his coverage under the Pension Plans and
          the Welfare Benefit Plans had continued for an additional four year
          period, and (y) the compensation described in Section 6.7 (b) which
          would have been credited under the Pension Plans and/or the Welfare
          Plans were paid to the Executive ratably over a four year period.

          h. All restrictions, if any, on shares of restricted stock previously
          granted to Executive shall immediately lapse as of the Date of
          Termination, and Executive shall be entitled to the possession of the
          shares of such stock as of such date upon the payment of any
          applicable withholding taxes.

     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
          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 any payments or
          benefits from the Corporation (whether or not provided under this
          Agreement) (the


                                       14

<PAGE>

          "Severance Payments") that 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 and employment taxes 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 (as defined in Section 280G of
          the Code) or Executive's termination of employment (whether pursuant
          to the terms of this 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 (x) the total amount of the Severance
          Payments or (y) 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 

                                       15

<PAGE>

          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 to the appropriate taxing authority;
          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 Upon receipt of written notice from Executive that Executive has been
     reemployed by another company or entity on a full-time basis , benefits
     otherwise receivable by Executive pursuant to Subsections 6.6(d) or 6.7(e)
     related solely to life, health disability and accident insurance plans and
     programs and other similar benefits (but not Incentive Compensation , LTIP,
     Pension Plans or other similar plans and programs) 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 .

     6.10. Any stock of the Corporation which is delivered to the Executive
     pursuant to Subsection 6.6 or 6.7 shall be delivered to him fully
     registered for immediate sale to the public under all applicable securities
     laws.

7.   Successors; Binding Agreement

                                       16

<PAGE>

     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 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 Agreement and shall entitle Executive to terminate this
     Agreement for Good Reason. As used in this Agreement, "Corporation" shall
     mean the Corporation and any successor to its business and or assets as
     aforesaid which assumes and agrees to perform this Agreement by operation
     of law, or otherwise.

8.   Notice

     For the purpose of this Agreement, notices and all other communications
     provided for in the 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's most recent home address on file with the Corporation, and to
     the Corporation at 3 Coliseum Centre, 2550 West Tyvola Road, Charlotte, NC
     28217 to the attention of the Chairman of the Board of Directors 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 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 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. In the event that the independent
     accountants of the Corporation shall determine that anything contained
     herein shall prevent the Corporation from consummating any business
     combination approved by the Board of Directors which combination is
     intended to be accounted for as a Pooling, then Executive agrees to

     negotiate in good faith concerning amendments to such portions of this
     Agreement as may be requested by the Corporation so as to allow such
     business combination to be accounted for as a Pooling; provided, however,
     that any such amendment shall: (a) be as limited in scope as is absolutely
     necessary in the opinion of the Corporation's advisors to allow the
     business combination to be accounted for as a Pooling, and (b) be designed
     to have as minimal an economic detriment to the Executive as is possible
     while still allowing the business combination to be accounted for as a
     Pooling.

                                       17

<PAGE>

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 five percent (5%) or more of the
     Corporation's gross revenues or earnings before taxes or derives five
     percent (5%) 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 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 either
     Sections 6.6(b) or 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 five percent
     (5%) 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

                                       18

<PAGE>

     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 Agreement shall
     not affect the validity or enforceability of any other provision of this
     Agreement, which shall remain in full force and effect.

12.  Counterparts

     This 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 Agreement, any dispute or
     controversy arising under or in connection with this Agreement shall be
     settled exclusively by arbitration in Charlotte, NC or such 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 Agreement shall be governed by and construed and enforced in
     accordance with the laws of the State of North Carolina.

15.  Entire Agreement; Survival of Certain Provisions

     15.1 This 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 Agreement have been
     made by either party which are not expressly set forth in this Agreement

     15.2 The obligations of the Corporation under Section 6.8 above and the
     Executive's obligations under Section 10 above shall survive the expiration
     of the term of this Agreement.

16.  Withholding

                                       19

<PAGE>

     Any payments made to Executive under this 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 Agreement as of
the Effective Date.

                                               COLTEC INDUSTRIES INC


                                           By /s/ R. J. TUBBS
                                             -----------------------------------



                                              /s/ LAURENCE H. POLSKY
                                             -----------------------------------
                                                       EXECUTIVE



                                       20