<PAGE>
                       FIRST RESTATED EMPLOYMENT AGREEMENT

     The Employment Agreement dated June 1, 1995 (the "Employment Agreement")
between John W. Guffey, Jr. ( 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 five years commencing on the Effective Date
     and terminating on the fifth 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 6 below.

2.   Duties

     2.1 The Executive shall serve, subject to the supervision and control of
     the Corporation's Board of Directors (the "Board") as Chairman and Chief
     Executive Officer 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).


<PAGE>


     Executive shall also perform any additional lawful services and assume any
     reasonable additional responsibilities, not inconsistent with his current

     position, as shall from time to time be assigned to him by the Board.

     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 as (ii) a director of any corporation which is not
     a competitor of the Corporation, provided that such service by Executive
     does not materially interfere with the performance by Executive of the
     responsibilities delegated under Section 2.1 above.

     2.3 Executive shall carry out all responsibilities delegated in Section 2.1
     above at the Corporation's headquarters at 3 Coliseum Centre, 2550 West
     Tyvola Rd. Charlotte, NC except for travel reasonably required in the
     performance of Executive's responsibilities.

3.   Compensation and Benefits

     Throughout the Contract Period, 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 that 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.

     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


                                       2
<PAGE>



     to, the Retirement Savings Plan, the Retirement Program, the Benefits
     Equalization Plan (collectively, the "Retirement Plans") 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.   Management of the Corporation

     During the Contract Period and subject to its fiduciary duties, the Board
     shall not interfere with Executive's responsibilities in connection with
     the normal day to day management of the Corporation's business matters and
     will involve Executive as a director, in determining the strategic
     direction of the Corporation, consistent with the Board's past practice and
     its fiduciary duties to the Corporation's shareholders and its management.

6.   Termination of Employment

     The Contract Period shall terminate prior to the completion of its term on
     the Date of Termination as defined in Sections 6.2 or 6.3 below following
     receipt by the Executive or the Corporation, as the case may be, of a
     Notice of Termination as defined in Section 6.1 below.

     6.1 "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 9 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>



     6.2 "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 7.6 or 7.7 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.

     6.3 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 6.2(e) above
     ("Retirement Termination")

7.   Compensation Upon Termination or During Disability

     7.1 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 Board;

               iii. the willful engaging by Executive in conduct relating to the
                    Corporation which is demonstrably and materially injurious
                    to the Corporation after a written demand for cessation of
                    such conduct is delivered to Executive by the Board, which
                    demand specifically identifies the manner in which the Board
                    believes the Executive has engaged in such conduct and the
                    injury to the Corporation;

               iv.  a willful material breach of an established written policy
                    or procedure of the Corporation, 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
                    11.1 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 6.2 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 8 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 6


                                       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 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
               Board which demand specifically identifies the manner in which
               Executive believes that any 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 Board members
               in regular reviews of those items which have, consistent with the
               Corporation's past practices, been normally within the purview
               the Board's responsibilities 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 Charlotte, NC without the concurrence of Executive;

          vii. after a Change-in-Control, the corporation a)reduces Executive's
               annual salary, b) impairs Executive's 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 a Change-in-Control, or d)
               eliminates or impairs Executive's ability to participate in
               Retirement Plans, or

          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,

                                        6
<PAGE>



     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

          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


                                       7
<PAGE>


               Corporation; or of (3) the sale or other disposition of all or
               substantially all of the assets of the Corporation.


     7.2 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.

     7.3 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 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.

     7.4 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


                                       8
<PAGE>


     plans and programs effective on the Date of Termination to which he is

     eligible in accordance with their terms.

     7.5 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.

     7.6 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 7.7 below ("Section 7.7 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
          sum of Executive's annual base salary plus the highest annual bonus
          received by the Executive during any of the three previous calendar
          years multiplied by the higher of three (3) 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 ("BE Plan").

          d. For the longer of three 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


                                       9
<PAGE>



          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 7.9, 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 7.6(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 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 7.6(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


                                       10
<PAGE>



          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 7.6(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.

     7.7 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 Section 7.6:

          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 five times (5x) the sum of Executive's
          annual base salary for one calendar year at the rate in effect
          immediately prior to the time Notice of Termination is given plus the
          highest annual bonus received by the Executive 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.


                                       11

<PAGE>


          e. For five 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 7.9, 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 7.7(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

               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 five 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 7.7(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



                                       12
<PAGE>


                    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 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 7.7(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


                                       13
<PAGE>


          continued for an additional five year period, and (y) the compensation
          described in Section 7.7(b) which would have been credited under the
          Pension Plans and/or the Welfare Plans were paid to the Executive
          ratably over a five 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.

     7.8 In addition to the benefits set forth in Sections 7.6 and 7.7, 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 7.7 Good Reason, or (3) by Executive for Section 7.7 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 addition to all other benefits provided hereunder, in the event
          that Executive becomes entitled to any payments or benefits from the
          corporation (whether or not provided under this Agreement) ("Severance
          Payments") if Executive will be subject to the tax (the "Excise Tax")
          imposed by Section 4999 of the Code, the Corporation shall pay to
          Executive at the time or times specified in Paragraph (h) below, an
          additional amount (the "Gross-Up Payment") such that the net amount
          retained by Executive, after deduction of (i) any additional Excise
          Tax payable by Executive as a result of Executive's receipt of the
          Severance Payments, and (ii) any additional Federal, state and local
          income 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


                                       14
<PAGE>


          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
          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.


                                       15
<PAGE>


          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).

     7.9 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 7.6(d) or 7.7(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.

     7.10 Any stock of the Corporation which is delivered to the Executive
     pursuant to Subsections 7.6 or 7.7 shall be delivered to him fully
     registered for immediate sale to the public under all applicable securities
     laws.

8.   Successors; Binding Agreement

     The Corporation will require any successor (whether direct or indirect, by
     purchase, merger, consolidation or otherwise) to all or substantially all
     of the business and/or assets of the Corporation to expressly assume and
     agree to perform this 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.

9.   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


                                       16
<PAGE>


     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 Compensation Committee 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.

10.  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.

11.  Non-competition


     11.1 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 11.1 shall permit the Corporation to terminate Executive's
     employment for Cause in accordance with Section 7.l(b) hereof.


                                       17
<PAGE>


     11.2 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 7.6(b) or 7.7(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 11. 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.

     11.3 Executive acknowledges and agrees that damages for breach of the
     covenant not to compete in this Section 11 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 14 below, may seek specific
     enforcement of the covenant not to compete in any court of competent
     jurisdiction, including, without limitation, by the issuance of a temporary
     or permanent injunction, without the necessity of a bond. Executive and the

     Corporation agree that the provisions of this covenant not to compete are
     reasonable. However, should any court or arbitrator determine that any
     provision of this covenant not to compete is unreasonable, either in period
     of time, geographical area, or otherwise, the parties agree that this
     covenant not to compete should be interpreted and enforced to the maximum
     extent which such court or arbitrator deems reasonable.

12.  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.

13.  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.


                                       18
<PAGE>


14.  Arbitration

     Except as contemplated by Section 11.3 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.

15.  Governing Law

     This Agreement shall be governed by and construed and enforced in
     accordance with the laws of the State of North Carolina.

16.  Entire Agreement; Survival of Certain Provisions

     16.1 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

     16.2 The obligations of the Corporation under Section 7.8 above and the
     Executive's obligations under Section 11 above shall survive the expiration
     of the term of this Agreement.

17.  Withholding

     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/ JOHN W. GUFFEY, JR.
                                                  ------------------------
                                                        EXECUTIVE



                                       19